PRINCIPAL
VARIABLE CONTRACTS FUNDS, INC.
Class 1 and Class
2 Shares
("PVC" or the
"Fund”)
The date of this Prospectus is May
1, 2018.
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ACCOUNTS OF
THE FUND |
Equity
Accounts |
Asset
Allocation Accounts |
Diversified International
Account (Classes 1 & 2) |
Diversified Balanced Account
(Classes 1 & 2) |
Equity Income Account (Classes
1 & 2) |
Diversified Balanced Managed
Volatility Account (Class 2) |
International Emerging Markets
Account (Classes 1 & 2) |
Diversified Balanced Volatility
Control Account (Class 2) |
LargeCap Growth Account
(Classes 1 & 2) |
Diversified Growth Account
(Class 2) |
LargeCap Growth Account I
(Classes 1 & 2) |
Diversified Growth Managed
Volatility Account (Class 2) |
LargeCap S&P 500 Index
Account (Classes 1 & 2) |
Diversified Growth Volatility
Control Account (Class 2) |
LargeCap S&P 500 Managed
Volatility Index Account (Class 1) |
Diversified Income Account
(Class 2) |
LargeCap Value Account (Classes
1 & 2) |
Principal LifeTime
Accounts |
MidCap Account (Classes 1 &
2) |
Strategic Income Account (Class
1) |
Multi-Asset Income Account
(Classes 1 & 2) |
2010 Account (Class
1) |
Principal Capital Appreciation
Account (Classes 1 & 2) |
2020 Account (Classes 1 &
2) |
Real Estate Securities Account
(Classes 1 & 2) |
2030 Account (Classes 1 &
2) |
SmallCap Account (Classes 1
& 2) |
2040 Account (Classes 1 &
2) |
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2050 Account (Classes 1 &
2) |
Fixed-Income
Accounts |
2060 Account (Class
1) |
Bond Market Index Account
(Class 1) |
Strategic Asset Management
Portfolios |
Core Plus Bond Account (Classes
1 & 2) |
SAM Balanced Portfolio (Classes
1 & 2) |
Government & High Quality
Bond Account (Classes 1 & 2) |
SAM Conservative Balanced
Portfolio (Classes 1 & 2) |
Income Account (Classes 1 &
2) |
SAM Conservative Growth
Portfolio (Classes 1 & 2) |
Short-Term Income Account
(Classes 1 & 2) |
SAM Flexible Income Portfolio
(Classes 1 & 2) |
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SAM Strategic Growth Portfolio
(Classes 1 & 2) |
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This prospectus describes a mutual
fund organized by Principal Life Insurance Company® (“Principal Life”). The Fund
provides a choice of investment objectives through the Accounts listed
above.
The Securities and Exchange
Commission has not approved or disapproved these securities or passed upon the
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
TABLE OF
CONTENTS
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ACCOUNT
SUMMARIES |
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Bond Market Index
Account |
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Core Plus Bond
Account |
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Diversified Balanced
Account |
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Diversified Balanced Managed
Volatility Account |
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Diversified Balanced Volatility
Control Account |
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Diversified Growth
Account |
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Diversified Growth Managed
Volatility Account |
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Diversified Growth Volatility
Control Account |
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Diversified Income
Account |
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Diversified International
Account |
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Equity Income
Account |
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Government & High Quality
Bond Account |
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Income Account |
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International Emerging Markets
Account |
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LargeCap Growth
Account |
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LargeCap Growth Account
I |
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LargeCap S&P 500 Index
Account |
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LargeCap S&P 500 Managed
Volatility Index Account |
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LargeCap Value
Account |
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MidCap Account |
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Multi-Asset Income
Account |
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Principal Capital Appreciation
Account |
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Principal LifeTime Strategic
Income Account |
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Principal LifeTime 2010
Account |
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Principal LifeTime 2020
Account |
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Principal LifeTime 2030
Account |
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Principal LifeTime 2040
Account |
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Principal LifeTime 2050
Account |
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Principal LifeTime 2060
Account |
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Real Estate Securities
Account |
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SAM (Strategic Asset
Management) Balanced Portfolio |
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SAM (Strategic Asset
Management) Conservative Balanced Portfolio |
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SAM (Strategic Asset
Management) Conservative Growth Portfolio |
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SAM (Strategic Asset
Management) Flexible Income Portfolio |
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SAM (Strategic Asset
Management) Strategic Growth Portfolio |
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Short-Term Income
Account |
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SmallCap Account
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ADDITIONAL INFORMATION ABOUT
INVESTMENT STRATEGIES AND RISKS |
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PORTFOLIO HOLDINGS
INFORMATION |
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MANAGEMENT OF THE
FUND |
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PRICING OF ACCOUNT
SHARES |
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DIVIDENDS AND
DISTRIBUTIONS |
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TAX
CONSIDERATIONS |
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DISTRIBUTION PLAN AND
ADDITIONAL INFORMATION REGARDING INTERMEDIARY COMPENSATION |
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ONGOING FEES |
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GENERAL INFORMATION ABOUT AN
ACCOUNT |
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Frequent Trading and Market
Timing (Abusive Trading Practices) |
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Eligible
Purchasers |
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Purchase of Account
Shares |
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Sale of Account
Shares |
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Restricted
Transfers |
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Financial
Statements |
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APPENDIX A – INDEX
ABBREVIATIONS |
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APPENDIX B – DESCRIPTION OF
BOND RATINGS |
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APPENDIX C – FINANCIAL
HIGHLIGHTS |
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ADDITIONAL
INFORMATION |
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BOND MARKET INDEX
ACCOUNT
Objective:
The Account seeks to
provide current income.
Fees and Expenses
of the Account
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Account. These fees
and expenses do not reflect the fees and expenses of any variable insurance
contract that may invest in the Account and would be higher if they
did.
Annual Account
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
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Class
1 |
Management Fees |
0.25% |
Other Expenses |
—% |
Acquired Fund Fees and
Expenses |
0.01% |
Total Annual
Account Operating Expenses |
0.26% |
Fee Waiver (1) |
(0.10)% |
Total Annual
Account Operating Expenses after Fee Waiver |
0.16% |
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(1)
Principal
Global Investors, LLC ("PGI"), the investment advisor, has contractually
agreed to limit the Account's Management Fees through the period ending
April 30, 2019. The fee waiver will reduce the Account's Management
Fees by 0.10% (expressed as a percent of average net assets on an
annualized basis). It is expected that the fee waiver will continue
through the period disclosed; however, Principal Variable Contracts Funds,
Inc. and PGI, the parties to the agreement, may mutually agree to
terminate the fee waiver prior to the end of the
period. |
Example
This Example is intended to help you
compare the cost of investing in the Account with the cost of investing in other
mutual funds.
The Example assumes that you invest
$10,000 in the Account for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Account's operating
expenses remain the same. If separate account expenses and contract level
expenses were included, expenses would be higher. The calculation of costs takes
into account any applicable contractual fee waivers and/or expense
reimbursements for the period noted in the table above. Although your actual
costs may be higher or lower, based on these assumptions your costs would
be:
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1
year |
3
years |
5
years |
10
years |
Bond Market
Index Account - Class 1 |
$16 |
$74 |
$136 |
$321 |
Portfolio
Turnover
The Account pays transaction costs,
such as commissions, when it buys and sells securities (or “turns over” its
portfolio). A higher portfolio turnover rate may indicate higher transaction
costs. These costs, which are not reflected in annual Account operating expenses
or in the example, affect the Account’s performance. During the most recent
fiscal year, the Account's portfolio turnover rate was 108.9% of the average value of its
portfolio.
Principal
Investment Strategies
Under normal circumstances, the
Account uses a passive investment approach known as "sampling" to invest at
least 80% of its net assets, plus any borrowings for investment purposes, in
investments designed to track the Bloomberg Barclays U.S. Aggregate Bond Index
(the "Index") at the time of purchase. The Index is composed of investment
grade, fixed rate debt issues with maturities of one year or more, including
government securities, corporate securities, and asset-backed and
mortgage-backed securities (securitized products). The Index is rebalanced
monthly to reflect securities that have dropped out of or entered the Index in
the preceding month. Because of the practical difficulties and expense of
purchasing all of the securities in the Index, the Account does not purchase all
of the securities in the Index. Instead, the Account uses a sampling methodology
to purchase securities with generally the same risk and return characteristics
of the Index. Under normal circumstances, the Account maintains an average
portfolio duration that is in line with the duration of the Index, which as of
December 31,
2017 was 5.98 years . The Account will not concentrate
its investments (invest more than 25% of its assets) in a particular industry
except to the extent the Index is so concentrated. Because the Account's portfolio
turnover rate during the most recent fiscal year was more than 100%, the Account
is considered actively-traded.
Principal
Risks
The value of your investment in the
Account changes with the value of the Account 's investments. Many factors
affect that value, and it is possible to lose money by investing in the Account.
An investment in the Account is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. The principal risks of investing in the Account, in alphabetical order,
are:
Fixed-Income
Securities Risk. Fixed-income securities are subject
to interest rate, credit quality, and liquidity risks. The market value of
fixed-income securities generally declines when interest rates rise, and
increased interest rates may adversely affect the liquidity of certain
fixed-income securities. Moreover, an issuer of fixed-income securities could
default on its payment obligations due to increased interest rates or for other
reasons.
Index Fund
Risk. An index fund has
operating and other expenses while an index does not. As a result, over time,
index funds tend to underperform the index. The correlation between fund
performance and index performance may also be affected by the type of passive
investment approach used by a fund (sampling or replication), 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, which means funds with
longer average portfolio durations may be more volatile than those with shorter
durations.
Portfolio
Turnover (Active Trading) Risk. High portfolio turnover (more than
100%) caused by actively trading portfolio securities may result in accelerating
the realization of taxable gains and losses, lower fund performance and
increased brokerage costs.
Real Estate
Securities Risk. Investing in real estate securities
subjects the fund to the risks associated with the real estate market (which are
similar to the risks associated with direct ownership in real estate), including
declines in real estate values, loss due to casualty or condemnation, property
taxes, interest rate changes, increased expenses, cash flow of underlying real
estate assets, regulatory changes (including zoning, land use and rents), and
environmental problems, as well as to the risks related to 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, result in changes to expense
ratios and increased expenses, and adversely affect underlying fund performance.
Moreover, a fund of fund's redemptions or reallocations among share classes of
an underlying fund may result in changes to the expense ratios of affected
classes, which may increase the expenses paid by shareholders of the class that
experienced the redemption.
Securitized
Products Risk.
Investments in securitized products are subject to risks similar to traditional
fixed income securities, such as credit, interest rate, liquidity, prepayment,
extension, and default risk, as well as additional risks associated with the
nature of the assets and the servicing of those assets. Unscheduled prepayments
on securitized products 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.
Performance
The following information provides
some indication of the risks of investing in the Account. Past performance is
not necessarily an indication of how the Account will perform in the future. You
may get updated performance information by calling 1-800-222-5852.
The bar chart shows changes in the
Account's performance from year to year. The table shows how the Account's
average annual returns for 1, 5, and 10 years (or, if shorter, the life of the
Account) compare with those of one or more broad measures of market performance.
Performance figures for the Accounts do not include any separate
account expenses, cost of insurance,
or other contract-level expenses; total returns for the Accounts would be lower
if such expenses were included.
Life of Account returns are measured
from the date the Account's shares were first sold (May 15, 2012).
Total Returns as
of December 31
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Highest
return for a quarter during the period of the bar chart
above: |
Q1
'16 |
2.94 |
% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q4
'16 |
(3.12 |
)% |
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Average
Annual Total Returns |
For the
periods ended December 31, 2017 |
1
Year |
5
Years |
Life of
Account |
Bond Market
Index Account - Class 1 |
3.27% |
1.74% |
1.92% |
Bloomberg Barclays U.S.
Aggregate Bond Index (reflects no deduction for fees, expenses, or
taxes) |
3.54% |
2.10% |
2.28% |
Management
Investment
Advisor:
Principal Global Investors,
LLC
Sub-Advisor and
Portfolio Managers:
BNY Mellon Asset Management North
America Corporation
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Paul Benson (since 2015),
Managing Director, Head of Fixed Income Portfolio
Management |
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Gregg Lee (since 2012), Vice
President, Senior Portfolio Manager, Fixed
Income |
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Nancy G. Rogers (since 2015),
Director, Senior Portfolio Manager, Fixed
Income |
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Stephanie Shu (since 2015),
Director, Senior Portfolio Manager, Fixed
Income |
Tax
Information
The Fund intends to comply with
applicable variable asset diversification regulations. Taxation to you will
depend on what you do with your variable life insurance or variable annuity
contract. See your variable product prospectus for information about the tax
implications of investing in the Accounts.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, to recommend one Account or share class of the Fund over another
Account or share class, or to recommend one variable annuity, variable life
insurance policy or mutual fund over another. Ask your salesperson or visit your
financial intermediary's website for more information.
CORE PLUS BOND
ACCOUNT
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Objective: |
The Account seeks to provide
current income and, as a secondary objective, capital
appreciation. |
Fees and Expenses
of the Account
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Account. These fees
and expenses do not reflect the fees and expenses of any variable insurance
contract that may invest in the Account and would be higher if they
did.
Annual Account
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
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Class
1 |
Class
2 |
Management Fees |
0.45% |
0.45% |
Distribution and/or Service
(12b-1) Fees |
N/A |
0.25% |
Other Expenses |
0.01% |
0.01% |
Total Annual
Account Operating Expenses |
0.46% |
0.71% |
Example
This Example is intended to help you
compare the cost of investing in the Account with the cost of investing in other
mutual funds.
The Example assumes that you invest
$10,000 in the Account for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Account’s operating
expenses remain the same. If separate account expenses and contract level
expenses were included, expenses would be higher. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
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1
year |
3
years |
5
years |
10
years |
Core Plus
Bond Account - Class 1 |
$47 |
$148 |
$258 |
$579 |
Core Plus
Bond Account - Class 2 |
73 |
227 |
395 |
883 |
Portfolio
Turnover
The Account pays transaction costs,
such as commissions, when it buys and sells securities (or “turns over” its
portfolio). A higher portfolio turnover rate may indicate higher transaction
costs. These costs, which are not reflected in annual Account operating expenses
or in the example, affect the Account’s performance. During the most recent
fiscal year, the Account’s portfolio turnover rate was 123.5% of the average value of its
portfolio.
Principal
Investment Strategies
Under normal circumstances, the
Account invests at least 80% of its net assets, plus any borrowings for
investment purposes, in bonds or other debt securities at the time of purchase.
The bonds and other debt securities in which the Account invests include
intermediate maturity fixed-income securities, which are rated, at the time of
purchase, BBB- or higher by S&P Global Ratings ("S&P Global") or Baa3 or
higher by Moody's Investors Service, Inc. ("Moody's").
The fixed-income securities in which
the Account invests include securities issued or guaranteed by the U.S.
government or its agencies or instrumentalities (including collateralized
mortgage obligations); asset-backed securities or mortgage-backed securities
(securitized products); corporate bonds; and securities issued or guaranteed by
foreign governments payable in U.S. dollars. The Account also invests in foreign
securities, and up to 20% of its assets in below investment grade bonds
(sometimes called “high yield bonds” or "junk bonds") which are rated at the
time of purchase Ba1 or lower by Moody's and BB+ or lower by S&P Global (if
the bond has been rated by only one of those agencies, that rating will
determine whether the bond is below investment grade; if the bond has not been
rated by either of those agencies, those selecting such investments will
determine whether the bond is of a quality comparable to those rated below
investment grade). The Account is not managed to a particular maturity. Under
normal circumstances, the Account maintains an average portfolio duration that
is within ±25% of the duration of the Bloomberg Barclays U.S. Aggregate Bond
Index, which as of December 31, 2017 was 5.98 years.
The Account actively trades
portfolio securities and enters into dollar roll transactions which may involve
leverage. The Account utilizes derivative strategies for hedging or managing
fixed income exposure. A derivative is a financial arrangement, the value of
which is derived from, or based on, a traditional security, asset, or market
index. Specifically, the Account invests in Treasury futures or interest rate
swaps to manage the fixed-income exposure (including for hedging purposes) and
credit default swaps to increase or decrease, in an efficient manner, exposures
to certain sectors or individual issuers.
During the fiscal year ended
December 31, 2017, the average ratings of the Account's fixed-income assets,
based on market value at each month-end, were as follows (all ratings are by
Moody's):
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47.00% in securities rated
Aaa |
8.24% in securities rated
Ba |
0.03% in securities rated
C |
3.94% in securities rated
Aa |
4.58% in securities rated
B |
0.00% in securities rated
D |
11.27% in securities rated
A |
0.91% in securities rated
Caa |
0.70% in securities not
rated |
23.32% in securities rated
Baa |
0.01% in securities rated
Ca |
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Principal
Risks
The value of your investment in the
Account changes with the value of the Account's investments. Many factors affect
that value, and it is possible to lose money by investing in the Account. An
investment in the Account is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. The principal risks of investing in the Account, 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. 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.
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Credit
Default Swaps.
Credit default swaps involve special risks in addition to those associated
with swaps generally because they are difficult to value, are highly
susceptible to liquidity and credit risk, and generally pay a return to
the party that has paid the premium only in the event of an actual default
by the issuer of the underlying obligation (as opposed to a credit
downgrade or other indication of financial difficulty). The protection
“buyer” in a credit default contract may be obligated to pay the
protection “seller” an upfront payment or a periodic stream of payments
over the term of the contract provided generally that no credit event on a
reference obligation has occurred. If a credit event occurs, the seller
generally must pay the buyer the “par value” (full notional value) of the
swap in exchange for an equal face amount of deliverable obligations of
the reference entity described in the swap, or the seller may be required
to deliver the related net cash amount, if the swap is cash settled. The
Fund may be either the buyer or seller in the
transaction. |
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Currency
Contracts.
Derivatives related to currency contracts involve the specific risk of
government action through exchange controls that would restrict the
ability of the fund to deliver or receive
currency. |
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Futures and
Swaps. Futures
and swaps 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 or swap; possible lack of a liquid secondary
market for a future or swap and the resulting inability to close a future
or swap 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. |
Fixed-Income
Securities Risk. Fixed-income securities are subject
to interest rate, credit quality, and liquidity risks. The market value of
fixed-income securities generally declines when interest rates rise, and
increased interest rates may adversely affect the liquidity of certain
fixed-income securities. Moreover, an issuer of fixed-income securities could
default on its payment obligations due to increased interest rates or for other
reasons.
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).
Hedging
Risk. A fund that
implements a hedging strategy using derivatives and/or securities could expose
the fund to the risk that can arise when a change in the value of a hedge does
not match a change in the value of the asset it hedges. In other words, the
change in value of the hedge could move in a direction that does not match the
change in value of the underlying asset, resulting in a risk of loss to the
fund.
High Yield
Securities Risk. High
yield fixed-income securities (commonly referred to as "junk bonds") are subject
to greater credit quality risk than higher rated fixed-income securities and
should be considered speculative.
Leverage
Risk.
Leverage created by
borrowing or certain types of transactions or investments may impair the fund’s
liquidity, cause it to liquidate positions at an unfavorable time, increase
volatility of the fund’s net asset value, or diminish the fund’s
performance.
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, which means funds with
longer average portfolio durations may be more volatile than those with shorter
durations.
Portfolio
Turnover (Active Trading) Risk. High portfolio turnover (more than
100%) caused by actively trading portfolio securities may result in accelerating
the realization of taxable gains and losses, lower fund performance and
increased brokerage costs.
Real Estate
Securities Risk. Investing in real estate securities
subjects the fund to the risks associated with the real estate market (which are
similar to the risks associated with direct ownership in real estate), including
declines in real estate values, loss due to casualty or condemnation, property
taxes, interest rate changes, increased expenses, cash flow of underlying real
estate assets, regulatory changes (including zoning, land use and rents), and
environmental problems, as well as to the risks related to 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, result in changes to expense
ratios and increased expenses, and adversely affect underlying fund performance.
Moreover, a fund of fund's redemptions or reallocations among share classes of
an underlying fund may result in changes to the expense ratios of affected
classes, which may increase the expenses paid by shareholders of the class that
experienced the redemption.
Securitized
Products Risk. Investments in securitized products
are subject to risks similar to traditional fixed income securities, such as
credit, interest rate, liquidity, prepayment, extension, and default risk, as
well as additional risks associated with the nature of the assets and the
servicing of those assets. Unscheduled prepayments on securitized products 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.
Performance
The following information provides
some indication of the risks of investing in the Account. Past performance is
not necessarily an indication of how the Account will perform in the future. You
may get updated performance information by calling 1-800-222-5852.
The bar chart shows changes in the
performance of the Account's Class 1 shares from year to year. The table shows
how the Account's average annual returns for 1, 5, and 10 years (or, if shorter,
the life of the Account) compare with those of one or more broad measures of
market performance. Performance figures for the Account do not include any
separate account expenses, cost of insurance, or other contract-level expenses;
total returns for the Account would be lower if such expenses were
included.
For periods prior to the inception
date of Class 2 shares (May 1, 2015), the performance shown in the table for
Class 2 shares is that of the Account's Class 1 shares, adjusted to reflect the
fees and expenses of the Class 2 shares. These adjustments result in performance
for such periods that is no higher than the historical performance of the Class
1 shares.
Total Returns as
of December 31
|
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q3
'09 |
9.32 |
% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q4
'08 |
(8.24 |
)% |
|
|
|
|
|
Average
Annual Total Returns |
For the
periods ended December 31, 2017 |
1
Year |
5
Years |
10
Years |
Core Plus
Bond Account - Class 1 |
4.81% |
2.52% |
3.86% |
Core Plus
Bond Account - Class 2 |
4.50% |
2.25% |
3.59% |
Bloomberg Barclays U.S.
Aggregate Bond Index (reflects no deduction for fees, expenses, or
taxes) |
3.54% |
2.10% |
4.01% |
Management
Investment
Advisor and Portfolio Managers:
Principal Global Investors,
LLC
|
|
• |
William C. Armstrong (since
2000), Portfolio Manager |
|
|
• |
Tina Paris (since 2015),
Portfolio Manager |
|
|
• |
Timothy R. Warrick (since
2000), Portfolio Manager |
Tax
Information
The Fund intends to comply with
applicable variable asset diversification regulations. Taxation to you will
depend on what you do with your variable life insurance or variable annuity
contract. See your variable product prospectus for information about the tax
implications of investing in the Accounts.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, to recommend one Account or share class of the Fund over another
Account or share class, or to recommend one variable annuity, variable life
insurance policy or mutual fund over another. Ask your salesperson or visit your
financial intermediary's website for more information.
DIVERSIFIED
BALANCED ACCOUNT
|
|
Objective: |
The Account seeks to provide
as high a level of total return (consisting of reinvested income and
capital appreciation) as is consistent with reasonable
risk. |
Fees and Expenses
of the Account
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Account. These fees
and expenses do not reflect the fees and expenses of any variable insurance
contract that may invest in the Account and would be higher if they
did.
Annual Account
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
|
Class
1 |
Class
2 |
Management Fees |
0.05% |
0.05% |
Distribution and/or Service
(12b-1) Fees |
N/A |
0.25% |
Other Expenses |
—% |
—% |
Acquired Fund Fees and
Expenses |
0.24% |
0.24% |
Total Annual
Account Operating Expenses |
0.29% |
0.54% |
Example
This Example is intended to help you
compare the cost of investing in the Account with the cost of investing in other
mutual funds.
The Example assumes that you invest
$10,000 in the Account for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Account's operating
expenses remain the same. If separate account expenses and contract level
expenses were included, expenses would be higher. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
Diversified
Balanced Account - Class 1 |
$30 |
$93 |
$163 |
$368 |
Diversified
Balanced Account - Class 2 |
55 |
173 |
302 |
677 |
Portfolio
Turnover
As a fund of funds, the Account does
not pay transaction costs, such as commissions, when it buys and sells shares of
underlying funds (or “turns over” its portfolio). An underlying fund does pay
transaction costs when it buys and sells portfolio securities, and a higher
portfolio turnover may indicate higher transaction costs. These costs, which are
not reflected in annual account operating expenses or in the examples, affect
the performance of the underlying fund and the Account. During its most recent
fiscal year, the Account's portfolio turnover rate was 13.9% of the average value of its
portfolio.
Principal
Investment Strategies
The Account operates as a fund of
funds and invests in funds and exchange-traded funds ("ETFs") of Principal
Funds, Inc., PVC, Principal Exchange-Traded Funds, and other fund complexes
(collectively, the "Underlying Funds"). The Account generally allocates
approximately 50% of its assets to equity index Underlying Funds to gain broad
market capitalization exposure to both U.S. and non-U.S investments and
approximately 50% to fixed-income index Underlying Funds for intermediate
duration fixed-income exposure. The asset class diversification of the Account
is designed to moderate overall price volatility and cushion severe losses in
any one investment sector.
The Account's assets are allocated
among Underlying Funds in accordance with the Account's investment objective and
based on qualitative and quantitative analyses and the relative market
valuations of the Underlying Funds. Without shareholder approval, the Advisor
may alter the percentage ranges and/or substitute or remove Underlying Funds
when it deems appropriate. The Account is re-balanced monthly.
The Underlying Funds utilize
derivative strategies. A derivative is a financial arrangement, the value of
which is derived from, or based on, a traditional security, asset, or market
index. Specifically, the Underlying Funds invest in equity index futures and
ETFs to manage the equity exposure.
Principal
Risks
The value of your investment in the
Account changes with the value of the Account's investments. Many factors affect
that value, and it is possible to lose money by investing in the Account. An
investment in the Account is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
The principal risks of investing in
the Account that are inherent in the fund of funds are:
Fund of Funds
Risk. Account
shareholders bear indirectly their proportionate share of the expenses of the
Underlying Funds in which the Account invests. The Account's selection and
weighting of asset classes and allocation of investments in Underlying Funds may
cause it to underperform other funds with a similar investment objective. The
Account's performance and risks correspond directly to the performance and risks
of the Underlying Funds in which it invests, proportionately in accordance with
the weightings of such investments, and there is no assurance that the
Underlying Funds will achieve their investment objectives. Management of the
Account entails potential conflicts of interest: the Account invests in
affiliated Underlying Funds; and the Advisor and its affiliates may earn
different fees from different Underlying Funds and may have an incentive to
allocate more Account assets to Underlying Funds from which they receive higher
fees.
Principal Risks
due to the Account's Investments in Underlying Funds
Derivatives
Risk. 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. |
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 market capitalization or style), 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 Risk. Investments in small and
medium sized companies may involve greater risk and price volatility than
investments 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 would cause the stock price to increase may not occur as
anticipated or at all. Moreover, a stock that appears to be undervalued
actually may be appropriately priced at a low level and therefore would
not be profitable for the fund. |
Fixed-Income
Securities Risk. Fixed-income securities are subject
to interest rate, credit quality, and liquidity risks. The market value of
fixed-income securities generally declines when interest rates rise, and
increased interest rates may adversely affect the liquidity of certain
fixed-income securities. Moreover, an issuer of fixed-income securities could
default on its payment obligations due to increased interest rates or for other
reasons.
Index Fund
Risk. An index fund has
operating and other expenses while an index does not. As a result, over time,
index funds tend to underperform the index. The correlation between fund
performance and index performance may also be affected by the type of passive
investment approach used by a fund (sampling or replication), changes in
securities markets, changes in the composition of the index, and the timing of
purchases and sales of fund shares.
Investment
Company Securities Risk. A fund that invests in another
investment company (for example, another fund or an exchange-traded fund
(“ETF”)) is subject to the risks associated with direct ownership of the
securities in which such investment company invests. Fund shareholders
indirectly bear their proportionate share of the expenses of each such
investment company.
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, which means funds with
longer average portfolio durations may be more volatile than those with shorter
durations.
Real Estate
Securities Risk. Investing in real estate securities
subjects the fund to the risks associated with the real estate market (which are
similar to the risks associated with direct ownership in real estate), including
declines in real estate values, loss due to casualty or condemnation, property
taxes, interest rate changes, increased expenses, cash flow of underlying real
estate assets, regulatory changes (including zoning, land use and rents), and
environmental problems, as well as to the risks related to 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, result in changes to expense
ratios and increased expenses, and adversely affect underlying fund
performance.
Securitized
Products Risk. Investments in securitized products
are subject to risks similar to traditional fixed income securities, such as
credit, interest rate, liquidity, prepayment, extension, and default risk, as
well as additional risks associated with the nature of the assets and the
servicing of those assets. Unscheduled prepayments on securitized products 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.
Performance
The following information provides
some indication of the risks of investing in the Account. Past performance is
not necessarily an indication of how the Account will perform in the future. You
may get updated performance information by calling 1-800-222-5852.
Using the historical performance of
the Account’s Class 2 shares, adjusted as described below, the bar chart shows
changes in the performance of the Account's Class 1 shares from year to year.
The table shows how the Account's average annual returns for 1, 5, and 10 years
(or, if shorter, the life of the Account) compare with those of one or more
broad measures of market performance. Performance figures for the Account do not
include any separate account expenses, cost of insurance, or other
contract-level expenses; total returns for the Account would be lower if such
expenses were included.
For periods prior to the inception
date of Class 1 Shares (May 1, 2017), the performance shown in the table for
Class 1 shares is that of the Account's Class 2 shares, adjusted to reflect the
fees and expenses of the Class 1 shares. However, where the
adjustment for fees and expenses results in performance for Class 1 that is
higher than the historical performance of the Class 2 shares, the historical
performance of Class 2 shares is used. These adjustments result in
performance for such periods that is no higher than the historical performance
of the Class 2 shares.
Life of Account results are measured
from the date the Account's shares were first sold (December 30,
2009).
Total Returns as
of December 31
|
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q3
'10 |
6.79 |
% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q3
'11 |
(6.34 |
)% |
|
|
|
|
|
Average
Annual Total Returns |
For the
periods ended December 31, 2017 |
1
Year |
5
Years |
Life of
Account |
Diversified
Balanced Account - Class 1 |
11.63% |
7.71% |
7.74% |
Diversified
Balanced Account - Class 2 |
11.43% |
7.67% |
7.72% |
Bloomberg Barclays U.S.
Aggregate Bond Index (reflects no deduction for fees, expenses, or
taxes) |
3.54% |
2.10% |
3.59% |
S&P 500 Index (reflects no
deduction for fees, expenses, or taxes) |
21.83% |
15.79% |
13.77% |
MSCI EAFE Index NR (reflects no
deduction for fees, expenses, or taxes) |
25.03% |
7.90% |
6.31% |
S&P Midcap 400 Index
(reflects no deduction for fees, expenses, or taxes) |
16.24% |
15.01% |
14.30% |
S&P Smallcap 600 Index
(reflects no deduction for fees, expenses, or taxes) |
13.23% |
15.99% |
15.06% |
Diversified Balanced Custom
Index (reflects no deduction for fees, expenses, or taxes) |
12.06% |
8.36% |
8.40% |
The Bloomberg Barclays U.S.
Aggregate Bond Index is used to show performance of domestic, taxable
fixed-income securities performance. The S&P 500 Index is used to show large
cap U.S. equity market performance. The MSCI EAFE Index NR is used to show
international stock performance. The S&P Midcap 400 Index is used to show
mid cap U.S. equity market performance. The S&P Smallcap 600 Index is used
to show small cap U.S. equity market performance. The custom index (as defined
below) is used to show the performance of the various asset classes used by the
Account, and the Average Annual Total Returns table shows performance of the
components of the custom index. The weightings for the Diversified Balanced
Custom Index are 50% Bloomberg Barclays U.S. Aggregate Bond Index, 35% S&P
500 Index, 7% MSCI EAFE Index NR, 4% S&P Midcap 400 Index, and 4% S&P
Smallcap 600 Index.
Management
Investment
Advisor and Portfolio Managers:
Principal Global Investors,
LLC
|
|
• |
James W. Fennessey (since
2009), Portfolio Manager |
|
|
• |
Randy L. Welch (since 2009),
Portfolio Manager |
Tax
Information
The Fund intends to comply with
applicable variable asset diversification regulations. Taxation to you will
depend on what you do with your variable life insurance or variable annuity
contract. See your variable product prospectus for information about the tax
implications of investing in the Accounts.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, to recommend one Account or share class of the Fund over another
Account or share class, or to recommend one variable annuity, variable life
insurance policy or mutual fund over another. Ask your salesperson or visit your
financial intermediary's website for more information.
DIVERSIFIED
BALANCED MANAGED VOLATILITY ACCOUNT
|
|
Objective: |
The Account seeks to provide
as high a level of total return (consisting of reinvested income and
capital appreciation) as is consistent with reasonable risk, with an
emphasis on managing volatility. |
Fees and Expenses
of the Account
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Account. These fees
and expenses do not reflect the fees and expenses of any variable insurance
contract that may invest in the Account and would be higher if they
did.
Annual Account
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
Class
2 |
Management Fees |
0.05% |
Distribution and/or Service
(12b-1) Fees |
0.25% |
Other Expenses |
0.01% |
Acquired Fund Fees and Expenses
|
0.31% |
Total Annual
Account Operating Expenses |
0.62% |
Expense Reimbursement
(1) |
—% |
Total Annual
Account Operating Expenses after Expense Reimbursement |
0.62% |
|
|
(1)
Principal
Global Investors, LLC ("PGI"), the investment advisor, has contractually
agreed to limit the Account’s expenses by paying, if necessary, expenses
normally payable by the Account, (excluding interest expense, expenses
related to fund investments, acquired fund fees and expenses, and other
extraordinary expenses) to maintain a total level of operating expenses
(expressed as a percent of average net assets on an annualized basis) not
to exceed 0.31% for Class 2 shares. It is expected that the expense limit
will continue through the period ending April 30, 2019; however, Principal
Variable Contracts Funds, Inc. and PGI, the parties to the agreement, may
mutually agree to terminate the expense limit prior to the end of the
period. |
Example
This Example is intended to help you
compare the cost of investing in the Account with the cost of investing in other
mutual funds.
The Example assumes that you invest
$10,000 in the Account for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Account’s operating
expenses remain the same. If separate account expenses and contract level
expenses were included, expenses would be higher. The calculation of costs takes
into account any applicable contractual fee waivers and/or expense
reimbursements for the period noted in the table above. Although your actual
costs may be higher or lower, based on these assumptions your costs would
be:
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
Diversified
Balanced Managed Volatility Account - Class 2 |
$63 |
$199 |
$346 |
$774 |
Portfolio
Turnover
As a fund of funds, the Account does
not pay transaction costs, such as commissions, when it buys and sells shares of
underlying funds (or “turns over” its portfolio). An underlying fund does pay
transaction costs when it buys and sells portfolio securities, and a higher
portfolio turnover may indicate higher transaction costs. These costs, which are
not reflected in annual account operating expenses or in the examples, affect
the performance of the underlying fund and the Account. During its most recent
fiscal year, the Account's portfolio turnover rate was 13.6% of the average value of its
portfolio.
Principal
Investment Strategies
The Account operates as a fund of
funds and invests in funds and exchange-traded funds ("ETFs") of Principal
Funds, Inc., PVC, Principal Exchange-Traded Funds and other fund complexes
(collectively, the "Underlying Funds"). The Account generally allocates
approximately 50% of its assets to equity index Underlying Funds to gain broad
market capitalization exposure to both U.S. and non-U.S investments and
approximately 50% to fixed-income index Underlying Funds for intermediate
duration fixed-income exposure. The asset class diversification of the Account
is designed to moderate overall price volatility and cushion severe losses in
any one investment sector.
The Account’s assets are allocated
among Underlying Funds in accordance with the Account's investment objective and
based on qualitative and quantitative analyses and the relative market
valuations of the Underlying Funds.
Without shareholder approval, the
Advisor may alter the percentage ranges and/or substitute or remove Underlying
Funds when it deems appropriate. The Account is re-balanced
monthly.
The Underlying Funds utilize
derivative strategies. A derivative is a financial arrangement, the value of
which is derived from, or based on, a traditional security, asset, or market
index. Specifically, the Underlying Funds invest in equity index futures and
ETFs to manage the equity exposure, as well as vertical call spreads and
vertical put spreads as part of an active strategy intended to reduce
volatility. Vertical spreads are the simultaneous purchase and sale of two
options of the same type with the same expiration date but two different strike
prices. The strike price is the fixed price at which the owner of the option can
buy (in the case of a call), or sell (in the case of a put), the underlying
security.
Principal
Risks
The value of your investment in the
Account changes with the value of the Account's investments. Many factors affect
that value, and it is possible to lose money by investing in the Account. An
investment in the Account is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
The principal risks of investing in
the Account that are inherent in the fund of funds are:
Fund of Funds
Risk. Account
shareholders bear indirectly their proportionate share of the expenses of
Underlying Funds in which the Account invests. The Account's selection and
weighting of asset classes and allocation of investments in Underlying Funds may
cause it to underperform other funds with a similar investment objective. The
Account's performance and risks correspond directly to the performance and risks
of the Underlying Funds in which it invests, proportionately in accordance with
the weightings of such investments, and there is no assurance that the
Underlying Funds will achieve their investment objectives. Management of the
Account entails potential conflicts of interest: the Account invests in
affiliated Underlying Funds; and the Advisor and its affiliates may earn
different fees from different Underlying Funds and may have an incentive to
allocate more Account assets to Underlying Funds from which they receive higher
fees.
Principal Risks
due to the Account's Investments in Underlying Funds
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. 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. |
|
|
• |
Options.
Options involve
specific risks, including: imperfect correlation between the change in
market value of the instruments held by the fund and the price of the
options, counterparty risk, difference in trading hours for the options
markets and the markets for the underlying securities (rate movements can
take place in the underlying markets that cannot be reflected in the
options markets), and an insufficient liquid secondary market for
particular options. |
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 market capitalization or style), 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 Risk. Investments in small and
medium sized companies may involve greater risk and price volatility than
investments 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 would cause the stock price to increase may not occur as
anticipated or at all. Moreover, a stock that appears to be undervalued
actually may be appropriately priced at a low level and therefore would
not be profitable for the fund. |
Fixed-Income
Securities Risk. Fixed-income securities are subject
to interest rate, credit quality, and liquidity risks. The market value of
fixed-income securities generally declines when interest rates rise, and
increased interest rates may adversely affect the liquidity of certain
fixed-income securities. Moreover, an issuer of fixed-income securities could
default on its payment obligations due to increased interest rates or for other
reasons.
Hedging
Risk. A fund that
implements a hedging strategy using derivatives and/or securities could expose
the fund to the risk that can arise when a change in the value of a hedge does
not match a change in the value of the asset it hedges. In other words, the
change in value of the hedge could move in a direction that does not match the
change in value of the underlying asset, resulting in a risk of loss to the
fund.
Index Fund
Risk. An index fund has
operating and other expenses while an index does not. As a result, over time,
index funds tend to underperform the index. The correlation between fund
performance and index performance may also be affected by the type of passive
investment approach used by a fund (sampling or replication), changes in
securities markets, changes in the composition of the index, and the timing of
purchases and sales of fund shares.
Investment
Company Securities Risk. A fund that invests in another
investment company (for example, another fund or an exchange-traded fund
(“ETF”)) is subject to the risks associated with direct ownership of the
securities in which such investment company invests. Fund shareholders
indirectly bear their proportionate share of the expenses of each such
investment company.
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, which means funds with
longer average portfolio durations may be more volatile than those with shorter
durations.
Real Estate
Securities Risk. Investing in real estate securities
subjects the fund to the risks associated with the real estate market (which are
similar to the risks associated with direct ownership in real estate), including
declines in real estate values, loss due to casualty or condemnation, property
taxes, interest rate changes, increased expenses, cash flow of underlying real
estate assets, regulatory changes (including zoning, land use and rents), and
environmental problems, as well as to the risks related to 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, result in changes to expense
ratios and increased expenses, and adversely affect underlying fund
performance.
Securitized
Products Risk. Investments in securitized products
are subject to risks similar to traditional fixed income securities, such as
credit, interest rate, liquidity, prepayment, extension, and default risk, as
well as additional risks associated with the nature of the assets and the
servicing of those assets. Unscheduled prepayments on securitized products 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.
Volatility
Mitigation Risk. Volatility mitigation
strategies may increase fund transaction costs, which could increase losses or
reduce gains. These strategies may not protect the fund from market
declines and may reduce the fund's participation in market gains.
Performance
The following information provides
some indication of the risks of investing in the Account. Past performance is
not necessarily an indication of how the Account will perform in the future. You
may get updated performance information by calling 1-800-222-5852.
The bar chart shows changes in the
Account's performance from year to year. The table shows how the Account's
average annual returns for 1, 5, and 10 years (or, if shorter, the life of the
Account) compare with those of one or more broad measures of market performance.
Performance figures for the Accounts do not include any separate account
expenses, cost of insurance, or other contract-level expenses; total returns for
the Accounts would be lower if such expenses were included.
Life of Account returns are measured
from the date the Account's shares were first sold (October 31, 2013).
Total Returns as
of December 31
|
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q4
'17 |
2.94 |
% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q3
'15 |
(3.03 |
)% |
|
|
|
|
Average
Annual Total Returns |
For the
periods ended December 31, 2017 |
1
Year |
Life of
Account |
Diversified
Balanced Managed Volatility Account - Class 2 |
10.90% |
6.19% |
Bloomberg Barclays U.S.
Aggregate Bond Index (reflects no deduction for fees, expenses, or
taxes) |
3.54% |
2.80% |
S&P 500 Index (reflects no
deduction for fees, expenses, or taxes) |
21.83% |
12.95% |
MSCI EAFE Index NR (reflects no
deduction for fees, expenses, or taxes) |
25.03% |
4.85% |
S&P Midcap 400 Index
(reflects no deduction for fees, expenses, or taxes) |
16.24% |
11.50% |
S&P Smallcap 600 Index
(reflects no deduction for fees, expenses, or taxes) |
13.23% |
11.52% |
Diversified Balanced Managed
Volatility Custom Index (reflects no deduction for fees, expenses, or
taxes) |
12.06% |
7.27% |
The Bloomberg Barclays U.S.
Aggregate Bond Index is used to show performance of domestic, taxable
fixed-income securities performance. The S&P 500 Index is used to show large
cap U.S. equity market performance. The MSCI EAFE Index NR is used to show
international stock performance. The S&P Midcap 400 Index is used to show
mid cap U.S. equity market performance. The S&P Smallcap 600 Index is used
to show small cap U.S. equity market performance. The custom index (as defined
below) is used to show the performance of the various asset classes used by the
Account, and the Average Annual Total Returns table shows performance of the
components of the custom index. The weightings for the Diversified Balanced
Managed Volatility Custom Index are 50% Bloomberg Barclays U.S. Aggregate Bond
Index, 35% S&P 500 Index, 7% MSCI EAFE Index NR, 4% S&P Midcap 400
Index, and 4% S&P Smallcap 600 Index.
Management
Investment
Advisor and Portfolio Managers:
Principal Global Investors,
LLC
|
|
• |
James W. Fennessey (since
2013), Portfolio Manager |
|
|
• |
Randy L. Welch (since 2013),
Portfolio Manager |
Tax
Information
The Fund intends to comply with
applicable variable asset diversification regulations. Taxation to you will
depend on what you do with your variable life insurance or variable annuity
contract. See your variable product prospectus for information about the tax
implications of investing in the Accounts.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, to recommend one Account or share class of the Fund over another
Account or share class, or to recommend one variable annuity, variable life
insurance policy or mutual fund over another. Ask your salesperson or visit your
financial intermediary's website for more information.
DIVERSIFIED
BALANCED VOLATILITY CONTROL ACCOUNT
|
|
Objective: |
The Account seeks to provide
as high a level of total return (consisting of reinvested income and
capital appreciation) as is consistent with reasonable risk, while seeking
to control volatility. |
Fees and Expenses
of the Account
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Account. These fees
and expenses do not reflect the fees and expenses of any variable insurance
contract that may invest in the Account and would be higher if they
did.
Annual Account
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
Class
2 |
Management Fees |
0.12% |
Distribution and/or Service
(12b-1) Fees |
0.25% |
Other Expenses |
0.03% |
Acquired Fund Fees and Expenses
|
0.19% |
Total Annual
Account Operating Expenses |
0.59% |
Expense Reimbursement
(1) |
(0.01)% |
Total Annual
Account Operating Expenses after Expense Reimbursement |
0.58% |
|
|
(1)
Principal
Global Investors, LLC ("PGI"), the investment advisor, has contractually
agreed to limit the Account's expenses by paying, if necessary, expenses
normally payable by the Account, (excluding interest expense, expenses
related to fund investments, acquired fund fees and expenses, and other
extraordinary expenses) to maintain a total level of operating expenses
(expressed as a percent of average net assets on an annualized basis) not
to exceed 0.39% for Class 2 shares. It is expected that the expense limit
will continue through the period ending April 30, 2019; however, Principal
Variable Contracts Funds, Inc. and PGI, the parties to the agreement, may
mutually agree to terminate the expense limit prior to the end of the
period. |
Example
This Example is intended to help you
compare the cost of investing in the Account with the cost of investing in other
mutual funds.
The Example assumes that you invest
$10,000 in the Account for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Account’s operating
expenses remain the same. If separate account expenses and contract level
expenses were included, expenses would be higher. The calculation of costs takes
into account any applicable contractual fee waivers and/or expense
reimbursements for the period noted in the table above. Although your actual
costs may be higher or lower, based on these assumptions your costs would
be:
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
Diversified
Balanced Volatility Control Account - Class 2 |
$59 |
$188 |
$328 |
$737 |
Portfolio
Turnover
As a fund of funds, the Account does
not pay transaction costs, such as commissions, when it buys and sells shares of
underlying funds (or “turns over” its portfolio). An underlying fund does pay
transaction costs when it buys and sells portfolio securities, and a higher
portfolio turnover may indicate higher transaction costs. These costs, which are
not reflected in annual account operating expenses or in the examples, affect
the performance of the underlying fund and the Account. From March 30, 2017, the
date operations commenced, through December 31, 2017, the Account's annualized
portfolio turnover rate was 8.0% of the average value of its
portfolio.
Principal
Investment Strategies
The Account operates as a fund of
funds and invests in funds and exchange-traded funds ("ETFs") of Principal
Funds, Inc., PVC, Principal Exchange-Traded Funds and other fund complexes
(collectively, the “Underlying Funds”). The Account also invests in cash and
cash equivalents (as investments and/or to serve as margin or collateral for
derivatives positions) and derivative instruments (primarily exchange-traded
futures). A derivative is a financial arrangement, the value of which is derived
from, or based on, a traditional security, asset, or market index.
The Account uses a systematic
approach to identify volatility signals in the market and determine whether
equity market volatility is below or above average. During periods of lower
equity market volatility, the Account generally allocates approximately 50% of
its assets to equity index Underlying Funds and long positions in ETFs and
exchange-traded futures to gain broad market capitalization exposure to both
U.S. and non-U.S. equity investments and approximately 50% to fixed-income
Underlying Funds for intermediate duration fixed-income exposure.
During periods of higher equity
market volatility, the Account implements a volatility control strategy to hedge
its equity exposure. Specifically, the Account invests in cash and/or cash
equivalents such as high quality short-term money market investments and/or
takes short positions in exchange-traded futures.
The Account's assets are allocated
among Underlying Funds in accordance with the Account's investment objective and
based on qualitative and quantitative analyses and the relative market
valuations of the Underlying Funds. Without shareholder approval, the Advisor
may alter the percentage ranges and strategy allocations and/or substitute or
remove Underlying Funds when it deems appropriate. For example, during periods
of higher equity market volatility, the allocations to the equity Underlying
Funds might be reduced. The asset class diversification of the Account is
designed to moderate overall price volatility and cushion severe losses in any
one investment sector.
Principal
Risks
The value of your investment in the
Account changes with the value of the Account's investments. Many factors affect
that value, and it is possible to lose money by investing in the Account. An
investment in the Account is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
The principal risks of investing in
the Account that are inherent in the fund of funds, in alphabetical order,
are:
Fund of Funds
Risk. Account
shareholders bear indirectly their proportionate share of the expenses of the
Underlying Funds. The Account's selection and weighting of asset classes and
allocation of investments in Underlying Funds may cause it to underperform other
funds with a similar investment objective. The Account's performance and risks
correspond directly to the performance and risks of the Underlying Funds,
proportionately in accordance with the weightings of such investments, and there
is no assurance that the Underlying Funds will achieve their investment
objectives. Management of the Account entails potential conflicts of interest:
the Account invests in affiliated Underlying Funds; and the Advisor and its
affiliates may earn different fees from different Underlying Funds and may have
an incentive to allocate more Account assets to Underlying Funds from which they
receive higher fees.
Derivatives
Risk. 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. |
Hedging
Risk. A fund that
implements a hedging strategy using derivatives and/or securities could expose
the fund to the risk that can arise when a change in the value of a hedge does
not match a change in the value of the asset it hedges. In other words, the
change in value of the hedge could move in a direction that does not match the
change in value of the underlying asset, resulting in a risk of loss to the
fund.
Short Sale
Risk. A short sale
involves the sale by the fund of a security that it does not own with the hope
of purchasing the same security at a later date at a lower price. A fund may
also enter into a short derivative position through a futures contract or swap
agreement. If the price of the security or derivative has increased during this
time, then the fund will incur a loss equal to the increase in price from the
time that the short sale was entered into plus any premiums and interest paid to
the third party. Therefore, short sales involve the risk that losses may be
exaggerated, potentially losing more money than the actual cost of the
investment. Also, there is the risk that the third party to the short sale may
fail to honor its contract terms, causing a loss to the fund.
Volatility
Mitigation Risk. Volatility mitigation
strategies may increase fund transaction costs, which could increase losses or
reduce gains. These strategies may not protect the fund from market
declines and may reduce the fund's participation in market gains.
Principal Risks
due to the Account's Investments in Underlying Funds
Derivatives
Risk. 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. |
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 market capitalization or style), may underperform other
market segments or the equity markets as a whole.
|
|
• |
Small and
Medium Market Capitalization Companies Risk. Investments in small and
medium sized companies may involve greater risk and price volatility than
investments in larger, more mature
companies. |
Fixed-Income
Securities Risk. Fixed-income securities are subject
to interest rate, credit quality, and liquidity risks. The market value of
fixed-income securities generally declines when interest rates rise, and
increased interest rates may adversely affect the liquidity of certain
fixed-income securities. Moreover, an issuer of fixed-income securities could
default on its payment obligations due to increased interest rates or for other
reasons.
Index Fund
Risk. An index fund has
operating and other expenses while an index does not. As a result, over time,
index funds tend to underperform the index. The correlation between fund
performance and index performance may also be affected by the type of passive
investment approach used by a fund (sampling or replication), changes in
securities markets, changes in the composition of the index, and the timing of
purchases and sales of fund shares.
Investment
Company Securities Risk. A fund that invests in another
investment company (for example, another fund or an exchange-traded fund
(“ETF”)) is subject to the risks associated with direct ownership of the
securities in which such investment company invests. Fund shareholders
indirectly bear their proportionate share of the expenses of each such
investment company.
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, which means funds with
longer average portfolio durations may be more volatile than those with shorter
durations.
Real Estate
Securities Risk. Investing in real estate securities
subjects the fund to the risks associated with the real estate market (which are
similar to the risks associated with direct ownership in real estate), including
declines in real estate values, loss due to casualty or condemnation, property
taxes, interest rate changes, increased expenses, cash flow of underlying real
estate assets, regulatory changes (including zoning, land use and rents), and
environmental problems, as well as to the risks related to 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, result in changes to expense
ratios and increased expenses, and adversely affect underlying fund
performance.
Securitized
Products Risk. Investments in securitized products
are subject to risks similar to traditional fixed income securities, such as
credit, interest rate, liquidity, prepayment, extension, and default risk, as
well as additional risks associated with the nature of the assets and the
servicing of those assets. Unscheduled prepayments on securitized products 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.
Performance
No performance information is shown
below because the Account has not yet had a calendar year of performance. The
Account's performance is benchmarked against the Bloomberg Barclays U.S.
Aggregate Bond Index. Performance information provides some indication of the
risks of investing in the Account. Past performance is not necessarily an
indication of how the Account will perform in the future. You may get updated
performance information by calling 1-800-222-5852.
Management
Investment
Advisor and Portfolio Managers:
Principal Global Investors,
LLC
|
|
• |
James W. Fennessey (since
2017), Portfolio Manager |
|
|
• |
Thomas L. Kruchten (since
2017), Portfolio Manager |
|
|
• |
Mark R. Nebelung (since 2017),
Portfolio Manager |
|
|
• |
Jeffrey A. Schwarte (since
2017), Portfolio Manager |
|
|
• |
Randy L. Welch (since 2017),
Portfolio Manager |
Tax
Information
The Fund intends to comply with
applicable variable asset diversification regulations. Taxation to you will
depend on what you do with your variable life insurance or variable annuity
contract. See your variable product prospectus for information about the tax
implications of investing in the Accounts.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, to recommend one Account or share class of the Fund over another
Account or share class, or to recommend one variable annuity, variable life
insurance policy or mutual fund over another. Ask your salesperson or visit your
financial intermediary's website for more information.
DIVERSIFIED
GROWTH ACCOUNT
|
|
Objective: |
The Account seeks to provide
long-term capital appreciation. |
Fees and Expenses
of the Account
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Account. These fees
and expenses do not reflect the fees and expenses of any variable insurance
contract that may invest in the Account and would be higher if they
did.
Annual Account
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
Class
2 |
Management Fees |
0.05% |
Distribution and/or Service
(12b-1) Fees |
0.25% |
Other Expenses |
—% |
Acquired Fund Fees and
Expenses |
0.24% |
Total Annual
Account Operating Expenses |
0.54% |
Example
This Example is intended to help you
compare the cost of investing in the Account with the cost of investing in other
mutual funds.
The Example assumes that you invest
$10,000 in the Account for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Account’s operating
expenses remain the same. If separate account expenses and contract level
expenses were included, expenses would be higher. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
Diversified
Growth Account - Class 2 |
$55 |
$173 |
$302 |
$677 |
Portfolio
Turnover
As a fund of funds, the Account does
not pay transaction costs, such as commissions, when it buys and sells shares of
underlying funds (or “turns over” its portfolio). An underlying fund does pay
transaction costs when it buys and sells portfolio securities, and a higher
portfolio turnover may indicate higher transaction costs. These costs, which are
not reflected in annual account operating expenses or in the examples, affect
the performance of the underlying fund and the Account. During its most recent
fiscal year, the Account's portfolio turnover rate was 10.9% of the average value of its
portfolio.
Principal
Investment Strategies
The Account operates as a fund of
funds and invests in funds and exchange-traded funds ("ETFs") of Principal
Funds, Inc., PVC, Principal Exchange-Traded Funds, and other fund complexes
(collectively, the "Underlying Funds"). The Account generally allocates
approximately 65% of its assets to equity index Underlying Funds to gain broad
market capitalization exposure to both U.S. and non-U.S investments and
approximately 35% to fixed-income index Underlying Funds for intermediate
duration fixed-income exposure. The asset class diversification of the Account
is designed to moderate overall price volatility and cushion severe losses in
any one investment sector. The Account's assets are allocated among Underlying
Funds in accordance with the Account's investment objective and based on
qualitative and quantitative analyses and the relative market valuations of the
Underlying Funds. Without shareholder approval, the Advisor may alter the
percentage ranges and/or substitute or remove Underlying Funds when it deems
appropriate. The Account is re-balanced monthly.
The Underlying Funds utilize
derivative strategies. A derivative is a financial arrangement, the value of
which is derived from, or based on, a traditional security, asset, or market
index. Specifically, the Underlying Funds invest in equity index futures and
ETFs to manage the equity exposure.
Principal
Risks
The value of your investment in the
Account changes with the value of the Account's investments. Many factors affect
that value, and it is possible to lose money by investing in the Account. An
investment in the Account is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
The principal risks of investing in
the Account that are inherent in the fund of funds are:
Fund of Funds
Risk. Account
shareholders bear indirectly their proportionate share of the expenses of
Underlying Funds in which the Account invests. The Account's selection and
weighting of asset classes and allocation of investments in Underlying Funds may
cause it to underperform other funds with a similar investment objective. The
Account's performance and risks correspond directly to the performance and risks
of the Underlying Funds in which it invests, proportionately in accordance with
the weightings of such investments, and there is no assurance that the
Underlying Funds will achieve their investment objectives. Management of the
Account entails potential conflicts of interest: the Account invests in
affiliated Underlying Funds; and the Advisor and its affiliates may earn
different fees from different Underlying Funds and may have an incentive to
allocate more Account assets to Underlying Funds from which they receive higher
fees.
Principal Risks
due to the Account's Investments in Underlying Funds
Derivatives
Risk. 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. |
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 market capitalization or style), 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 Risk. Investments in small- and
medium-sized companies may involve greater risk and price volatility than
investments 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 would cause the stock price to increase may not occur as
anticipated or at all. Moreover, a stock that appears to be undervalued
actually may be appropriately priced at a low level and therefore would
not be profitable for the fund. |
Fixed-Income
Securities Risk. Fixed-income securities are subject
to interest rate, credit quality, and liquidity risks. The market value of
fixed-income securities generally declines when interest rates rise, and
increased interest rates may adversely affect the liquidity of certain
fixed-income securities. Moreover, an issuer of fixed-income securities could
default on its payment obligations due to increased interest rates or for other
reasons.
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
Risk. An index fund has
operating and other expenses while an index does not. As a result, over time,
index funds tend to underperform the index. The correlation between fund
performance and index performance may also be affected by the type of passive
investment approach used by a fund (sampling or replication), changes in
securities markets, changes in the composition of the index, and the timing of
purchases and sales of fund shares.
Investment
Company Securities Risk. A fund that invests in another
investment company (for example, another fund or an exchange-traded fund
(“ETF”)) is subject to the risks associated with direct ownership of the
securities in which such investment company invests. Fund shareholders
indirectly bear their proportionate share of the expenses of each such
investment company.
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, which means funds with
longer average portfolio durations may be more volatile than those with shorter
durations.
Real Estate
Securities Risk. Investing in real estate securities
subjects the fund to the risks associated with the real estate market (which are
similar to the risks associated with direct ownership in real estate), including
declines in real estate values, loss due to casualty or condemnation, property
taxes, interest rate changes, increased expenses, cash flow of underlying real
estate assets, regulatory changes (including zoning, land use and rents), and
environmental problems, as well as to the risks related to 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, result in changes to expense
ratios and increased expenses, and adversely affect underlying fund
performance.
Securitized
Products Risk. Investments in securitized products
are subject to risks similar to traditional fixed income securities, such as
credit, interest rate, liquidity, prepayment, extension, and default risk, as
well as additional risks associated with the nature of the assets and the
servicing of those assets. Unscheduled prepayments on securitized products 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.
Performance
The following information provides
some indication of the risks of investing in the Account. Past performance is
not necessarily an indication of how the Account will perform in the future. You
may get updated performance information by calling 1-800-222-5852.
The bar chart shows changes in the
Account's performance from year to year. The table shows how the Account's
average annual returns for 1, 5, and 10 years (or, if shorter, the life of the
Account) compare with those of one or more broad measures of market performance.
Performance figures for the Accounts do not include any separate account
expenses, cost of insurance, or other contract-level expenses; total returns for
the Accounts would be lower if such expenses were included.
Life of Account returns are measured
from the date the Account's shares were first sold (December 30,
2009).
Total Returns as
of December 31
|
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q3
'10 |
8.57 |
% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q3
'11 |
(9.31 |
)% |
|
|
|
|
|
Average
Annual Total Returns |
For the
periods ended December 31, 2017 |
1
Year |
5
Years |
Life of
Account |
Diversified
Growth Account - Class 2 |
14.21% |
9.49% |
9.09% |
S&P 500 Index (reflects no
deduction for fees, expenses, or taxes) |
21.83% |
15.79% |
13.77% |
Bloomberg Barclays U.S.
Aggregate Bond Index (reflects no deduction for fees, expenses, or
taxes) |
3.54% |
2.10% |
3.59% |
MSCI EAFE Index NR (reflects no
deduction for fees, expenses, or taxes) |
25.03% |
7.90% |
6.31% |
S&P Midcap 400 Index
(reflects no deduction for fees, expenses, or taxes) |
16.24% |
15.01% |
14.30% |
S&P Smallcap 600 Index
(reflects no deduction for fees, expenses, or taxes) |
13.23% |
15.99% |
15.06% |
Diversified Growth Custom Index
(reflects no deduction for fees, expenses, or taxes) |
14.78% |
10.18% |
9.72% |
The S&P 500 Index is used to
show large cap U.S. equity market performance. The Bloomberg Barclays U.S.
Aggregate Bond Index is used to show performance of domestic, taxable
fixed-income securities performance. The MSCI EAFE Index NR is used to show
international stock performance. The S&P Midcap 400 Index is used to show
mid cap U.S. equity market performance. The S&P Smallcap 600 Index is used
to show small cap U.S. equity market performance. The custom index (as defined
below) is used to show the performance of the various asset classes used by the
Account, and the Average Annual Total Returns table shows performance of the
components of the custom index. The weightings for the Diversified Growth Custom
Index are 45% S&P 500 Index, 35% Bloomberg Barclays U.S. Aggregate Bond
Index, 10% MSCI EAFE Index NR, 5% S&P Midcap 400 Index, and 5% S&P
Smallcap 600 Index.
Management
Investment
Advisor and Portfolio Managers:
Principal Global Investors,
LLC
|
|
• |
James W. Fennessey (since
2009), Portfolio Manager |
|
|
• |
Randy L. Welch (since 2009),
Portfolio Manager |
Tax
Information
The Fund intends to comply with
applicable variable asset diversification regulations. Taxation to you will
depend on what you do with your variable life insurance or variable annuity
contract. See your variable product prospectus for information about the tax
implications of investing in the Accounts.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, to recommend one Account or share class of the Fund over another
Account or share class, or to recommend one variable annuity, variable life
insurance policy or mutual fund over another. Ask your salesperson or visit your
financial intermediary's website for more information.
DIVERSIFIED
GROWTH MANAGED VOLATILITY ACCOUNT
|
|
Objective: |
The Account seeks to provide
long-term capital appreciation, with an emphasis on managing
volatility. |
Fees and Expenses
of the Account
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Account. These fees
and expenses do not reflect the fees and expenses of any variable insurance
contract that may invest in the Account and would be higher if they
did.
Annual Account
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
Class
2 |
Management Fees |
0.05% |
Distribution and/or Service
(12b-1) Fees |
0.25% |
Other Expenses |
—% |
Acquired Fund Fees and
Expenses |
0.34% |
Total Annual
Account Operating Expenses |
0.64% |
Expense Reimbursement
(1) |
—% |
Total Annual
Account Operating Expenses after Expense Reimbursement |
0.64% |
|
(1) Principal Global
Investors, LLC ("PGI"), the investment advisor, has contractually agreed
to limit the Account’s expenses by paying, if necessary, expenses normally
payable by the Account, (excluding interest expense, expenses related to
fund investments, acquired fund fees and expenses, and other extraordinary
expenses) to maintain a total level of operating expenses (expressed as a
percent of average net assets on an annualized basis) not to exceed 0.31%
for Class 2 shares. It is expected that the expense limit will continue
through the period ending April 30, 2019; however, Principal Variable
Contracts Funds, Inc. and PGI, the parties to the agreement, may mutually
agree to terminate the expense limit prior to the end of the period.
|
Example
This Example is intended to help you
compare the cost of investing in the Account with the cost of investing in other
mutual funds.
The Example assumes that you invest
$10,000 in the Account for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Account’s operating
expenses remain the same. If separate account expenses and contract level
expenses were included, expenses would be higher. The calculation of costs takes
into account any applicable contractual fee waivers and/or expense
reimbursements for the period noted in the table above. Although your actual
costs may be higher or lower, based on these assumptions your costs would
be:
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
Diversified
Growth Managed Volatility Account - Class 2 |
$65 |
$205 |
$357 |
$798 |
Portfolio
Turnover
As a fund of funds, the Account does
not pay transaction costs, such as commissions, when it buys and sells shares of
underlying funds (or “turns over” its portfolio). An underlying fund does pay
transaction costs when it buys and sells portfolio securities, and a higher
portfolio turnover may indicate higher transaction costs. These costs, which are
not reflected in annual account operating expenses or in the examples, affect
the performance of the underlying fund and the Account. During its most recent
fiscal year, the Account's portfolio turnover rate was 12.5% of the average value of its
portfolio.
Principal
Investment Strategies
The Account operates as a fund of
funds and invests in funds and exchange-traded funds ("ETFs") of Principal
Funds, Inc., PVC, Principal Exchange-Traded Funds and other fund complexes
(collectively, the "Underlying Funds"). The Account generally allocates
approximately 65% of its assets to equity index Underlying Funds to gain broad
market capitalization exposure to both U.S. and non-U.S investments and
approximately 35% to fixed-income index Underlying Funds for intermediate
duration fixed-income exposure. The asset class diversification of the Account
is designed to moderate overall price volatility and cushion severe losses in
any one investment sector.
The Account's assets are allocated
among Underlying Funds in accordance with the Account's investment objective and
based on qualitative and quantitative analyses and the relative market
valuations of the Underlying Funds. Without shareholder approval, the Advisor
may alter the percentage ranges and/or substitute or remove Underlying Funds
when it deems appropriate. The Account is re-balanced monthly.
The Underlying Funds utilize
derivative strategies. A derivative is a financial arrangement, the value of
which is derived from, or based on, a traditional security, asset, or market
index. Specifically, the Underlying Funds invest in equity index futures and
ETFs to manage the equity exposure, as well as vertical call spreads and
vertical put spreads as part of an active strategy intended to reduce
volatility. Vertical spreads are the simultaneous purchase and sale of two
options of the same type with the same expiration date but two different strike
prices. The strike price is the fixed price at which the owner of the option can
buy (in the case of a call), or sell (in the case of a put), the underlying
security.
Principal
Risks
The value of your investment in the
Account changes with the value of the Account's investments. Many factors affect
that value, and it is possible to lose money by investing in the Account. An
investment in the Account is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
The principal risks of investing in
the Account that are inherent in the fund of funds are:
Fund of Funds
Risk. Account
shareholders bear indirectly their proportionate share of the expenses of
Underlying Funds in which the Account invests. The Account's selection and
weighting of asset classes and allocation of investments in Underlying Funds may
cause it to underperform other funds with a similar investment objective. The
Account's performance and risks correspond directly to the performance and risks
of the Underlying Funds in which it invests, proportionately in accordance with
the weightings of such investments, and there is no assurance that the
underlying funds will achieve their investment objectives. Management of the
Account entails potential conflicts of interest: the Account invests in
affiliated Underlying Funds; and the Advisor and its affiliates may earn
different fees from different Underlying Funds and may have an incentive to
allocate more Account assets to Underlying Funds from which they receive higher
fees.
Principal Risks
due to the Account's Investments in Underlying Funds
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. 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. |
|
|
• |
Options.
Options involve
specific risks, including: imperfect correlation between the change in
market value of the instruments held by the fund and the price of the
options, counterparty risk, difference in trading hours for the options
markets and the markets for the underlying securities (rate movements can
take place in the underlying markets that cannot be reflected in the
options markets), and an insufficient liquid secondary market for
particular options. |
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 market capitalization or style), 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 Risk. Investments in small and
medium sized companies may involve greater risk and price volatility than
investments 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 would cause the stock price to increase may not occur as
anticipated or at all. Moreover, a stock that appears to be undervalued
actually may be appropriately priced at a low level and therefore would
not be profitable for the fund. |
Fixed-Income
Securities Risk. Fixed-income securities are subject
to interest rate, credit quality, and liquidity risks. The market value of
fixed-income securities generally declines when interest rates rise, and
increased interest rates may adversely affect the liquidity of certain
fixed-income securities. Moreover, an issuer of fixed-income securities could
default on its payment obligations due to increased interest rates or for other
reasons.
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).
Hedging
Risk. A fund that
implements a hedging strategy using derivatives and/or securities could expose
the fund to the risk that can arise when a change in the value of a hedge does
not match a change in the value of the asset it hedges. In other words, the
change in value of the hedge could move in a direction that does not match the
change in value of the underlying asset, resulting in a risk of loss to the
fund.
Index Fund
Risk. An index fund has
operating and other expenses while an index does not. As a result, over time,
index funds tend to underperform the index. The correlation between fund
performance and index performance may also be affected by the type of passive
investment approach used by a fund (sampling or replication), changes in
securities markets, changes in the composition of the index, and the timing of
purchases and sales of fund shares.
Investment
Company Securities Risk. A fund that invests in another
investment company (for example, another fund or an exchange-traded fund
(“ETF”)) is subject to the risks associated with direct ownership of the
securities in which such investment company invests. Fund shareholders
indirectly bear their proportionate share of the expenses of each such
investment company.
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, which means funds with
longer average portfolio durations may be more volatile than those with shorter
durations.
Real Estate
Securities Risk. Investing in real estate securities
subjects the fund to the risks associated with the real estate market (which are
similar to the risks associated with direct ownership in real estate), including
declines in real estate values, loss due to casualty or condemnation, property
taxes, interest rate changes, increased expenses, cash flow of underlying real
estate assets, regulatory changes (including zoning, land use and rents), and
environmental problems, as well as to the risks related to 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, result in changes to expense
ratios and increased expenses, and adversely affect underlying fund
performance.
Securitized
Products Risk. Investments in securitized products
are subject to risks similar to traditional fixed income securities, such as
credit, interest rate, liquidity, prepayment, extension, and default risk, as
well as additional risks associated with the nature of the assets and the
servicing of those assets. Unscheduled prepayments on securitized products 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.
Volatility
Mitigation Risk.
Volatility mitigation strategies may increase fund transaction costs, which
could increase losses or reduce gains. These strategies may not protect the fund
from market declines and may reduce the fund's participation in market
gains.
Performance
The following information provides
some indication of the risks of investing in the Account. Past performance is
not necessarily an indication of how the Account will perform in the future. You
may get updated performance information by calling 1-800-222-5852.
The bar chart shows changes in the
Account's performance from year to year. The table shows how the Account's
average annual returns for 1, 5, and 10 years (or, if shorter, the life of the
Account) compare with those of one or more broad measures of market performance.
Performance figures for the Accounts do not include any separate account
expenses, cost of insurance, or other contract-level expenses; total returns for
the Accounts would be lower if such expenses were included.
Life of Account returns are measured
from the date the Account's shares were first sold (October 31, 2013).
Total Returns as
of December 31
|
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q1
'17 |
3.66 |
% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q3
'15 |
(4.23 |
)% |
|
|
|
|
Average
Annual Total Returns |
For the
periods ended December 31, 2017 |
1
Year |
Life of
Account |
Diversified
Growth Managed Volatility Account - Class 2 |
13.34% |
7.30% |
S&P 500 Index (reflects no
deduction for fees, expenses, or taxes) |
21.83% |
12.95% |
Bloomberg Barclays U.S.
Aggregate Bond Index (reflects no deduction for fees, expenses, or
taxes) |
3.54% |
2.80% |
MSCI EAFE Index NR (reflects no
deduction for fees, expenses, or taxes) |
25.03% |
4.85% |
S&P Midcap 400 Index
(reflects no deduction for fees, expenses, or taxes) |
16.24% |
11.50% |
S&P Smallcap 600 Index
(reflects no deduction for fees, expenses, or taxes) |
13.23% |
11.52% |
Diversified Growth Managed
Volatility Custom Index (reflects no deduction for fees, expenses, or
taxes) |
14.78% |
8.52% |
The S&P 500 Index is used to
show large cap U.S. equity market performance. The Bloomberg Barclays U.S.
Aggregate Bond Index is used to show performance of domestic, taxable
fixed-income securities performance. The MSCI EAFE Index NR is used to show
international stock performance. The S&P Midcap 400 Index is used to show
mid cap U.S. equity market performance. The S&P Smallcap 600 Index is used
to show small cap U.S. equity market performance. The custom index (as defined
below) is used to show the performance of the various asset classes used by the
Account, and the Average Annual Total Returns table shows performance of the
components of the
custom index. The weightings for the
Diversified Growth Managed Volatility Custom Index are 45% S&P 500 Index,
35% Bloomberg Barclays U.S. Aggregate Bond Index, 10% MSCI EAFE Index NR, 5%
S&P Midcap 400 Index, and 5% S&P Smallcap 600 Index.
Management
Investment
Advisor and Portfolio Managers:
Principal Global Investors,
LLC
|
|
• |
James W. Fennessey (since
2013), Portfolio Manager |
|
|
• |
Randy L. Welch (since 2013),
Portfolio Manager |
Tax
Information
The Fund intends to comply with
applicable variable asset diversification regulations. Taxation to you will
depend on what you do with your variable life insurance or variable annuity
contract. See your variable product prospectus for information about the tax
implications of investing in the Accounts.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, to recommend one Account or share class of the Fund over another
Account or share class, or to recommend one variable annuity, variable life
insurance policy or mutual fund over another. Ask your salesperson or visit your
financial intermediary's website for more information.
DIVERSIFIED
GROWTH VOLATILITY CONTROL ACCOUNT
|
|
Objective: |
The Account seeks to provide
long-term capital appreciation, while seeking to control
volatility. |
Fees and Expenses
of the Account
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Account. These fees
and expenses do not reflect the fees and expenses of any variable insurance
contract that may invest in the Account and would be higher if they
did.
Annual Account
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
Class
2 |
Management Fees |
0.12% |
Distribution and/or Service
(12b-1) Fees |
0.25% |
Other Expenses |
0.01% |
Acquired Fund Fees and Expenses
|
0.20% |
Total Annual
Account Operating Expenses |
0.58% |
Expense Reimbursement
(1) |
—% |
Total Annual
Account Operating Expenses after Expense Reimbursement |
0.58% |
|
|
(1) Principal Global
Investors, LLC ("PGI"), the investment advisor, has contractually agreed
to limit the Account's expenses by paying, if necessary, expenses normally
payable by the Account, (excluding interest expense, expenses related to
fund investments, acquired fund fees and expenses, and other extraordinary
expenses) to maintain a total level of operating expenses (expressed as a
percent of average net assets on an annualized basis) not to exceed 0.39%
for Class 2 shares. It is expected that the expense limit will continue
through the period ending April 30, 2019; however, Principal Variable
Contracts Funds, Inc. and PGI, the parties to the agreement, may mutually
agree to terminate the expense limit prior to the end of the
period. |
Example
This Example is intended to help you
compare the cost of investing in the Account with the cost of investing in other
mutual funds.
The Example assumes that you invest
$10,000 in the Account for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Account’s operating
expenses remain the same. If separate account expenses and contract level
expenses were included, expenses would be higher. The calculation of costs takes
into account any applicable contractual fee waivers and/or expense
reimbursements for the period noted in the table above. Although your actual
costs may be higher or lower, based on these assumptions your costs would
be:
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
Diversified
Growth Volatility Control Account - Class 2 |
$59 |
$186 |
$324 |
$726 |
Portfolio
Turnover
As a fund of funds, the Account does
not pay transaction costs, such as commissions, when it buys and sells shares of
underlying funds (or “turns over” its portfolio). An underlying fund does pay
transaction costs when it buys and sells portfolio securities, and a higher
portfolio turnover may indicate higher transaction costs. These costs, which are
not reflected in annual account operating expenses or in the examples, affect
the performance of the underlying fund and the Account. From March 30, 2017, the
date operations commenced, through December 31, 2017, the Account's annualized
portfolio turnover rate was 0.9% of the average value of its
portfolio.
Principal
Investment Strategies
The Account operates as a fund of
funds and invests in funds and exchange-traded funds (“ETFs”) of Principal
Funds, Inc., PVC, Principal Exchange-Traded Funds, and other fund complexes
(collectively, the “Underlying Funds”). The Account also invests in cash and
cash equivalents (as investments and/or to serve as margin or collateral for
derivatives positions) and derivative instruments (primarily exchange-traded
futures). A derivative is a financial arrangement, the value of which is derived
from, or based on, a traditional security, asset, or market index.
The Account uses a systematic
approach to identify volatility signals in the market and determine whether
equity market volatility is below or above average. During periods of lower
equity market volatility, the Account generally allocates approximately 65% of
its assets to equity index Underlying Funds and long positions in ETFs and
exchange-traded futures to gain broad market capitalization exposure to both
U.S. and non-U.S. equity investments and approximately 35% to fixed-income
Underlying Funds for intermediate duration fixed-income exposure.
During periods of higher equity
market volatility, the Account implements a volatility control strategy to hedge
its equity exposure. Specifically, the Account invests in cash and/or cash
equivalents such as high quality short-term money market investments and/or
takes short positions in exchange-traded futures.
The Account's assets are allocated
among Underlying Funds in accordance with the Account's investment objective and
based on qualitative and quantitative analyses and the relative market
valuations of the Underlying Funds. Without shareholder approval, the Advisor
may alter the percentage ranges and strategy allocations and/or substitute or
remove Underlying Funds when it deems appropriate. For example, during periods
of higher equity market volatility, the allocations to the equity Underlying
Funds might be reduced. The asset class diversification of the Account is
designed to moderate overall price volatility and cushion severe losses in any
one investment sector.
Principal
Risks
The value of your investment in the
Account changes with the value of the Account's investments. Many factors affect
that value, and it is possible to lose money by investing in the Account. An
investment in the Account is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
The principal risks of investing in
the Account that are inherent in the fund of funds, in alphabetical order,
are:
Fund of Funds
Risk. Account
shareholders bear indirectly their proportionate share of the expenses of the
Underlying Funds. The Account's selection and weighting of asset classes and
allocation of investments in Underlying Funds may cause it to underperform other
funds with a similar investment objective. The Account's performance and risks
correspond directly to the performance and risks of the Underlying Funds,
proportionately in accordance with the weightings of such investments, and there
is no assurance that the Underlying Funds will achieve their investment
objectives. Management of the Account entails potential conflicts of interest:
the Account invests in affiliated Underlying Funds; and the Advisor and its
affiliates may earn different fees from different Underlying Funds and may have
an incentive to allocate more Account assets to Underlying Funds from which they
receive higher fees.
Derivatives
Risk. 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. |
Hedging
Risk. A fund that
implements a hedging strategy using derivatives and/or securities could expose
the fund to the risk that can arise when a change in the value of a hedge does
not match a change in the value of the asset it hedges. In other words, the
change in value of the hedge could move in a direction that does not match the
change in value of the underlying asset, resulting in a risk of loss to the
fund.
Short Sale
Risk. A short sale
involves the sale by the fund of a security that it does not own with the hope
of purchasing the same security at a later date at a lower price. A fund may
also enter into a short derivative position through a futures contract or swap
agreement. If the price of the security or derivative has increased during this
time, then the fund will incur a loss equal to the increase in price from the
time that the short sale was entered into plus any premiums and interest paid to
the third party. Therefore, short sales involve the risk that losses may be
exaggerated, potentially losing more money than the actual cost of the
investment. Also, there is the risk that the third party to the short sale may
fail to honor its contract terms, causing a loss to the fund.
Volatility
Mitigation Risk. Volatility mitigation
strategies may increase fund transaction costs, which could increase losses or
reduce gains. These strategies may not protect the fund from market declines and
may reduce the fund's participation in market gains.
Principal Risks
due to the Account's Investments in Underlying Funds
Derivatives
Risk. 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. |
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 market capitalization or style), may underperform other
market segments or the equity markets as a whole.
|
|
• |
Small and
Medium Market Capitalization Companies Risk. Investments in small and
medium sized companies may involve greater risk and price volatility than
investments in larger, more mature
companies. |
Fixed-Income
Securities Risk. Fixed-income securities are subject
to interest rate, credit quality, and liquidity risks. The market value of
fixed-income securities generally declines when interest rates rise, and
increased interest rates may adversely affect the liquidity of certain
fixed-income securities. Moreover, an issuer of fixed-income securities could
default on its payment obligations due to increased interest rates or for other
reasons.
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
Risk. An index fund has
operating and other expenses while an index does not. As a result, over time,
index funds tend to underperform the index. The correlation between fund
performance and index performance may also be affected by the type of passive
investment approach used by a fund (sampling or replication), changes in
securities markets, changes in the composition of the index, and the timing of
purchases and sales of fund shares.
Investment
Company Securities Risk. A fund that invests in another
investment company (for example, another fund or an exchange-traded fund
(“ETF”)) is subject to the risks associated with direct ownership of the
securities in which such investment company invests. Fund shareholders
indirectly bear their proportionate share of the expenses of each such
investment company.
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, which means funds with
longer average portfolio durations may be more volatile than those with shorter
durations.
Real Estate
Securities Risk. Investing in real estate securities
subjects the fund to the risks associated with the real estate market (which are
similar to the risks associated with direct ownership in real estate), including
declines in real estate values, loss due to casualty or condemnation, property
taxes, interest rate changes, increased expenses, cash flow of underlying real
estate assets, regulatory changes (including zoning, land use and rents), and
environmental problems, as well as to the risks related to 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, result in changes to expense
ratios and increased expenses, and adversely affect underlying fund
performance.
Securitized
Products Risk. Investments in securitized products
are subject to risks similar to traditional fixed income securities, such as
credit, interest rate, liquidity, prepayment, extension, and default risk, as
well as additional risks associated with the nature of the assets and the
servicing of those assets. Unscheduled prepayments on securitized products 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.
Performance
No performance information is shown
below because the Account has not yet had a calendar year of performance. The
Account's performance is benchmarked against the S&P 500 Index. Performance
information provides some indication of the risks of investing in the Account.
Past performance is not necessarily an indication of how the Account will
perform in the future. You may get updated performance information by calling
1-800-222-5852.
Management
Investment
Advisor and Portfolio Managers:
Principal Global Investors,
LLC
|
|
• |
James W. Fennessey (since
2017), Portfolio Manager |
|
|
• |
Thomas L. Kruchten (since
2017), Portfolio Manager |
|
|
• |
Mark R. Nebelung (since 2017),
Portfolio Manager |
|
|
• |
Jeffrey A. Schwarte (since
2017), Portfolio Manager |
|
|
• |
Randy L. Welch (since 2017),
Portfolio Manager |
Tax
Information
The Fund intends to comply with
applicable variable asset diversification regulations. Taxation to you will
depend on what you do with your variable life insurance or variable annuity
contract. See your variable product prospectus for information about the tax
implications of investing in the Accounts.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, to recommend one Account or share class of the Fund over another
Account or share class, or to recommend one variable annuity, variable life
insurance policy or mutual fund over another. Ask your salesperson or visit your
financial intermediary's website for more information.
DIVERSIFIED
INCOME ACCOUNT
|
|
Objective:
|
The Account seeks to provide a
high level of total return (consisting of reinvestment of income with some
capital appreciation). |
Fees and Expenses
of the Account
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Account. These fees
and expenses do not reflect the fees and expenses of any variable insurance
contract that may invest in the Account and would be higher if they
did.
Annual Account
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
Class
2 |
Management Fees |
0.05% |
Distribution and/or Service
(12b-1) Fees |
0.25% |
Other Expenses |
—% |
Acquired Fund Fees and Expenses
|
0.24% |
Total Annual
Account Operating Expenses |
0.54% |
Example
This Example is intended to help you
compare the cost of investing in the Account with the cost of investing in other
mutual funds.
The Example assumes that you invest
$10,000 in the Account for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Account's operating
expenses remain the same. If separate account expenses and contract level
expenses were included, expenses would be higher. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
Diversified
Income Account - Class 2 |
$55 |
$173 |
$302 |
$677 |
Portfolio
Turnover
As a fund of funds, the Account does
not pay transaction costs, such as commissions, when it buys and sells shares of
underlying funds (or “turns over” its portfolio). An underlying fund does pay
transaction costs when it buys and sells portfolio securities, and a higher
portfolio turnover may indicate higher transaction costs. These costs, which are
not reflected in annual account operating expenses or in the examples, affect
the performance of the underlying fund and the Account. During its most recent
fiscal year, the Account's portfolio turnover rate was 21.2% of the average value of its
portfolio.
Principal
Investment Strategies
The Account operates as a fund of
funds and invests in funds and exchange-traded funds ("ETFs") of Principal
Funds, Inc., PVC, Principal Exchange-Traded Funds, and other fund complexes
(collectively, the "Underlying Funds"). The Account generally allocates
approximately 35% of its assets to equity index Underlying Funds to gain broad
market capitalization exposure to both U.S. and non-U.S investments and
approximately 65% to fixed-income index Underlying Funds for intermediate
duration fixed-income exposure. The asset class diversification of the Account
is designed to moderate overall price volatility and cushion severe losses in
any one investment sector.
The Account's assets are allocated
among Underlying Funds in accordance with the Account's investment objective and
based on qualitative and quantitative analyses and the relative market
valuations of the Underlying Funds. Without shareholder approval, the Advisor
may alter the percentage ranges and/or substitute or remove Underlying Funds
when it deems appropriate. The Account is re-balanced monthly.
The Underlying Funds utilize
derivative strategies. A derivative is a financial arrangement, the value of
which is derived from, or based on, a traditional security, asset, or market
index. Specifically, the Underlying Funds invest in equity index futures and
ETFs to manage the equity exposure.
Principal
Risks
The value of your investment in the
Account changes with the value of the Account's investments. Many factors affect
that value, and it is possible to lose money by investing in the Account. An
investment in the Account is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
The principal risks of investing in
the Account that are inherent in the fund of funds are:
Fund of Funds
Risk. Account
shareholders bear indirectly their proportionate share of the expenses of
Underlying Funds in which the Account invests. The Account's selection and
weighting of asset classes and allocation of investments in Underlying Funds may
cause it to underperform other funds with a similar investment objective. The
Account's performance and risks correspond directly to the performance and risks
of the Underlying Funds in which it invests, proportionately in accordance with
the weightings of such investments, and there is no assurance that the
Underlying Funds will achieve their investment objectives. Management of the
Account entails potential conflicts of interest: the Account invests in
affiliated Underlying Funds; and the Advisor and its affiliates may earn
different fees from different Underlying Funds and may have an incentive to
allocate more Account assets to Underlying Funds from which they receive higher
fees.
Principal Risks
due to the Account's Investments in Underlying Funds
Derivatives
Risk. 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. |
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 market capitalization or style), 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 Risk. Investments in small and
medium sized companies may involve greater risk and price volatility than
investments 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 would cause the stock price to increase may not occur as
anticipated or at all. Moreover, a stock that appears to be undervalued
actually may be appropriately priced at a low level and therefore would
not be profitable for the fund. |
Fixed-Income
Securities Risk. Fixed-income securities are subject
to interest rate, credit quality, and liquidity risks. The market value of
fixed-income securities generally declines when interest rates rise, and
increased interest rates may adversely affect the liquidity of certain
fixed-income securities. Moreover, an issuer of fixed-income securities could
default on its payment obligations due to increased interest rates or for other
reasons.
Index Fund
Risk. An index fund has
operating and other expenses while an index does not. As a result, over time,
index funds tend to underperform the index. The correlation between fund
performance and index performance may also be affected by the type of passive
investment approach used by a fund (sampling or replication), changes in
securities markets, changes in the composition of the index, and the timing of
purchases and sales of fund shares.
Investment
Company Securities Risk. A fund that invests in another
investment company (for example, another fund or an exchange-traded fund
(“ETF”)) is subject to the risks associated with direct ownership of the
securities in which such investment company invests. Fund shareholders
indirectly bear their proportionate share of the expenses of each such
investment company.
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, which means funds with
longer average portfolio durations may be more volatile than those with shorter
durations.
Real Estate
Securities Risk. Investing in real estate securities
subjects the fund to the risks associated with the real estate market (which are
similar to the risks associated with direct ownership in real estate), including
declines in real estate values, loss due to casualty or condemnation, property
taxes, interest rate changes, increased expenses, cash flow of underlying real
estate assets, regulatory changes (including zoning, land use and rents), and
environmental problems, as well as to the risks related to 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, result in changes to expense
ratios and increased expenses, and adversely affect underlying fund
performance.
Securitized
Products Risk. Investments in securitized products
are subject to risks similar to traditional fixed income securities, such as
credit, interest rate, liquidity, prepayment, extension, and default risk, as
well as additional risks associated with the nature of the assets and the
servicing of those assets. Unscheduled prepayments on securitized products 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.
Performance
The following information provides
some indication of the risks of investing in the Account. Past performance is
not necessarily an indication of how the Account will perform in the future. You
may get updated performance information by calling 1-800-222-5852.
The bar chart shows changes in the
Account's performance from year to year. The table shows how the Account's
average annual returns for 1, 5, and 10 years (or, if shorter, the life of the
Account) compare with those of one or more broad measures of market performance.
Performance figures for the Accounts do not include any separate account
expenses, cost of insurance, or other contract-level expenses; total returns for
the Accounts would be lower if such expenses were included.
Life of Account returns are measured
from the date the Account's shares were first sold (May 15, 2012).
Total Returns as
of December 31
|
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q1
'13 |
3.23 |
% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q3
'15 |
(1.85 |
)% |
|
|
|
|
|
Average
Annual Total Returns |
For the
periods ended December 31, 2017 |
1
Year |
5
Years |
Life of
Account |
Diversified
Income Account - Class 2 |
8.81% |
5.87% |
6.18% |
Bloomberg Barclays U.S.
Aggregate Bond Index (reflects no deduction for fees, expenses, or
taxes) |
3.54% |
2.10% |
2.28% |
S&P 500 Index (reflects no
deduction for fees, expenses, or taxes) |
21.83% |
15.79% |
15.62% |
MSCI EAFE Index NR (reflects no
deduction for fees, expenses, or taxes) |
25.03% |
7.90% |
9.88% |
S&P Midcap 400 Index
(reflects no deduction for fees, expenses, or taxes) |
16.24% |
15.01% |
14.91% |
S&P Smallcap 600 Index
(reflects no deduction for fees, expenses, or taxes) |
13.23% |
15.99% |
15.93% |
Diversified Income Custom Index
(reflects no deduction for fees, expenses, or taxes) |
9.39% |
6.54% |
6.69% |
The Bloomberg Barclays U.S.
Aggregate Bond Index is used to show performance of domestic, taxable
fixed-income securities performance. The S&P 500 Index is used to show large
cap U.S. equity market performance. The MSCI EAFE Index NR is used to show
international stock performance. The S&P Midcap 400 Index is used to show
mid cap U.S. equity market performance. The S&P Smallcap 600 Index is used
to show small cap U.S. equity market performance. The custom index (as defined
below) is used to show the performance of the various asset classes used by the
Account, and the Average Annual Total Returns table shows performance of the
components of the custom index. The weightings for the Diversified Income Custom
Index are 65% Bloomberg Barclays U.S. Aggregate Bond Index, 25% S&P 500
Index, 4% MSCI EAFE Index NR, 3% S&P Midcap 400 Index, and 3% S&P
Smallcap 600 Index.
Management
Investment
Advisor and Portfolio Managers:
Principal Global Investors,
LLC
|
|
• |
James W. Fennessey (since
2012), Portfolio Manager |
|
|
• |
Randy L. Welch (since 2012),
Portfolio Manager |
Tax
Information
The Fund intends to comply with
applicable variable asset diversification regulations. Taxation to you will
depend on what you do with your variable life insurance or variable annuity
contract. See your variable product prospectus for information about the tax
implications of investing in the Accounts.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, to recommend one Account or share class of the Fund over another
Account or share class, or to recommend one variable annuity, variable life
insurance policy or mutual fund over another. Ask your salesperson or visit your
financial intermediary's website for more information.
DIVERSIFIED
INTERNATIONAL ACCOUNT
|
|
Objective: |
The
Account seeks
long-term growth of capital. |
Fees and Expenses
of the Account
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Account. These fees
and expenses do not reflect the fees and expenses of any variable insurance
contract that may invest in the Account and would be higher if they
did.
Annual Account
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
Class
1 |
Class
2 |
Management Fees |
0.84% |
0.84% |
Distribution and/or Service
(12b-1) Fees |
N/A |
0.25% |
Other Expenses |
0.07% |
0.07% |
Total Annual
Account Operating Expenses |
0.91% |
1.16% |
Example
This Example is intended to help you
compare the cost of investing in the Account with the cost of investing in other
mutual funds.
The Example assumes that you invest
$10,000 in the Account for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Account’s operating
expenses remain the same. If separate account expenses and contract level
expenses were included, expenses would be higher. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
Diversified
International Account - Class 1 |
$93 |
$290 |
$504 |
$1,120 |
Diversified
International Account - Class 2 |
118 |
368 |
638 |
1,409 |
Portfolio
Turnover
The Account pays transaction costs,
such as commissions, when it buys and sells securities (or “turns over” its
portfolio). A higher portfolio turnover rate may indicate higher transaction
costs. These costs, which are not reflected in annual Account operating expenses
or in the example, affect the Account’s performance. During the most recent
fiscal year, the Account’s portfolio turnover rate was 42.8% of the average value of its
portfolio.
Principal
Investment Strategies
The Account invests primarily in
foreign equity securities. The Account has no limitation on the percentage of
assets that are invested in any one country or denominated in any one currency,
but the Account typically invests in foreign securities of at least 20
countries. Primary consideration is given to securities of corporations of
developed areas, such as Japan, Western Europe, Canada, Australia, Hong Kong,
Singapore and New Zealand; however, the Account also invests in emerging market
securities. The Account invests in equity securities regardless of market
capitalization (small, medium or large) and style (growth or
value).
Principal
Risks
The value of your investment in the
Account changes with the value of the Account 's investments. Many factors
affect that value, and it is possible to lose money by investing in the Account.
An investment in the Account is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. The principal risks of investing in the Account, in alphabetical order,
are:
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 market capitalization or style), 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 Risk. Investments in small and
medium sized companies may involve greater risk and price volatility than
investments 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 would
cause the stock price to increase may not occur as anticipated or at all.
Moreover, a stock that appears to be undervalued actually may be
appropriately priced at a low level and therefore would not be profitable
for the fund. |
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).
Performance
The following information provides
some indication of the risks of investing in the Account. Past performance is
not necessarily an indication of how the Account will perform in the future. You
may get updated performance information by calling 1-800-222-5852.
The bar chart shows changes in the
performance of the Account's Class 1 shares from year to year. The table shows
how the Account's average annual returns for 1, 5, and 10 years (or, if shorter,
the life of the Account) compare with those of one or more broad measures of
market performance. Performance figures for the Accounts do not include any
separate account expenses, cost of insurance, or other contract-level expenses;
total returns for the Accounts would be lower if such expenses were
included.
Total Returns as
of December 31
|
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q2
'09 |
21.14 |
% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q3
'08 |
(24.01 |
)% |
|
|
|
|
|
Average
Annual Total Returns |
For the
periods ended December 31, 2017 |
1
Year |
5
Years |
10
Years |
Diversified
International Account - Class 1 |
29.06% |
8.14% |
1.89% |
Diversified
International Account - Class 2 |
28.79% |
7.90% |
1.62% |
MSCI ACWI Ex-U.S. Index
(reflects no deduction for fees, expenses, or taxes) |
27.19% |
6.80% |
1.84% |
Management
Investment
Advisor and Portfolio Managers:
Principal Global Investors,
LLC
|
|
• |
Paul H. Blankenhagen (since
2003), Portfolio Manager |
|
|
• |
Juliet Cohn (since 2004),
Portfolio Manager |
Tax
Information
The Fund intends to comply with
applicable variable asset diversification regulations. Taxation to you will
depend on what you do with your variable life insurance or variable annuity
contract. See your variable product prospectus for information about the tax
implications of investing in the Accounts.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, to recommend one Account or share class of the Fund over another
Account or share class, or to recommend one variable annuity, variable life
insurance policy or mutual fund over another. Ask your salesperson or visit your
financial intermediary's website for more information.
EQUITY INCOME
ACCOUNT
|
|
Objective: |
The Account seeks to provide
current income and long-term growth of income and
capital. |
Fees and Expenses
of the Account
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Account. These fees
and expenses do not reflect the fees and expenses of any variable insurance
contract that may invest in the Account and would be higher if they
did.
Annual Account
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
Class
1 |
Class
2 |
Management Fees |
0.49% |
0.49% |
Distribution and/or Service
(12b-1) Fees |
N/A |
0.25% |
Other Expenses |
0.01% |
0.01% |
Total Annual
Account Operating Expenses |
0.50% |
0.75% |
Example
This Example is intended to help you
compare the cost of investing in the Account with the cost of investing in other
mutual funds.
The Example assumes that you invest
$10,000 in the Account for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Account’s operating
expenses remain the same. If separate account expenses and contract level
expenses were included, expenses would be higher. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
Equity
Income Account - Class 1 |
$51 |
$160 |
$280 |
$628 |
Equity
Income Account - Class 2 |
77 |
240 |
417 |
930 |
Portfolio
Turnover
The Account pays transaction costs,
such as commissions, when it buys and sells securities (or “turns over” its
portfolio). A higher portfolio turnover rate may indicate higher transaction
costs. These costs, which are not reflected in annual Account operating expenses
or in the example, affect the Account’s performance. During the most recent
fiscal year, the Account’s portfolio turnover rate was 15.9% of the average value of its
portfolio.
Principal
Investment Strategies
Under normal circumstances, the
Account invests at least 80% of its net assets, plus any borrowings for
investment purposes, in dividend-paying equity securities at the time of
purchase. The Account usually invests in equity securities of companies with
large and medium market capitalizations. The Account invests in value equity
securities, an investment strategy that emphasizes buying equity securities that
appear to be undervalued. The Account also invests in real estate investment
trusts and securities of foreign issuers.
Principal
Risks
The value of your investment in the
Account changes with the value of the Account 's investments. Many factors
affect that value, and it is possible to lose money by investing in the Account.
An investment in the Account is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. The principal risks of investing in the Account, in alphabetical order,
are:
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 market capitalization or style), may underperform other
market segments or the equity markets as a whole.
|
|
• |
Medium
Market Capitalization Companies Risk. Investments in medium-sized
companies may involve greater risk and price volatility than investments
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 would cause the stock price to increase may not occur as
anticipated or at all. Moreover, a stock that appears to be undervalued
actually may be appropriately priced at a low level and therefore would
not be profitable for the fund. |
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).
Real Estate
Investment Trusts (“REITs”) Risk. In addition to risks associated with
investing in real estate securities, REITs are dependent upon management skills,
are not diversified, and are subject to heavy cash flow dependency, risks of
default by borrowers, and self-liquidation. Investment in REITs also involves
risks similar to risks of investing in small market capitalization companies,
such as limited financial resources, less frequent and limited volume trading,
and may be subject to more abrupt or erratic price movements than larger company
securities. A REIT could fail to qualify for tax-free pass-through of income
under the Internal Revenue Code. Fund shareholders will indirectly bear their
proportionate share of the expenses of REITs in which the fund
invests.
Real Estate
Securities Risk. Investing in real estate securities
subjects the fund to the risks associated with the real estate market (which are
similar to the risks associated with direct ownership in real estate), including
declines in real estate values, loss due to casualty or condemnation, property
taxes, interest rate changes, increased expenses, cash flow of underlying real
estate assets, regulatory changes (including zoning, land use and rents), and
environmental problems, as well as to the risks related to 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, result in changes to expense
ratios and increased expenses, and adversely affect underlying fund performance.
Moreover, a fund of fund's redemptions or reallocations among share classes of
an underlying fund may result in changes to the expense ratios of affected
classes, which may increase the expenses paid by shareholders of the class that
experienced the redemption.
Performance
The following information provides
some indication of the risks of investing in the Account. Past performance is
not necessarily an indication of how the Account will perform in the future. You
may get updated performance information by calling 1-800-222-5852.
The bar chart shows changes in the
Account's performance from year to year. The table shows how the Account's
average annual returns for 1, 5, and 10 years (or, if shorter, the life of the
Account) compare with those of one or more broad measures of market performance.
Performance figures for the Accounts do not include any separate account
expenses, cost of insurance, or other contract-level expenses; total returns for
the Accounts would be lower if such expenses were included.
Total Returns as
of December 31
|
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q3
'09 |
13.88 |
% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q4
'08 |
(19.89 |
)% |
|
|
|
|
|
Average
Annual Total Returns |
For the
periods ended December 31, 2017 |
1
Year |
5
Years |
10
Years |
Equity
Income Account - Class 1 |
21.08% |
14.09% |
7.81% |
Equity
Income Account - Class 2 |
20.77% |
13.80% |
7.54% |
Russell 1000 Value Index
(reflects no deduction for fees, expenses, or taxes) |
13.66% |
14.04% |
7.10% |
Management
Investment
Advisor and Portfolio Managers:
Principal Global Investors, LLC
|
|
• |
Daniel R. Coleman (since
2010), Portfolio Manager |
|
|
• |
David W. Simpson (since 2008),
Portfolio Manager |
|
|
• |
Nedret Vidinli (since 2017),
Associate Portfolio Manager |
Tax
Information
The Fund intends to comply with
applicable variable asset diversification regulations. Taxation to you will
depend on what you do with your variable life insurance or variable annuity
contract. See your variable product prospectus for information about the tax
implications of investing in the Accounts.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, to recommend one Account or share class of the Fund over another
Account or share class, or to recommend one variable annuity, variable life
insurance policy or mutual fund over another. Ask your salesperson or visit your
financial intermediary's website for more information.
GOVERNMENT &
HIGH QUALITY BOND ACCOUNT
|
|
Objective: |
The Account seeks to provide a
high level of current income consistent with safety and
liquidity. |
Fees and Expenses
of the Account
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Account. These fees
and expenses do not reflect the fees and expenses of any variable insurance
contract that may invest in the Account and would be higher if they
did.
Annual Account
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
Class
1 |
Class
2 |
Management Fees |
0.50% |
0.50% |
Distribution and/or Service
(12b-1) Fees |
N/A |
0.25% |
Other Expenses |
0.01% |
0.01% |
Total Annual
Account Operating Expenses |
0.51% |
0.76% |
Example
This Example is intended to help you
compare the cost of investing in the Account with the cost of investing in other
mutual funds.
The Example assumes that you invest
$10,000 in the Account for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Account’s operating
expenses remain the same. If separate account expenses and contract level
expenses were included, expenses would be higher. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
Government &
High Quality Bond Account - Class 1 |
$52 |
$164 |
$285 |
$640 |
Government &
High Quality Bond Account - Class 2 |
78 |
243 |
422 |
942 |
Portfolio
Turnover
The Account pays transaction costs,
such as commissions, when it buys and sells securities (or “turns over” its
portfolio). A higher portfolio turnover rate may indicate higher transaction
costs. These costs, which are not reflected in annual Account operating expenses
or in the example, affect the Account’s performance. During the most recent
fiscal year, the Account’s portfolio turnover rate was 24.3% of the average value of its
portfolio.
Principal
Investment Strategies
Under normal circumstances, the
Account invests at least 80% of its net assets, plus any borrowings for
investment purposes, in debt securities issued by the U.S. government, its
agencies or instrumentalities or debt securities that are rated, at the time of
purchase, AAA by S&P Global Ratings ("S&P Global") or Aaa by Moody's
Investors Service, Inc. ("Moody's"), or, if unrated, in the opinion of those
selecting such investments, are of comparable quality including but not limited
to mortgage securities such as agency and non-agency collateralized mortgage
obligations, and other obligations that are secured by mortgages or
mortgage-backed securities (securitized products). The Account also invests in
mortgage-backed securities that are not issued by the U.S. government, its
agencies or instrumentalities or rated lower than AAA by S&P Global, AAA by
Fitch, or Aaa by Moody's (or of comparable quality), including collateralized
mortgage obligations, and in other obligations that are secured by mortgages or
mortgage-backed securities. Under normal circumstances, the Account maintains an
average portfolio duration that is within ±25% of the duration of the Bloomberg
Barclays Fixed-Rate MBS Index, which as of December 31, 2017 was 4.43 years. The Account is not managed to a
particular maturity.
Principal
Risks
The value of your investment in the
Account changes with the value of the Account 's investments. Many factors
affect that value, and it is possible to lose money by investing in the Account.
An investment in the Account is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. The principal risks of investing in the Account, in alphabetical order,
are:
Fixed-Income
Securities Risk. Fixed-income securities are subject
to interest rate, credit quality, and liquidity risks. The market value of
fixed-income securities generally declines when interest rates rise, and
increased interest rates may adversely affect the liquidity of certain
fixed-income securities. Moreover, an issuer of fixed-income securities could
default on its payment obligations due to increased interest rates or for other
reasons.
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, which means funds with
longer average portfolio durations may be more volatile than those with shorter
durations.
Real Estate
Securities Risk. Investing in real estate securities
subjects the fund to the risks associated with the real estate market (which are
similar to the risks associated with direct ownership in real estate), including
declines in real estate values, loss due to casualty or condemnation, property
taxes, interest rate changes, increased expenses, cash flow of underlying real
estate assets, regulatory changes (including zoning, land use and rents), and
environmental problems, as well as to the risks related to 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, result in changes to expense
ratios and increased expenses, and adversely affect underlying fund performance.
Moreover, a fund of fund's redemptions or reallocations among share classes of
an underlying fund may result in changes to the expense ratios of affected
classes, which may increase the expenses paid by shareholders of the class that
experienced the redemption.
Securitized
Products Risk. Investments in securitized products
are subject to risks similar to traditional fixed income securities, such as
credit, interest rate, liquidity, prepayment, extension, and default risk, as
well as additional risks associated with the nature of the assets and the
servicing of those assets. Unscheduled prepayments on securitized products 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.
Performance
The following information provides
some indication of the risks of investing in the Account. Past performance is
not necessarily an indication of how the Account will perform in the future. You
may get updated performance information by calling 1-800-222-5852.
The bar chart shows changes in the
Account's performance from year to year. The table shows how the Account's
average annual returns for 1, 5, and 10 years (or, if shorter, the life of the
Account) compare with those of one or more broad measures of market performance.
Performance figures for the Accounts do not include any separate account
expenses, cost of insurance, or other contract-level expenses; total returns for
the Accounts would be lower if such expenses were included.
Total Returns as
of December 31
|
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q2
'10 |
3.28 |
% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q4
'16 |
(1.96 |
)% |
|
|
|
|
|
Average
Annual Total Returns |
For the
periods ended December 31, 2017 |
1
Year |
5
Years |
10
Years |
Government
& High Quality Bond Account - Class 1 |
1.88% |
1.69% |
3.54% |
Government
& High Quality Bond Account - Class 2 |
1.50% |
1.41% |
3.27% |
Bloomberg Barclays MBS Fixed
Rate Index (reflects no deduction for fees, expenses, or
taxes) |
2.48% |
2.04% |
3.87% |
Management
Investment
Advisor and Portfolio Managers:
Principal Global Investors,
LLC
|
|
• |
John R. Friedl (since 2010),
Portfolio Manager |
|
|
• |
Ryan P. McCann (since 2010),
Portfolio Manager |
|
|
• |
Scott J. Peterson (since
2010), Portfolio Manager |
Tax
Information
The Fund intends to comply with
applicable variable asset diversification regulations. Taxation to you will
depend on what you do with your variable life insurance or variable annuity
contract. See your variable product prospectus for information about the tax
implications of investing in the Accounts.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, to recommend one Account or share class of the Fund over another
Account or share class, or to recommend one variable annuity, variable life
insurance policy or mutual fund over another. Ask your salesperson or visit your
financial intermediary's website for more information.
INCOME
ACCOUNT
|
|
Objective: |
The Account seeks to provide a
high level of current income consistent with preservation of
capital. |
Fees and Expenses
of the Account
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Account. These fees
and expenses do not reflect the fees and expenses of any variable insurance
contract that may invest in the Account and would be higher if they
did.
Annual Account
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
Class
1 |
Class
2 |
Management Fees |
0.50% |
0.50% |
Distribution and/or Service
(12b-1) Fees |
N/A |
0.25% |
Other Expenses |
0.01% |
0.01% |
Total Annual
Account Operating Expenses |
0.51% |
0.76% |
Example
This Example is intended to help you
compare the cost of investing in the Account with the cost of investing in other
mutual funds.
The Example assumes that you invest
$10,000 in the Account for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Account’s operating
expenses remain the same. If separate account expenses and contract level
expenses were included, expenses would be higher. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
Income
Account - Class 1 |
$52 |
$164 |
$285 |
$640 |
Income
Account - Class 2 |
78 |
243 |
422 |
942 |
Portfolio
Turnover
The Account pays transaction costs,
such as commissions, when it buys and sells securities (or “turns over” its
portfolio). A higher portfolio turnover rate may indicate higher transaction
costs. These costs, which are not reflected in annual Account operating expenses
or in the example, affect the Account’s performance. During the most recent
fiscal year, the Account’s portfolio turnover rate was 8.7% of the average value of its
portfolio.
Principal
Investment Strategies
Under normal circumstances, the
Account invests primarily in a diversified pool of fixed-income securities
including corporate securities, U.S. government securities, and mortgage-backed
securities (securitized products) (including collateralized mortgage
obligations). The Account may invest up to 35% of its assets in below investment
grade bonds (sometimes called “high yield bonds” or "junk bonds") which are
rated, at the time of purchase, Ba1 or lower by Moody's Investors Service, Inc.
("Moody's") and BB+ or lower by S&P Global Ratings ("S&P Global") (if
the bond has been rated by only one of those agencies, that rating will
determine whether the bond is below investment grade; if the bond has not been
rated by either of those agencies, those selecting such investments will
determine whether the bond is of a quality comparable to those rated below
investment grade). The Account also invests in foreign securities. Under normal
circumstances, the Account maintains an average portfolio duration that is
within ±25% of the duration of the Bloomberg Barclays U.S. Aggregate Bond Index,
which as of December
31, 2017 was
5.98 years. The Account is not managed to a
particular maturity.
During the fiscal year ended
December 31, 2017, the average ratings of the Account's fixed-income assets,
based on market value at each month-end, were as follows (all ratings are by
Moody's):
|
|
|
|
38.03% in securities rated
Aaa |
2.34% in securities rated
Ba |
0.00% in securities rated
C |
3.26% in securities rated
Aa |
4.73% in securities rated
B |
0.00% in securities rated
D |
18.96% in securities rated
A |
1.98% in securities rated
Caa |
0.71% in securities not
rated |
29.81% in securities rated
Baa |
0.18% in securities rated
Ca |
|
Principal
Risks
The value of your investment in the
Account changes with the value of the Account 's investments. Many factors
affect that value, and it is possible to lose money by investing in the Account.
An investment in the Account is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. The principal risks of investing in the Account, in alphabetical order,
are:
Fixed-Income
Securities Risk. Fixed-income securities are subject
to interest rate, credit quality, and liquidity risks. The market value of
fixed-income securities generally declines when interest rates rise, and
increased interest rates may adversely affect the liquidity of certain
fixed-income securities. Moreover, an issuer of fixed-income securities could
default on its payment obligations due to increased interest rates or for other
reasons.
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).
High Yield
Securities Risk. High
yield fixed-income securities (commonly referred to as "junk bonds") are subject
to greater credit quality risk than higher rated fixed-income securities and
should be considered speculative.
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, which means funds with
longer average portfolio durations may be more volatile than those with shorter
durations.
Real Estate
Securities Risk. Investing in real estate securities
subjects the fund to the risks associated with the real estate market (which are
similar to the risks associated with direct ownership in real estate), including
declines in real estate values, loss due to casualty or condemnation, property
taxes, interest rate changes, increased expenses, cash flow of underlying real
estate assets, regulatory changes (including zoning, land use and rents), and
environmental problems, as well as to the risks related to 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, result in changes to expense
ratios and increased expenses, and adversely affect underlying fund performance.
Moreover, a fund of fund's redemptions or reallocations among share classes of
an underlying fund may result in changes to the expense ratios of affected
classes, which may increase the expenses paid by shareholders of the class that
experienced the redemption.
Securitized
Products Risk. Investments in securitized products
are subject to risks similar to traditional fixed income securities, such as
credit, interest rate, liquidity, prepayment, extension, and default risk, as
well as additional risks associated with the nature of the assets and the
servicing of those assets. Unscheduled prepayments on securitized products 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.
Performance
The following information provides
some indication of the risks of investing in the Account. Past performance is
not necessarily an indication of how the Account will perform in the future. You
may get updated performance information by calling 1-800-222-5852.
The bar chart shows changes in the
Account's performance from year to year. The table shows how the Account's
average annual returns for 1, 5, and 10 years (or, if shorter, the life of the
Account) compare with those of one or more broad measures of market performance.
Performance figures for the Accounts do not include any separate account
expenses, cost of insurance, or other contract-level expenses; total returns for
the Accounts would be lower if such expenses were included.
Total Returns as
of December 31
|
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q2
'09 |
7.98 |
% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q3
'08 |
(4.21 |
)% |
|
|
|
|
|
Average
Annual Total Returns |
For the
periods ended December 31, 2017 |
1
Year |
5
Years |
10
Years |
Income
Account - Class 1 |
5.12% |
3.18% |
5.39% |
Income
Account - Class 2 |
4.87% |
2.93% |
5.13% |
Bloomberg Barclays U.S.
Aggregate Bond Index (reflects no deduction for fees, expenses, or
taxes) |
3.54% |
2.10% |
4.01% |
Management
Investment
Advisor and Portfolio Managers:
Principal Global Investors,
LLC
|
|
• |
John R. Friedl (since 2005),
Portfolio Manager |
|
|
• |
Ryan P. McCann (since 2010),
Portfolio Manager |
|
|
• |
Scott J. Peterson (since
2010), Portfolio Manager |
Tax
Information
The Fund intends to comply with
applicable variable asset diversification regulations. Taxation to you will
depend on what you do with your variable life insurance or variable annuity
contract. See your variable product prospectus for information about the tax
implications of investing in the Accounts.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, to recommend one Account or share class of the Fund over another
Account or share class, or to recommend one variable annuity, variable life
insurance policy or mutual fund over another. Ask your salesperson or visit your
financial intermediary's website for more information.
INTERNATIONAL
EMERGING MARKETS ACCOUNT
|
|
Objective: |
The Account seeks long-term
growth of capital. |
Fees and Expenses
of the Account
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Account. These fees
and expenses do not reflect the fees and expenses of any variable insurance
contract that may invest in the Account and would be higher if they
did.
Annual Account
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
Class
1 |
Class
2 |
Management Fees |
1.25% |
1.25% |
Distribution and/or Service
(12b-1) Fees |
N/A |
0.25% |
Other Expenses |
0.12% |
0.12% |
Total Annual
Account Operating Expenses |
1.37% |
1.62% |
Expense
Reimbursement(1) |
(0.02)% |
(0.02)% |
Total Annual
Account Operating Expenses after Expense Reimbursement |
1.35% |
1.60% |
|
|
|
(1)
Principal
Global Investors, LLC ("PGI"), the investment advisor, has contractually
agreed to limit the Account’s expenses by paying, if necessary, expenses
normally payable by the Account, (excluding interest expense, expenses
related to fund investments, acquired fund fees and expenses, and other
extraordinary expenses) to maintain a total level of operating expenses
(expressed as a percent of average net assets on an annualized basis) not
to exceed 1.35% for Class 1 and 1.60% for Class 2 shares. It is expected
that the expense limits will continue through the period ending April 30,
2019; however, Principal Variable Contracts Funds, Inc. and PGI, the
parties to the agreement, may mutually agree to terminate the expense
limits prior to the end of the period.
|
Example
This Example is intended to help you
compare the cost of investing in the Account with the cost of investing in other
mutual funds.
The Example assumes that you invest
$10,000 in the Account for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Account’s operating
expenses remain the same. If separate account expenses and contract level
expenses were included, expenses would be higher. The calculation of costs takes
into account any applicable contractual fee waivers and/or expense
reimbursements for the period noted in the table above. Although your actual
costs may be higher or lower, based on these assumptions your costs would
be:
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
International
Emerging Markets Account - Class 1 |
$137 |
$432 |
$748 |
$1,645 |
International
Emerging Markets Account - Class 2 |
163 |
509 |
879 |
1,920 |
Portfolio
Turnover
The Account pays transaction costs,
such as commissions, when it buys and sells securities (or “turns over” its
portfolio). A higher portfolio turnover rate may indicate higher transaction
costs. These costs, which are not reflected in annual Account operating expenses
or in the example, affect the Account’s performance. During the most recent
fiscal year, the Account’s portfolio turnover rate was 98.6% of the average value of its
portfolio.
Principal
Investment Strategies
Under normal circumstances, the
Account invests at least 80% of its net assets, plus any borrowings for
investment purposes, in equity securities of emerging market companies at the
time of purchase. The Account considers a security to be tied economically to an
emerging market country (an "emerging market security") if the issuer of the
security has its principal place of business or principal office in an emerging
market country, has its principal securities trading market in an emerging
market country, or derives a majority of its revenue from emerging market
countries.
Here, "emerging market country"
means any country which is considered to be an emerging country by the
international financial community (including the MSCI Emerging Markets Index or
Bloomberg Barclays Emerging Markets USD Aggregate Bond Index). These countries
generally exclude the United States, Canada, Japan, Australia, Hong Kong,
Singapore, New Zealand, and most nations located in Western Europe. The Account
invests in equity securities regardless of market capitalization (small, medium
or large) and style (growth or value).
Principal
Risks
The value of your investment in the
Account changes with the value of the Account's investments. Many factors affect
that value, and it is possible to lose money by investing in the Account. An
investment in the Account is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. The principal risks of investing in the Account, in alphabetical order,
are:
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 market capitalization or style), 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 Risk. Investments in small and
medium sized companies may involve greater risk and price volatility than
investments 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 would cause the stock price to increase may not occur as
anticipated or at all. Moreover, a stock that appears to be undervalued
actually may be appropriately priced at a low level and therefore would
not be profitable for the fund. |
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).
Performance
The following information provides
some indication of the risks of investing in the Account. Past performance is
not necessarily an indication of how the Account will perform in the future. You
may get updated performance information by calling 1-800-222-5852.
The bar chart shows changes in the
Account's performance from year to year. The table shows how the Account's
average annual returns for 1, 5, and 10 years (or, if shorter, the life of the
Account) compare with those of one or more broad measures of market performance.
Performance figures for the Account do not include any separate account
expenses, cost of insurance, or other contract-level expenses; total returns for
the Account would be lower if such expenses were included.
For periods prior to the inception
date of Class 2 shares (May 1, 2015), the performance shown in the table for
Class 2 shares is that of the Account's Class 1 shares, adjusted to reflect the
fees and expenses of the Class 2 shares. These adjustments result in performance
for such periods that is no higher than the historical performance of the Class
1 shares.
During 2016, the Account experienced
a significant one-time gain of approximately $0.07 per share as the result of a
settlement in a litigation proceeding. If such gain had not been recognized, the
total return amounts expressed herein would have been lower.
Total Returns as
of December 31
|
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q2
'09 |
29.44 |
% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q3
'08 |
(29.34 |
)% |
|
|
|
|
|
|
|
|
Average
Annual Total Returns |
|
For the
periods ended December 31, 2017 |
1
Year |
|
5
Years |
|
10
Years |
|
International
Emerging Markets Account - Class 1 |
40.84% |
|
3.95% |
(1) |
0.85% |
(1) |
International
Emerging Markets Account - Class 2 |
40.51% |
|
3.70% |
(1) |
0.61% |
(1) |
MSCI Emerging Markets NR Index
(reflects no deduction for fees, expenses, or taxes) |
37.28% |
|
4.35% |
|
1.68% |
|
(1) During 2016, the
Account experienced a significant one-time gain of approximately $0.07 per
share as the result of a settlement in a litigation proceeding. If such
gain had not been recognized, the total return amounts expressed herein
would have been lower. |
|
Management
Investment
Advisor and Portfolio Managers:
Principal Global Investors, LLC
|
|
• |
Mihail Dobrinov (since 2007),
Portfolio Manager |
|
|
• |
Alan Wang (since 2014),
Portfolio Manager |
|
|
• |
Mohammed Zaidi (since 2012),
Portfolio Manager |
Tax
Information
The Fund intends to comply with
applicable variable asset diversification regulations. Taxation to you will
depend on what you do with your variable life insurance or variable annuity
contract. See your variable product prospectus for information about the tax
implications of investing in the Accounts.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, to recommend one Account or share class of the Fund over another
Account or share class, or to recommend one variable annuity, variable life
insurance policy or mutual fund over another. Ask your salesperson or visit your
financial intermediary's website for more information.
LARGECAP GROWTH
ACCOUNT
|
|
Objective: |
The Account seeks long-term
growth of capital. |
Fees and Expenses
of the Account
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Account. These fees
and expenses do not reflect the fees and expenses of any variable insurance
contract that may invest in the Account and would be higher if they
did.
Annual Account
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
Class
1 |
Class
2 |
Management Fees |
0.68% |
0.68% |
Distribution and/or Service
(12b-1) Fees |
N/A |
0.25% |
Other Expenses |
0.01% |
0.01% |
Total Annual
Account Operating Expenses |
0.69% |
0.94% |
Example
This Example is intended to help you
compare the cost of investing in the Account with the cost of investing in other
mutual funds.
The Example assumes that you invest
$10,000 in the Account for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Account’s operating
expenses remain the same. If separate account expenses and contract level
expenses were included, expenses would be higher. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
LargeCap
Growth Account - Class 1 |
$70 |
$221 |
$384 |
$859 |
LargeCap
Growth Account - Class 2 |
96 |
300 |
520 |
1,155 |
Portfolio
Turnover
The Account pays transaction costs,
such as commissions, when it buys and sells securities (or “turns over” its
portfolio). A higher portfolio turnover rate may indicate higher transaction
costs. These costs, which are not reflected in annual Account operating expenses
or in the example, affect the Account’s performance. During the most recent
fiscal year, the Account’s portfolio turnover rate was 72.3% of the average value of its
portfolio.
Principal
Investment Strategies
Under normal circumstances, the
Account invests at least 80% of its net assets, plus any borrowings for
investment purposes, in equity securities of companies with large market
capitalizations at the time of purchase. For this Account, companies with large
market capitalizations are those with market capitalizations within the range of
companies comprising the Russell 1000® Growth Index (as of December 31, 2017, this range was between
approximately $1.2
billion and
$868.9
billion). The Account
invests in growth equity securities; growth orientation emphasizes buying equity
securities of companies whose potential for growth of capital and earnings is
expected to be above average.
Principal
Risks
The value of your investment in the
Account changes with the value of the Account's investments. Many factors affect
that value, and it is possible to lose money by investing in the Account. An
investment in the Account is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. The principal risks of investing in the Account, in alphabetical order,
are:
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 market capitalization or style), 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. |
Performance
The following information provides
some indication of the risks of investing in the Account. Past performance is
not necessarily an indication of how the Account will perform in the future. You
may get updated performance information by calling 1-800-222-5852.
The bar chart shows changes in the
Account's performance from year to year. The table shows how the Account's
average annual returns for 1, 5, and 10 years (or, if shorter, the life of the
Account) compare with those of one or more broad measures of market performance.
Performance figures for the Accounts do not include any separate account
expenses, cost of insurance, or other contract-level expenses; total returns for
the Accounts would be lower if such expenses were included.
Total Returns as
of December 31
|
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q1
'12 |
17.54 |
% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q4
'08 |
(25.99 |
)% |
|
|
|
|
|
Average
Annual Total Returns |
For the
periods ended December 31, 2017 |
1
Year |
5
Years |
10
Years |
LargeCap
Growth Account - Class 1 |
34.89% |
14.86% |
6.69% |
LargeCap
Growth Account - Class 2 |
34.54% |
14.58% |
6.44% |
Russell 1000 Growth Index
(reflects no deduction for fees, expenses, or taxes) |
30.21% |
17.33% |
10.00% |
Management
Investment
Advisor:
Principal Global Investors,
LLC
Sub-Advisor and
Portfolio Managers:
Columbus Circle Investors
|
|
• |
Thomas J.
Bisighini (since 2009), Senior Managing Director/Portfolio
Manager |
|
|
• |
Anthony Rizza (since 2005),
Senior Managing Director/Portfolio
Manager |
Tax
Information
The Fund intends to comply with
applicable variable asset diversification regulations. Taxation to you will
depend on what you do with your variable life insurance or variable annuity
contract. See your variable product prospectus for information about the tax
implications of investing in the Accounts.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, to recommend one Account or share class of the Fund over another
Account or share class, or to recommend one variable annuity, variable life
insurance policy or mutual fund over another. Ask your salesperson or visit your
financial intermediary's website for more information.
LARGECAP GROWTH
ACCOUNT I
|
|
Objective: |
The Account seeks long-term
growth of capital. |
Fees and Expenses
of the Account
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Account. These fees
and expenses do not reflect the fees and expenses of any variable insurance
contract that may invest in the Account and would be higher if they
did.
Annual Account
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
Class
1 |
Class
2 |
Management Fees |
0.75% |
0.75% |
Distribution and/or Service
(12b-1) Fees |
N/A |
0.25% |
Other Expenses |
0.02% |
0.02% |
Total Annual
Account Operating Expenses |
0.77% |
1.02% |
Fee Waiver (1) |
(0.02)% |
(0.02)% |
Total Annual
Account Operating Expenses after Fee Waiver |
0.75% |
1.00% |
|
|
|
(1)
Principal
Global Investors, LLC ("PGI"), the investment advisor, has contractually
agreed to limit the Account's Management Fees through the period ending
April 30, 2019. The fee waiver will reduce the Account's Management
Fees by 0.016% (expressed as a percent of average net assets on an
annualized basis). It is expected that the fee waiver will continue
through the period disclosed; however, Principal Variable Contracts Funds,
Inc. and PGI, the parties to the agreement, may mutually agree to
terminate the fee waiver prior to the end of the
period. |
Example
This Example is intended to help you
compare the cost of investing in the Account with the cost of investing in other
mutual funds.
The Example assumes that you invest
$10,000 in the Account for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Account’s operating
expenses remain the same. If separate account expenses and contract level
expenses were included, expenses would be higher. The calculation of costs takes
into account any applicable contractual fee waivers and/or expense
reimbursements for the period noted in the table above. Although your actual
costs may be higher or lower, based on these assumptions your costs would
be:
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
LargeCap
Growth Account I - Class 1 |
$77 |
$244 |
$426 |
$952 |
LargeCap
Growth Account I - Class 2 |
102 |
323 |
561 |
1,246 |
Portfolio
Turnover
The Account pays transaction costs,
such as commissions, when it buys and sells securities (or “turns over” its
portfolio). A higher portfolio turnover rate may indicate higher transaction
costs. These costs, which are not reflected in annual Account operating expenses
or in the example, affect the Account’s performance. During the most recent
fiscal year, the Account’s portfolio turnover rate was 36.2% of the average value of its
portfolio.
Principal
Investment Strategies
Under normal circumstances, the
Account invests at least 80% of its net assets, plus any borrowings for
investment purposes, in equity securities of companies with large market
capitalizations at the time of purchase. For this Account, companies with large
market capitalizations are those with market capitalizations within the range of
companies comprising the Russell 1000® Growth Index (as of December 31, 2017, this range was between
approximately $1.2
billion and
$868.9
billion). The Account
invests in growth equity securities; growth orientation emphasizes buying equity
securities of companies whose potential for growth of capital and earnings is
expected to be above average.
Principal Global Investors, LLC
invests up to 30% of the Account's assets in equity securities in an attempt to
match or exceed the performance of the Russell 1000® Growth Index by purchasing
securities in the index while slightly overweighting and underweighting certain
individual equity securities relative to their weight in the index. The
Account's remaining assets are managed by the sub-advisors.
Principal
Risks
The value of your investment in the
Account changes with the value of the Account's investments. Many factors affect
that value, and it is possible to lose money by investing in the Account. An
investment in the Account is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. The principal risks of investing in the Account, in alphabetical order,
are:
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 market capitalization or style), 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. |
Performance
The following information provides
some indication of the risks of investing in the Account. Past performance is
not necessarily an indication of how the Account will perform in the future. You
may get updated performance information by calling 1-800-222-5852.
The bar chart shows changes in the
Account's performance from year to year. The table shows how the Account's
average annual returns for 1, 5, and 10 years (or, if shorter, the life of the
Account) compare with those of one or more broad measures of market performance.
Performance figures for the Account do not include any separate account
expenses, cost of insurance, or other contract-level expenses; total returns for
the Account would be lower if such expenses were included.
For periods prior to the inception
date of Class 2 shares (May 1, 2015), the performance shown in the table for
Class 2 shares is that of the Account's Class 1 shares adjusted to reflect the
fees and expenses of the Class 2 shares. These adjustments result in performance
for such periods that is no higher than the historical performance of the Class
1 shares.
Total Returns as
of December 31
|
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q2
'09 |
19.90 |
% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q4
'08 |
(22.69 |
)% |
|
|
|
|
|
Average
Annual Total Returns |
For the
periods ended December 31, 2017 |
1
Year |
5
Years |
10
Years |
LargeCap
Growth Account I - Class 1 |
33.71% |
16.63% |
10.50% |
LargeCap
Growth Account I - Class 2 |
33.38% |
16.36% |
10.24% |
Russell 1000 Growth Index
(reflects no deduction for fees, expenses, or taxes) |
30.21% |
17.33% |
10.00% |
Management
Investment
Advisor and Portfolio Managers:
Principal Global Investors,
LLC
|
|
• |
James W. Fennessey (since
2009), Portfolio Manager |
|
|
• |
Randy L. Welch (since 2009),
Portfolio Manager |
Sub-Advisors:
Brown Advisory, LLC
T. Rowe Price Associates,
Inc.
Tax
Information
The Fund intends to comply with
applicable variable asset diversification regulations. Taxation to you will
depend on what you do with your variable life insurance or variable annuity
contract. See your variable product prospectus for information about the tax
implications of investing in the Accounts.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, to recommend one Account or share class of the Fund over another
Account or share class, or to recommend one variable annuity, variable life
insurance policy or mutual fund over another. Ask your salesperson or visit your
financial intermediary's website for more information.
LARGECAP S&P
500 INDEX ACCOUNT
|
|
Objective: |
The Account seeks long-term
growth of capital. |
Fees and Expenses
of the Account
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Account. These fees
and expenses do not reflect the fees and expenses of any variable insurance
contract that may invest in the Account and would be higher if they
did.
Annual Account
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
Class
1 |
Class
2 |
Management Fees |
0.25% |
0.25% |
Distribution and/or Service
(12b-1) Fees |
N/A |
0.25% |
Other Expenses |
—% |
—% |
Total Annual
Account Operating Expenses |
0.25% |
0.50% |
Example
This Example is intended to help you
compare the cost of investing in the Account with the cost of investing in other
mutual funds.
The Example assumes that you invest
$10,000 in the Account for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Account’s operating
expenses remain the same. If separate account expenses and contract level
expenses were included, expenses would be higher. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
LargeCap
S&P 500 Index Account - Class 1 |
$26 |
$80 |
$141 |
$318 |
LargeCap
S&P 500 Index Account - Class 2 |
51 |
160 |
280 |
628 |
Portfolio
Turnover
The Account pays transaction costs,
such as commissions, when it buys and sells securities (or “turns over” its
portfolio). A higher portfolio turnover rate may indicate higher transaction
costs. These costs, which are not reflected in annual Account operating expenses
or in the example, affect the Account’s performance. During the most recent
fiscal year, the Account’s portfolio turnover rate was 3.0% of the average value of its
portfolio.
Principal
Investment Strategies
Under normal circumstances, the
Account invests at least 80% of its net assets, plus any borrowings for
investment purposes, in equity securities of companies that compose the Standard
& Poor's ("S&P") 500 Index (the "Index") at the time of purchase. The
Index is designed to represent U.S equities with risk/return characteristics of
the large cap universe, which include growth and value stocks. As of
December 31,
2017 , the market
capitalization range of the companies comprising the Index was between
approximately $2.7
billion and
$868.9 billion
. Each component stock of the
Index is weighted in proportion to its total market value. The Index is balanced
quarterly.
The Account employs a passive
investment approach designed to attempt to track the performance of the Index.
In seeking its objective, the Account typically employs a replication strategy
which involves investing in all the securities that make up the Index, in the
same proportions as the Index.
The Account utilizes derivative
strategies and exchange-traded funds ("ETFs"). A derivative is a financial
arrangement, the value of which is derived from, or based on, a traditional
security, asset, or market index. Specifically, the Account invests in index
futures and equity ETFs on a daily basis to gain exposure to the Index in an
effort to minimize tracking error relative to the benchmark.
The Account will not concentrate its
investments (invest more than 25% of its assets) in a particular industry except
to the extent the Index is so concentrated.
|
|
Note: |
“Standard & Poor's 500"
and "S&P 500®" are trademarks of S&P
Global and have been licensed by Principal. The Account is not sponsored,
endorsed, sold, or promoted by S&P Global and S&P Global makes no
representation regarding the advisability of investing in the
Account. |
Principal
Risks
The value of your investment in the
Account changes with the value of the Account's investments. Many factors affect
that value, and it is possible to lose money by investing in the Account. An
investment in the Account is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. The principal risks of investing in the Account, in alphabetical order,
are:
Derivatives
Risk. 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 contracts 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
futures contract; possible lack of a liquid secondary market for a futures
contract and the resulting inability to close a futures contract 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. |
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 market capitalization or style), 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. |
|
|
• |
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 would cause the stock price to increase may not occur as
anticipated or at all. Moreover, a stock that appears to be undervalued
actually may be appropriately priced at a low level and therefore would
not be profitable for the fund. |
Index Fund
Risk. An index fund has
operating and other expenses while an index does not. As a result, over time,
index funds tend to underperform the index. 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.
Investment
Company Securities Risk. A fund that invests in another
investment company (for example, another fund or an exchange-traded fund
(“ETF”)) is subject to the risks associated with direct ownership of the
securities in which such investment company invests. Fund shareholders
indirectly bear their proportionate share of expenses of each such investment
company.
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, result in changes to expense
ratios and increased expenses, and adversely affect underlying fund performance.
Moreover, a fund of fund's redemptions or reallocations among share classes of
an underlying fund may result in changes to the expense ratios of affected
classes, which may increase the expenses paid by shareholders of the class that
experienced the redemption.
Performance
The following information provides
some indication of the risks of investing in the Account. Past performance is
not necessarily an indication of how the Account will perform in the future. You
may get updated performance information by calling 1-800-222-5852.
The bar chart shows changes in the
Account's performance from year to year. The table shows how the Account's
average annual returns for 1, 5, and 10 years (or, if shorter, the life of the
Account) compare with those of one or more broad measures of market performance.
Performance figures for the Account do not include any separate account
expenses, cost of insurance, or other contract-level expenses; total returns for
the Account would be lower if such expenses were included.
For periods prior to the inception
date of Class 2 shares (May 1, 2015), the performance shown in the table for
Class 2 shares is that of the Account's Class 1 shares, adjusted to reflect the
fees and expenses of the Class 2 shares. These adjustments result in performance
for such periods that is no higher than the historical performance of the Class
1 shares.
Total Returns as
of December 31
|
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q2
'09 |
15.69 |
% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q4
'08 |
(22.01 |
)% |
|
|
|
|
|
Average
Annual Total Returns |
For the
periods ended December 31, 2017 |
1
Year |
5
Years |
10
Years |
LargeCap
S&P 500 Index Account - Class 1 |
21.49% |
15.45% |
8.18% |
LargeCap
S&P 500 Index Account - Class 2 |
21.20% |
15.17% |
7.93% |
S&P 500 Index (reflects no
deduction for fees, expenses, or taxes) |
21.83% |
15.79% |
8.50% |
Management
Investment
Advisor and Portfolio Managers:
Principal Global Investors,
LLC
|
|
• |
Thomas L. Kruchten (since
2011), Research Analyst and Portfolio
Manager |
|
|
• |
Jeffrey A. Schwarte (since
2016), Portfolio Manager |
Tax
Information
The Fund intends to comply with
applicable variable asset diversification regulations. Taxation to you will
depend on what you do with your variable life insurance or variable annuity
contract. See your variable product prospectus for information about the tax
implications of investing in the Accounts.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, to recommend one Account or share class of the Fund over another
Account or share class, or to recommend one variable annuity, variable life
insurance policy or mutual fund over another. Ask your salesperson or visit your
financial intermediary's website for more information.
LARGECAP S&P
500 MANAGED VOLATILITY INDEX ACCOUNT
|
|
Objective: |
The Account seeks long-term
growth of capital, with an emphasis on managing
volatility. |
Fees and Expenses
of the Account
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Account. These fees
and expenses do not reflect the fees and expenses of any variable insurance
contract that may invest in the Account and would be higher if they
did.
Annual Account
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
Class
1 |
Management Fees |
0.45% |
Other Expenses |
0.01% |
Acquired Fund Fees and
Expenses |
0.01% |
Total Annual
Account Operating Expenses |
0.47% |
Example
This Example is intended to help you
compare the cost of investing in the Account with the cost of investing in other
mutual funds.
The Example assumes that you invest
$10,000 in the Account for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Account's operating
expenses remain the same. If separate account expenses and contract level
expenses were included, expenses would be higher. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
LargeCap
S&P 500 Managed Volatility Index Account - Class 1 |
$48 |
$151 |
$263 |
$591 |
Portfolio
Turnover
The Account pays transaction costs,
such as commissions, when it buys and sells securities (or “turns over” its
portfolio). A higher portfolio turnover rate may indicate higher transaction
costs. These costs, which are not reflected in annual Account operating expenses
or in the example, affect the Account's performance. During the most recent
fiscal year, the Account's portfolio turnover rate was 3.0% of the average value of its
portfolio.
Principal
Investment Strategies
Under normal circumstances, the
Account invests at least 80% of its net assets, plus any borrowings for
investment purposes, in equity securities of companies that compose the S&P
500 Index (the "Index") at the time of each purchase. The Index is designed to
represent U.S. equities with risk/return characteristics of the large cap
universe, which include growth and value stocks. As of December 31, 2017 , the market capitalization range of
the Index was between approximately $2.7 billion and $868.9 billion . The index is rebalanced
quarterly.
In part, the Account employs a
passive investment approach designed to attempt to track the performance of the
Index. In seeking its objective, the Account typically employs a replication
strategy which involves investing in all the securities that make up the Index,
in the same proportion as the Index. The Account also uses derivative strategies
and exchange-traded funds ("ETFs"). A derivative is a financial arrangement, the
value of which is derived from, or based on, a traditional security, asset, or
market index. Specifically, this portion of the Account invests in index futures
and ETFs on a daily basis to gain exposure to the Index in an effort to minimize
tracking error relative to the benchmark.
The Account also employs an active
volatility management strategy that buys vertical put spreads and vertical call
spreads on the S&P 500 Index, S&P 500 Index futures, and an S&P 500
Index ETF. Vertical spreads are the simultaneous purchase and sale of two
options of the same type with the same expiration date but two different strike
prices. The strike price is the fixed price at which the owner of the option can
buy (in the case of a call), or sell (in the case of a put), the underlying
security. This strategy seeks to produce gains regardless of the directional
movement of the S&P 500 Index and mitigate volatility.
The Account will not concentrate its
investments (invest more than 25% of its assets) in a particular industry except
to the extent the Index is so concentrated.
|
|
Note: |
“Standard & Poor's 500"
and "S&P 500®" are trademarks of S&P
Global and have been licensed by PGI. The Account is not sponsored,
endorsed, sold, or promoted by S&P Global and S&P Global makes no
representation regarding the advisability of investing in the
Account. |
Principal
Risks
The value of your investment in the
Account changes with the value of the Account's investments. Many factors affect
that value, and it is possible to lose money by investing in the Account. An
investment in the Account is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. The principal risks of investing in the Account, in alphabetical order,
are:
Derivatives
Risk. 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. |
|
|
• |
Options.
Options involve
specific risks, including: imperfect correlation between the change in
market value of the instruments held by the fund and the price of the
options, counterparty risk, difference in trading hours for the options
markets and the markets for the underlying securities (rate movements can
take place in the underlying markets that cannot be reflected in the
options markets), and an insufficient liquid secondary market for
particular options. |
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 market capitalization or style), 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. |
|
|
• |
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 would cause the stock price to increase may not occur as
anticipated or at all. Moreover, a stock that appears to be undervalued
actually may be appropriately priced at a low level and therefore would
not be profitable for the fund. |
Hedging
Risk. A fund that
implements a hedging strategy using derivatives and/or securities could expose
the fund to the risk that can arise when a change in the value of a hedge does
not match a change in the value of the asset it hedges. In other words, the
change in value of the hedge could move in a direction that does not match the
change in value of the underlying asset, resulting in a risk of loss to the
fund.
Index Fund
Risk. An index fund has
operating and other expenses while an index does not. As a result, over time,
index funds tend to underperform the index. The correlation between fund
performance and index performance may also be affected by the type of passive
investment approach used by a fund (sampling or replication), changes in
securities markets, changes in the composition of the index, and the timing of
purchases and sales of fund shares.
Investment
Company Securities Risk. A fund that invests in another
investment company (for example, another fund or an exchange-traded fund
(“ETF”)) is subject to the risks associated with direct ownership of the
securities in which such investment company invests. Fund shareholders
indirectly bear their proportionate share of the expenses of each such
investment company.
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, result in changes to expense
ratios and increased expenses, and adversely affect underlying fund
performance.
Volatility
Mitigation Risk. Volatility mitigation
strategies may increase fund transaction costs, which could increase losses or
reduce gains. These strategies may not protect the fund from market
declines and may reduce the fund's participation in market gains.
Performance
The following information provides
some indication of the risks of investing in the Account. Past performance is
not necessarily an indication of how the Account will perform in the future. You
may get updated performance information by calling 1-800-222-5852.
The bar chart shows changes in the
Account's performance from year to year. The table shows how the Account's
average annual returns for 1, 5, and 10 years (or, if shorter, the life of the
Account) compare with those of one or more broad measures of market performance.
Performance figures for the Accounts do not include any separate account
expenses, cost of insurance, or other contract-level expenses; total returns for
the Accounts would be lower if such expenses were included.
Life of Account returns are measured
from the date the Account's shares were first sold (October 31, 2013).
Total Returns as
of December 31
|
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q4
'15 |
6.62 |
% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q3
'15 |
(6.02 |
)% |
|
|
|
|
Average
Annual Total Returns |
For the
periods ended December 31, 2017 |
1
Year |
Life of
Account |
LargeCap
S&P 500 Managed Volatility Index Account - Class 1 |
19.55% |
11.24% |
S&P 500 Index (reflects no
deduction for fees, expenses, or taxes) |
21.83% |
12.95% |
Management
Investment
Advisor and Portfolio Managers:
Principal Global Investors,
LLC
|
|
• |
Thomas L. Kruchten (since
2013), Research Analyst and Portfolio
Manager |
|
|
• |
Jeffrey A. Schwarte (since
2016), Portfolio Manager |
Sub-Advisor and
Portfolio Managers:
Spectrum Asset Management,
Inc.
|
|
• |
L. Phillip Jacoby, IV (since
2013), Chief Investment Officer and Back-up Portfolio
Manager |
|
|
• |
Manu Krishnan (since 2013),
Vice President and Back-up Portfolio
Manager |
|
|
• |
Kevin Nugent (since 2013),
Vice President and Primary Portfolio
Manager |
Tax
Information
The Fund intends to comply with
applicable variable asset diversification regulations. Taxation to you will
depend on what you do with your variable life insurance or variable annuity
contract. See your variable product prospectus for information about the tax
implications of investing in the Accounts.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, to recommend one Account or share class of the Fund over another
Account or share class, or to recommend one variable annuity, variable life
insurance policy or mutual fund over another. Ask your salesperson or visit your
financial intermediary's website for more information.
LARGECAP VALUE
ACCOUNT
|
|
Objective: |
The Account seeks long-term
growth of capital. |
Fees and Expenses
of the Account
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Account. These fees
and expenses do not reflect the fees and expenses of any variable insurance
contract that may invest in the Account and would be higher if they
did.
Annual Account
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
Class
1 |
Class
2 |
Management Fees |
0.60% |
0.60% |
Distribution and/or Service
(12b-1) Fees |
N/A |
0.25% |
Other Expenses |
0.01% |
0.01% |
Total Annual
Account Operating Expenses |
0.61% |
0.86% |
Example
This Example is intended to help you
compare the cost of investing in the Account with the cost of investing in other
mutual funds.
The Example assumes that you invest
$10,000 in the Account for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Account’s operating
expenses remain the same. If separate account expenses and contract level
expenses were included, expenses would be higher. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
LargeCap
Value Account - Class 1 |
$62 |
$195 |
$340 |
$762 |
LargeCap
Value Account - Class 2 |
88 |
274 |
477 |
1,061 |
Portfolio
Turnover
The Account pays transaction costs,
such as commissions, when it buys and sells securities (or “turns over” its
portfolio). A higher portfolio turnover rate may indicate higher transaction
costs. These costs, which are not reflected in annual Account operating expenses
or in the example, affect the Account’s performance. During the most recent
fiscal year, the Account’s portfolio turnover rate was 109.8% of the average value of its
portfolio.
Principal
Investment Strategies
Under normal circumstances, the
Account invests at least 80% of its net assets, plus any borrowings for
investment purposes, in equity securities of companies with large market
capitalizations at the time of purchase. For this Account, companies with large
market capitalizations are those with market capitalizations within the range of
companies comprising the Russell 1000 ®
Value Index (which as of
December 31,
2017 ranged between
approximately $1.1
billion and
$489.0 billion
). The Account invests in
value equity securities, an investment strategy that emphasizes buying equity
securities that appear to be undervalued. The Account also invests in growth
securities and in medium capitalization companies. The Account actively trades
portfolio securities.
Principal
Risks
The value of your investment in the
Account changes with the value of the Account's investments. Many factors affect
that value, and it is possible to lose money by investing in the Account. An
investment in the Account is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. The principal risks of investing in the Account, in alphabetical order,
are:
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 market capitalization or style), 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. |
|
|
• |
Medium
Market Capitalization Companies Risk. Investments in medium sized
companies may involve greater risk and price volatility than investments
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 would cause the stock price to increase may not occur as
anticipated or at all. Moreover, a stock that appears to be undervalued
actually may be appropriately priced at a low level and therefore would
not be profitable for the fund. |
Portfolio
Turnover (Active Trading) Risk. High portfolio turnover (more than
100%) caused by actively trading portfolio securities may result in accelerating
the realization of taxable gains and losses, lower fund performance and
increased brokerage costs.
Performance
The following information provides
some indication of the risks of investing in the Account. Past performance is
not necessarily an indication of how the Account will perform in the future. You
may get updated performance information by calling 1-800-222-5852.
The bar chart shows changes in the
Account's performance from year to year. The table shows how the Account's
average annual returns for 1, 5, and 10 years (or, if shorter, the life of the
Account) compare with those of one or more broad measures of market performance.
Performance figures for the Account do not include any separate account
expenses, cost of insurance, or other contract-level expenses; total returns for
the Account would be lower if such expenses were included.
For periods prior to the inception
date of Class 2 shares (May 1, 2015), the performance shown in the table for
Class 2 shares is that of the Account's Class 1 shares, adjusted to reflect the
fees and expenses of the Class 2 shares. These adjustments result in performance
for such periods that is no higher than the historical performance of the Class
1 shares.
Total Returns as
of December 31
|
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q3
'09 |
15.93 |
% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q4
'08 |
(21.55 |
)% |
|
|
|
|
|
Average
Annual Total Returns |
For the
periods ended December 31, 2017 |
1
Year |
5
Years |
10
Years |
LargeCap
Value Account - Class 1 |
16.83% |
12.70% |
6.49% |
LargeCap
Value Account - Class 2 |
16.53% |
12.42% |
6.23% |
Russell 1000 Value Index
(reflects no deduction for fees, expenses, or taxes) |
13.66% |
14.04% |
7.10% |
Management
Investment
Advisor and Portfolio Managers:
Principal Global Investors,
LLC
|
|
• |
Christopher Ibach (since
2015), Portfolio Manager |
|
|
• |
Jeffrey A. Schwarte (since
2018), Portfolio Manager |
Tax
Information
The Fund intends to comply with
applicable variable asset diversification regulations. Taxation to you will
depend on what you do with your variable life insurance or variable annuity
contract. See your variable product prospectus for information about the tax
implications of investing in the Accounts.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, to recommend one Account or share class of the Fund over another
Account or share class, or to recommend one variable annuity, variable life
insurance policy or mutual fund over another. Ask your salesperson or visit your
financial intermediary's website for more information.
MIDCAP
ACCOUNT
|
|
Objective: |
The Account seeks long-term
growth of capital. |
Fees and Expenses
of the Account
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Account. These fees
and expenses do not reflect the fees and expenses of any variable insurance
contract that may invest in the Account and would be higher if they
did.
Annual Account
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
Class
1 |
Class
2 |
Management Fees |
0.53% |
0.53% |
Distribution and/or Service
(12b-1) Fees |
N/A |
0.25% |
Other Expenses |
0.01% |
0.01% |
Total Annual
Account Operating Expenses |
0.54% |
0.79% |
Example
This Example is intended to help you
compare the cost of investing in the Account with the cost of investing in other
mutual funds.
The Example assumes that you invest
$10,000 in the Account for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Account’s operating
expenses remain the same. If separate account expenses and contract level
expenses were included, expenses would be higher. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
MidCap
Account - Class 1 |
$55 |
$173 |
$302 |
$677 |
MidCap
Account - Class 2 |
81 |
252 |
439 |
978 |
Portfolio
Turnover
The Account pays transaction costs,
such as commissions, when it buys and sells securities (or “turns over” its
portfolio). A higher portfolio turnover rate may indicate higher transaction
costs. These costs, which are not reflected in annual Account operating expenses
or in the example, affect the Account’s performance. During the most recent
fiscal year, the Account’s portfolio turnover rate was 13.4% of the average value of its
portfolio.
Principal
Investment Strategies
Under normal circumstances, the
Account invests at least 80% of its net assets, plus any borrowings for
investment purposes, in equity securities of companies with medium market
capitalizations at the time of purchase. For this Account, companies with medium
market capitalizations are those with market capitalizations within the range of
companies comprising the Russell Midcap® Index (as of December 31, 2017, this range was between
approximately $1.1
billion and
$36.7
billion). The Account
also invests in foreign securities.
The Account invests in equity
securities with growth and/or value characteristics. Investing in value equity
securities is an investment strategy that emphasizes buying equity securities
that appear to be undervalued. The growth orientation selection emphasizes
buying equity securities of companies whose potential for growth of capital and
earnings is expected to be above average. The Account does not have a policy of
preferring one of these categories over the other.
Principal
Risks
The value of your investment in the
Account changes with the value of the Account's investments. Many factors affect
that value, and it is possible to lose money by investing in the Account. An
investment in the Account is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. The principal risks of investing in the Account, in alphabetical order,
are:
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 market capitalization or style), 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 Risk. Investments in small and
medium sized companies may involve greater risk and price volatility than
investments 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 would cause the stock price to increase may not occur as
anticipated or at all. Moreover, a stock that appears to be undervalued
actually may be appropriately priced at a low level and therefore would
not be profitable for the fund. |
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).
Performance
The following information provides
some indication of the risks of investing in the Account. Past performance is
not necessarily an indication of how the Account will perform in the future. You
may get updated performance information by calling 1-800-222-5852.
The bar chart shows changes in the
Account's performance from year to year. The table shows how the Account's
average annual returns for 1, 5, and 10 years (or, if shorter, the life of the
Account) compare with those of one or more broad measures of market performance.
Performance figures for the Accounts do not include any separate account
expenses, cost of insurance, or other contract-level expenses; total returns for
the Accounts would be lower if such expenses were included.
For periods prior to the inception
date of Class 2 shares (September 9, 2009), the performance shown in the table
for Class 2 shares is that of the Account's Class 1 shares, adjusted to reflect
the fees and expenses of the Class 2 shares. These adjustments result in
performance for such periods that is no higher than the historical performance
of the Class 1 shares.
Total Returns as
of December 31
|
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q2
'09 |
18.19 |
% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q4
'08 |
(23.92 |
)% |
|
|
|
|
|
Average
Annual Total Returns |
For the
periods ended December 31, 2017 |
1
Year |
5
Years |
10
Years |
MidCap
Account - Class 1 |
25.51% |
16.33% |
11.70% |
MidCap
Account - Class 2 |
25.19% |
16.04% |
11.41% |
Russell Midcap Index (reflects
no deduction for fees, expenses, or taxes) |
18.52% |
14.96% |
9.11% |
Management
Investment
Advisor and Portfolio Managers:
Principal Global Investors,
LLC
|
|
• |
K. William Nolin (since 2000),
Portfolio Manager |
|
|
• |
Tom Rozycki (since 2013),
Portfolio Manager |
Purchase and Sale
of Account Shares
Effective as of the close of the New
York Stock Exchange on August 15, 2013, the MidCap Account is no longer
available for purchase from new contractholders of variable products invested in
the MidCap Account. See the section General Information About an Account -
Purchase of Account Shares - MidCap Account for additional
information.
Tax
Information
The Fund intends to comply with
applicable variable asset diversification regulations. Taxation to you will
depend on what you do with your variable life insurance or variable annuity
contract. See your variable product prospectus for information about the tax
implications of investing in the Accounts.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, to recommend one Account or share class of the Fund over another
Account or share class, or to recommend one variable annuity, variable life
insurance policy or mutual fund over another. Ask your salesperson or visit your
financial intermediary's website for more information.
MULTI-ASSET
INCOME ACCOUNT
|
|
Objective: |
The
Account seeks
current income. |
Fees and Expenses
of the Account
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Account. These fees
and expenses do not reflect the fees and expenses of any variable insurance
contract that may invest in the Account and would be higher if they
did.
Annual Account
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
Class
1 |
Class
2 |
Management Fees |
0.03% |
0.03% |
Distribution and/or Service
(12b-1) Fees |
N/A |
0.25% |
Other Expenses |
2.39% |
2.39% |
Acquired Fund Fees and
Expenses |
0.73% |
0.73% |
Total Annual
Account Operating Expenses |
3.15% |
3.40% |
Expense Reimbursement
(1) |
(2.34)% |
(2.34)% |
Total Annual
Account Operating Expenses after Expense Reimbursement |
0.81% |
1.06% |
|
|
|
(1) Principal Global
Investors, LLC ("PGI"), the investment advisor, has contractually agreed
to limit the Account’s expenses by paying, if necessary, expenses normally
payable by the Account, (excluding interest expense, expenses related to
fund investments, acquired fund fees and expenses, and other extraordinary
expenses) to maintain a total level of operating expenses (expressed as a
percent of average net assets on an annualized basis) not to exceed 0.08%
for Class 1 and 0.33% for Class 2 shares. It is expected that the expense
limits will continue through the period ending April 30, 2019; however,
Principal Variable Contracts Funds, Inc. and PGI, the parties to the
agreement, may mutually agree to terminate the expense limits prior to the
end of the period. |
Example
This Example is intended to help you
compare the cost of investing in the Account with the cost of investing in other
mutual funds.
The Example assumes that you invest
$10,000 in the Account for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Account’s operating
expenses remain the same. If separate account expenses and contract level
expenses were included, expenses would be higher. The calculation of costs takes
into account any applicable contractual fee waivers and/or expense
reimbursements for the period noted in the table above. Although your actual
costs may be higher or lower, based on these assumptions your costs would
be:
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
Multi-Asset
Income Account - Class 1 |
$83 |
$751 |
$1,445 |
$3,294 |
Multi-Asset
Income Account - Class 2 |
108 |
826 |
1,568 |
3,527 |
Portfolio
Turnover
As a fund of funds, the Account does
not pay transaction costs, such as commissions, when it buys and sells shares of
underlying funds (or "turns over" its portfolio). An underlying fund does pay
transaction costs when it buys and sells portfolio securities, and a higher
portfolio turnover may indicate higher transaction costs. These costs, which are
not reflected in annual account operating expenses or in the examples, affect
the performance of the underlying fund and the Account. During the most recent
fiscal year, The Account's portfolio turnover rate was 22.7% of the average value of its
portfolio.
Principal
Investment Strategies
The Account is a
fund of funds and invests in funds of Principal Funds, Inc. ("PFI").The
Account's underlying funds consist of domestic and foreign equity funds,
fixed-income funds, and other funds that aim to offer diversification beyond
traditional equity and fixed income securities. The diversification of the Account
is designed to moderate overall price volatility and cushion severe losses in
any one investment sector.
Under normal
circumstances, the Account allocates a majority of its assets to underlying
funds that invest in fixed income securities (including high-yield bonds,
preferred securities, commercial mortgage-backed securities (“CMBS”)(securitized
products)) and a portion of its assets to underlying funds that invest in equity
securities (including equity securities of domestic and foreign companies
principally engaged in the real estate industry, including real estate
investment trusts, and growth and value equities of domestic and foreign
companies, including those in emerging markets). These investments may be
denominated in foreign currencies. The Account invests in these types of
underlying funds in an effort to provide incremental fixed-income yields over a
portfolio of government securities and equity dividend yields, while
diversifying the fixed-income risks. The Account’s underlying funds utilize
derivative strategies. A derivative is a financial arrangement, the value of
which is derived from, or based on, a traditional security, asset, or market
index. Specifically, the underlying funds invest in swaps, including interest
rate, credit default and/or total return swaps, and Treasury futures to
efficiently manage the fixed-income exposure.
The Account allocates its
investments among the underlying funds based on qualitative and quantitative
analysis. Without shareholder approval, the Account may alter the allocations
and/or add, substitute or remove underlying funds (including investing in other
investment companies) when it deems appropriate.
Principal
Risks
The value of your investment in the
Account changes with the value of the Account's investments. Many factors affect
that value, and it is possible to lose money by investing in the Account. An
investment in the Account is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
The principal risks of investing in
the Account that are inherent in the fund of funds are:
Fund of Funds
Risk. Fund shareholders
bear indirectly their proportionate share of the expenses of other investment
companies in which the Fund invests ("underlying funds"). The Fund's selection
and weighting of asset classes and allocation of investments in underlying funds
may cause it to underperform other funds with a similar investment objective.
The Fund's performance and risks correspond directly to the performance and
risks of the underlying funds in which it invests, proportionately in accordance
with the weightings of such investments, and there is no assurance that the
underlying funds will achieve their investment objectives. Management of the
Fund entails potential conflicts of interest: the Fund invests in affiliated
underlying funds; and the Advisor and its affiliates may earn different fees
from different underlying funds and may have an incentive to allocate more Fund
assets to underlying funds from which they receive higher fees.
Principal Risks
due to the Account's Investments in Underlying Funds
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. 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.
|
|
• |
Credit
Default Swaps.
Credit default swaps involve special risks in addition to those associated
with swaps generally because they are difficult to value, are highly
susceptible to liquidity and credit risk, and generally pay a return to
the party that has paid the premium only in the event of an actual default
by the issuer of the underlying obligation (as opposed to a credit
downgrade or other indication of financial difficulty). The protection
“buyer” in a credit default contract may be obligated to pay the
protection “seller” an up-front payment or a periodic stream of payments
over the term of the contract provided generally that no credit event on a
reference obligation has occurred. If a credit event occurs, the seller
generally must pay the buyer the “par value” (i.e., full notional value)
of the swap in exchange for an equal face amount of deliverable
obligations of the reference entity described in the swap, or the seller
may be required to deliver the related net cash amount, if the swap is
cash settled. The Fund may be either the buyer or seller in the
transaction. |
|
|
• |
Currency
Contracts.
Derivatives related to currency contracts involve the specific risk of
government action through exchange controls that would restrict the
ability of the fund to deliver or receive
currency. |
|
|
• |
Forward
Contracts, Futures and Swaps. Forward contracts, futures,
and swaps 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 forward contract, future or swap; possible lack of a
liquid secondary market for a forward contract, future or swap and the
resulting inability to close a forward contract, future or swap 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 market capitalization or style), 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 Risk. Investments in small and
medium-sized companies may involve greater risk and price volatility than
investments 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 would cause the stock price to increase may not occur as
anticipated or at all. Moreover, a stock that appears to be undervalued
actually may be appropriately priced at a low level and therefore would
not be profitable for the fund. |
Fixed-Income
Securities Risk. Fixed-income securities are subject
to interest rate, credit quality, and liquidity risks. The market value of
fixed-income securities generally declines when interest rates rise, and
increased interest rates may adversely affect the liquidity of certain
fixed-income securities. Moreover, an issuer of fixed-income securities could
default on its payment obligations due to increased interest rates or for other
reasons.
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).
High Yield
Securities Risk. High
yield fixed-income securities (commonly referred to as "junk bonds") are subject
to greater credit quality risk than higher rated fixed-income securities and
should be considered speculative.
Industry
Concentration Risk. A
fund that concentrates investments in a particular industry or group of
industries has greater exposure than other funds to market, economic and other
factors affecting that industry or group of industries.
|
|
• |
Real
Estate. A fund
concentrating in the real estate industry can be subject to the risks
associated with direct ownership of real estate, securities of companies
in the real estate industry, and/or real estate investment
trusts. |
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, which means funds with
longer average portfolio durations may be more volatile than those with shorter
durations.
Preferred
Securities Risk. Preferred securities are securities
with a lower priority claim on assets or earnings than bonds and other debt
instruments in a company's capital structure, and therefore can be subject to
greater credit and liquidation risk than more senior debt instruments. In
addition, preferred securities are subject to other risks, such as limited or no
voting rights, deferring or skipping distributions, interest rate risk, and
redeeming the security prior to the stated maturity date.
Real Estate
Investment Trusts (“REITs”) Risk. In addition to risks associated
with investing in real estate securities, REITs are dependent upon management
skills, are not diversified, and are subject to heavy cash flow dependency,
risks of default by borrowers, and self-liquidation. Investment in REITs also
involves risks similar to risks of investing in small market capitalization
companies, such as limited financial resources, less frequent and limited volume
trading, and may be subject to more abrupt or erratic price movements than
larger company securities. A REIT could fail to qualify for tax-free
pass-through of income under the Internal Revenue Code. Fund shareholders will
indirectly bear their proportionate share of the expenses of REITs in which the
fund invests.
Real Estate
Securities Risk. Investing in real estate securities
subjects the fund to the risks associated with the real estate market (which are
similar to the risks associated with direct ownership in real estate), including
declines in real estate values, loss due to casualty or condemnation, property
taxes, interest rate changes, increased expenses, cash flow of underlying real
estate assets, regulatory changes (including zoning, land use and rents), and
environmental problems, as well as to the risks related to 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, result in changes to expense
ratios and increased expenses, and adversely affect underlying fund
performance.
Securitized
Products Risk. Investments in securitized products
are subject to risks similar to traditional fixed income securities, such as
credit, interest rate, liquidity, prepayment, extension, and default risk, as
well as additional risks associated with the nature of the assets and the
servicing of those assets. Unscheduled prepayments on securitized products 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).
Performance
The following information provides
some indication of the risks of investing in the Account. Past performance is
not necessarily an indication of how the Account will perform in the future. You
may get updated performance information by calling 1-800-222-5852.
The bar chart shows changes in the
Account's performance from year to year. The table shows how the Account's
average annual returns for 1, 5, and 10 years (or, if shorter, the life of the
Account) compare with those of one or more broad measures of market performance.
Performance figures for the Accounts do not include any separate account
expenses, cost of insurance, or other contract-level expenses; total returns for
the Accounts would be lower if such expenses were included.
Life of Account returns are measured
from the date the Account's shares were first sold (July 28, 2015).
Total Returns as
of December 31
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q1
'17 |
3.71% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q4
'16 |
(0.58)% |
|
|
|
|
Average
Annual Total Returns |
For the
periods ended December 31, 2017 |
1
Year |
Life of
Account |
Multi-Asset
Income Account - Class 1 |
11.99% |
6.88% |
Multi-Asset
Income Account - Class 2 |
11.84% |
6.65% |
Bloomberg Barclays Global
Credit Index (reflects no deduction for fees, expenses, or
taxes) |
9.19% |
5.30% |
MSCI ACWI Value Index (reflects
no deduction for fees, expenses, or taxes) |
18.26% |
9.91% |
Bloomberg Barclays Global High
Yield Index (reflects no deduction for fees, expenses, or
taxes) |
10.43% |
8.33% |
Multi-Asset Income Blended
Index (reflects no deduction for fees, expenses, or taxes) |
12.69% |
7.89% |
The blended index is used to show
the performance of the various asset classes used by the Account, and the
Average Annual Total Returns table shows performance of the components of the
blended index. The weightings for the Multi-Asset Income Blended Index are 35%
Bloomberg Barclays Global Credit Index, 35% MSCI ACWI Value Index, and 30%
Bloomberg Barclays Global High Yield Index.
Management
Investment
Advisor and Portfolio Managers:
Principal Global Investors,
LLC
|
|
• |
Scott W. Smith (since 2015),
Portfolio Manager, Asset Allocation |
Tax
Information
The Fund intends to comply with
applicable variable asset diversification regulations. Taxation to you will
depend on what you do with your variable life insurance or variable annuity
contract. See your variable product prospectus for information about the tax
implications of investing in the Accounts.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, to recommend one Account or share class of the Fund over another
Account or share class, or to recommend one variable annuity, variable life
insurance policy or mutual fund over another. Ask your salesperson or visit your
financial intermediary's website for more information.
PRINCIPAL CAPITAL
APPRECIATION ACCOUNT
|
|
Objective: |
The Account seeks to provide
long-term growth of capital. |
Fees and Expenses
of the Account
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Account. These fees
and expenses do not reflect the fees and expenses of any variable insurance
contract that may invest in the Account and would be higher if they
did.
Annual Account
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
Class
1 |
Class
2 |
Management Fees |
0.62% |
0.62% |
Distribution and/or Service
(12b-1) Fees |
N/A |
0.25% |
Other Expenses |
0.01% |
0.01% |
Total Annual
Account Operating Expenses |
0.63% |
0.88% |
Example
This Example is intended to help you
compare the cost of investing in the Account with the cost of investing in other
mutual funds.
The Example assumes that you invest
$10,000 in the Account for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Account's operating
expenses remain the same. If separate account expenses and contract level
expenses were included, expenses would be higher. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
Principal
Capital Appreciation Account - Class 1 |
$64 |
$202 |
$351 |
$786 |
Principal
Capital Appreciation Account - Class 2 |
90 |
281 |
488 |
1,084 |
Portfolio
Turnover
The Account pays transaction costs,
such as commissions, when it buys and sells securities (or “turns over” its
portfolio). A higher portfolio turnover rate may indicate higher transaction
costs. These costs, which are not reflected in annual Account operating expenses
or in the example, affect the Account's performance. During the most recent
fiscal year, the Account's portfolio turnover rate was 28.5% of the average value of its
portfolio.
Principal
Investment Strategies
The Account invests primarily in
equity securities of companies with any market capitalization, but has a greater
exposure to large market capitalization companies than small or medium market
capitalization companies.
The Account invests in equity
securities with value and/or growth characteristics. Investing in value equity
securities is an investment strategy that emphasizes buying equity securities
that appear to be undervalued. The growth orientation selection emphasizes
buying equity securities of companies whose potential for growth of capital and
earnings is expected to be above average. The Account does not have a policy of
preferring one of these categories over the other.
Principal
Risks
The value of your investment in the
Account changes with the value of the Account's investments. Many factors affect
that value, and it is possible to lose money by investing in the Account. An
investment in the Account is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. The principal risks of investing in the Account, in alphabetical order,
are:
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 market capitalization or style), 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 Risk. Investments in small and
medium sized companies may involve greater risk and price volatility than
investments 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 would cause the stock price to increase may not occur as
anticipated or at all. Moreover, a stock that appears to be undervalued
actually may be appropriately priced at a low level and therefore would
not be profitable for the fund. |
Performance
The following information provides
some indication of the risks of investing in the Account. Past performance is
not necessarily an indication of how the Account will perform in the future. You
may get updated performance information by calling 1-800-222-5852.
The bar chart shows changes in the
Account's performance from year to year. The table shows how the Account's
average annual returns for 1, 5, and 10 years (or, if shorter, the life of the
Account) compare with those of one or more broad measures of market performance.
Performance figures for the Accounts do not include any separate account
expenses, cost of insurance, or other contract-level expenses; total returns for
the Accounts would be lower if such expenses were included.
Total Returns as
of December 31
|
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q2
'09 |
16.33 |
% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q4
'08 |
(22.70 |
)% |
|
|
|
|
|
Average
Annual Total Returns |
For the
periods ended December 31, 2017 |
1
Year |
5
Years |
10
Years |
Principal
Capital Appreciation Account - Class 1 |
20.75% |
14.96% |
8.61% |
Principal
Capital Appreciation Account - Class 2 |
20.46% |
14.68% |
8.34% |
Russell 3000 Index (reflects no
deduction for fees, expenses, or taxes) |
21.13% |
15.58% |
8.60% |
Management
Investment
Advisor and Portfolio Managers:
Principal Global Investors,
LLC
|
|
• |
Daniel R. Coleman (since
2010), Portfolio Manager |
|
|
• |
Theodore Jayne (since 2015),
Portfolio Manager |
Tax
Information
The Fund intends to comply with
applicable variable asset diversification regulations. Taxation to you will
depend on what you do with your variable life insurance or variable annuity
contract. See your variable product prospectus for information about the tax
implications of investing in the Accounts.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, to recommend one Account or share class of the Fund over another
Account or share class, or to recommend one variable annuity, variable life
insurance policy or mutual fund over another. Ask your salesperson or visit your
financial intermediary's website for more information.
PRINCIPAL
LIFETIME STRATEGIC INCOME ACCOUNT
|
|
Objective: |
The
Account seeks
current income, and as a secondary objective, capital
appreciation. |
Fees and Expenses
of the Account
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Account. These fees
and expenses do not reflect the fees and expenses of any variable insurance
contract that may invest in the Account and would be higher if they
did.
Annual Account
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
Class
1 |
Management Fees
|
0.00% |
Other Expenses |
0.02% |
Acquired Fund Fees and
Expenses |
0.63% |
Total Annual
Account Operating Expenses |
0.65% |
Example
This Example is intended to help you
compare the cost of investing in the Account with the cost of investing in other
mutual funds.
The Example assumes that you invest
$10,000 in the Account for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Account’s operating
expenses remain the same. If separate account expenses and contract level
expenses were included, expenses would be higher. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
Principal
LifeTime Strategic Income Account – Class 1 |
$66 |
$208 |
$362 |
$810 |
Portfolio
Turnover
As a fund of funds, the Account does
not pay transaction costs, such as commissions, when it buys and sells shares of
underlying funds (or “turns over” its portfolio). An underlying fund does pay
transaction costs when it buys and sells portfolio securities, and a higher
portfolio turnover may indicate higher transaction costs. These costs, which are
not reflected in annual Account operating expenses or in the examples, affect
the performance of the underlying fund and the Account. During its most recent
fiscal year, the Account's portfolio turnover rate was 20.0% of the average value of its
portfolio.
Principal
Investment Strategies
The Account invests according to an
asset allocation strategy designed for investors primarily seeking current
income and secondarily capital appreciation. The Account's asset allocation is
designed for investors who are approximately 15 years beyond the normal
retirement age of 65. The Account is a fund of funds and invests in underlying
funds of Principal Funds, Inc. ("PFI") and of Principal Variable Contracts
Funds, Inc. ("PVC"). Its underlying funds consist of domestic and foreign equity
funds, fixed-income funds, real asset funds, and other funds that aim to offer
diversification beyond traditional equity and fixed-income securities. The
diversification of the Account is designed to moderate overall price volatility.
The Account may add, remove, or substitute underlying funds at any
time.
The Account is managed with
strategic or long-term asset class targets and target ranges. There is a
rebalancing strategy that aligns with the target weights to identify asset
classes that are either overweight or underweight. The Account may shift asset
class targets in response to normal evaluative processes, the shortening time
horizon of the Account or changes in market forces or Account
circumstances.
In selecting underlying funds and
target weights, the Account considers both quantitative measures (e.g., past
performance, expected levels of risk and returns, expense levels,
diversification and style consistency) and qualitative factors (e.g.,
organizational stability, investment experience, investment and risk management
processes, and information, trading, and compliance systems). There are no
minimum or maximum percentages of assets that the Account must invest in a
specific asset class or underlying fund.
The underlying funds invest in
growth and value stocks of large market capitalization companies, fixed-income
securities, domestic and foreign securities, securities denominated in foreign
currencies, investment companies (including index funds), securitized products,
U.S. government and U.S. government-sponsored securities, and derivatives. A
derivative is a financial arrangement, the value of which is derived from, or
based on, a traditional security, asset, or market index. The underlying funds
principally use futures, options, swaps (including, for example, credit default,
interest rate, and currency swaps) and forwards in order to gain exposure to a
variety of securities or asset classes or attempt to reduce risk.
Principal
Risks
The value of your investment in the
Account changes with the value of the Account's investments. Many factors affect
that value, and it is possible to lose money by investing in the Account. An
investment in the Account is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
The principal risks of investing in
the Account that are inherent in the fund of funds, in alphabetical order,
are:
Fund of Funds
Risk. Account
shareholders bear indirectly their proportionate share of the expenses of other
investment companies in which the Account invests ("underlying funds"). The
Account's selection and weighting of asset classes and allocation of investments
in underlying funds may cause it to underperform other funds with a similar
investment objective. The Fund's performance and risks correspond directly to
the performance and risks of the underlying funds in which it invests,
proportionately in accordance with the weightings of such investments, and there
is no assurance that the underlying funds will achieve their investment
objectives. Management of the Account entails potential conflicts of interest:
the Account invests in affiliated underlying funds; and the Advisor and its
affiliates may earn different fees from different underlying funds and may have
an incentive to allocate more Fund assets to underlying funds from which they
receive higher fees.
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.
Principal Risks
due to the Account's Investments in Underlying Funds
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. 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.
|
|
• |
Credit
Default Swaps.
Credit default swaps involve special risks in addition to those generally
associated with swaps because they are difficult to value, are highly
susceptible to liquidity and credit risk, and generally pay a return to
the party that has paid the premium only in the event of an actual default
by the issuer of the underlying obligation (as opposed to a credit
downgrade or other indication of financial difficulty). The protection
“buyer” in a credit default contract may be obligated to pay the
protection “seller” an upfront payment or a periodic stream of payments
over the term of the contract provided generally that no credit event on a
reference obligation has occurred. If a credit event occurs, the seller
generally must pay the buyer the “par value” (full notional value) of the
swap in exchange for an equal face amount of deliverable obligations of
the reference entity described in the swap, or the seller may be required
to deliver the related net cash amount, if the swap is cash settled. The
Fund may be either the buyer or seller in the
transaction. |
|
|
• |
Forward
Contracts, Futures and Swaps. Forward contracts, futures
and swaps 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 forward contract, future or swap; possible lack of a
liquid secondary market for a forward contract, future or swap and the
resulting inability to close a forward contract, future or swap 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. |
|
|
• |
Options. Options involve specific
risks, including: imperfect correlation between the change in market value
of the instruments held by the fund and the price of the options,
counterparty risk, difference in trading hours for the options markets and
the markets for the underlying securities (rate movements can take place
in the underlying markets that cannot be reflected in the options
markets), and an insufficient liquid secondary market for particular
options. |
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 market capitalization or style), 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. |
|
|
• |
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 would cause the stock price to increase may not occur as
anticipated or at all. Moreover, a stock that appears to be undervalued
actually may be appropriately priced at a low level and therefore would
not be profitable for the fund. |
Fixed-Income
Securities Risk. Fixed-income securities are subject
to interest rate, credit quality, and liquidity risks. The market value of
fixed-income securities generally declines when interest rates rise, and
increased interest rates may adversely affect the liquidity of certain
fixed-income securities. Moreover, an issuer of fixed-income securities could
default on its payment obligations due to increased interest rates or for other
reasons.
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
Risk. An index fund has
operating and other expenses while an index does not. As a result, over time,
index funds tend to underperform the index. 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, which means funds with
longer average portfolio durations may be more volatile than those with shorter
durations.
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, result in changes to expense
ratios and increased expenses, and adversely affect underlying fund performance.
Moreover, a fund of fund's redemptions or reallocations among share classes of
an underlying fund may result in changes to the expense ratios of affected
classes, which may increase the expenses paid by shareholders of the class that
experienced the redemption.
Securitized
Products Risk. Investments in securitized products
are subject to risks similar to traditional fixed income securities, such as
credit, interest rate, liquidity, prepayment, extension, and default risk, as
well as additional risks associated with the nature of the assets and the
servicing of those assets. Unscheduled prepayments on securitized products 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.
Performance
The following information provides
some indication of the risks of investing in the Account. Past performance is
not necessarily an indication of how the Account will perform in the future. You
may get updated performance information by calling 1-800-222-5852.
The bar chart shows changes in the
Account's performance from year to year. The table shows how the Account's
average annual returns for 1, 5, and 10 years (or, if shorter, the life of the
Account) compare with those of one or more broad measures of market performance.
Performance figures for the Accounts do not include any separate account
expenses, cost of insurance, or other contract-level expenses; total returns for
the Accounts would be lower if such expenses were included.
Total Returns as
of December 31
|
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q2
'09 |
10.25 |
% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q4
'08 |
(12.55 |
)% |
|
|
|
|
|
Average
Annual Total Returns |
For the
periods ended December 31, 2017 |
1
Year |
5
Years |
10
Years |
Principal
LifeTime Strategic Income Account - Class 1 |
8.76% |
4.41% |
3.56% |
S&P Target Date Retirement
Income Index (reflects no deduction for fees, expenses, or
taxes) |
8.54% |
4.86% |
4.12% |
Management
Investment
Advisor and Portfolio Managers:
Principal Global Investors,
LLC
|
|
• |
Matthew Annenberg (since
2013), Portfolio Manager |
|
|
• |
James W. Fennessey (since
2007), Portfolio Manager |
|
|
• |
Scott Smith (since 2017),
Associate Portfolio Manager |
|
|
• |
Randy L. Welch (since 2007),
Portfolio Manager |
Tax
Information
The Fund intends to comply with
applicable variable asset diversification regulations. Taxation to you will
depend on what you do with your variable life insurance or variable annuity
contract. See your variable product prospectus for information about the tax
implications of investing in the Accounts.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, to recommend one Account or share class of the Fund over another
Account or share class, or to recommend one variable annuity, variable life
insurance policy or mutual fund over another. Ask your salesperson or visit your
financial intermediary's website for more information.
PRINCIPAL
LIFETIME 2010 ACCOUNT
|
|
Objective: |
The Account seeks a total
return consisting of long-term growth of capital and current
income. |
Fees and Expenses
of the Account
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Account. These fees
and expenses do not reflect the fees and expenses of any variable insurance
contract that may invest in the Account and would be higher if they
did.
Annual Account
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
Class
1 |
Management Fees
|
0.00% |
Other Expenses |
0.01% |
Acquired Fund Fees and
Expenses |
0.65% |
Total Annual
Account Operating Expenses |
0.66% |
Example
This Example is intended to help you
compare the cost of investing in the Account with the cost of investing in other
mutual funds.
The Example assumes that you invest
$10,000 in the Account for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Account’s operating
expenses remain the same. If separate account expenses and contract level
expenses were included, expenses would be higher. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
Principal
LifeTime 2010 Account - Class 1 |
$67 |
$211 |
$368 |
$822 |
Portfolio
Turnover
As a fund of funds, the Account does
not pay transaction costs, such as commissions, when it buys and sells shares of
underlying funds (or “turns over” its portfolio). An underlying fund does pay
transaction costs when it buys and sells portfolio securities, and a higher
portfolio turnover may indicate higher transaction costs. These costs, which are
not reflected in annual account operating expenses or in the examples, affect
the performance of the underlying fund and the Account. During its most recent
fiscal year, the Account's portfolio turnover rate was 21.7% of the average value of its
portfolio.
Principal
Investment Strategies
The Account operates as a “target
date fund” that invests according to an asset allocation strategy designed for
investors having a retirement investment goal close to the year in the Account’s
name. The Account is a fund of funds and invests in underlying funds of
Principal Funds, Inc. ("PFI") and of Principal Variable Contracts Funds, Inc.
("PVC"). Its underlying funds consist of domestic and foreign equity funds,
fixed-income funds, real asset funds, and other funds that aim to offer
diversification beyond traditional equity and fixed-income securities. The asset
class diversification of the Account is designed to moderate overall price
volatility. The Account may add, remove, or substitute underlying funds at any
time.
The Account is managed with
strategic or long-term asset class targets and target ranges. There is a
rebalancing strategy that aligns with the target weights to identify asset
classes that are either overweight or underweight. The Account may shift asset
class targets in response to normal evaluative processes, the shortening time
horizon of the Account or changes in market forces or Account
circumstances.
In selecting underlying funds and
target weights, the Account considers both quantitative measures (e.g., past
performance, expected levels of risk and returns, expense levels,
diversification and style consistency) and qualitative factors (e.g.,
organizational stability, investment experience, investment and risk management
processes, and information, trading, and compliance systems). There are no
minimum or maximum percentages of assets that the Account must invest in a
specific asset class or underlying fund.
The underlying funds invest in
growth and value stocks of large market capitalization companies, fixed-income
securities, domestic and foreign securities, securities denominated in foreign
currencies, investment companies (including index funds), securitized products,
U.S. government and U.S. government-sponsored securities, and derivatives. A
derivative is a financial arrangement, the value of which is derived from, or
based on, a traditional security, asset, or market index. The underlying funds
principally use futures, options, swaps (including, for example, credit default,
interest rate, and currency swaps) and forwards in order to gain exposure to a
variety of securities or asset classes or attempt to reduce risk.
The Account's asset allocation will
become more conservative over time as investment goals near (for example,
retirement, which is assumed to begin at age 65) and investors become more
risk-averse. Approximately 15 years after its target year, the Account's
underlying fund allocation is expected to match that of the Principal LifeTime
Strategic Income Account. At that time, the Account may be combined with the
Principal LifeTime Strategic Income Account if the Board of Directors determines
that the combination is in the best interests of Account shareholders. It is
expected that at the target date in the Account’s name, the shareholder will
begin gradually withdrawing the account's value.
Principal
Risks
The value of your investment in the
Account changes with the value of the Account's investments. Many factors affect
that value, and it is possible to lose money by investing in the Account. An
investment in the Account is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
The principal risks of investing in
the Account that are inherent in the fund of funds, in alphabetical order,
are:
Fund of Funds
Risk. Fund shareholders
bear indirectly their proportionate share of the expenses of other investment
companies in which the Fund invests ("underlying funds"). The Fund's selection
and weighting of asset classes and allocation of investments in underlying funds
may cause it to underperform other funds with a similar investment objective.
The Fund's performance and risks correspond directly to the performance and
risks of the underlying funds in which it invests, proportionately in accordance
with the weightings of such investments, and there is no assurance that the
underlying funds will achieve their investment objectives. Management of the
Fund entails potential conflicts of interest: the Fund invests in affiliated
underlying funds; and the Advisor and its affiliates may earn different fees
from different underlying funds and may have an incentive to allocate more Fund
assets to underlying funds from which they receive higher fees.
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.
Principal Risks
due to the Account's Investments in Underlying Funds
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. 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.
|
|
• |
Credit
Default Swaps.
Credit default swaps involve special risks, in addition to those generally
associated with swaps, because they are difficult to value, are highly
susceptible to liquidity and credit risk, and generally pay a return to
the party that has paid the premium only in the event of an actual default
by the issuer of the underlying obligation (as opposed to a credit
downgrade or other indication of financial difficulty). The protection
“buyer” in a credit default contract may be obligated to pay the
protection “seller” an upfront payment or a periodic stream of payments
over the term of the contract provided generally that no credit event on a
reference obligation has occurred. If a credit event occurs, the seller
generally must pay the buyer the “par value” (full notional value) of the
swap in exchange for an equal face amount of deliverable obligations of
the reference entity described in the swap, or the seller may be required
to deliver the related net cash amount, if the swap is cash settled. The
Fund may be either the buyer or seller in the
transaction. |
|
|
• |
Forward
Contracts, Futures and Swaps. Forward contracts, futures
and swaps 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 forward contract, future or swap; possible lack of a
liquid secondary market for a forward contract, future or swap and the
resulting inability to close a forward contract, future or swap 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. |
|
|
• |
Options. Options involve specific
risks, including: imperfect correlation between the change in market value
of the instrument held by the fund and the price of the options,
counterparty risk, difference in trading hours for the options markets and
the markets for the underlying securities (rate movements can take place
in the underlying markets that cannot be reflected in the options
markets), and an insufficient liquid secondary market for particular
options. |
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 market capitalization or style), 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. |
|
|
• |
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 would cause the stock price to increase may not occur as
anticipated or at all. Moreover, a stock that appears to be undervalued
actually may be appropriately priced at a low level and therefore would
not be profitable for the fund. |
Fixed-Income
Securities Risk. Fixed-income securities are subject
to interest rate, credit quality, and liquidity risks. The market value of
fixed-income securities generally declines when interest rates rise, and
increased interest rates may adversely affect the liquidity of certain
fixed-income securities. Moreover, an issuer of fixed-income securities could
default on its payment obligations due to increased interest rates or for other
reasons.
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
Risk. An index fund has
operating and other expenses while an index does not. As a result, over time,
index funds tend to underperform the index. 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, which means funds with
longer average portfolio durations may be more volatile than those with shorter
durations.
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, result in changes to expense
ratios and increased expenses, and adversely affect underlying fund performance.
Moreover, a fund of fund's redemptions or reallocations among share classes of
an underlying fund may result in changes to the expense ratios of affected
classes, which may increase the expenses paid by shareholders of the class that
experienced the redemption.
Securitized
Products Risk. Investments in securitized products
are subject to risks similar to traditional fixed income securities, such as
credit, interest rate, liquidity, prepayment, extension, and default risk, as
well as additional risks associated with the nature of the assets and the
servicing of those assets. Unscheduled prepayments on securitized products 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.
Performance
The following information provides
some indication of the risks of investing in the Account. Past performance is
not necessarily an indication of how the Account will perform in the future. You
may get updated performance information by calling 1-800-222-5852.
The bar chart shows changes in the
Account's performance from year to year. The table shows how the Account's
average annual returns for 1, 5, and 10 years (or, if shorter, the life of the
Account) compare with those of one or more broad measures of market performance.
Performance figures for the Accounts do not include any separate account
expenses, cost of insurance, or other contract-level expenses; total returns for
the Accounts would be lower if such expenses were included.
Total Returns as
of December 31
|
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q2
'09 |
14.48 |
% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q4
'08 |
(17.06 |
)% |
|
|
|
|
|
Average
Annual Total Returns |
For the
periods ended December 31, 2017 |
1
Year |
5
Years |
10
Years |
Principal
LifeTime 2010 Account - Class 1 |
11.42% |
6.12% |
4.16% |
S&P Target Date 2010 Index
(reflects no deduction for fees, expenses, or taxes) |
9.95% |
5.94% |
4.56% |
Management
Investment
Advisor and Portfolio Managers:
Principal Global Investors,
LLC
|
|
• |
Matthew Annenberg (since
2013), Portfolio Manager |
|
|
• |
James W. Fennessey (since
2007), Portfolio Manager |
|
|
• |
Scott Smith (since 2017),
Associate Portfolio Manager |
|
|
• |
Randy L. Welch (since 2007),
Portfolio Manager |
Tax
Information
The Fund intends to comply with
applicable variable asset diversification regulations. Taxation to you will
depend on what you do with your variable life insurance or variable annuity
contract. See your variable product prospectus for information about the tax
implications of investing in the Accounts.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, to recommend one Account or share class of the Fund over another
Account or share class, or to recommend one variable annuity, variable life
insurance policy or mutual fund over another. Ask your salesperson or visit your
financial intermediary's website for more information.
PRINCIPAL
LIFETIME 2020 ACCOUNT
|
|
Objective: |
The Account seeks a total
return consisting of long-term growth of capital and current
income. |
Fees and Expenses
of the Account
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Account. These fees
and expenses do not reflect the fees and expenses of any variable insurance
contract that may invest in the Account and would be higher if they
did.
Annual Account
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
Class
1 |
Class
2 |
Management Fees
|
0.00% |
0.00% |
Distribution and/or Service
(12b-1) Fees |
N/A |
0.25% |
Other Expenses |
—% |
—% |
Acquired Fund Fees and
Expenses |
0.68% |
0.68% |
Total Annual
Account Operating Expenses |
0.68% |
0.93% |
Example
This Example is intended to help you
compare the cost of investing in the Account with the cost of investing in other
mutual funds.
The Example assumes that you invest
$10,000 in the Account for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Account’s operating
expenses remain the same. If separate account expenses and contract level
expenses were included, expenses would be higher. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
Principal
LifeTime 2020 Account - Class 1 |
$69 |
$218 |
$379 |
$847 |
Principal
LifeTime 2020 Account - Class 2 |
95 |
296 |
515 |
1,143 |
Portfolio
Turnover
As a fund of funds, the Account does
not pay transaction costs, such as commissions, when it buys and sells shares of
underlying funds (or “turns over” its portfolio). An underlying fund does pay
transaction costs when it buys and sells portfolio securities, and a higher
portfolio turnover may indicate higher transaction costs. These costs, which are
not reflected in annual Account operating expenses or in the examples, affect
the performance of the underlying fund and the Account. During its most recent
fiscal year, the Account's portfolio turnover rate was 23.6% of the average value of its
portfolio.
Principal
Investment Strategies
The Account operates as a “target
date fund” that invests according to an asset allocation strategy designed for
investors having a retirement investment goal close to the year in the Account’s
name. The Account is a fund of funds and invests in underlying funds of
Principal Funds, Inc. ("PFI") and of Principal Variable Contracts Funds, Inc.
("PVC"). Its underlying funds consist of domestic and foreign equity funds,
fixed-income funds, real asset funds, and other funds that aim to offer
diversification beyond traditional equity and fixed-income securities. The asset
class diversification of the Account is designed to moderate overall price
volatility. The Account may add, remove, or substitute underlying funds at any
time.
The Account is managed with
strategic or long-term asset class targets and target ranges. There is a
rebalancing strategy that aligns with the target weights to identify asset
classes that are either overweight or underweight. The Account may shift asset
class targets in response to normal evaluative processes, the shortening time
horizon of the Account or changes in market forces or Account
circumstances.
In selecting underlying funds and
target weights, the Account considers both quantitative measures (e.g., past
performance, expected levels of risk and returns, expense levels,
diversification and style consistency) and qualitative factors (e.g.,
organizational stability, investment experience, investment and risk management
processes, and information, trading, and compliance systems). There are no
minimum or maximum percentages of assets that the Account must invest in a
specific asset class or underlying fund.
The underlying funds invest in
growth and value stocks of small, medium, and large market capitalization
companies, fixed-income securities, domestic and foreign securities, securities
denominated in foreign currencies, investment companies (including index funds),
U.S. government and U.S. government-sponsored securities, and derivatives. A
derivative is a financial arrangement, the value of which is derived from, or
based on, a traditional security, asset, or market index. The underlying funds
principally use futures, options, swaps (including, for example, credit default,
interest rate, and currency swaps) and forwards in order to gain exposure to a
variety of securities or asset classes or attempt to reduce risk.
The Account's asset allocation will
become more conservative over time as investment goals near (for example,
retirement, which is assumed to begin at age 65) and investors become more
risk-averse. Approximately 15 years after its target year, the Account's
underlying fund allocation is expected to match that of the Principal LifeTime
Strategic Income Account. At that time, the Account may be combined with the
Principal LifeTime Strategic Income Account if the Board of Directors determines
that the combination is in the best interests of Account shareholders. It is
expected that at the target date in the Account’s name, the shareholder will
begin gradually withdrawing the account's value.
Principal
Risks
The value of your investment in the
Account changes with the value of the Account's investments. Many factors affect
that value, and it is possible to lose money by investing in the Account. An
investment in the Account is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
The principal risks of investing in
the Account that are inherent in the fund of funds, in alphabetical order,
are:
Fund of Funds
Risk. Fund shareholders
bear indirectly their proportionate share of the expenses of other investment
companies in which the Fund invests ("underlying funds"). The Fund's selection
and weighting of asset classes and allocation of investments in underlying funds
may cause it to underperform other funds with a similar investment objective.
The Fund's performance and risks correspond directly to the performance and
risks of the underlying funds in which it invests, proportionately in accordance
with the weightings of such investments, and there is no assurance that the
underlying funds will achieve their investment objectives. Management of the
Fund entails potential conflicts of interest: the Fund invests in affiliated
underlying funds; and the Advisor and its affiliates may earn different fees
from different underlying funds and may have an incentive to allocate more Fund
assets to underlying funds from which they receive higher fees.
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.
Principal Risks
due to the Account's Investments in Underlying Funds
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. 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.
|
|
• |
Credit
Default Swaps.
Credit default swaps involve special risks, in addition to those generally
associated with swaps, because they are difficult to value, are highly
susceptible to liquidity and credit risk, and generally pay a return to
the party that has paid the premium only in the event of an actual default
by the issuer of the underlying obligation (as opposed to a credit
downgrade or other indication of financial difficulty). The protection
“buyer” in a credit default contract may be obligated to pay the
protection “seller” an upfront payment or a periodic stream of payments
over the term of the contract provided generally that no credit event on a
reference obligation has occurred. If a credit event occurs, the seller
generally must pay the buyer the “par value” (full notional value) of the
swap in exchange for an equal face amount of deliverable obligations of
the reference entity described in the swap, or the seller may be required
to deliver the related net cash amount, if the swap is cash settled. The
Fund may be either the buyer or seller in the
transaction. |
|
|
• |
Forward
Contracts, Futures and Swaps. Forward contracts, futures
and swaps 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 forward contract, future or swap; possible lack of a
liquid secondary market for a forward contract, future or swap and the
resulting inability to close a forward contract, future or swap 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. |
|
|
• |
Options. Options involve specific
risks, including: imperfect correlation between the change in market value
of the instrument held by the fund and the price of the options,
counterparty risk, difference in trading hours for the options markets and
the markets for the underlying securities (rate movements can take place
in the underlying markets that cannot be reflected in the options
markets), and an insufficient liquid secondary market for particular
options. |
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 market capitalization or style), 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 Risk. Investments in small and
medium sized companies may involve greater risk and price volatility than
investments 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 would cause the stock price to increase may not occur as
anticipated or at all. Moreover, a stock that appears to be undervalued
actually may be appropriately priced at a low level and therefore would
not be profitable for the fund. |
Fixed-Income
Securities Risk. Fixed-income securities are subject
to interest rate, credit quality, and liquidity risks. The market value of
fixed-income securities generally declines when interest rates rise, and
increased interest rates may adversely affect the liquidity of certain
fixed-income securities. Moreover, an issuer of fixed-income securities could
default on its payment obligations due to increased interest rates or for other
reasons.
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
Risk. An index fund has
operating and other expenses while an index does not. As a result, over time,
index funds tend to underperform the index. 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, which means funds with
longer average portfolio durations may be more volatile than those with shorter
durations.
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, result in changes to expense
ratios and increased expenses, and adversely affect underlying fund performance.
Moreover, a fund of fund's redemptions or reallocations among share classes of
an underlying fund may result in changes to the expense ratios of affected
classes, which may increase the expenses paid by shareholders of the class that
experienced the redemption.
Securitized
Products Risk. Investments in securitized products
are subject to risks similar to traditional fixed income securities, such as
credit, interest rate, liquidity, prepayment, extension, and default risk, as
well as additional risks associated with the nature of the assets and the
servicing of those assets. Unscheduled prepayments on securitized products 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.
Performance
The following information provides
some indication of the risks of investing in the Account. Past performance is
not necessarily an indication of how the Account will perform in the future. You
may get updated performance information by calling 1-800-222-5852.
The bar chart shows changes in the
Account's performance from year to year. The table shows how the Account's
average annual returns for 1, 5, and 10 years (or, if shorter, the life of the
Account) compare with those of one or more broad measures of market performance.
Performance figures for the Accounts do not include any separate account
expenses, cost of insurance, or other contract-level expenses; total returns for
the Accounts would be lower if such expenses were included.
For periods prior to the inception
date of Class 2 shares (May 1, 2015), the performance shown in the table for
Class 2 shares is that of the Account's Class 1 shares, adjusted to reflect the
fees and expenses of the Class 2 shares. These adjustments result in performance
for such periods that is no higher than the historical performance of the Class
1 shares.
Total Returns as
of December 31
|
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q2
'09 |
16.15 |
% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q4
'08 |
(18.82 |
)% |
|
|
|
|
|
Average
Annual Total Returns |
For the
periods ended December 31, 2017 |
1
Year |
5
Years |
10
Years |
Principal
LifeTime 2020 Account - Class 1 |
15.00% |
8.08% |
4.92% |
Principal
LifeTime 2020 Account - Class 2 |
14.70% |
7.81% |
4.68% |
S&P Target Date 2020 Index
(reflects no deduction for fees, expenses, or taxes) |
12.80% |
7.92% |
5.28% |
Management
Investment
Advisor and Portfolio Managers:
Principal Global Investors,
LLC
|
|
• |
Matthew Annenberg (since
2013), Portfolio Manager |
|
|
• |
James W. Fennessey (since
2007), Portfolio Manager |
|
|
• |
Scott Smith (since 2017),
Associate Portfolio Manager |
|
|
• |
Randy L. Welch (since 2007),
Portfolio Manager |
Tax
Information
The Fund intends to comply with
applicable variable asset diversification regulations. Taxation to you will
depend on what you do with your variable life insurance or variable annuity
contract. See your variable product prospectus for information about the tax
implications of investing in the Accounts.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, to recommend one Account or share class of the Fund over another
Account or share class, or to recommend one variable annuity, variable life
insurance policy or mutual fund over another. Ask your salesperson or visit your
financial intermediary's website for more information.
PRINCIPAL
LIFETIME 2030 ACCOUNT
|
|
Objective: |
The Account seeks a total
return consisting of long-term growth of capital and current
income. |
Fees and Expenses
of the Account
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Account. These fees
and expenses do not reflect the fees and expenses of any variable insurance
contract that may invest in the Account and would be higher if they
did.
Annual Account
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
Class
1 |
Class
2 |
Management Fees
|
0.00% |
0.00% |
Distribution and/or Service
(12b-1) Fees |
N/A |
0.25% |
Other Expenses |
0.01% |
0.01% |
Acquired Fund Fees and
Expenses |
0.71% |
0.71% |
Total Annual
Account Operating Expenses |
0.72% |
0.97% |
Example
This Example is intended to help you
compare the cost of investing in the Account with the cost of investing in other
mutual funds.
The Example assumes that you invest
$10,000 in the Account for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Account's operating
expenses remain the same. If separate account expenses and contract level
expenses were included, expenses would be higher. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
Principal
LifeTime 2030 Account - Class 1 |
$74 |
$230 |
$401 |
$894 |
Principal
LifeTime 2030 Account - Class 2 |
99 |
309 |
536 |
1,190 |
Portfolio
Turnover
As a fund of funds, the Account does
not pay transaction costs, such as commissions, when it buys and sells shares of
underlying funds (or “turns over” its portfolio). An underlying fund does pay
transaction costs when it buys and sells portfolio securities, and a higher
portfolio turnover may indicate higher transaction costs. These costs, which are
not reflected in annual Account operating expenses or in the examples, affect
the performance of the underlying fund and the Account. During its most recent
fiscal year, the Account's portfolio turnover rate was 31.0% of the average value of its
portfolio.
Principal
Investment Strategies
The Account operates as a “target
date fund” that invests according to an asset allocation strategy designed for
investors having a retirement investment goal close to the year in the Account’s
name. The Account is a fund of funds and invests in underlying funds of
Principal Funds, Inc. ("PFI") and of Principal Variable Contracts Funds, Inc.
("PVC"). Its underlying funds consist of domestic and foreign equity funds,
fixed-income funds, real asset funds, and other funds that aim to offer
diversification beyond traditional equity and fixed-income securities. The asset
class diversification of the Account is designed to moderate overall price
volatility. The Account may add, remove, or substitute underlying funds at any
time.
The Account is managed with
strategic or long-term asset class targets and target ranges. There is a
rebalancing strategy that aligns with the target weights to identify asset
classes that are either overweight or underweight. The Account may shift asset
class targets in response to normal evaluative processes, the shortening time
horizon of the Account or changes in market forces or Account
circumstances.
In selecting underlying funds and
target weights, the Account considers both quantitative measures (e.g., past
performance, expected levels of risk and returns, expense levels,
diversification and style consistency) and qualitative factors (e.g.,
organizational stability, investment experience, investment and risk management
processes, and information, trading, and compliance systems). There are no
minimum or maximum percentages of assets that the Account must invest in a
specific asset class or underlying fund.
The underlying funds invest in
growth and value stocks of small, medium, and large market capitalization
companies, fixed-income securities, domestic and foreign securities, securities
denominated in foreign currencies, investment companies (including index funds),
U.S. government and U.S. government-sponsored securities and derivatives. A
derivative is a financial arrangement, the value of which is derived from, or
based on, a traditional security, asset, or market index. The underlying funds
principally use futures, options, swaps (including, for example, credit default,
interest rate, and currency swaps) and forwards in order to gain exposure to a
variety of securities or asset classes or attempt to reduce risk.
The Account's asset allocation will
become more conservative over time as investment goals near (for example,
retirement, which is assumed to begin at age 65) and investors become more
risk-averse. Approximately 15 years after its target year, the Account's
underlying fund allocation is expected to match that of the Principal LifeTime
Strategic Income Account. At that time, the Account may be combined with the
Principal LifeTime Strategic Income Account if the Board of Directors determines
that the combination is in the best interests of Account shareholders. It is
expected that at the target date in the Account's name, the shareholder will
begin gradually withdrawing the account's value.
Principal
Risks
The value of your investment in the
Account changes with the value of the Account's investments. Many factors affect
that value, and it is possible to lose money by investing in the Account. An
investment in the Account is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
The principal risks of investing in
the Account that are inherent in the fund of funds, in alphabetical order,
are:
Fund of Funds
Risk. Fund shareholders
bear indirectly their proportionate share of the expenses of other investment
companies in which the Fund invests ("underlying funds"). The Fund's selection
and weighting of asset classes and allocation of investments in underlying funds
may cause it to underperform other funds with a similar investment objective.
The Fund's performance and risks correspond directly to the performance and
risks of the underlying funds in which it invests, proportionately in accordance
with the weightings of such investments, and there is no assurance that the
underlying funds will achieve their investment objectives. Management of the
Fund entails potential conflicts of interest: the Fund invests in affiliated
underlying funds; and the Advisor and its affiliates may earn different fees
from different underlying funds and may have an incentive to allocate more Fund
assets to underlying funds from which they receive higher fees.
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.
Principal Risks
due to the Account's Investments in Underlying Funds
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. 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.
|
|
• |
Credit
Default Swaps.
Credit default swaps involve special risks, in addition to those generally
associated with swaps, because they are difficult to value, are highly
susceptible to liquidity and credit risk, and generally pay a return to
the party that has paid the premium only in the event of an actual default
by the issuer of the underlying obligation (as opposed to a credit
downgrade or other indication of financial difficulty). The protection
“buyer” in a credit default contract may be obligated to pay the
protection “seller” an upfront payment or a periodic stream of payments
over the term of the contract provided generally that no credit event on a
reference obligation has occurred. If a credit event occurs, the seller
generally must pay the buyer the “par value” (full notional value) of the
swap in exchange for an equal face amount of deliverable obligations of
the reference entity described in the swap, or the seller may be required
to deliver the related net cash amount, if the swap is cash settled. The
Fund may be either the buyer or seller in the
transaction. |
|
|
• |
Forward
Contracts, Futures and Swaps. Forward contracts, futures
and swaps 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 forward contract, future or swap; possible lack of a
liquid secondary market for a forward contract, future or swap and the
resulting inability to close a forward contract, future or swap 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. |
|
|
• |
Options. Options involve specific
risks, including: imperfect correlation between the change in market value
of the instrument held by the fund and the price of the options,
counterparty risk, difference in trading hours for the options markets and
the markets for the underlying securities (rate movements can take place
in the underlying markets that cannot be reflected in the options
markets), and an insufficient liquid secondary market for particular
options. |
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 market capitalization or style), 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 Risk. Investments in small and
medium sized companies may involve greater risk and price volatility than
investments 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 would cause the stock price to increase may not occur as
anticipated or at all. Moreover, a stock that appears to be undervalued
actually may be appropriately priced at a low level and therefore would
not be profitable for the fund. |
Fixed-Income
Securities Risk. Fixed-income securities are subject
to interest rate, credit quality, and liquidity risks. The market value of
fixed-income securities generally declines when interest rates rise, and
increased interest rates may adversely affect the liquidity of certain
fixed-income securities. Moreover, an issuer of fixed-income securities could
default on its payment obligations due to increased interest rates or for other
reasons.
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
Risk. An index fund has
operating and other expenses while an index does not. As a result, over time,
index funds tend to underperform the index. 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, which means funds with
longer average portfolio durations may be more volatile than those with shorter
durations.
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, result in changes to expense
ratios and increased expenses, and adversely affect underlying fund performance.
Moreover, a fund of fund's redemptions or reallocations among share classes of
an underlying fund may result in changes to the expense ratios of affected
classes, which may increase the expenses paid by shareholders of the class that
experienced the redemption.
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.
Performance
The following information provides
some indication of the risks of investing in the Account. Past performance is
not necessarily an indication of how the Account will perform in the future. You
may get updated performance information by calling 1-800-222-5852.
The bar chart shows changes in the
Account's performance from year to year. The table shows how the Account's
average annual returns for 1, 5, and 10 years (or, if shorter, the life of the
Account) compare with those of one or more broad measures of market performance.
Performance figures for the Accounts do not include any separate account
expenses, cost of insurance, or other contract-level expenses; total returns for
the Accounts would be lower if such expenses were included.
For periods prior to the inception
date of Class 2 shares (May 1, 2015), the performance shown in the table for
Class 2 shares is that of the Account's Class 1 shares, adjusted to reflect the
fees and expenses of the Class 2 shares. These adjustments result in performance
for such periods that is no higher than the historical performance of the Class
1 shares.
Total Returns as
of December 31
|
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q2
'09 |
16.66 |
% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q4
'08 |
(20.20 |
)% |
|
|
|
|
|
Average
Annual Total Returns |
For the
periods ended December 31, 2017 |
1
Year |
5
Years |
10
Years |
Principal
LifeTime 2030 Account - Class 1 |
18.26% |
9.34% |
5.21% |
Principal
LifeTime 2030 Account - Class 2 |
17.95% |
9.06% |
4.96% |
S&P Target Date 2030 Index
(reflects no deduction for fees, expenses, or taxes) |
16.19% |
9.57% |
5.72% |
Management
Investment
Advisor and Portfolio Managers:
Principal Global Investors,
LLC
|
|
• |
Matthew Annenberg (since
2013), Portfolio Manager |
|
|
• |
James W. Fennessey (since
2007), Portfolio Manager |
|
|
• |
Scott Smith (since 2017),
Associate Portfolio Manager |
|
|
• |
Randy L. Welch (since 2007),
Portfolio Manager |
Tax
Information
The Fund intends to comply with
applicable variable asset diversification regulations. Taxation to you will
depend on what you do with your variable life insurance or variable annuity
contract. See your variable product prospectus for information about the tax
implications of investing in the Accounts.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, to recommend one Account or share class of the Fund over another
Account or share class, or to recommend one variable annuity, variable life
insurance policy or mutual fund over another. Ask your salesperson or visit your
financial intermediary's website for more information.
PRINCIPAL
LIFETIME 2040 ACCOUNT
|
|
Objective: |
The Account seeks a total
return consisting of long-term growth of capital and current
income. |
Fees and Expenses
of the Account
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Account. These fees
and expenses do not reflect the fees and expenses of any variable insurance
contract that may invest in the Account and would be higher if they
did.
Annual Account
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
Class
1 |
Class
2 |
Management Fees
|
0.00% |
0.00% |
Distribution and/or Service
(12b-1) Fees |
N/A |
0.25% |
Other Expenses |
0.01% |
0.01% |
Acquired Fund Fees and
Expenses |
0.68% |
0.68% |
Total Annual
Account Operating Expenses |
0.69% |
0.94% |
Example
This Example is intended to help you
compare the cost of investing in the Account with the cost of investing in other
mutual funds.
The Example assumes that you invest
$10,000 in the Account for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Account’s operating
expenses remain the same. If separate account expenses and contract level
expenses were included, expenses would be higher. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
Principal
LifeTime 2040 Account - Class 1 |
$70 |
$221 |
$384 |
$859 |
Principal
LifeTime 2040 Account - Class 2 |
96 |
300 |
520 |
1,155 |
Portfolio
Turnover
As a fund of funds, the Account does
not pay transaction costs, such as commissions, when it buys and sells shares of
underlying funds (or “turns over” its portfolio). An underlying fund does pay
transaction costs when it buys and sells portfolio securities, and a higher
portfolio turnover may indicate higher transaction costs. These costs, which are
not reflected in annual Account operating expenses or in the examples, affect
the performance of the underlying fund and the Account. During its most recent
fiscal year, the Account's portfolio turnover rate was 28.3% of the average value of its
portfolio.
Principal
Investment Strategies
The Account operates as a “target
date fund” that invests according to an asset allocation strategy designed for
investors having a retirement investment goal close to the year in the Account’s
name. The Account is a fund of funds and invests in underlying funds of
Principal Funds, Inc. ("PFI") and of Principal Variable Contracts Funds, Inc.
("PVC"). Its underlying funds consist of domestic and foreign equity funds,
fixed-income funds, real asset funds, and other funds that aim to offer
diversification beyond traditional equity and fixed-income securities. The asset
class diversification of the Account is designed to moderate overall price
volatility. The Account may add, remove, or substitute underlying funds at any
time.
The Account is managed with
strategic or long-term asset class targets and target ranges. There is a
rebalancing strategy that aligns with the target weights to identify asset
classes that are either overweight or underweight. The Account may shift asset
class targets in response to normal evaluative processes, the shortening time
horizon of the Account or changes in market forces or Account
circumstances.
In selecting underlying funds and
target weights, the Account considers both quantitative measures (e.g., past
performance, expected levels of risk and returns, expense levels,
diversification and style consistency) and qualitative factors (e.g.,
organizational stability, investment experience, investment and risk management
processes, and information, trading, and compliance systems). There are no
minimum or maximum percentages of assets that the Account must invest in a
specific asset class or underlying fund.
The underlying funds invest in
growth and value stocks of small, medium, and large market capitalization
companies, fixed-income securities, domestic and foreign (including those in
emerging markets) securities, securities denominated in foreign currencies,
investment companies (including index funds), U.S. government and U.S.
government-sponsored securities, and derivatives. A derivative is a financial
arrangement, the value of which is derived from, or based on, a traditional
security, asset, or market index. The underlying funds principally use equity
index futures and options in order to gain exposure to a variety of securities
or asset classes or attempt to reduce risk.
The Account's asset allocation will
become more conservative over time as investment goals near (for example,
retirement, which is assumed to begin at age 65) and investors become more
risk-averse. Approximately 15 years after its target year, the Account's
underlying fund allocation is expected to match that of the Principal LifeTime
Strategic Income Account. At that time, the Account may be combined with the
Principal LifeTime Strategic Income Account if the Board of Directors determines
that the combination is in the best interests of Account shareholders. It is
expected that at the target date in the Account’s name, the shareholder will
begin gradually withdrawing the account's value.
Principal
Risks
The value of your investment in the
Account changes with the value of the Account's investments. Many factors affect
that value, and it is possible to lose money by investing in the Account. An
investment in the Account is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
The principal risks of investing in
the Account that are inherent in the fund of funds, in alphabetical order,
are:
Fund of Funds
Risk. Fund shareholders
bear indirectly their proportionate share of the expenses of other investment
companies in which the Fund invests ("underlying funds"). The Fund's selection
and weighting of asset classes and allocation of investments in underlying funds
may cause it to underperform other funds with a similar investment objective.
The Fund's performance and risks correspond directly to the performance and
risks of the underlying funds in which it invests, proportionately in accordance
with the weightings of such investments, and there is no assurance that the
underlying funds will achieve their investment objectives. Management of the
Fund entails potential conflicts of interest: the Fund invests in affiliated
underlying funds; and the Advisor and its affiliates may earn different fees
from different underlying funds and may have an incentive to allocate more Fund
assets to underlying funds from which they receive higher fees.
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.
Principal Risks
due to the Account's Investments in Underlying Funds
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. 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. |
|
|
• |
Options. Options involve specific
risks, including: imperfect correlation between the change in market value
of the instrument held by the fund and the price of the options,
counterparty risk, difference in trading hours for the options markets and
the markets for the underlying securities (rate movements can take place
in the underlying markets that cannot be reflected in the options
markets), and an insufficient liquid secondary market for particular
options. |
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 market capitalization or style), 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 Risk. Investments in small and
medium sized companies may involve greater risk and price volatility than
investments 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 would cause the stock price to increase may not occur as
anticipated or at all. Moreover, a stock that appears to be undervalued
actually may be appropriately priced at a low level and therefore would
not be profitable for the fund. |
Fixed-Income
Securities Risk. Fixed-income securities are subject
to interest rate, credit quality, and liquidity risks. The market value of
fixed-income securities generally declines when interest rates rise, and
increased interest rates may adversely affect the liquidity of certain
fixed-income securities. Moreover, an issuer of fixed-income securities could
default on its payment obligations due to increased interest rates or for other
reasons.
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
Risk. An index fund has
operating and other expenses while an index does not. As a result, over time,
index funds tend to underperform the index. 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, which means funds with
longer average portfolio durations may be more volatile than those with shorter
durations.
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, result in changes to expense
ratios and increased expenses, and adversely affect underlying fund performance.
Moreover, a fund of fund's redemptions or reallocations among share classes of
an underlying fund may result in changes to the expense ratios of affected
classes, which may increase the expenses paid by shareholders of the class that
experienced the redemption.
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.
Performance
The following information provides
some indication of the risks of investing in the Account. Past performance is
not necessarily an indication of how the Account will perform in the future. You
may get updated performance information by calling 1-800-222-5852.
The bar chart shows changes in the
Account's performance from year to year. The table shows how the Account's
average annual returns for 1, 5, and 10 years (or, if shorter, the life of the
Account) compare with those of one or more broad measures of market performance.
Performance figures for the Accounts do not include any separate account
expenses, cost of insurance, or other contract-level expenses; total returns for
the Accounts would be lower if such expenses were included.
For periods prior to the inception
date of Class 2 shares (May 1, 2015), the performance shown in the table for
Class 2 shares is that of the Account's Class 1 shares, adjusted to reflect the
fees and expenses of the Class 2 shares. These adjustments result in performance
for such periods that is no higher than the historical performance of the Class
1 shares.
Total Returns as
of December 31
|
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q2
'09 |
17.52 |
% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q4
'08 |
(21.31 |
)% |
|
|
|
|
|
Average
Annual Total Returns |
For the
periods ended December 31, 2017 |
1
Year |
5
Years |
10
Years |
Principal
LifeTime 2040 Account - Class 1 |
20.68% |
10.41% |
5.57% |
Principal
LifeTime 2040 Account - Class 2 |
20.41% |
10.14% |
5.33% |
S&P Target Date 2040 Index
(reflects no deduction for fees, expenses, or taxes) |
18.87% |
10.78% |
6.03% |
Management
Investment
Advisor and Portfolio Managers:
Principal Global Investors,
LLC
|
|
• |
Matthew Annenberg (since
2013), Portfolio Manager |
|
|
• |
James W. Fennessey (since
2007), Portfolio Manager |
|
|
• |
Scott Smith (since 2017),
Associate Portfolio Manager |
|
|
• |
Randy L. Welch (since 2007),
Portfolio Manager |
Tax
Information
The Fund intends to comply with
applicable variable asset diversification regulations. Taxation to you will
depend on what you do with your variable life insurance or variable annuity
contract. See your variable product prospectus for information about the tax
implications of investing in the Accounts.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, to recommend one Account or share class of the Fund over another
Account or share class, or to recommend one variable annuity, variable life
insurance policy or mutual fund over another. Ask your salesperson or visit your
financial intermediary's website for more information.
PRINCIPAL
LIFETIME 2050 ACCOUNT
|
|
Objective: |
The Account seeks a total
return consisting of long-term growth of capital and current
income. |
Fees and Expenses
of the Account
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Account. These fees
and expenses do not reflect the fees and expenses of any variable insurance
contract that may invest in the Account and would be higher if they
did.
Annual Account
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
Class
1 |
Class
2 |
Management Fees
|
0.00% |
0.00% |
Distribution and/or Service
(12b-1) Fees |
N/A |
0.25% |
Other Expenses |
0.02% |
0.02% |
Acquired Fund Fees and
Expenses |
0.70% |
0.70% |
Total Annual
Account Operating Expenses |
0.72% |
0.97% |
Example
This Example is intended to help you
compare the cost of investing in the Account with the cost of investing in other
mutual funds.
The Example assumes that you invest
$10,000 in the Account for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Account’s operating
expenses remain the same. If separate account expenses and contract level
expenses were included, expenses would be higher. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
Principal
LifeTime 2050 Account - Class 1 |
$74 |
$230 |
$401 |
$894 |
Principal
LifeTime 2050 Account - Class 2 |
99 |
309 |
536 |
1,190 |
Portfolio
Turnover
As a fund of funds, the Account does
not pay transaction costs, such as commissions, when it buys and sells shares of
underlying funds (or “turns over” its portfolio). An underlying fund does pay
transaction costs when it buys and sells portfolio securities, and a higher
portfolio turnover may indicate higher transaction costs. These costs, which are
not reflected in annual Account operating expenses or in the examples, affect
the performance of the underlying fund and the Account. During its most recent
fiscal year, the Account's portfolio turnover rate was 36.5% of the average value of its
portfolio.
Principal
Investment Strategies
The Account operates as a “target
date fund” that invests according to an asset allocation strategy designed for
investors having a retirement investment goal close to the year in the Account’s
name. The Account is a fund of funds and invests in underlying funds of
Principal Funds, Inc. ("PFI") and of Principal Variable Contracts Funds, Inc.
("PVC"). Its underlying funds consist of domestic and foreign equity funds,
fixed-income funds, real asset funds, and other funds that aim to offer
diversification beyond traditional equity and fixed-income securities. The asset
class diversification of the Account is designed to moderate overall price
volatility. The Account may add, remove, or substitute underlying funds at any
time.
The Account is managed with
strategic or long-term asset class targets and target ranges. There is a
rebalancing strategy that aligns with the target weights to identify asset
classes that are either overweight or underweight. The Account may shift asset
class targets in response to normal evaluative processes, the shortening time
horizon of the Account or changes in market forces or Account
circumstances.
In selecting underlying funds and
target weights, the Account considers both quantitative measures (e.g., past
performance, expected levels of risk and returns, expense levels,
diversification and style consistency) and qualitative factors (e.g.,
organizational stability, investment experience, investment and risk management
processes, and information, trading, and compliance systems). There are no
minimum or maximum percentages of assets that the Account must invest in a
specific asset class or underlying fund.
The underlying funds invest in
growth and value stocks of small, medium, and large market capitalization
companies, fixed-income securities, domestic and foreign (including those in
emerging markets) securities, securities denominated in foreign currencies,
investment companies (including index funds), and derivatives. A derivative is a
financial arrangement, the value of which is derived from, or based on, a
traditional security, asset, or market index. The underlying funds principally
use equity index futures and options.
The Account's asset allocation will
become more conservative over time as investment goals near (for example,
retirement, which is assumed to begin at age 65) and investors become more
risk-averse. Approximately 15 years after its target year, the Account's
underlying fund allocation is expected to match that of the Principal LifeTime
Strategic Income Account. At that time, the Account may be combined with the
Principal LifeTime Strategic Income Account if the Board of Directors determines
that the combination is in the best interests of Account shareholders. It is
expected that at the target date in the Account’s name, the shareholder will
begin gradually withdrawing the account's value.
Principal
Risks
The value of your investment in the
Account changes with the value of the Account's investments. Many factors affect
that value, and it is possible to lose money by investing in the Account. An
investment in the Account is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
The principal risks of investing in
the Account that are inherent in the fund of funds, in alphabetical order,
are:
Fund of Funds
Risk. Fund shareholders
bear indirectly their proportionate share of the expenses of other investment
companies in which the Fund invests ("underlying funds"). The Fund's selection
and weighting of asset classes and allocation of investments in underlying funds
may cause it to underperform other funds with a similar investment objective.
The Fund's performance and risks correspond directly to the performance and
risks of the underlying funds in which it invests, proportionately in accordance
with the weightings of such investments, and there is no assurance that the
underlying funds will achieve their investment objectives. Management of the
Fund entails potential conflicts of interest: the Fund invests in affiliated
underlying funds; and the Advisor and its affiliates may earn different fees
from different underlying funds and may have an incentive to allocate more Fund
assets to underlying funds from which they receive higher fees.
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.
Principal Risks
due to the Account's Investments in Underlying Funds
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. 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. |
|
|
• |
Options. Options involve specific
risks, including: imperfect correlation between the change in market value
of the instrument held by the fund and the price of the options,
counterparty risk, difference in trading hours for the options markets and
the markets for the underlying securities (rate movements can take place
in the underlying markets that cannot be reflected in the options
markets), and an insufficient liquid secondary market for particular
options. |
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 market capitalization or style), 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 Risk. Investments in small and
medium sized companies may involve greater risk and price volatility than
investments 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 would cause the stock price to increase may not occur as
anticipated or at all. Moreover, a stock that appears to be undervalued
actually may be appropriately priced at a low level and therefore would
not be profitable for the fund. |
Fixed-Income
Securities Risk. Fixed-income securities are subject
to interest rate, credit quality, and liquidity risks. The market value of
fixed-income securities generally declines when interest rates rise, and
increased interest rates may adversely affect the liquidity of certain
fixed-income securities. Moreover, an issuer of fixed-income securities could
default on its payment obligations due to increased interest rates or for other
reasons.
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
Risk. An index fund has
operating and other expenses while an index does not. As a result, over time,
index funds tend to underperform the index. 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, which means funds with
longer average portfolio durations may be more volatile than those with shorter
durations.
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, result in changes to expense
ratios and increased expenses, and adversely affect underlying fund performance.
Moreover, a fund of fund's redemptions or reallocations among share classes of
an underlying fund may result in changes to the expense ratios of affected
classes, which may increase the expenses paid by shareholders of the class that
experienced the redemption.
Performance
The following information provides
some indication of the risks of investing in the Account. Past performance is
not necessarily an indication of how the Account will perform in the future. You
may get updated performance information by calling 1-800-222-5852.
The bar chart shows changes in the
Account's performance from year to year. The table shows how the Account's
average annual returns for 1, 5, and 10 years (or, if shorter, the life of the
Account) compare with those of one or more broad measures of market performance.
Performance figures for the Accounts do not include any separate account
expenses, cost of insurance, or other contract-level expenses; total returns for
the Accounts would be lower if such expenses were included.
For periods prior to the inception
date of Class 2 shares (May 1, 2015), the performance shown in the table for
Class 2 shares is that of the Account's Class 1 shares, adjusted to reflect the
fees and expenses of the Class 2 shares. These adjustments result in performance
for such periods that is no higher than the historical performance of the Class
1 shares.
Total Returns as
of December 31
|
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q2
'09 |
17.92 |
% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q4
'08 |
(22.08 |
)% |
|
|
|
|
|
Average
Annual Total Returns |
For the
periods ended December 31, 2017 |
1
Year |
5
Years |
10
Years |
Principal
LifeTime 2050 Account - Class 1 |
22.14% |
10.97% |
5.71% |
Principal
LifeTime 2050 Account - Class 2 |
21.89% |
10.70% |
5.47% |
S&P Target Date 2050 Index
(reflects no deduction for fees, expenses, or taxes) |
20.18% |
11.48% |
6.22% |
Management
Investment
Advisor and Portfolio Managers:
Principal Global Investors,
LLC
|
|
• |
Matthew Annenberg (since
2013), Portfolio Manager |
|
|
• |
James W. Fennessey (since
2007), Portfolio Manager |
|
|
• |
Scott Smith (since 2017),
Associate Portfolio Manager |
|
|
• |
Randy L. Welch (since 2007),
Portfolio Manager |
Tax
Information
The Fund intends to comply with
applicable variable asset diversification regulations. Taxation to you will
depend on what you do with your variable life insurance or variable annuity
contract. See your variable product prospectus for information about the tax
implications of investing in the Accounts.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, to recommend one Account or share class of the Fund over another
Account or share class, or to recommend one variable annuity, variable life
insurance policy or mutual fund over another. Ask your salesperson or visit your
financial intermediary's website for more information.
PRINCIPAL
LIFETIME 2060 ACCOUNT
|
|
Objective: |
The Account seeks a total
return consisting of long-term growth of capital and current
income. |
Fees and Expenses
of the Account
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Account. These fees
and expenses do not reflect the fees and expenses of any variable insurance
contract that may invest in the Account and would be higher if they
did.
Annual Account
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
Class
1 |
Management Fees
|
0.00% |
Other Expenses |
0.14% |
Acquired Fund Fees and
Expenses |
0.71% |
Total Annual
Account Operating Expenses |
0.85% |
Expense Reimbursement
(1) |
(0.04)% |
Total Annual
Account Operating Expenses after Expense Reimbursement |
0.81% |
|
|
(1) Principal
Global Investors, LLC ("PGI"), the investment advisor, has contractually
agreed to limit the Account’s expenses by paying, if necessary, expenses
normally payable by the Account, (excluding interest expense, expenses
related to fund investments, acquired fund fees and expenses, and other
extraordinary expenses) to maintain a total level of operating expenses
(expressed as a percent of average net assets on an annualized basis) not
to exceed 0.10% for Class 1 shares. It is expected that the expense limit
will continue through the period ending April 30, 2019; however, Principal
Variable Contracts Funds, Inc. and PGI, the parties to the agreement, may
mutually agree to terminate the expense limit prior to the end of the
period. |
Example
This Example is intended to help you
compare the cost of investing in the Account with the cost of investing in other
mutual funds.
The Example assumes that you invest
$10,000 in the Account for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Account’s operating
expenses remain the same. If separate account expenses and contract level
expenses were included, expenses would be higher. The calculation of costs takes
into account any applicable contractual fee waivers and/or expense
reimbursements for the period noted in the table above. Although your actual
costs may be higher or lower, based on these assumptions your costs would
be:
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
Principal
LifeTime 2060 Account - Class 1 |
$83 |
$267 |
$467 |
$1,045 |
Portfolio
Turnover
As a fund of funds, the Account does
not pay transaction costs, such as commissions, when it buys and sells shares of
underlying funds (or “turns over” its portfolio). An underlying fund does pay
transaction costs when it buys and sells portfolio securities, and a higher
portfolio turnover may indicate higher transaction costs. These costs, which are
not reflected in annual Account operating expenses or in the examples, affect
the performance of the underlying fund and the Account. During its most recent
fiscal year, the Account's portfolio turnover rate was 33.1% of the average value of its
portfolio.
Principal
Investment Strategies
The Account operates as a “target
date fund” that invests according to an asset allocation strategy designed for
investors having a retirement investment goal close to the year in the Account’s
name. The Account is a fund of funds and invests in underlying funds of
Principal Funds, Inc. ("PFI") and of Principal Variable Contracts Funds, Inc.
("PVC"). Its underlying funds consist of domestic and foreign equity funds,
fixed-income funds, real asset funds, and other funds that aim to offer
diversification beyond traditional equity and fixed-income securities. The asset
class diversification of the Account is designed to moderate overall price
volatility. The Account may add, remove, or substitute underlying funds at any
time.
The Account is managed with
strategic or long-term asset class targets and target ranges. There is a
rebalancing strategy that aligns with the target weights to identify asset
classes that are either overweight or underweight. The Account may shift asset
class targets in response to normal evaluative processes, the shortening time
horizon of the Account or changes in market forces or Account
circumstances.
In selecting underlying funds and
target weights, the Account considers both quantitative measures (e.g., past
performance, expected levels of risk and returns, expense levels,
diversification and style consistency) and qualitative factors (e.g.,
organizational stability, investment experience, investment and risk management
processes, and information, trading, and compliance systems). There are no
minimum or maximum percentages of assets that the Account must invest in a
specific asset class or underlying fund.
The underlying funds invest in
growth and value stocks of small, medium, and large market capitalization
companies, fixed-income securities, domestic and foreign (including those in
emerging markets) securities, securities denominated in foreign currencies,
investment companies (including index funds), and derivatives. A derivative is a
financial arrangement, the value of which is derived from, or based on, a
traditional security, asset, or market index. The underlying funds principally
use equity index futures and options.
The Account's asset allocation will
become more conservative over time as investment goals near (for example,
retirement, which is assumed to begin at age 65) and investors become more
risk-averse. Approximately 15 years after its target year, the Account's
underlying fund allocation is expected to match that of the Principal LifeTime
Strategic Income Account. At that time, the Account may be combined with the
Principal LifeTime Strategic Income Account if the Board of Directors determines
that the combination is in the best interests of Account shareholders. It is
expected that at the target date in the Account’s name, the shareholder will
begin gradually withdrawing the account's value
Principal
Risks
The value of your investment in the
Account changes with the value of the Account's investments. Many factors affect
that value, and it is possible to lose money by investing in the Account. An
investment in the Account is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
The principal risks of investing in
the Account that are inherent in the fund of funds, in alphabetical order,
are:
Fund of Funds
Risk. Fund shareholders
bear indirectly their proportionate share of the expenses of other investment
companies in which the Fund invests ("underlying funds"). The Fund's selection
and weighting of asset classes and allocation of investments in underlying funds
may cause it to underperform other funds with a similar investment objective.
The Fund's performance and risks correspond directly to the performance and
risks of the underlying funds in which it invests, proportionately in accordance
with the weightings of such investments, and there is no assurance that the
underlying funds will achieve their investment objectives. Management of the
Fund entails potential conflicts of interest: the Fund invests in affiliated
underlying funds; and the Advisor and its affiliates may earn different fees
from different underlying funds and may have an incentive to allocate more Fund
assets to underlying funds from which they receive higher fees.
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.
Principal Risks
due to the Account's Investments in Underlying Funds
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. 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. |
|
|
• |
Options. Options involve specific
risks, including: imperfect correlation between the change in market value
of the instrument held by the fund and the price of the options,
counterparty risk, difference in trading hours for the options markets and
the markets for the underlying securities (rate movements can take place
in the underlying markets that cannot be reflected in the options
markets), and an insufficient liquid secondary market for particular
options. |
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 market capitalization or style), 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 Risk. Investments in small and
medium sized companies may involve greater risk and price volatility than
investments 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 would cause the stock price to increase may not occur as
anticipated or at all. Moreover, a stock that appears to be undervalued
actually may be appropriately priced at a low level and therefore would
not be profitable for the fund. |
Fixed-Income
Securities Risk. Fixed-income securities are subject
to interest rate, credit quality, and liquidity risks. The market value of
fixed-income securities generally declines when interest rates rise, and
increased interest rates may adversely affect the liquidity of certain
fixed-income securities. Moreover, an issuer of fixed-income securities could
default on its payment obligations due to increased interest rates or for other
reasons.
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
Risk. An index fund has
operating and other expenses while an index does not. As a result, over time,
index funds tend to underperform the index. 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, which means funds with
longer average portfolio durations may be more volatile than those with shorter
durations.
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, result in changes to expense
ratios and increased expenses, and adversely affect underlying fund performance.
Moreover, a fund of fund's redemptions or reallocations among share classes of
an underlying fund may result in changes to the expense ratios of affected
classes, which may increase the expenses paid by shareholders of the class that
experienced the redemption.
Performance
The following information provides
some indication of the risks of investing in the Account. Past performance is
not necessarily an indication of how the Account will perform in the future. You
may get updated performance information by calling 1-800-222-5852.
The bar chart shows changes in the
Account's performance from year to year. The table shows how the Account's
average annual returns for 1, 5, and 10 years (or, if shorter, the life of the
Account) compare with those of one or more broad measures of market performance.
Performance figures for the Accounts do not include any separate account
expenses, cost of insurance, or other contract-level expenses; total returns for
the Accounts would be lower if such expenses were included.
Life of Account returns are measured
from the date the Account's shares were first sold (May 1, 2013).
Total Returns as
of December 31
|
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q1
'17 |
6.23 |
% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q3
'15 |
(7.54 |
)% |
|
|
|
|
Average
Annual Total Returns |
For the
periods ended December 31, 2017 |
1
Year |
Life of
Account |
Principal
LifeTime 2060 Account - Class 1 |
22.74% |
10.17% |
S&P Target Date 2060+ Index
(reflects no deduction for fees, expenses, or taxes) |
20.75% |
10.54% |
Management
Investment
Advisor and Portfolio Managers:
Principal Global Investors,
LLC
|
|
• |
Matthew Annenberg (since
2013), Portfolio Manager |
|
|
• |
James W. Fennessey (since
2013), Portfolio Manager |
|
|
• |
Scott Smith (since 2017),
Associate Portfolio Manager |
|
|
• |
Randy L. Welch (since 2013),
Portfolio Manager |
Tax
Information
The Fund intends to comply with
applicable variable asset diversification regulations. Taxation to you will
depend on what you do with your variable life insurance or variable annuity
contract. See your variable product prospectus for information about the tax
implications of investing in the Accounts.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, to recommend one Account or share class of the Fund over another
Account or share class, or to recommend one variable annuity, variable life
insurance policy or mutual fund over another. Ask your salesperson or visit your
financial intermediary's website for more information.
REAL ESTATE
SECURITIES ACCOUNT
|
|
Objective: |
The Account seeks to generate
a total return. |
Fees and Expenses
of the Account
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Account. These fees
and expenses do not reflect the fees and expenses of any variable insurance
contract that may invest in the Account and would be higher if they
did.
Annual Account
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
Class
1 |
Class
2 |
Management Fees |
0.88% |
0.88% |
Distribution and/or Service
(12b-1) Fees |
N/A |
0.25% |
Other Expenses |
0.01% |
0.01% |
Total Annual
Account Operating Expenses |
0.89% |
1.14% |
Example
This Example is intended to help you
compare the cost of investing in the Account with the cost of investing in other
mutual funds.
The Example assumes that you invest
$10,000 in the Account for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Account’s operating
expenses remain the same. If separate account expenses and contract level
expenses were included, expenses would be higher. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
Real Estate
Securities Account - Class 1 |
$91 |
$284 |
$493 |
$1,096 |
Real Estate
Securities Account - Class 2 |
116 |
362 |
628 |
1,386 |
Portfolio
Turnover
The Account pays transaction costs,
such as commissions, when it buys and sells securities (or “turns over” its
portfolio). A higher portfolio turnover rate may indicate higher transaction
costs. These costs, which are not reflected in annual Account operating expenses
or in the example, affect the Account’s performance. During the most recent
fiscal year, the Account’s portfolio turnover rate was 19.6% of the average value of its
portfolio.
Principal
Investment Strategies
Under normal circumstances, the
Account invests at least 80% of its net assets, plus any borrowings for
investment purposes, in equity securities of companies principally engaged in
the real estate industry at the time of purchase. A real estate company has at
least 50% of its assets, income or profits derived from products or services
related to the real estate industry. Real estate companies include real estate
investment trusts ("REITs") and companies with substantial real estate holdings
such as paper, lumber, hotel and entertainment companies as well as those whose
products and services relate to the real estate industry include building supply
manufacturers, mortgage lenders and mortgage servicing companies.
REITs are pooled investment vehicles
that invest in income producing real estate, real estate related loans, or other
types of real estate interests. REITs are corporations or business trusts that
are permitted to eliminate corporate level federal income taxes by meeting
certain requirements of the Internal Revenue Code.
The Account invests in value equity
securities, an investment strategy that emphasizes buying securities that appear
to be undervalued. The Account concentrates its investments (invest more than
25% of its net assets) in securities in the real estate industry.
The Account is considered
non-diversified, which means it can invest a higher percentage of assets in
securities of individual issuers than a diversified fund. As a result, changes
in the value of a single investment could cause greater fluctuations in the
Account's share price than would occur in a more diversified fund.
Principal
Risks
The value of your investment in the
Account changes with the value of the Account's investments. Many factors affect
that value, and it is possible to lose money by investing in the Account. An
investment in the Account is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. The principal risks of investing in the Account, in alphabetical order,
are:
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 market capitalization or style), may underperform other
market segments or the equity markets as a whole.
|
|
• |
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 would cause the stock price to increase may not occur as
anticipated or at all. Moreover, a stock that appears to be undervalued
actually may be appropriately priced at a low level and therefore would
not be profitable for the fund. |
Industry
Concentration Risk. A
fund that concentrates investments in a particular industry or group of
industries has greater exposure than other funds to market, economic and other
factors affecting that industry or group of industries.
|
|
• |
Real
Estate. A fund
concentrating in the real estate industry can be subject to the risks
associated with direct ownership of real estate, securities of companies
in the real estate industry, and/or real estate investment
trusts. |
Non-Diversification
Risk. A non-diversified
fund may invest a high percentage of its assets in the securities of a small
number of issuers and is more likely than diversified funds to be significantly
affected by a specific security’s poor performance.
Real Estate
Investment Trusts (“REITs”) Risk. In addition to risks associated with
investing in real estate securities, REITs are dependent upon management skills,
are not diversified, and are subject to heavy cash flow dependency, risks of
default by borrowers, and self-liquidation. Investment in REITs also involves
risks similar to risks of investing in small market capitalization companies,
such as limited financial resources, less frequent and limited volume trading,
and may be subject to more abrupt or erratic price movements than larger company
securities. A REIT could fail to qualify for tax-free pass-through of income
under the Internal Revenue Code. Fund shareholders will indirectly bear their
proportionate share of the expenses of REITs in which the fund
invests.
Real Estate
Securities Risk. Investing in real estate securities
subjects the fund to the risks associated with the real estate market (which are
similar to the risks associated with direct ownership in real estate), including
declines in real estate values, loss due to casualty or condemnation, property
taxes, interest rate changes, increased expenses, cash flow of underlying real
estate assets, regulatory changes (including zoning, land use and rents), and
environmental problems, as well as to the risks related to the management skill
and creditworthiness of the issuer.
Performance
The following information provides
some indication of the risks of investing in the Account. Past performance is
not necessarily an indication of how the Account will perform in the future. You
may get updated performance information by calling 1-800-222-5852.
The bar chart shows changes in the
Account's performance from year to year. The table shows how the Account's
average annual returns for 1, 5, and 10 years (or, if shorter, the life of the
Account) compare with those of one or more broad measures of market performance.
Performance figures for the Accounts do not include any separate account
expenses, cost of insurance, or other contract-level expenses; total returns for
the Accounts would be lower if such expenses were included.
Total Returns as
of December 31
|
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q3
'09 |
33.51 |
% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q4
'08 |
(34.16 |
)% |
|
|
|
|
|
Average
Annual Total Returns |
For the
periods ended December 31, 2017 |
1
Year |
5
Years |
10
Years |
Real Estate
Securities Account - Class 1 |
9.19% |
10.74% |
8.75% |
Real Estate
Securities Account - Class 2 |
8.94% |
10.46% |
8.48% |
MSCI US REIT Index (reflects no
deduction for fees, expenses, or taxes) |
5.07% |
9.34% |
7.44% |
Management
Investment
Advisor:
Principal Global Investors,
LLC
Sub-Advisor and
Portfolio Managers:
Principal Real Estate Investors,
LLC
|
|
• |
Keith Bokota (since 2013),
Portfolio Manager |
|
|
• |
Anthony Kenkel (since 2012),
Portfolio Manager |
|
|
• |
Kelly D. Rush (since 2000),
Portfolio Manager |
Tax
Information
The Fund intends to comply with
applicable variable asset diversification regulations. Taxation to you will
depend on what you do with your variable life insurance or variable annuity
contract. See your variable product prospectus for information about the tax
implications of investing in the Accounts.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, to recommend one Account or share class of the Fund over another
Account or share class, or to recommend one variable annuity, variable life
insurance policy or mutual fund over another. Ask your salesperson or visit your
financial intermediary's website for more information.
SAM (STRATEGIC
ASSET MANAGEMENT) BALANCED PORTFOLIO
|
|
Objective: |
The Portfolio seeks to provide
as high a level of total return (consisting of reinvested income and
capital appreciation) as is consistent with reasonable
risk. |
Fees and Expenses
of the Account
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Account. These fees
and expenses do not reflect the fees and expenses of any variable insurance
contract that may invest in the Account and would be higher if they
did.
Annual Account
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
Class
1 |
Class
2 |
Management Fees |
0.23% |
0.23% |
Distribution and/or Service
(12b-1) Fees |
N/A |
0.25% |
Other Expenses |
—% |
—% |
Acquired Fund Fees and
Expenses |
0.74% |
0.74% |
Total Annual
Account Operating Expenses |
0.97% |
1.22% |
Expense Reimbursement
(1) |
(0.11)% |
(0.11)% |
Total Annual
Account Operating Expenses after Expense Reimbursement |
0.86% |
1.11% |
|
|
|
(1) Principal
Global Investors, LLC ("PGI"), the investment advisor, has contractually
agreed to reduce its management fees so that certain Account's Total
Operating Expenses, (including acquired fund fees and expenses but
excluding interest expense, expenses related to fund investments, and
other extraordinary expenses) do not to exceed 0.86% for Class 1 and 1.11%
for Class 2 shares (expressed as a percent of average net assets on an
annualized basis). It is expected that the expense limits will continue
through the period ending April 30, 2019; however, Principal Variable
Contracts Funds, Inc. and PGI, the parties to the agreement, may mutually
agree to terminate the expense limits prior to the end of the
period. |
Example
This Example is intended to help you
compare the cost of investing in the Account with the cost of investing in other
mutual funds.
The Example assumes that you invest
$10,000 in the Account for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Account’s operating
expenses remain the same. If separate account expenses and contract level
expenses were included, expenses would be higher. The calculation of costs takes
into account any applicable contractual fee waivers and/or expense
reimbursements for the period noted in the table above. Although your actual
costs may be higher or lower, based on these assumptions your costs would
be:
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
SAM Balanced
Portfolio - Class 1 |
$88 |
$298 |
$526 |
$1,180 |
SAM Balanced
Portfolio - Class 2 |
113 |
376 |
660 |
1,468 |
Portfolio
Turnover
As a fund of funds, the Account does
not pay transaction costs, such as commissions, when it buys and sells shares of
underlying funds (or “turns over” its portfolio); however, the Account does pay
such transaction costs when it buys and sells other investments. Also, an
underlying fund pays transaction costs when it buys and sells portfolio
securities, and a higher portfolio turnover for the underlying fund may indicate
higher transaction costs. These costs, which are not reflected in annual Account
operating expenses or in the examples, affect the performance of the underlying
fund and the Account. During its most recent fiscal year, the Account's
portfolio turnover rate was 27.4% of the average value of its
portfolio.
Principal
Investment Strategies
The SAM Portfolios operate as funds
of funds and invest principally in funds and exchange-traded funds ("ETFs") of
Principal Funds, Inc., PVC, and Principal Exchange-Traded Funds (“Underlying
Funds”). The SAM Portfolios generally categorize each Underlying Fund as a
fixed-income, equity or specialty fund based on its investment profile. Each SAM
Portfolio typically allocates its assets among Underlying Funds, and within
predetermined percentage ranges, as determined by the SAM Portfolio in
accordance with its outlook for the economy, the financial markets and the
relative market valuations of the Underlying Funds. The asset class
diversification of the SAM Portfolio is designed to moderate overall price
volatility and cushion severe losses in any one investment sector.
The Portfolio generally
invests:
|
|
• |
between 20% and 60% of its
assets in fixed-income funds, and less than 40% in any one fixed-income
fund; such funds generally invest in fixed income instruments such as real
estate securities, securitized products, government and
government-sponsored securities, and corporate
bonds; |
|
|
• |
between 40% and 80% of its
assets in equity funds, and less than 30% in any one equity fund; such
funds generally invest in equity securities of domestic and foreign
companies, including small, medium, and large market capitalization
companies, and growth and value stock;
and |
|
|
• |
less than 20% of its assets in
specialty funds, and less than 20% in any one specialty fund; such funds
generally offer unique combinations of traditional equity securities and
fixed-income securities or use alternative investment strategies that aim
to offer diversification beyond traditional equity and fixed-income
securities and include investments in such assets as infrastructure,
commodities, currencies, and natural resources
companies. |
The SAM Portfolio may temporarily
exceed the applicable percentage ranges for short periods, and may alter the
percentage ranges when it deems appropriate.
Principal
Risks
The value of your investment in the
Portfolio changes with the value of the Portfolio's investments. Many factors
affect that value, and it is possible to lose money by investing in the
Portfolio. An investment in the Portfolio is not a deposit of a bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
The principal risks of investing in
the Portfolio that are inherent in the fund of funds are:
Fund of Funds
Risk. Portfolio
shareholders bear indirectly their proportionate share of the expenses of other
investment companies in which the Portfolio invests ("underlying funds"). The
Portfolio's selection and weighting of asset classes and allocation of
investments in underlying funds may cause it to underperform other funds with a
similar investment objective. The Portfolio's performance and risks correspond
directly to the performance and risks of the underlying funds in which it
invests, proportionately in accordance with the weightings of such investments,
and there is no assurance that the underlying funds will achieve their
investment objectives. Management of the Portfolio entails potential conflicts
of interest: the Portfolio invests in affiliated underlying funds; and the
Advisor and its affiliates may earn different fees from different underlying
funds and may have an incentive to allocate more Portfolio assets to underlying
funds from which they receive higher fees.
Principal Risks
due to the Portfolio's Investments in Underlying Funds
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 market capitalization or style), 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 Risk. Investments in small and
medium sized companies may involve greater risk and price volatility than
investments 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 would cause the stock price to increase may not occur as
anticipated or at all. Moreover, a stock that appears to be undervalued
actually may be appropriately priced at a low level and therefore would
not be profitable for the fund. |
Fixed-Income
Securities Risk. Fixed-income securities are subject
to interest rate, credit quality, and liquidity risks. The market value of
fixed-income securities generally declines when interest rates rise, and
increased interest rates may adversely affect the liquidity of certain
fixed-income securities. Moreover, an issuer of fixed-income securities could
default on its payment obligations due to increased interest rates or for other
reasons.
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).
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, which means funds with
longer average portfolio durations may be more volatile than those with shorter
durations.
Real Estate
Securities Risk. Investing in real estate securities
subjects the fund to the risks associated with the real estate market (which are
similar to the risks associated with direct ownership in real estate), including
declines in real estate values, loss due to casualty or condemnation, property
taxes, interest rate changes, increased expenses, cash flow of underlying real
estate assets, regulatory changes (including zoning, land use and rents), and
environmental problems, as well as to the risks related to 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, result in changes to expense
ratios and increased expenses, and adversely affect underlying fund performance.
Moreover, a fund of fund's redemptions or reallocations among share classes of
an underlying fund may result in changes to the expense ratios of affected
classes, which may increase the expenses paid by shareholders of the class that
experienced the redemption.
Securitized
Products Risk. Investments in securitized products
are subject to risks similar to traditional fixed income securities, such as
credit, interest rate, liquidity, prepayment, extension, and default risk, as
well as additional risks associated with the nature of the assets and the
servicing of those assets. Unscheduled prepayments on securitized products 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.
Performance
The following information provides
some indication of the risks of investing in the Account. Past performance is
not necessarily an indication of how the Account will perform in the future. You
may get updated performance information by calling 1-800-222-5852.
The bar chart shows changes in the
Account’s performance from year to year. The table shows how the Account’s
average annual returns for 1, 5, and 10 years (or, if shorter, the life of the
Account) compare with those of one or more broad measures of market performance.
Performance figures for the Accounts do not include any separate account
expenses, cost of insurance, or other contract-level expenses; total returns for
the Accounts would be lower if such expenses were included.
Total Returns as
of December 31
|
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q2
'09 |
13.21 |
% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q4
'08 |
(14.58 |
)% |
|
|
|
|
|
Average
Annual Total Returns |
For the
periods ended December 31, 2017 |
1
Year |
5
Years |
10
Years |
SAM Balanced
Portfolio - Class 1 |
15.21% |
8.94% |
6.14% |
SAM Balanced
Portfolio - Class 2 |
14.88% |
8.66% |
5.87% |
Russell 3000 Index (reflects no
deduction for fees, expenses, or taxes) |
21.13% |
15.58% |
8.60% |
Bloomberg Barclays U.S.
Aggregate Bond Index (reflects no deduction for fees, expenses, or
taxes) |
3.54% |
2.10% |
4.01% |
MSCI EAFE Index NR (reflects no
deduction for fees, expenses, or taxes) |
25.03% |
7.90% |
1.94% |
SAM Balanced Blended Index
(reflects no deduction for fees, expenses, or taxes) |
14.37% |
9.04% |
6.11% |
Performance of a blended index shows
how the Portfolio’s performance compares to a blend of indices with similar
investment objectives. Performance of the components of the blended index is
also shown. The weightings for SAM Balanced Blended Index are 45% Russell
3000® Index, 40% Bloomberg Barclays U.S.
Aggregate Bond Index, and 15% MSCI EAFE Index NR. The custom or blended index
returns reflect the allocation in effect for the time period(s) for which the
fund returns are disclosed. Previous weightings or allocations of the custom or
blended index are not restated.
Management
Investment
Advisor and Portfolio Managers:
Principal Global Investors,
LLC
|
|
• |
Charles D. Averill (since
2010), Portfolio Manager |
|
|
• |
Todd A. Jablonski (since
2010), Chief Investment Officer and Portfolio
Manager |
|
|
• |
Gregory L. Tornga (since
2017), Managing Director and Portfolio
Manager |
Tax
Information
The Fund intends to comply with
applicable variable asset diversification regulations. Taxation to you will
depend on what you do with your variable life insurance or variable annuity
contract. See your variable product prospectus for information about the tax
implications of investing in the Accounts.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, to recommend one Account or share class of the Fund over another
Account or share class, or to recommend one variable annuity, variable life
insurance policy or mutual fund over another. Ask your salesperson or visit your
financial intermediary's website for more information.
SAM (STRATEGIC
ASSET MANAGEMENT) CONSERVATIVE BALANCED PORTFOLIO
|
|
Objective: |
The Portfolio seeks to provide
a high level of total return (consisting of reinvestment of income and
capital appreciation), consistent with a moderate degree of principal
risk. |
Fees and Expenses
of the Account
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Account. These fees
and expenses do not reflect the fees and expenses of any variable insurance
contract that may invest in the Account and would be higher if they
did.
Annual Account
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
Class
1 |
Class
2 |
Management Fees |
0.23% |
0.23% |
Distribution and/or Service
(12b-1) Fees |
N/A |
0.25% |
Other Expenses |
—% |
—% |
Acquired Fund Fees and
Expenses |
0.67% |
0.67% |
Total Annual
Account Operating Expenses |
0.90% |
1.15% |
Expense Reimbursement
(1) |
(0.06)% |
(0.06)% |
Total Annual
Account Operating Expenses after Expense Reimbursement |
0.84% |
1.09% |
|
|
|
(1) Principal
Global Investors, LLC ("PGI"), the investment advisor, has contractually
agreed to reduce its management fees so that certain Account's Total
Operating Expenses, (including acquired fund fees and expenses but
excluding interest expense, expenses related to fund investments, and
other extraordinary expenses) do not to exceed 0.84% for Class 1 and 1.09%
for Class 2 shares (expressed as a percent of average net assets on an
annualized basis). It is expected that the expense limits will continue
through the period ending April 30, 2019; however, Principal Variable
Contracts Funds, Inc. and PGI, the parties to the agreement, may mutually
agree to terminate the expense limits prior to the end of the
period. |
Example
This Example is intended to help you
compare the cost of investing in the Account with the cost of investing in other
mutual funds.
The Example assumes that you invest
$10,000 in the Account for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Account’s operating
expenses remain the same. If separate account expenses and contract level
expenses were included, expenses would be higher. The calculation of costs takes
into account any applicable contractual fee waivers and/or expense
reimbursements for the period noted in the table above. Although your actual
costs may be higher or lower, based on these assumptions your costs would
be:
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
SAM
Conservative Balanced Portfolio - Class 1 |
$86 |
$281 |
$493 |
$1,102 |
SAM
Conservative Balanced Portfolio - Class 2 |
111 |
359 |
627 |
1,392 |
Portfolio
Turnover
As a fund of funds, the Account does
not pay transaction costs, such as commissions, when it buys and sells shares of
underlying funds (or “turns over” its portfolio); however, the Account does pay
such transaction costs when it buys and sells other investments. Also, an
underlying fund pays transaction costs when it buys and sells portfolio
securities, and a higher portfolio turnover for the underlying fund may indicate
higher transaction costs. These costs, which are not reflected in annual Account
operating expenses or in the examples, affect the performance of the underlying
fund and the Account. During its most recent fiscal year, the Account's
portfolio turnover rate was 26.3% of the average value of its
portfolio.
Principal
Investment Strategies
The SAM Portfolios operate as funds
of funds and invest principally in funds and exchange-traded funds ("ETFs") of
Principal Funds, Inc., PVC, and Principal Exchange-Traded Funds (“Underlying
Funds”). The SAM Portfolios generally categorize each Underlying Fund as a
fixed-income, equity or specialty fund based on its investment profile. Each SAM
Portfolio typically allocates its assets among Underlying Funds, and within
predetermined percentage ranges, as determined by the SAM Portfolio in
accordance with its outlook for the economy, the financial markets and the
relative market valuations of the Underlying Funds. The asset class
diversification of the SAM Portfolio is designed to moderate overall price
volatility and cushion severe losses in any one investment sector.
The Portfolio generally
invests:
|
|
• |
between 40% and 80% of its
assets in fixed-income funds, and less than 40% in any one fixed-income
fund; such funds generally invest in fixed income instruments such as high
yield securities (or “junk” bonds), real estate securities, securitized
products, government and government-sponsored securities, and corporate
bonds; |
|
|
• |
between 20% and 60% of its
assets in equity funds, and less than 30% in any one equity fund; such
funds generally invest in equity securities of domestic and foreign
companies, including small, medium and large market capitalization
companies, and growth and value stock;
and |
|
|
• |
less than 20% of its assets in
specialty funds, and less than 20% in any one specialty fund; such funds
generally offer unique combinations of traditional equity securities and
fixed-income securities or use alternative investment strategies that aim
to offer diversification beyond traditional equity and fixed-income
securities and include investments in such assets as infrastructure,
commodities, currencies, and natural resources
companies. |
The SAM Portfolio may temporarily
exceed these percentage ranges for short periods, and may alter the percentage
ranges when it deems appropriate.
Principal
Risks
The value of your investment in the
Portfolio changes with the value of the Portfolio's investments. Many factors
affect that value, and it is possible to lose money by investing in the
Portfolio. An investment in the Portfolio is not a deposit of a bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
The principal risks of investing in
the Portfolio that are inherent in the fund of funds are:
Fund of Funds
Risk. Portfolio
shareholders bear indirectly their proportionate share of the expenses of other
investment companies in which the Portfolio invests ("underlying funds"). The
Portfolio's selection and weighting of asset classes and allocation of
investments in underlying funds may cause it to underperform other funds with a
similar investment objective. The Portfolio's performance and risks correspond
directly to the performance and risks of the underlying funds in which it
invests, proportionately in accordance with the weightings of such investments,
and there is no assurance that the underlying funds will achieve their
investment objectives. Management of the Portfolio entails potential conflicts
of interest: the Portfolio invests in affiliated underlying funds; and the
Advisor and its affiliates may earn different fees from different underlying
funds and may have an incentive to allocate more Portfolio assets to underlying
funds from which they receive higher fees.
Principal Risks
due to the Portfolio's Investments in Underlying Funds
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 market capitalization or style), 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 Risk. Investments in small- and
medium-sized companies may involve greater risk and price volatility than
investments 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 would cause the stock price to increase may not occur as
anticipated or at all. Moreover, a stock that appears to be undervalued
actually may be appropriately priced at a low level and therefore would
not be profitable for the fund. |
Fixed-Income
Securities Risk. Fixed-income securities are subject
to interest rate, credit quality, and liquidity risks. The market value of
fixed-income securities generally declines when interest rates rise, and
increased interest rates may adversely affect the liquidity of certain
fixed-income securities. Moreover, an issuer of fixed-income securities could
default on its payment obligations due to increased interest rates or for other
reasons.
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).
High Yield
Securities Risk. High
yield fixed-income securities (commonly referred to as "junk bonds") are subject
to greater credit quality risk than higher rated fixed-income securities and
should be considered speculative.
Investment
Company Securities Risk. A fund that invests in another
investment company (for example, another fund or an exchange-traded fund
(“ETF”)) is subject to the risks associated with direct ownership of the
securities in which such investment company invests. Fund shareholders
indirectly bear their proportionate share of the expenses of each such
investment company.
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, which means funds with
longer average portfolio durations may be more volatile than those with shorter
durations.
Real Estate
Securities Risk. Investing in real estate securities
subjects the fund to the risks associated with the real estate market (which are
similar to the risks associated with direct ownership in real estate), including
declines in real estate values, loss due to casualty or condemnation, property
taxes, interest rate changes, increased expenses, cash flow of underlying real
estate assets, regulatory changes (including zoning, land use and rents), and
environmental problems, as well as to the risks related to 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, result in changes to expense
ratios and increased expenses, and adversely affect underlying fund performance.
Moreover, a fund of fund's redemptions or reallocations among share classes of
an underlying fund may result in changes to the expense ratios of affected
classes, which may increase the expenses paid by shareholders of the class that
experienced the redemption.
Securitized
Products Risk. Investments in securitized products
are subject to risks similar to traditional fixed income securities, such as
credit, interest rate, liquidity, prepayment, extension, and default risk, as
well as additional risks associated with the nature of the assets and the
servicing of those assets. Unscheduled prepayments on securitized products 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.
Performance
The following information provides
some indication of the risks of investing in the Account. Past performance is
not necessarily an indication of how the Account will perform in the future. You
may get updated performance information by calling 1-800-222-5852.
The bar chart shows changes in the
Account's performance from year to year. The table shows how the Account's
average annual returns for 1, 5, and 10 years (or, if shorter, the life of the
Account) compare with those of one or more broad measures of market performance.
Performance figures for the Accounts do not include any separate account
expenses, cost of insurance, or other contract-level expenses; total returns for
the Accounts would be lower if such expenses were included.
Total Returns as
of December 31
|
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q2
'09 |
11.00 |
% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q4
'08 |
(10.39 |
)% |
|
|
|
|
|
Average
Annual Total Returns |
For the
periods ended December 31, 2017 |
1
Year |
5
Years |
10
Years |
SAM
Conservative Balanced Portfolio - Class 1 |
11.46% |
6.86% |
5.66% |
SAM
Conservative Balanced Portfolio - Class 2 |
11.14% |
6.60% |
5.40% |
Bloomberg Barclays U.S.
Aggregate Bond Index (reflects no deduction for fees, expenses, or
taxes) |
3.54% |
2.10% |
4.01% |
Russell 3000 Index (reflects no deduction for
fees, expenses, or taxes) |
21.13% |
15.58% |
8.60% |
MSCI EAFE Index NR (reflects no
deduction for fees, expenses, or taxes) |
25.03% |
7.90% |
1.94% |
SAM Conservative Balanced
Blended Index (reflects no deduction for fees, expenses, or
taxes) |
10.66% |
6.72% |
5.52% |
Performance of a blended index shows
how the Portfolio’s performance compares to a blend of indices with similar
investment objectives. Performance of the components of the blended index is
also shown. The weightings for SAM Conservative Balanced Blended Index are 60%
Bloomberg Barclays U.S. Aggregate Bond Index, 30% Russell 3000® Index, and 10% MSCI EAFE Index NR.
The custom or blended index returns reflect the allocation in effect for the
time period(s) for which the fund returns are disclosed. Previous weightings or
allocations of the custom or blended index are not restated.
Management
Investment
Advisor:
Principal Global Investors,
LLC
|
|
• |
Charles D. Averill (since
2010), Portfolio Manager |
|
|
• |
Todd A. Jablonski (since
2010), Chief Investment Officer and Portfolio
Manager |
|
|
• |
Gregory L. Tornga (since
2017), Managing Director and Portfolio
Manager |
Tax
Information
The Fund intends to comply with
applicable variable asset diversification regulations. Taxation to you will
depend on what you do with your variable life insurance or variable annuity
contract. See your variable product prospectus for information about the tax
implications of investing in the Accounts.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, to recommend one Account or share class of the Fund over another
Account or share class, or to recommend one variable annuity, variable life
insurance policy or mutual fund over another. Ask your salesperson or visit your
financial intermediary's website for more information.
SAM (STRATEGIC
ASSET MANAGEMENT) CONSERVATIVE GROWTH PORTFOLIO
|
|
Objective: |
The Portfolio seeks to provide
long-term capital appreciation. |
Fees and Expenses
of the Account
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Account. These fees
and expenses do not reflect the fees and expenses of any variable insurance
contract that may invest in the Account and would be higher if they
did.
Annual Account
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
Class
1 |
Class
2 |
Management Fees |
0.23% |
0.23% |
Distribution and/or Service
(12b-1) Fees |
N/A |
0.25% |
Other Expenses |
—% |
—% |
Acquired Fund Fees and
Expenses |
0.73% |
0.73% |
Total Annual
Account Operating Expenses |
0.96% |
1.21% |
Expense Reimbursement
(1) |
—% |
—% |
Total Annual
Account Operating Expenses after Expense Reimbursement |
0.96% |
1.21% |
|
|
|
(1) Principal
Global Investors, LLC ("PGI"), the investment advisor, has contractually
agreed to reduce its management fees so that certain Account's Total
Operating Expenses, (including acquired fund fees and expenses but
excluding interest expense, expenses related to fund investments, and
other extraordinary expenses) do not to exceed 0.99% for Class 1 and 1.24%
for Class 2 shares (expressed as a percent of average net assets on an
annualized basis). It is expected that the expense limits will continue
through the period ending April 30, 2019; however, Principal Variable
Contracts Funds, Inc. and PGI, the parties to the agreement, may mutually
agree to terminate the expense limits prior to the end of the
period. |
Example
This Example is intended to help you
compare the cost of investing in the Account with the cost of investing in other
mutual funds.
The Example assumes that you invest
$10,000 in the Account for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Account’s operating
expenses remain the same. If separate account expenses and contract level
expenses were included, expenses would be higher. The calculation of costs takes
into account any applicable contractual fee waivers and/or expense
reimbursements for the period noted in the table above. Although your actual
costs may be higher or lower, based on these assumptions your costs would
be:
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
SAM
Conservative Growth Portfolio – Class 1 |
$98 |
$306 |
$531 |
$1,178 |
SAM
Conservative Growth Portfolio - Class 2 |
123 |
384 |
665 |
1,466 |
Portfolio
Turnover
As a fund of funds, the Account does
not pay transaction costs, such as commissions, when it buys and sells shares of
underlying funds (or “turns over” its portfolio); however, the Account does pay
such transaction costs when it buys and sells other investments. Also, an
underlying fund pays transaction costs when it buys and sells portfolio
securities, and a higher portfolio turnover for the underlying fund may indicate
higher transaction costs. These costs, which are not reflected in annual Account
operating expenses or in the examples, affect the performance of the underlying
fund and the Account. During its most recent fiscal year, the Account's
portfolio turnover rate was 35.1% of the average value of its
portfolio.
Principal
Investment Strategies
The SAM Portfolios operate as funds
of funds and invest principally in funds and exchange-traded funds ("ETFs") of
Principal Funds, Inc., PVC, and Principal Exchange-Traded Funds (“Underlying
Funds”). The SAM Portfolios generally categorize each Underlying Fund as a
fixed-income, equity or specialty fund based on its investment profile. Each SAM
Portfolio typically allocates its assets among Underlying Funds, and within
predetermined percentage ranges, as determined by the SAM Portfolio in
accordance with its outlook for the economy, the financial markets and the
relative market valuations of the Underlying Funds. The asset class
diversification of the SAM Portfolio is designed to moderate overall price
volatility and cushion severe losses in any one investment sector.
The Portfolio generally
invests:
|
|
• |
between 0% and 40% of its
assets in fixed-income funds, and less than 30% in any one fixed-income
fund; such funds generally invest in fixed-income instruments such as
government and government-sponsored securities and corporate
bonds; |
|
|
• |
between 60% and 100% of its
assets in equity funds, and less than 40% in any one equity fund; such
funds generally invest in equity securities of domestic and foreign
companies, including small, medium, and large market capitalization
companies, and growth and value stock;
and |
|
|
• |
less than 20% of its assets in
specialty funds, and less than 20% in any one specialty fund; such funds
generally offer unique combinations of traditional equity securities and
fixed-income securities or use alternative investment strategies that aim
to offer diversification beyond traditional equity and fixed-income
securities and include investments in such assets as infrastructure,
commodities, currencies, and natural resources
companies. |
The SAM Portfolio may temporarily
exceed the applicable percentage ranges for short periods, and may alter the
percentage ranges when it deems appropriate.
Principal
Risks
The value of your investment in the
Portfolio changes with the value of the Portfolio's investments. Many factors
affect that value, and it is possible to lose money by investing in the
Portfolio. An investment in the Portfolio is not a deposit of a bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
The principal risks of investing in
the Portfolio that are inherent in the fund of funds are:
Fund of Funds
Risk. Portfolio
shareholders bear indirectly their proportionate share of the expenses of other
investment companies in which the Portfolio invests ("underlying funds"). The
Portfolio's selection and weighting of asset classes and allocation of
investments in underlying funds may cause it to underperform other funds with a
similar investment objective. The Portfolio's performance and risks correspond
directly to the performance and risks of the underlying funds in which it
invests, proportionately in accordance with the weightings of such investments,
and there is no assurance that the underlying funds will achieve their
investment objectives. Management of the Portfolio entails potential conflicts
of interest: the Portfolio invests in affiliated underlying funds; and the
Advisor and its affiliates may earn different fees from different underlying
funds and may have an incentive to allocate more Portfolio assets to underlying
funds from which they receive higher fees.
Principal Risks
due to the Portfolio's Investments in Underlying Funds
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 market capitalization or style), 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 Risk. Investments in small and
medium-sized companies may involve greater risk and price volatility than
investments 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 would cause the stock price to increase may not occur as
anticipated or at all. Moreover, a stock that appears to be undervalued
actually may be appropriately priced at a low level and therefore would
not be profitable for the fund. |
Fixed-Income
Securities Risk. Fixed-income securities are subject
to interest rate, credit quality, and liquidity risks. The market value of
fixed-income securities generally declines when interest rates rise, and
increased interest rates may adversely affect the liquidity of certain
fixed-income securities. Moreover, an issuer of fixed-income securities could
default on its payment obligations due to increased interest rates or for other
reasons.
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).
Investment
Company Securities Risk. A fund that invests in another
investment company (for example, another fund or an exchange-traded fund
(“ETF”)) is subject to the risks associated with direct ownership of the
securities in which such investment company invests. Fund shareholders
indirectly bear their proportionate share of the expenses of each such
investment company.
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, which means funds with
longer average portfolio durations may be more volatile than those with shorter
durations.
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, result in changes to expense
ratios and increased expenses, and adversely affect underlying fund performance.
Moreover, a fund of fund's redemptions or reallocations among share classes of
an underlying fund may result in changes to the expense ratios of affected
classes, which may increase the expenses paid by shareholders of the class that
experienced the redemption.
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.
Performance
The following information provides
some indication of the risks of investing in the Account. Past performance is
not necessarily an indication of how the Account will perform in the future. You
may get updated performance information by calling 1-800-222-5852.
The bar chart shows changes in the
Account’s performance from year to year. The table shows how the Account’s
average annual returns for 1, 5, and 10 years (or, if shorter, the life of the
Account) compare with those of one or more broad measures of market performance.
Performance figures for the Accounts do not include any separate account
expenses, cost of insurance, or other contract-level expenses; total returns for
the Accounts would be lower if such expenses were included.
Total Returns as
of December 31
|
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q2
'09 |
14.61 |
% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q4
'08 |
(19.24 |
)% |
|
|
|
|
|
Average
Annual Total Returns |
For the
periods ended December 31, 2017 |
1
Year |
5
Years |
10
Years |
SAM
Conservative Growth Portfolio - Class 1 |
19.78% |
10.88% |
6.32% |
SAM
Conservative Growth Portfolio - Class 2 |
19.46% |
10.61% |
6.05% |
Russell 3000 Index (reflects no
deduction for fees, expenses, or taxes) |
21.13% |
15.58% |
8.60% |
Bloomberg Barclays U.S.
Aggregate Bond Index (reflects no deduction for fees, expenses, or
taxes) |
3.54% |
2.10% |
4.01% |
MSCI EAFE Index NR (reflects no
deduction for fees, expenses, or taxes) |
25.03% |
7.90% |
1.94% |
SAM Conservative Growth Blended
Index (reflects no deduction for fees, expenses, or taxes) |
18.19% |
11.35% |
6.60% |
Performance of a blended index shows
how the Portfolio’s performance compares to a blend of indices with similar
investment objectives. Performance of the components of the blended index is
also shown. The weightings for SAM Conservative Growth Blended Index are 60%
Russell 3000® Index, 20% Bloomberg Barclays U.S.
Aggregate Bond Index and 20% MSCI EAFE Index NR. The custom or blended index
returns reflect the allocation in effect for the time period(s) for which the
fund returns are disclosed. Previous weightings or allocations of the custom or
blended index are not restated.
Management
Investment
Advisor and Portfolio Managers:
Principal Global Investors,
LLC
|
|
• |
Charles D. Averill (since
2010), Portfolio Manager |
|
|
• |
Todd A. Jablonski (since
2010), Chief Investment Officer and Portfolio
Manager |
|
|
• |
Gregory L. Tornga (since
2017), Managing Director and Portfolio
Manager |
Tax
Information
The Fund intends to comply with
applicable variable asset diversification regulations. Taxation to you will
depend on what you do with your variable life insurance or variable annuity
contract. See your variable product prospectus for information about the tax
implications of investing in the Accounts.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, to recommend one Account or share class of the Fund over another
Account or share class, or to recommend one variable annuity, variable life
insurance policy or mutual fund over another. Ask your salesperson or visit your
financial intermediary's website for more information.
SAM (STRATEGIC
ASSET MANAGEMENT) FLEXIBLE INCOME PORTFOLIO
|
|
Objective: |
The Portfolio seeks to provide
a high level of total return (consisting of reinvestment of income with
some capital appreciation). |
Fees and Expenses
of the Account
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Account. These fees
and expenses do not reflect the fees and expenses of any variable insurance
contract that may invest in the Account and would be higher if they
did.
Annual Account
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
Class
1 |
Class
2 |
Management Fees |
0.23% |
0.23% |
Distribution and/or Service
(12b-1) Fees |
N/A |
0.25% |
Other Expenses |
—% |
—% |
Acquired Fund Fees and
Expenses |
0.56% |
0.56% |
Total Annual
Account Operating Expenses |
0.79% |
1.04% |
Example
This Example is intended to help you
compare the cost of investing in the Account with the cost of investing in other
mutual funds.
The Example assumes that you invest
$10,000 in the Account for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Account’s operating
expenses remain the same. If separate account expenses and contract level
expenses were included, expenses would be higher. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
SAM Flexible
Income Portfolio - Class 1 |
$81 |
$252 |
$439 |
$978 |
SAM Flexible
Income Portfolio - Class 2 |
106 |
331 |
574 |
1,271 |
Portfolio
Turnover
As a fund of funds, the Account does
not pay transaction costs, such as commissions, when it buys and sells shares of
underlying funds (or “turns over” its portfolio); however, the Account does pay
such transaction costs when it buys and sells other investments. Also, an
underlying fund pays transaction costs when it buys and sells portfolio
securities, and a higher portfolio turnover for the underlying fund may indicate
higher transaction costs. These costs, which are not reflected in annual Account
operating expenses or in the examples, affect the performance of the underlying
fund and the Account. During its most recent fiscal year, the Account's
portfolio turnover rate was 29.3% of the average value of its
portfolio.
Principal
Investment Strategies
The SAM Portfolios operate as funds
of funds and invest principally in funds and exchange-traded funds ("ETFs") of
Principal Funds, Inc., PVC, and Principal Exchange-Traded Funds (“Underlying
Funds”). The SAM Portfolios generally categorize each Underlying Fund as a
fixed-income, equity, or specialty fund based on its investment profile. Each
SAM Portfolio typically allocates its assets among Underlying Funds, and within
predetermined percentage ranges, as determined by the SAM Portfolio in
accordance with its outlook for the economy, the financial markets and the
relative market valuations of the Underlying Funds. The asset class
diversification of the SAM Portfolio is designed to moderate overall price
volatility and cushion severe losses in any one investment sector.
The Portfolio generally
invests:
|
|
• |
between 55% and 95% of its
assets in fixed-income funds, and less than 40% in any one fixed-income
fund; such funds generally invest in fixed income instruments such as high
yield securities (or “junk” bonds), real estate securities, securitized
products, government and government-sponsored securities, and corporate
bonds; |
|
|
• |
between 5% and 45% of its
assets in equity funds, and less than 30% in any one equity fund; such
funds generally invest in equity securities of domestic and foreign
companies, including value stock; and |
|
|
• |
less than 20% of its assets in
specialty funds, and less than 20% in any one specialty fund; such funds
generally offer unique combinations of traditional equity securities and
fixed-income securities or use alternative investment strategies that aim
to offer diversification beyond traditional equity and fixed-income
securities and include investments in such assets as infrastructure,
commodities, currencies, and natural resources
companies. |
The SAM Portfolio may temporarily
exceed these percentage ranges for short periods, and may alter the percentage
ranges when it deems appropriate.
Principal
Risks
The value of your investment in the
Portfolio changes with the value of the Portfolio's investments. Many factors
affect that value, and it is possible to lose money by investing in the
Portfolio. An investment in the Portfolio is not a deposit of a bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
The principal risks of investing in
the Portfolio that are inherent in the fund of funds are:
Fund of Funds
Risk. Portfolio
shareholders bear indirectly their proportionate share of the expenses of other
investment companies in which the Portfolio invests ("underlying funds"). The
Portfolio's selection and weighting of asset classes and allocation of
investments in underlying funds may cause it to underperform other funds with a
similar investment objective. The Portfolio's performance and risks correspond
directly to the performance and risks of the underlying funds in which it
invests, proportionately in accordance with the weightings of such investments,
and there is no assurance that the underlying funds will achieve their
investment objectives. Management of the Portfolio entails potential conflicts
of interest: the Portfolio invests in affiliated underlying funds; and the
Advisor and its affiliates may earn different fees from different underlying
funds and may have an incentive to allocate more Portfolio assets to underlying
funds from which they receive higher fees.
Principal Risks
due to the Portfolio's Investments in Underlying Funds
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 market capitalization or style), may underperform other
market segments or the equity markets as a whole.
|
|
• |
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 would cause the stock price to increase may not occur as
anticipated or at all. Moreover, a stock that appears to be undervalued
actually may be appropriately priced at a low level and therefore would
not be profitable for the fund. |
Fixed-Income
Securities Risk. Fixed-income securities are subject
to interest rate, credit quality, and liquidity risks. The market value of
fixed-income securities generally declines when interest rates rise, and
increased interest rates may adversely affect the liquidity of certain
fixed-income securities. Moreover, an issuer of fixed-income securities could
default on its payment obligations due to increased interest rates or for other
reasons.
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).
High Yield
Securities Risk. High
yield fixed-income securities (commonly referred to as "junk bonds") are subject
to greater credit quality risk than higher rated fixed-income securities and
should be considered speculative.
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, which means funds with
longer average portfolio durations may be more volatile than those with shorter
durations.
Real Estate
Securities Risk. Investing in real estate securities
subjects the fund to the risks associated with the real estate market (which are
similar to the risks associated with direct ownership in real estate), including
declines in real estate values, loss due to casualty or condemnation, property
taxes, interest rate changes, increased expenses, cash flow of underlying real
estate assets, regulatory changes (including zoning, land use and rents), and
environmental problems, as well as to the risks related to 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, result in changes to expense
ratios and increased expenses, and adversely affect underlying fund performance.
Moreover, a fund of fund's redemptions or reallocations among share classes of
an underlying fund may result in changes to the expense ratios of affected
classes, which may increase the expenses paid by shareholders of the class that
experienced the redemption.
Securitized
Products Risk. Investments in securitized products
are subject to risks similar to traditional fixed income securities, such as
credit, interest rate, liquidity, prepayment, extension, and default risk, as
well as additional risks associated with the nature of the assets and the
servicing of those assets. Unscheduled prepayments on securitized products 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.
Performance
The following information provides
some indication of the risks of investing in the Account. Past performance is
not necessarily an indication of how the Account will perform in the future. You
may get updated performance information by calling 1-800-222-5852.
The bar chart shows changes in the
Account's performance from year to year. The table shows how the Account's
average annual returns for 1, 5, and 10 years (or, if shorter, the life of the
Account) compare with those of one or more broad measures of market performance.
Performance figures for the Accounts do not include any separate account
expenses, cost of insurance, or other contract-level expenses; total returns for
the Accounts would be lower if such expenses were included.
Total Returns as
of December 31
|
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q2
'09 |
10.44 |
% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q4
'08 |
(6.95 |
)% |
|
|
|
|
|
Average
Annual Total Returns |
For the
periods ended December 31, 2017 |
1
Year |
5
Years |
10
Years |
SAM Flexible
Income Portfolio - Class 1 |
8.41% |
5.52% |
5.52% |
SAM Flexible
Income Portfolio - Class 2 |
8.13% |
5.25% |
5.24% |
Bloomberg Barclays U.S.
Aggregate Bond Index (reflects no deduction for fees, expenses, or
taxes) |
3.54% |
2.10% |
4.01% |
Russell 3000 Index (reflects no deduction for
fees, expenses, or taxes) |
21.13% |
15.58% |
8.60% |
MSCI EAFE Index NR (reflects no
deduction for fees, expenses, or taxes) |
25.03% |
7.90% |
1.94% |
SAM Flexible Income Blended
Index (reflects no deduction for fees, expenses, or taxes) |
7.90% |
5.08% |
5.08% |
Performance of a blended index shows
how the Portfolio’s performance compares to a blend of indices with similar
investment objectives. Performance of the components of the blended index is
also shown. The weightings for SAM Flexible Income Blended Index are 75%
Bloomberg Barclays U.S. Aggregate Bond Index, 20% Russell 3000® Index, and 5% MSCI EAFE Index NR.
The custom or blended index returns reflect the allocation in effect for the
time period(s) for which the fund returns are disclosed. Previous weightings or
allocations of the custom or blended index are not restated.
Management
Investment
Advisor and Portfolio Managers:
Principal Global Investors,
LLC
|
|
• |
Charles D. Averill (since
2010), Portfolio Manager |
|
|
• |
Todd A. Jablonski (since
2010), Chief Investment Officer and Portfolio
Manager |
|
|
• |
Gregory L. Tornga (since
2017), Managing Director and Portfolio
Manager |
Tax
Information
The Fund intends to comply with
applicable variable asset diversification regulations. Taxation to you will
depend on what you do with your variable life insurance or variable annuity
contract. See your variable product prospectus for information about the tax
implications of investing in the Accounts.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, to recommend one Account or share class of the Fund over another
Account or share class, or to recommend one variable annuity, variable life
insurance policy or mutual fund over another. Ask your salesperson or visit your
financial intermediary's website for more information.
SAM (STRATEGIC
ASSET MANAGEMENT) STRATEGIC GROWTH PORTFOLIO
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|
Objective: |
The Portfolio seeks to provide
long-term capital appreciation. |
Fees and Expenses
of the Account
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Account. These fees
and expenses do not reflect the fees and expenses of any variable insurance
contract that may invest in the Account and would be higher if they
did.
Annual Account
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
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|
|
|
|
Class
1 |
Class
2 |
Management Fees |
0.23% |
0.23% |
Distribution and/or Service
(12b-1) Fees |
N/A |
0.25% |
Other Expenses |
—% |
—% |
Acquired Fund Fees and
Expenses |
0.74% |
0.74% |
Total Annual
Account Operating Expenses |
0.97% |
1.22% |
Expense Reimbursement
(1) |
—% |
—% |
Total Annual
Account Operating Expenses after Expense Reimbursement |
0.97% |
1.22% |
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|
|
(1) Principal
Global Investors, LLC ("PGI"), the investment advisor, has contractually
agreed to reduce its management fees so that certain Account's Total
Operating Expenses, (including acquired fund fees and expenses but
excluding interest expense, expenses related to fund investments, and
other extraordinary expenses) do not to exceed 0.99% for Class 1 and 1.24%
for Class 2 shares (expressed as a percent of average net assets on an
annualized basis). It is expected that the expense limits will continue
through the period ending April 30, 2019; however, Principal Variable
Contracts Funds, Inc. and PGI, the parties to the agreement, may mutually
agree to terminate the expense limits prior to the end of the
period. |
Example
This Example is intended to help you
compare the cost of investing in the Account with the cost of investing in other
mutual funds.
The Example assumes that you invest
$10,000 in the Account for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Account’s operating
expenses remain the same. If separate account expenses and contract level
expenses were included, expenses would be higher. The calculation of costs takes
into account any applicable contractual fee waivers and/or expense
reimbursements for the period noted in the table above. Although your actual
costs may be higher or lower, based on these assumptions your costs would
be:
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|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
SAM
Strategic Growth Portfolio - Class 1 |
$99 |
$309 |
$536 |
$1,190 |
SAM
Strategic Growth Portfolio - Class 2 |
124 |
387 |
670 |
1,477 |
Portfolio
Turnover
As a fund of funds, the Account does
not pay transaction costs, such as commissions, when it buys and sells shares of
underlying funds (or “turns over” its portfolio); however, the Account does pay
such transaction costs when it buys and sells other investments. Also, an
underlying fund pays transaction costs when it buys and sells portfolio
securities, and a higher portfolio turnover for the underlying fund may indicate
higher transaction costs. These costs, which are not reflected in annual Account
operating expenses or in the examples, affect the performance of the underlying
fund and the Account. During its most recent fiscal year, the Account's
portfolio turnover rate was 37.7% of the average value of its
portfolio.
Principal
Investment Strategies
The SAM Portfolios operate as funds
of funds and invest principally in funds and exchange-traded funds ("ETFs") of
Principal Funds, Inc., PVC, and Principal Exchange-Traded Funds (“Underlying
Funds”). The SAM Portfolios generally categorize each Underlying Fund as a fixed
income, equity, or specialty fund based on its investment profile. Each SAM
Portfolio typically allocates its assets among Underlying Funds, and within
predetermined percentage ranges, as determined by the SAM Portfolio in
accordance with its outlook for the economy, the financial markets and the
relative market valuations of the Underlying Funds. The asset class
diversification of the SAM Portfolio is designed to moderate overall price
volatility and cushion severe losses in any one investment sector.
The Portfolio generally
invests:
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|
• |
between 75% and 100% of its
assets in equity funds, and less than 50% in any one equity fund; such
funds generally invest in equity securities of domestic and foreign
companies, including small, medium, and large market capitalization
companies, and growth and value stock;
and |
|
|
• |
less than 20% of its assets in
specialty funds, and less than 20% in any one specialty fund; such funds
generally offer unique combinations of traditional equity securities and
fixed-income securities or use alternative investment strategies that aim
to offer diversification beyond traditional equity and fixed-income
securities and include investments in such assets as infrastructure,
commodities, currencies, and natural resources
companies. |
The SAM Portfolio may temporarily
exceed the applicable percentage ranges for short periods, and may alter the
percentage ranges when it deems appropriate.
Principal
Risks
The value of your investment in the
Portfolio changes with the value of the Portfolio's investments. Many factors
affect that value, and it is possible to lose money by investing in the
Portfolio. An investment in the Portfolio is not a deposit of a bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
The principal risks of investing in
the Portfolio that are inherent in the fund of funds are:
Fund of Funds
Risk. Portfolio
shareholders bear indirectly their proportionate share of the expenses of other
investment companies in which the Portfolio invests ("underlying funds"). The
Portfolio's selection and weighting of asset classes and allocation of
investments in underlying funds may cause it to underperform other funds with a
similar investment objective. The Portfolio's performance and risks correspond
directly to the performance and risks of the underlying funds in which it
invests, proportionately in accordance with the weightings of such investments,
and there is no assurance that the underlying funds will achieve their
investment objectives. Management of the Portfolio entails potential conflicts
of interest: the Portfolio invests in affiliated underlying funds; and the
Advisor and its affiliates may earn different fees from different underlying
funds and may have an incentive to allocate more Portfolio assets to underlying
funds from which they receive higher fees.
Principal Risks
due to the Portfolio's Investments in Underlying Funds
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 market capitalization or style), may underperform other
market segments or the equity markets as a whole.
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|
• |
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. |
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|
• |
Small and
Medium Market Capitalization Companies Risk. Investments in small and
medium sized companies may involve greater risk and price volatility than
investments in larger, more mature
companies. |
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|
• |
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 would cause the stock price to increase may not occur as
anticipated or at all. Moreover, a stock that appears to be undervalued
actually may be appropriately priced at a low level and therefore would
not be profitable for the fund. |
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).
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, result in changes to expense
ratios and increased expenses, and adversely affect underlying fund performance.
Moreover, a fund of fund's redemptions or reallocations among share classes of
an underlying fund may result in changes to the expense ratios of affected
classes, which may increase the expenses paid by shareholders of the class that
experienced the redemption.
Performance
The following information provides
some indication of the risks of investing in the Account. Past performance is
not necessarily an indication of how the Account will perform in the future. You
may get updated performance information by calling 1-800-222-5852.
The bar chart shows changes in the
Account’s performance from year to year. The table shows how the Account’s
average annual returns for 1, 5, and 10 years (or, if shorter, the life of the
Account) compare with those of one or more broad measures of market performance.
Performance figures for the Accounts do not include any separate account
expenses, cost of insurance, or other contract-level expenses; total returns for
the Accounts would be lower if such expenses were included.
Total Returns as
of December 31
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|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q3
'09 |
15.95 |
% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q4
'08 |
(22.38 |
)% |
|
|
|
|
|
Average
Annual Total Returns |
For the
periods ended December 31, 2017 |
1
Year |
5
Years |
10
Years |
SAM
Strategic Growth Portfolio - Class 1 |
22.22% |
12.06% |
6.40% |
SAM
Strategic Growth Portfolio - Class 2 |
21.95% |
11.78% |
6.14% |
Russell 3000 Index (reflects no deduction for
fees, expenses, or taxes) |
21.13% |
15.58% |
8.60% |
MSCI EAFE Index NR (reflects no
deduction for fees, expenses, or taxes) |
25.03% |
7.90% |
1.94% |
Bloomberg Barclays U.S.
Aggregate Bond Index (reflects no deduction for fees, expenses, or
taxes) |
3.54% |
2.10% |
4.01% |
SAM Strategic Growth Blended
Index (reflects no deduction for fees, expenses, or taxes) |
21.18% |
13.00% |
6.81% |
Performance of a blended index shows
how the Portfolio’s performance compares to a blend of indices with similar
investment objectives. Performance of the components of the blended index is
also shown. The weightings for SAM Strategic Growth Blended Index are 70%
Russell 3000® Index, 25% MSCI EAFE Index NR and
5% Bloomberg Barclays U.S. Aggregate Bond Index. The custom or blended index
returns reflect the allocation in effect for the time period(s) for which the
fund returns are disclosed. Previous weightings or allocations of the custom or
blended index are not restated.
Management
Investment
Advisor and Portfolio Managers:
Principal Global Investors, LLC
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|
• |
Charles D. Averill (since
2010), Portfolio Manager |
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|
• |
Todd A. Jablonski (since
2010), Chief Investment Officer and Portfolio
Manager |
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|
• |
Gregory L. Tornga (since
2017), Managing Director and Portfolio
Manager |
Tax
Information
The Fund intends to comply with
applicable variable asset diversification regulations. Taxation to you will
depend on what you do with your variable life insurance or variable annuity
contract. See your variable product prospectus for information about the tax
implications of investing in the Accounts.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, to recommend one Account or share class of the Fund over another
Account or share class, or to recommend one variable annuity, variable life
insurance policy or mutual fund over another. Ask your salesperson or visit your
financial intermediary's website for more information.
SHORT-TERM INCOME
ACCOUNT
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|
Objective: |
The Account seeks to provide
as high a level of current income as is consistent with prudent investment
management and stability of principal. |
Fees and Expenses
of the Account
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Account. These fees
and expenses do not reflect the fees and expenses of any variable insurance
contract that may invest in the Account and would be higher if they
did.
Annual Account
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
Class
1 |
Class
2 |
Management Fees |
0.50% |
0.50% |
Distribution and/or Service
(12b-1) Fees |
N/A |
0.25% |
Other Expenses |
0.01% |
0.01% |
Total Annual
Account Operating Expenses |
0.51% |
0.76% |
Expense Reimbursement
(1) |
(0.01)% |
(0.01)% |
Total Annual
Account Operating Expenses after Expense Reimbursement |
0.50% |
0.75% |
|
(1) Principal Global Investors, LLC
("PGI"), the investment advisor, has contractually agreed to reduce the
Account's expenses by 0.01% through the period ending April 30, 2019. It
is expected that the expense reimbursement will continue through the
period disclosed; however, Principal Variable Contracts Funds, Inc. and
PGI, the parties to the agreement, may mutually agree to terminate the
expense reimbursement prior to the end of the
period. |
Example
This Example is intended to help you
compare the cost of investing in the Account with the cost of investing in other
mutual funds.
The Example assumes that you invest
$10,000 in the Account for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Account's operating
expenses remain the same. If separate account expenses and contract level
expenses were included, expenses would be higher. The calculation of costs takes
into account any applicable contractual fee waivers and/or expense
reimbursements for the period noted in the table above. Although your actual
costs may be higher or lower, based on these assumptions your costs would
be:
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|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
Short-Term
Income Account - Class 1 |
$51 |
$163 |
$284 |
$640 |
Short-Term
Income Account - Class 2 |
77 |
242 |
421 |
941 |
Portfolio
Turnover
The Account pays transaction costs,
such as commissions, when it buys and sells securities (or “turns over” its
portfolio). A higher portfolio turnover rate may indicate higher transaction
costs. These costs, which are not reflected in annual Account operating expenses
or in the example, affect the Account's performance. During the most recent
fiscal year, the Account's portfolio turnover rate was 67.3% of the average value of its
portfolio.
Principal
Investment Strategies
The Account invests primarily in
high quality short-term bonds and other fixed-income securities that, at the
time of purchase, are rated BBB- or higher by S&P Global Ratings ("S&P
Global") or Baa3 or higher by Moody's Investors Service, Inc. ("Moody's") or, if
unrated, in the opinion of those selecting such investments, are of comparable
quality.The Account's investments also include corporate securities, U.S. and
foreign government securities, mortgage-backed and asset-backed securities
(securitized products), and real estate investment trust ("REIT") securities.
The Account invests in securities denominated in foreign currencies and in
securities of foreign issuers. Under normal circumstances, the Account maintains
an effective maturity of five years or less and an average portfolio duration
that is within ±15% of the duration of the Bloomberg Barclays Credit 1-3 Year
Index which as of December 31, 2017 was 1.88 years.
Principal
Risks
The value of your investment in the
Account changes with the value of the Account's investments. Many factors affect
that value, and it is possible to lose money by investing in the Account. An
investment in the Account is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. The principal risks of investing in the Account, in alphabetical order,
are:
Fixed-Income
Securities Risk. Fixed-income securities are subject
to interest rate, credit quality, and liquidity risks. The market value of
fixed-income securities generally declines when interest rates rise, and
increased interest rates may adversely affect the liquidity of certain
fixed-income securities. Moreover, an issuer of fixed-income securities could
default on its payment obligations due to increased interest rates or for other
reasons.
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).
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, which means funds with
longer average portfolio durations may be more volatile than those with shorter
durations.
Real Estate
Investment Trusts (“REITs”) Risk. In addition to risks associated with
investing in real estate securities, REITs are dependent upon management skills,
are not diversified, and are subject to heavy cash flow dependency, risks of
default by borrowers, and self-liquidation. Investment in REITs also involves
risks similar to risks of investing in small market capitalization companies,
such as limited financial resources, less frequent and limited volume trading,
and may be subject to more abrupt or erratic price movements than larger company
securities. A REIT could fail to qualify for tax-free pass-through of income
under the Internal Revenue Code. Fund shareholders will indirectly bear their
proportionate share of the expenses of REITs in which the fund
invests.
Real Estate
Securities Risk. Investing in real estate securities
subjects the fund to the risks associated with the real estate market (which are
similar to the risks associated with direct ownership in real estate), including
declines in real estate values, loss due to casualty or condemnation, property
taxes, interest rate changes, increased expenses, cash flow of underlying real
estate assets, regulatory changes (including zoning, land use and rents), and
environmental problems, as well as to the risks related to 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, result in changes to expense
ratios and increased expenses, and adversely affect underlying fund performance.
Moreover, a fund of fund's redemptions or reallocations among share classes of
an underlying fund may result in changes to the expense ratios of affected
classes, which may increase the expenses paid by shareholders of the class that
experienced the redemption.
Securitized
Products Risk. Investments in securitized products
are subject to risks similar to traditional fixed income securities, such as
credit, interest rate, liquidity, prepayment, extension, and default risk, as
well as additional risks associated with the nature of the assets and the
servicing of those assets. Unscheduled prepayments on securitized products 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.
Performance
The following information provides
some indication of the risks of investing in the Account. Past performance is
not necessarily an indication of how the Account will perform in the future. You
may get updated performance information by calling 1-800-222-5852.
The bar chart shows changes in the
Account's performance from year to year. The table shows how the Account's
average annual returns for 1, 5, and 10 years (or, if shorter, the life of the
Account) compare with those of one or more broad measures of market performance.
Performance figures for the Accounts do not include any separate account
expenses, cost of insurance, or other contract-level expenses; total returns for
the Accounts would be lower if such expenses were included.
Total Returns as
of December 31
|
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q2
'09 |
3.23 |
% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q4
'08 |
(2.03 |
)% |
|
|
|
|
|
Average
Annual Total Returns |
For the
periods ended December 31, 2017 |
1
Year |
5
Years |
10
Years |
Short-Term
Income Account - Class 1 |
2.39% |
1.62% |
2.77% |
Short-Term
Income Account - Class 2 |
1.78% |
1.33% |
2.48% |
Bloomberg Barclays Credit 1-3
Year Index (reflects no deduction for fees, expenses, or
taxes) |
1.66% |
1.44% |
2.82% |
Management
Investment
Advisor and Portfolio Managers:
Principal Global Investors,
LLC
|
|
• |
John R. Friedl (since 2010),
Portfolio Manager |
|
|
• |
Ryan P. McCann (since 2010),
Portfolio Manager |
|
|
• |
Scott J. Peterson (since
2010), Portfolio Manager |
Tax
Information
The Fund intends to comply with
applicable variable asset diversification regulations. Taxation to you will
depend on what you do with your variable life insurance or variable annuity
contract. See your variable product prospectus for information about the tax
implications of investing in the Accounts.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, to recommend one Account or share class of the Fund over another
Account or share class, or to recommend one variable annuity, variable life
insurance policy or mutual fund over another. Ask your salesperson or visit your
financial intermediary's website for more information.
SMALLCAP
ACCOUNT
|
|
Objective: |
The Account seeks long-term
growth of capital. |
Fees and Expenses
of the Account
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Account. These fees
and expenses do not reflect the fees and expenses of any variable insurance
contract that may invest in the Account and would be higher if they
did.
Annual Account
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
Class
1 |
Class
2 |
Management Fees |
0.82% |
0.82% |
Distribution and/or Service
(12b-1) Fees |
N/A |
0.25% |
Other Expenses |
0.01% |
0.01% |
Total Annual
Account Operating Expenses |
0.83% |
1.08% |
Example
This Example is intended to help you
compare the cost of investing in the Account with the cost of investing in other
mutual funds.
The Example assumes that you invest
$10,000 in the Account for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Account’s operating
expenses remain the same. If separate account expenses and contract level
expenses were included, expenses would be higher. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
SmallCap
Account - Class 1 |
$85 |
$265 |
$460 |
$1,025 |
SmallCap
Account - Class 2 |
110 |
343 |
595 |
1,317 |
Portfolio
Turnover
The Account pays transaction costs,
such as commissions, when it buys and sells securities (or “turns over” its
portfolio). A higher portfolio turnover rate may indicate higher transaction
costs. These costs, which are not reflected in annual Account operating expenses
or in the example, affect the Account’s performance. During the most recent
fiscal year, the Account’s portfolio turnover rate was 64.1% of the average value of its
portfolio.
Principal
Investment Strategies
Under normal circumstances, the
Account invests at least 80% of its net assets, plus any borrowings for
investment purposes, in equity securities of companies with small market
capitalizations at the time of purchase. For this Account, companies with small
market capitalizations are those with market capitalizations within the range of
companies comprising the Russell 2000® Index (as of December 31, 2017, this range was between
approximately $22.5
million and
$9.3
billion).
The Account invests in equity
securities with value and/or growth characteristics and constructs an investment
portfolio that has a blend of equity securities with these characteristics.
Investing in value equity securities is an investment strategy that emphasizes
buying equity securities that appear to be undervalued. The growth orientation
selection emphasizes buying equity securities of companies whose potential for
growth of capital and earnings is expected to be above average. The Account does
not have a policy of preferring one of these categories over the
other.
Principal
Risks
The value of your investment in the
Account changes with the value of the Account's investments. Many factors affect
that value, and it is possible to lose money by investing in the Account. An
investment in the Account is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. The principal risks of investing in the Account, in alphabetical order,
are:
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 market capitalization or style), 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
Market Capitalization Companies Risk. Investments in small sized
companies may involve greater risk and price volatility than investments
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 would cause the stock price to increase may not occur as
anticipated or at all. Moreover, a stock that appears to be undervalued
actually may be appropriately priced at a low level and therefore would
not be profitable for the fund. |
Performance
The following information provides
some indication of the risks of investing in the Account. Past performance is
not necessarily an indication of how the Account will perform in the future. You
may get updated performance information by calling 1-800-222-5852.
The bar chart shows changes in the
Account's performance from year to year. The table shows how the Account's
average annual returns for 1, 5, and 10 years (or, if shorter, the life of the
Account) compare with those of one or more broad measures of market performance.
Performance figures for the Accounts do not include any separate account
expenses, cost of insurance, or other contract-level expenses; total returns for
the Accounts would be lower if such expenses were included.
For periods prior to the inception
date of Class 2 shares (February 17, 2015), the performance shown in the table
for Class 2 shares is that of the Fund's Class 1 shares, adjusted to reflect the
fees and expenses of the Class 2 shares. These adjustments result in performance
for such periods that is no higher than the historical performance of the Class
1 shares.
Total Returns as
of December 31
|
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q4
'11 |
18.26 |
% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q4
'08 |
(26.33 |
)% |
|
|
|
|
|
Average
Annual Total Returns |
For the
periods ended December 31, 2017 |
1
Year |
5
Years |
10
Years |
SmallCap
Account - Class 1 |
12.87% |
15.46% |
8.34% |
SmallCap
Account - Class 2 |
12.57% |
15.19% |
8.08% |
Russell 2000 Index (reflects no
deduction for fees, expenses, or taxes) |
14.65% |
14.12% |
8.71% |
Management
Investment
Advisor and Portfolio Managers:
Principal Global Investors,
LLC
|
|
• |
Phil Nordhus (since 2006),
Portfolio Manager |
|
|
• |
Brian W. Pattinson (since
2011), Portfolio Manager |
Tax
Information
The Fund intends to comply with
applicable variable asset diversification regulations. Taxation to you will
depend on what you do with your variable life insurance or variable annuity
contract. See your variable product prospectus for information about the tax
implications of investing in the Accounts.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, to recommend one Account or share class of the Fund over another
Account or share class, or to recommend one variable annuity, variable life
insurance policy or mutual fund over another. Ask your salesperson or visit your
financial intermediary's website for more information.
ADDITIONAL
INFORMATION ABOUT INVESTMENT STRATEGIES AND RISKS
Each Account's investment objective
is described in the summary section for each Account. The summary section also
describes each Account's principal investment strategies, including the types of
securities in which each Account invests, and the principal risks of investing
in each Account. The principal investment strategies are not the only investment
strategies available to each Account, but they are the ones each Account
primarily uses to achieve its investment objective.
Except for Fundamental Restrictions
described in the Fund's Statement of Additional Information ("SAI"), the Board
of Directors may change any Account's objective or investment strategies without
a shareholder vote if it determines such a change is in the best interests of
the Account. If there is a material change to an Account's investment objective
or investment strategies, you should consider whether the Account remains an
appropriate investment for you. There is no guarantee that each Account will
meet its objective.
Each Account is designed to be a
portion of an investor's portfolio. No Account is intended to be a complete
investment program. Investors should consider the risks of the Account before
making an investment; it is possible to lose money by investing in an
Account.
Active
Management
The performance of a fund that is
actively managed will reflect in part the ability of those managing the
investments of the fund to make investment decisions that are suited to
achieving the fund's investment objective. Actively-managed funds may invest
differently from the benchmark against which the Fund's performance is compared.
When making decisions about whether to buy or sell equity securities,
considerations may include, among other things, a company’s strength in
fundamentals, its potential for earnings growth over time, its ability to
navigate certain macroeconomic environments, the current price of its securities
relative to their perceived worth and relative to others in its industry, and
analysis from computer models. When making decisions about whether to buy or
sell fixed-income investments, considerations may include, among other things,
the strength of certain sectors of the fixed-income market relative to others,
interest rates, a range of economic, political and financial factors, the
balance between supply and demand for certain asset classes, the credit quality
of individual issuers, the fundamental strengths of corporate and municipal
issuers, and other general market conditions.
An active fund's investment
performance depends upon the successful allocation of the fund's assets among
asset classes, geographical regions, industry sectors, and specific issuers and
investments. There is no guarantee that these allocation techniques and
decisions will produce the desired results. It is possible to lose money on an
investment in a fund as a result of these allocation decisions. If a fund's
investment strategies do not perform as expected, the fund could underperform
other funds with similar investment objectives or lose money. Moreover, buying
and selling securities to adjust the fund’s asset allocation may increase
portfolio turnover and generate transaction costs.
Investment advisors with large
assets under management in an Account, or in other funds that have the same
strategy as an Account, may have difficulty fully investing such Account’s
assets according to its investment objective due to potential liquidity
constraints and high transaction costs. Typically, small-cap, mid-cap and
emerging market equity funds are more susceptible to such a risk. An Account may
add additional investment advisors or close the Account to new investors to
address such risks.
Passive
Management (Index Funds)
Index funds use a passive, or
indexing, investment approach. Accounts that are pure index funds do not attempt
to manage market volatility, use defensive strategies, or reduce the effect of
any long-term periods of poor stock or bond performance. Some index funds
attempt to fully replicate their relevant target index by investing primarily in
the securities held by the index in approximately the same proportion of the
weightings in the index. However, because of the difficulty of executing some
relatively small securities trades, other index funds may use a "sampling"
approach and may not be invested in the less heavily weighted securities held by
the index. Some index funds may invest in index futures and/or exchange-traded
funds on a daily basis in an effort to minimize tracking error relative to the
benchmark.
It is unlikely that an index fund's
performance will perfectly correlate with the performance of the fund's relevant
index. An index fund's ability to match the performance of its index may be
affected by many factors, such as fund expenses, the timing of cash flows into
and out of the fund, changes in securities markets, and changes in the
composition of the index.
Liquidity
Certain fund holdings may be deemed
to be less liquid or illiquid because they cannot be readily sold without
significantly impacting the value of the holdings. A fund is exposed to
liquidity risk when trading volume, lack of a market maker, or legal
restrictions impair its ability to sell particular securities or close
derivative positions at an advantageous price. Accounts with principal
investment strategies that involve securities of companies with smaller market
capitalizations, foreign securities, derivatives, high yield bonds and bank
loans or securities with substantial market and/or credit risk tend to have the
greatest exposure to liquidity risk.
Liquidity risk also refers to the
risk of unusually high redemption requests, redemption requests by certain large
shareholders such as institutional investors or asset allocators, or other
unusual market conditions that may make it difficult for a fund to sell
investments within the allowable time period to meet redemptions. Meeting such
redemption requests could require a fund to sell securities at reduced prices or
under unfavorable conditions, which would reduce the value of the
fund.
Market Volatility
and Securities Issuers
The value of a fund's portfolio
securities may decrease in response to overall stock or bond market movements.
Markets tend to move in cycles, with periods of rising prices and periods of
falling prices. Stocks tend to go up and down in value more than bonds. If a
fund's investments are concentrated in certain sectors, its performance could be
worse than the overall market. The value of an individual security or particular
type of security can be more volatile than the market as a whole and can perform
differently from the value of the market as a whole. The value of a security may
decline for reasons directly related to the issuer, such as management
performance, financial leverage, and reduced demand for the issuer’s goods or
services.
Temporary
Defensive Measures
From time to time, as part of its
investment strategy, an Account may invest without limit in cash and cash
equivalents for temporary defensive purposes in response to adverse market,
economic, or political conditions. For this purpose, cash equivalents include:
bank notes, bank certificates of deposit, bankers' acceptances, repurchase
agreements, commercial paper, and commercial paper master notes, which are
floating rate debt instruments without a fixed maturity. In addition, an Account
may purchase U.S. government securities, preferred stocks, and debt securities,
whether or not convertible into or carrying rights for common stock. There is no
limit on the extent to which an Account may take temporary defensive measures.
In taking such measures, an Account may lose the benefit of upswings and may
limit its ability to meet, or fail to achieve, its investment
objective.
Strategy and Risk
Table
The following table lists each
Account and identifies whether the strategies and risks discussed in this
section (listed in alphabetical order) are principal, non-principal (meaning
they are relevant to an Account but to a lesser degree than those designated as
principal), or not applicable for each Account. The risks described below for
each Account that operates as a fund of funds (as identified in the table)
include risks at both the fund of funds level and underlying funds level. Each
fund is also subject to the risks of any underlying funds in which it
invests.
The SAI contains additional
information about investment strategies and their related risks.
The term “Account,” as used in this
section, includes any of the underlying funds in which a fund of funds may
invest from time to time, at the discretion of Principal Global Investors, LLC
("PGI").
|
|
|
|
|
|
INVESTMENT
STRATEGIES AND RISKS |
BOND MARKET
INDEX |
CORE PLUS
BOND |
DIVERSIFIED
BALANCED |
DIVERSIFIED
BALANCED MANAGED VOLATILITY |
Bank Loans (also known as
Senior Floating Rate Interests) |
Not Applicable |
Non-Principal |
Not Applicable |
Not
Applicable |
Contingent Convertible
Securities ("CoCos") |
Not Applicable |
Non-Principal |
Not Applicable |
Not
Applicable |
Convertible
Securities |
Not Applicable |
Non-Principal |
Non-Principal |
Non-Principal |
Counterparty
Risk |
Non-Principal |
Principal |
Non-Principal |
Principal |
Derivatives |
Non-Principal |
Principal |
Principal |
Principal |
Emerging
Markets |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Equity
Securities |
Not Applicable |
Not Applicable |
Principal |
Principal |
|
Not Applicable |
Not Applicable |
Principal |
Principal |
• Small and Medium
Market Capitalization Companies |
Not Applicable |
Not Applicable |
Principal |
Principal |
|
Not Applicable |
Not Applicable |
Principal |
Principal |
Fixed-Income
Securities |
Principal |
Principal |
Principal |
Principal |
Foreign
Currency |
Non-Principal |
Principal |
Non-Principal |
Non-Principal |
Foreign
Securities |
Non-Principal |
Principal |
Non-Principal |
Non-Principal |
Fund of Funds |
Not Applicable |
Not Applicable |
Principal |
Principal |
Hedging |
Not Applicable |
Principal |
Non-Principal |
Principal |
High Yield
Securities |
Not Applicable |
Principal |
Not Applicable |
Not
Applicable |
Industry
Concentration |
Non-Principal(1) |
Not Applicable |
Not Applicable |
Not
Applicable |
Investment Company
Securities |
Not Applicable |
Not Applicable |
Principal |
Principal |
Leverage |
Non-Principal |
Principal |
Non-Principal |
Non-Principal |
Master Limited Partnerships
("MLPs") |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Municipal Obligations and
AMT-Subject Bonds |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Portfolio
Duration |
Principal |
Principal |
Principal |
Principal |
Portfolio Turnover (Active
Trading) |
Principal |
Principal |
Non-Principal |
Non-Principal |
Preferred
Securities |
Not Applicable |
Non-Principal |
Not Applicable |
Not
Applicable |
Real Estate Investment Trusts
("REITs") |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Real Estate
Securities |
Principal |
Principal |
Principal |
Principal |
Redemption Risk |
Principal |
Principal |
Principal |
Principal |
Securitized
Products |
Principal |
Principal |
Principal |
Principal |
Short Sales |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
U.S. Government and U.S.
Government Sponsored Securities |
Principal |
Principal |
Principal |
Principal |
Volatility
Mitigation |
Not Applicable |
Non-Principal |
Not Applicable |
Principal |
|
|
(1) |
An Index Account may
concentrate its investments in a particular industry only to the extent
that the relevant index is so
concentrated. |
|
|
|
|
|
|
INVESTMENT
STRATEGIES AND RISKS |
DIVERSIFIED
BALANCED VOLATILITY CONTROL |
DIVERSIFIED
GROWTH |
DIVERSIFIED
GROWTH MANAGED VOLATILITY |
DIVERSIFIED
GROWTH VOLATILITY CONTROL |
Bank Loans (also known as
Senior Floating Rate Interests) |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Contingent Convertible
Securities ("CoCos") |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Convertible
Securities |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Counterparty
Risk |
Not Applicable |
Non-Principal |
Principal |
Not
Applicable |
Derivatives |
Principal |
Principal |
Principal |
Principal |
Emerging
Markets |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Equity
Securities |
Principal |
Principal |
Principal |
Principal |
|
Not Applicable |
Principal |
Principal |
Not
Applicable |
• Small and Medium
Market Capitalization Companies |
Principal |
Principal |
Principal |
Principal |
|
Not Applicable |
Principal |
Principal |
Not
Applicable |
Fixed-Income
Securities |
Principal |
Principal |
Principal |
Principal |
Foreign
Currency |
Non-Principal |
Principal |
Principal |
Principal |
Foreign
Securities |
Non-Principal |
Principal |
Principal |
Principal |
Fund of Funds |
Principal |
Principal |
Principal |
Principal |
Hedging |
Principal |
Non-Principal |
Principal |
Principal |
High Yield
Securities |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Industry
Concentration |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Investment Company
Securities |
Principal |
Principal |
Principal |
Principal |
Leverage |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Master Limited Partnerships
("MLPs") |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Municipal Obligations and
AMT-Subject Bonds |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Portfolio
Duration |
Principal |
Principal |
Principal |
Principal |
Portfolio Turnover (Active
Trading) |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Preferred
Securities |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Real Estate Investment Trusts
("REITs") |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Real Estate
Securities |
Principal |
Principal |
Principal |
Principal |
Redemption Risk |
Principal |
Principal |
Principal |
Principal |
Securitized
Products |
Principal |
Principal |
Principal |
Principal |
Short Sales |
Principal |
Not Applicable |
Not Applicable |
Principal |
U.S. Government and U.S.
Government Sponsored Securities |
Principal |
Principal |
Principal |
Principal |
Volatility
Mitigation |
Principal |
Not Applicable |
Principal |
Principal |
|
|
|
|
|
|
INVESTMENT
STRATEGIES AND RISKS |
DIVERSIFIED
INCOME |
DIVERSIFIED
INTERNATIONAL |
EQUITY
INCOME |
GOVERNMENT
& HIGH QUALITY BOND |
Bank Loans (also known as
Senior Floating Rate Interests) |
Not Applicable |
Not Applicable |
Non-Principal |
Not
Applicable |
Contingent Convertible
Securities ("CoCos") |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Convertible
Securities |
Non-Principal |
Non-Principal |
Non-Principal |
Not
Applicable |
Counterparty
Risk |
Non-Principal |
Non-Principal |
Not Applicable |
Non-Principal |
Derivatives |
Principal |
Non-Principal |
Not Applicable |
Non-Principal |
Emerging
Markets |
Non-Principal |
Principal |
Non-Principal |
Not
Applicable |
Equity
Securities |
Principal |
Principal |
Principal |
Not
Applicable |
|
Principal |
Principal |
Non-Principal |
Not
Applicable |
• Small and Medium
Market Capitalization Companies |
Principal |
Principal |
Principal |
Not
Applicable |
|
Principal |
Principal |
Principal |
Not
Applicable |
Fixed-Income
Securities |
Principal |
Non-Principal |
Non-Principal |
Principal |
Foreign
Currency |
Non-Principal |
Principal |
Principal |
Not
Applicable |
Foreign
Securities |
Non-Principal |
Principal |
Principal |
Not
Applicable |
Fund of Funds |
Principal |
Not Applicable |
Not Applicable |
Not
Applicable |
Hedging |
Non-Principal |
Non-Principal |
Not Applicable |
Non-Principal |
High Yield
Securities |
Not Applicable |
Not Applicable |
Non-Principal |
Non-Principal |
Industry
Concentration |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Investment Company
Securities |
Principal |
Non-Principal |
Non-Principal |
Not
Applicable |
Leverage |
Non-Principal |
Non-Principal |
Not Applicable |
Non-Principal |
Master Limited Partnerships
("MLPs") |
Not Applicable |
Non-Principal |
Non-Principal |
Not
Applicable |
Municipal Obligations and
AMT-Subject Bonds |
Non-Principal |
Not Applicable |
Non-Principal |
Non-Principal |
Portfolio
Duration |
Principal |
Not Applicable |
Not Applicable |
Principal |
Portfolio Turnover (Active
Trading) |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Preferred
Securities |
Not Applicable |
Non-Principal |
Non-Principal |
Not
Applicable |
Real Estate Investment Trusts
("REITs") |
Non-Principal |
Non-Principal |
Principal |
Non-Principal |
Real Estate
Securities |
Principal |
Non-Principal |
Principal |
Principal |
Redemption Risk |
Principal |
Not Applicable |
Principal |
Principal |
Securitized
Products |
Principal |
Not Applicable |
Not Applicable |
Principal |
Short Sales |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
U.S. Government and U.S.
Government Sponsored Securities |
Principal |
Non-Principal |
Not Applicable |
Principal |
Volatility
Mitigation |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
|
|
|
|
|
|
INVESTMENT
STRATEGIES AND RISKS |
INCOME |
INTERNATIONAL
EMERGING
MARKETS |
LARGECAP
GROWTH |
LARGECAP
GROWTH I |
Bank Loans (also known as
Senior Floating Rate Interests) |
Non-Principal |
Not Applicable |
Not Applicable |
Not
Applicable |
Contingent Convertible
Securities ("CoCos") |
Non-Principal |
Not Applicable |
Not Applicable |
Not
Applicable |
Convertible
Securities |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Counterparty
Risk |
Non-Principal |
Non-Principal |
Not Applicable |
Not
Applicable |
Derivatives |
Non-Principal |
Non-Principal |
Not Applicable |
Non-Principal |
Emerging
Markets |
Non-Principal |
Principal |
Not Applicable |
Non-Principal |
Equity
Securities |
Non-Principal |
Principal |
Principal |
Principal |
|
Non-Principal |
Principal |
Principal |
Principal |
• Small and Medium
Market Capitalization Companies |
Non-Principal |
Principal |
Non-Principal |
Non-Principal |
|
Non-Principal |
Principal |
Non-Principal |
Non-Principal |
Fixed-Income
Securities |
Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Foreign
Currency |
Principal |
Principal |
Not Applicable |
Non-Principal |
Foreign
Securities |
Principal |
Principal |
Non-Principal |
Non-Principal |
Fund of Funds |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Hedging |
Non-Principal |
Non-Principal |
Not Applicable |
Non-Principal |
High Yield
Securities |
Principal |
Not Applicable |
Not Applicable |
Not
Applicable |
Industry
Concentration |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Investment Company
Securities |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Leverage |
Non-Principal |
Non-Principal |
Not Applicable |
Non-Principal |
Master Limited Partnerships
("MLPs") |
Not Applicable |
Non-Principal |
Non-Principal |
Non-Principal |
Municipal Obligations and
AMT-Subject Bonds |
Non-Principal |
Not Applicable |
Not Applicable |
Not
Applicable |
Portfolio
Duration |
Principal |
Not Applicable |
Not Applicable |
Not
Applicable |
Portfolio Turnover (Active
Trading) |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Preferred
Securities |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Real Estate Investment Trusts
(REITs) |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Real Estate
Securities |
Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Redemption Risk |
Principal |
Not Applicable |
Not Applicable |
Not
Applicable |
Securitized
Products |
Principal |
Not Applicable |
Not Applicable |
Not
Applicable |
Short Sales |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
U.S. Government and U.S.
Government Sponsored Securities |
Principal |
Non-Principal |
Not Applicable |
Not
Applicable |
Volatility
Mitigation |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
|
|
|
|
|
|
INVESTMENT
STRATEGIES AND RISKS |
LARGECAP
S&P 500
INDEX |
LARGECAP
S&P 500
MANAGED VOLATILITY INDEX |
LARGECAP
VALUE |
MIDCAP |
Bank Loans (also known as
Senior Floating Rate Interests) |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Contingent Convertible
Securities ("CoCos") |
Not Applicable |
Not Applicable |
Non-Principal |
Not
Applicable |
Convertible
Securities |
Not Applicable |
Not Applicable |
Non-Principal |
Non-Principal |
Counterparty
Risk |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Derivatives |
Principal |
Principal |
Non-Principal |
Non-Principal |
Emerging
Markets |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Equity
Securities |
Principal |
Principal |
Principal |
Principal |
|
Principal |
Principal |
Principal |
Principal |
• Small and Medium
Market Capitalization Companies |
Non-Principal |
Not Applicable |
Principal |
Principal |
|
Principal |
Principal |
Principal |
Principal |
Fixed-Income
Securities |
Not Applicable |
Not Applicable |
Non-Principal |
Non-Principal |
Foreign
Currency |
Not Applicable |
Not Applicable |
Non-Principal |
Principal |
Foreign
Securities |
Not Applicable |
Not Applicable |
Non-Principal |
Principal |
Fund of Funds |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Hedging |
Not Applicable |
Principal |
Non-Principal |
Non-Principal |
High Yield
Securities |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Industry
Concentration |
Non-Principal(1) |
Non-Principal(1) |
Not Applicable |
Not
Applicable |
Investment Company
Securities |
Principal |
Principal |
Non-Principal |
Non-Principal |
Leverage |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Master Limited Partnerships
("MLPs") |
Not Applicable |
Not Applicable |
Non-Principal |
Non-Principal |
Municipal Obligations and
AMT-Subject Bonds |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Portfolio
Duration |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Portfolio Turnover (Active
Trading) |
Non-Principal |
Non-Principal |
Principal |
Non-Principal |
Preferred
Securities |
Not Applicable |
Not Applicable |
Non-Principal |
Non-Principal |
Real Estate Investment Trusts
(REITs) |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Real Estate
Securities |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Redemption Risk |
Principal |
Principal |
Not Applicable |
Not
Applicable |
Securitized
Products |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Short Sales |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
U.S. Government and U.S.
Government Sponsored Securities |
Not Applicable |
Non-Principal |
Non-Principal |
Not
Applicable |
Volatility
Mitigation |
Not Applicable |
Principal |
Not Applicable |
Not
Applicable |
|
|
(1) |
An Index Account may
concentrate its investments in a particular industry only to the extent
that the relevant index is so
concentrated. |
|
|
|
|
|
|
INVESTMENT
STRATEGIES AND RISKS |
MULTI-ASSET
INCOME |
PRINCIPAL
CAPITAL APPRECIATION |
PRINCIPAL
LIFETIME
STRATEGIC INCOME |
PRINCIPAL
LIFETIME
2010 |
Bank Loans (also known as
Senior Floating Rate Interests) |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Contingent Convertible
Securities ("CoCos") |
Non-Principal |
Not Applicable |
Non-Principal |
Non-Principal |
Convertible
Securities |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Counterparty
Risk |
Principal |
Not Applicable |
Principal |
Principal |
Derivatives |
Principal |
Not Applicable |
Principal |
Principal |
Emerging
Markets |
Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Equity
Securities |
Principal |
Principal |
Principal |
Principal |
|
Principal |
Principal |
Principal |
Principal |
• Small and Medium
Market Capitalization Companies |
Principal |
Principal |
Non-Principal |
Non-Principal |
|
Principal |
Principal |
Principal |
Principal |
Fixed-Income
Securities |
Principal |
Non-Principal |
Principal |
Principal |
Foreign
Currency |
Principal |
Not Applicable |
Principal |
Principal |
Foreign
Securities |
Principal |
Non-Principal |
Principal |
Principal |
Fund of Funds |
Principal |
Not Applicable |
Principal |
Principal |
Hedging |
Non-Principal |
Not Applicable |
Non-Principal |
Non-Principal |
High Yield
Securities |
Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Industry
Concentration |
Principal |
Not Applicable |
Not Applicable |
Not
Applicable |
Investment Company
Securities |
Principal |
Non-Principal |
Principal |
Principal |
Leverage |
Non-Principal |
Not Applicable |
Non-Principal |
Non-Principal |
Master Limited Partnerships
("MLPs") |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Municipal Obligations and
AMT-Subject Bonds |
Non-Principal |
Not Applicable |
Non-Principal |
Non-Principal |
Portfolio
Duration |
Principal |
Not Applicable |
Principal |
Principal |
Portfolio Turnover (Active
Trading) |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Preferred
Securities |
Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Real Estate Investment Trusts
("REITs") |
Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Real Estate
Securities |
Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Redemption Risk |
Principal |
Not Applicable |
Principal |
Principal |
Securitized
Products |
Principal |
Not Applicable |
Principal |
Principal |
Short Sales |
Not Applicable |
Not Applicable |
Non-Principal |
Non-Principal |
U.S. Government and U.S.
Government Sponsored Securities |
Non-Principal |
Not Applicable |
Principal |
Principal |
Volatility
Mitigation |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
|
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|
|
|
INVESTMENT
STRATEGIES AND RISKS |
PRINCIPAL
LIFETIME
2020 |
PRINCIPAL
LIFETIME
2030 |
PRINCIPAL
LIFETIME
2040 |
PRINCIPAL
LIFETIME
2050 |
Bank Loans (also known as
Senior Floating Rate Interests) |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Contingent Convertible
Securities ("CoCos") |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Convertible
Securities |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Counterparty
Risk |
Principal |
Principal |
Principal |
Principal |
Derivatives |
Principal |
Principal |
Principal |
Principal |
Emerging
Markets |
Non-Principal |
Non-Principal |
Principal |
Principal |
Equity
Securities |
Principal |
Principal |
Principal |
Principal |
|
Principal |
Principal |
Principal |
Principal |
• Small and Medium
Market Capitalization Companies |
Principal |
Principal |
Principal |
Principal |
|
Principal |
Principal |
Principal |
Principal |
Fixed-Income
Securities |
Principal |
Principal |
Principal |
Principal |
Foreign
Currency |
Principal |
Principal |
Principal |
Principal |
Foreign
Securities |
Principal |
Principal |
Principal |
Principal |
Fund of Funds |
Principal |
Principal |
Principal |
Principal |
Hedging |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
High Yield
Securities |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Industry
Concentration |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Investment Company
Securities |
Principal |
Principal |
Principal |
Principal |
Leverage |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Master Limited Partnerships
("MLPs") |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Municipal Obligations and
AMT-Subject Bonds |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Portfolio
Duration |
Principal |
Principal |
Principal |
Principal |
Portfolio Turnover (Active
Trading) |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Preferred
Securities |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Real Estate Investment Trusts
("REITs") |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Real Estate
Securities |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Redemption Risk |
Principal |
Principal |
Principal |
Principal |
Securitized
Products |
Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Short Sales |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
U.S. Government and U.S.
Government Sponsored Securities |
Principal |
Principal |
Principal |
Non-Principal |
Volatility
Mitigation |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
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|
INVESTMENT
STRATEGIES AND RISKS |
PRINCIPAL
LIFETIME
2060 |
REAL ESTATE
SECURITIES |
SAM
BALANCED |
SAM
CONSERVATIVE BALANCED |
Bank Loans (also known as
Senior Floating Rate Interests) |
Non-Principal |
Not Applicable |
Non-Principal |
Non-Principal |
Contingent Convertible
Securities ("CoCos") |
Non-Principal |
Not Applicable |
Non-Principal |
Non-Principal |
Convertible
Securities |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Counterparty
Risk |
Principal |
Not Applicable |
Non-Principal |
Non-Principal |
Derivatives |
Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Emerging
Markets |
Principal |
Not Applicable |
Non-Principal |
Non-Principal |
Equity
Securities |
Principal |
Principal |
Principal |
Principal |
|
Principal |
Non-Principal |
Principal |
Principal |
• Small and Medium
Market Capitalization Companies |
Principal |
Non-Principal |
Principal |
Principal |
|
Principal |
Principal |
Principal |
Principal |
Fixed-Income
Securities |
Principal |
Non-Principal |
Principal |
Principal |
Foreign
Currency |
Principal |
Not Applicable |
Principal |
Principal |
Foreign
Securities |
Principal |
Non-Principal |
Principal |
Principal |
Fund of Funds |
Principal |
Not Applicable |
Principal |
Principal |
Hedging |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
High Yield
Securities |
Non-Principal |
Non-Principal |
Non-Principal |
Principal |
Industry
Concentration |
Not Applicable |
Principal |
Not Applicable |
Not
Applicable |
Investment Company
Securities |
Principal |
Non-Principal |
Principal |
Principal |
Leverage |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Master Limited Partnerships
("MLPs") |
Non-Principal |
Not Applicable |
Non-Principal |
Non-Principal |
Municipal Obligations and
AMT-Subject Bonds |
Non-Principal |
Not Applicable |
Non-Principal |
Non-Principal |
Portfolio
Duration |
Principal |
Not Applicable |
Principal |
Principal |
Portfolio Turnover (Active
Trading) |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Preferred
Securities |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Real Estate Investment Trusts
("REITs") |
Non-Principal |
Principal |
Non-Principal |
Non-Principal |
Real Estate
Securities |
Non-Principal |
Principal |
Principal |
Principal |
Redemption Risk |
Principal |
Not Applicable |
Principal |
Principal |
Securitized
Products |
Non-Principal |
Non-Principal |
Principal |
Principal |
Short Sales |
Non-Principal |
Not Applicable |
Non-Principal |
Non-Principal |
U.S. Government and U.S.
Government Sponsored Securities |
Non-Principal |
Not Applicable |
Principal |
Principal |
Volatility
Mitigation |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
|
|
|
|
|
|
INVESTMENT
STRATEGIES AND RISKS |
SAM
CONSERVATIVE GROWTH |
SAM
FLEXIBLE
INCOME |
SAM
STRATEGIC
GROWTH |
SHORT-TERM
INCOME |
Bank Loans (also known as
Senior Floating Rate Interests) |
Non-Principal |
Non-Principal |
Non-Principal |
Not
Applicable |
Contingent Convertible
Securities ("CoCos") |
Non-Principal |
Non-Principal |
Not Applicable |
Non-Principal |
Convertible
Securities |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Counterparty
Risk |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Derivatives |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Emerging
Markets |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Equity
Securities |
Principal |
Principal |
Principal |
Not
Applicable |
|
Principal |
Non-Principal |
Principal |
Not
Applicable |
• Small and Medium
Market Capitalization Companies |
Principal |
Non-Principal |
Principal |
Not
Applicable |
|
Principal |
Principal |
Principal |
Not
Applicable |
Fixed-Income
Securities |
Principal |
Principal |
Non-Principal |
Principal |
Foreign
Currency |
Principal |
Principal |
Principal |
Principal |
Foreign
Securities |
Principal |
Principal |
Principal |
Principal |
Fund of Funds |
Principal |
Principal |
Principal |
Not
Applicable |
Hedging |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
High Yield
Securities |
Non-Principal |
Principal |
Non-Principal |
Non-Principal |
Industry
Concentration |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Investment Company
Securities |
Principal |
Principal |
Principal |
Non-Principal |
Leverage |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Master Limited Partnerships
("MLPs") |
Non-Principal |
Non-Principal |
Non-Principal |
Not
Applicable |
Municipal Obligations and
AMT-Subject Bonds |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Portfolio
Duration |
Principal |
Principal |
Non-Principal |
Principal |
Portfolio Turnover (Active
Trading) |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Preferred
Securities |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Real Estate Investment Trusts
("REITs") |
Non-Principal |
Non-Principal |
Non-Principal |
Principal |
Real Estate
Securities |
Non-Principal |
Principal |
Non-Principal |
Principal |
Redemption Risk |
Principal |
Principal |
Principal |
Principal |
Securitized
Products |
Non-Principal |
Principal |
Non-Principal |
Principal |
Short Sales |
Non-Principal |
Non-Principal |
Non-Principal |
Not
Applicable |
U.S. Government and U.S.
Government Sponsored Securities |
Principal |
Principal |
Non-Principal |
Principal |
Volatility
Mitigation |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
|
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|
INVESTMENT
STRATEGIES AND RISKS |
SMALLCAP |
Bank Loans (also known as
Senior Floating Rate Interests) |
Not
Applicable |
Contingent Convertible
Securities ("CoCos") |
Not
Applicable |
Convertible
Securities |
Non-Principal |
Counterparty
Risk |
Not
Applicable |
Derivatives |
Non-Principal |
Emerging
Markets |
Not
Applicable |
Equity
Securities |
Principal |
|
Principal |
• Small and Medium
Market Capitalization Companies |
Principal |
|
Principal |
Fixed-Income
Securities |
Non-Principal |
Foreign
Currency |
Not
Applicable |
Foreign
Securities |
Non-Principal |
Fund of Funds |
Not
Applicable |
Hedging |
Non-Principal |
High Yield
Securities |
Not
Applicable |
Industry
Concentration |
Not
Applicable |
Investment Company
Securities |
Non-Principal |
Leverage |
Non-Principal |
Master Limited Partnerships
("MLPs") |
Non-Principal |
Municipal Obligations and
AMT-Subject Bonds |
Not
Applicable |
Portfolio
Duration |
Not
Applicable |
Portfolio Turnover (Active
Trading) |
Non-Principal |
Preferred
Securities |
Non-Principal |
Real Estate Investment Trusts
("REITs") |
Non-Principal |
Real Estate
Securities |
Non-Principal |
Redemption Risk |
Not
Applicable |
Securitized
Products |
Not
Applicable |
Short Sales |
Not
Applicable |
U.S. Government and U.S.
Government Sponsored Securities |
Non-Principal |
Volatility
Mitigation |
Not
Applicable |
Bank Loans (also
known as Senior Floating Rate Interests)
Bank loans typically hold the most
senior position in the capital structure of a business entity (the "Borrower"),
are secured by specific collateral, and have a claim on the Borrower's assets
and/or stock that is senior to that held by the Borrower's unsecured
subordinated debtholders and stockholders. The proceeds of bank loans primarily
are used to finance leveraged buyouts, recapitalizations, mergers, acquisitions,
stock repurchases, dividends, and, to a lesser extent, to finance internal
growth and for other corporate purposes. Bank loans are typically structured and
administered by a financial institution that acts as the agent of the lenders
participating in the bank loan. Most bank loans that will be purchased by a fund
are rated below-investment-grade (sometimes called “junk”) or will be comparable
if unrated, which means they are more likely to default than investment-grade
loans. A default could lead to non-payment of income which would result in a
reduction of income to the fund, and there can be no assurance that the
liquidation of any collateral would satisfy the Borrower's obligation in the
event of non-payment of scheduled interest or principal payments, or that such
collateral could be readily liquidated. Most bank loans are not traded on any
national securities exchange. Bank loans generally have less liquidity than
investment-grade bonds and there may be less public information available about
them. Bank loan interests may not be considered “securities,” and purchasers
therefore may not be entitled to rely on the anti-fraud protections of the
federal securities laws.
The primary and secondary market for
bank loans may be subject to irregular trading activity, wide bid/ask spreads
and extended trade settlement periods, which may cause a fund to be unable to
realize full value and thus cause a material decline in a fund's net asset
value. Because transactions in bank loans may be subject to extended settlement
periods, a fund may not receive proceeds from the sale of a bank loan for a
period of time after the sale. As a result, sale proceeds may not be available
to make additional investments or to meet a fund’s redemption obligations for a
period of time after the sale of the bank loans, which could lead to a fund
having to sell other investments, borrow to meet obligations, or borrow to
remain fully invested while awaiting settlement.
Bank loans pay interest at rates
which are periodically reset by reference to a base lending rate plus a spread.
These base lending rates are generally the prime rate offered by a designated
U.S. bank or the London InterBank Offered Rate (LIBOR) or the prime rate offered
by one or more major U.S. banks.
Bank loans generally are subject to
mandatory and/or optional prepayment. Because of these prepayment conditions and
because there may be significant economic incentives for the borrower to repay,
prepayments may occur.
Contingent
Convertible Securities ("CoCos")
Contingent convertible securities
(“CoCos”) are hybrid debt securities intended to either convert into equity or
have their principal written down upon the occurrence of certain “triggers.” The
triggers are generally linked to regulatory capital thresholds or regulatory
actions calling into question the issuing banking institution’s continued
viability as a going-concern, if the conversion trigger were not exercised.
CoCos’ unique equity conversion or principal write-down features are tailored to
the issuing banking institution and its regulatory requirements. Some additional
risks associated with CoCos include, but are not limited to, the
following:
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• |
The occurrence of a conversion
event is inherently unpredictable and depends on many factors, some of
which will be outside the issuer’s control. Because of the uncertainty
regarding whether a conversion event will occur, it may be difficult to
predict when, if at all, a CoCo will be converted to equity, and a fund
may suffer losses as a result. |
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• |
CoCos may have no stated
maturity and fully discretionary coupons. This means coupon (i.e.,
interest) payments can be canceled at the banking institution’s discretion
or at the request of the relevant regulatory authority in order to help
the bank absorb losses, without causing a
default. |
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• |
CoCos are usually issued in
the form of subordinated debt instruments to provide the appropriate
regulatory capital treatment. If an issuer liquidates, dissolves or
winds-up before a conversion to equity has occurred, the rights and claims
of the holders of the CoCos (such as a fund) against the issuer generally
rank junior to the claims of holders of unsubordinated obligations of the
issuer. In addition, if the CoCos are converted into the issuer’s
underlying equity securities after a conversion event (i.e., a “trigger”),
each holder will be further subordinated. |
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• |
The value of CoCos is
unpredictable and is influenced by many factors including, without
limitation: the creditworthiness of the issuer and/or fluctuations in such
issuer’s applicable capital ratios; supply and demand for CoCos; general
market conditions and available liquidity; and economic, financial and
political events that affect the issuer, its particular market or the
financial markets in general. Moreover, the performance of CoCos may be
correlated with one another and as a result negative information of one
issuer may cause decline in the value of CoCos of many other
issuers. |
Due to these features, CoCos may
have substantially greater risk than other securities in times of financial
stress. If the trigger level is breached, the issuer's decision to write down,
write off or convert a CoCo may result in the Account's complete loss on an
investment in CoCos with no chance of recovery even if the issuer remains in
existence.
Convertible
Securities
Convertible securities are usually
fixed-income securities that a fund has the right to exchange for equity
securities at a specified conversion price. Convertible securities could also
include corporate bonds, notes, or preferred stocks of U.S. or foreign issuers.
Convertible securities allow a fund to realize additional returns if the market
price of the equity securities exceeds the conversion price. For example, a fund
may hold fixed-income securities that are convertible into shares of common
stock at a conversion price of $10 per share. If the market value of the shares
of common stock reached $12, the fund could realize an additional $2 per share
by converting its fixed-income securities.
Convertible securities have lower
yields than comparable fixed-income securities. In addition, at the time a
convertible security is issued the conversion price exceeds the market value of
the underlying equity securities. Thus, convertible securities may provide lower
returns than non-convertible fixed-income securities or equity securities
depending upon changes in the price of the underlying equity securities.
However, convertible securities permit a fund to realize some of the potential
appreciation of the underlying equity securities with less risk of losing its
initial investment.
Depending on the features of the
convertible security, a fund will treat a convertible security as a fixed-income
security, equity security, or preferred security for purposes of investment
policies and limitations because of the unique characteristics of convertible
securities. Funds that invest in convertible securities may invest in
convertible securities that are below investment grade (sometimes referred to as
"junk"). Many convertible securities are relatively illiquid.
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. If a counterparty fails to meet its contractual
obligations, goes bankrupt, or otherwise experiences a business interruption, a
fund could miss investment opportunities or otherwise hold investments it would
prefer to sell, resulting in losses for the fund. In addition, a fund may suffer
losses if a counterparty fails to comply with applicable laws or other
requirements. Counterparty risk is pronounced during unusually adverse market
conditions and is particularly acute in environments in which financial services
firms are exposed to systemic risks.
Derivatives
Generally, a derivative is a
financial arrangement, the value of which is derived from, or based on, a
traditional security, asset, or market index. A fund may invest in certain
derivative strategies to earn income, manage or adjust the risk profile of the
fund, replace more direct investments, or obtain exposure to certain markets. A
fund may enter into forward commitment agreements, which call for the fund to
purchase or sell a security on a future date at a fixed price. A fund may also
enter into contracts to sell its investments either on demand or at a specific
interval.
The risks associated with derivative
investments include:
|
|
• |
increased volatility of a fund
and/or the failure of the investment to mitigate volatility as
intended; |
|
|
• |
the inability of those
managing investments of the fund to predict correctly the direction of
securities prices, interest rates, currency exchange rates, asset values,
and other economic factors; |
|
|
• |
losses caused by unanticipated
market movements, which may be substantially greater than a fund's initial
investment and are potentially unlimited; |
|
|
• |
the possibility that there may
be no liquid secondary market, which may make it difficult or impossible
to close out a position when desired; |
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|
• |
the possibility that the
counterparty may fail to perform its obligations;
and |
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|
• |
the inability to close out
certain hedged positions to avoid adverse tax
consequences. |
There are many different types of
derivatives and many different ways to use them. The specific derivatives that
are principal strategies of each Account are listed in its Account
Summary.
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|
• |
Commodity Index-Linked Notes
are derivative debt instruments issued by U.S. and foreign banks,
brokerage firms, insurance companies and other corporations with principal
and/or coupon payments linked to the performance of commodity indices.
These notes expose a fund to movements in commodity prices. They are also
subject to credit, counterparty, and interest rate risk. Commodity
index-linked notes are often leveraged, increasing the volatility of each
note's market value relative to changes in the underlying commodity index.
At the maturity of the note, a fund may receive more or less principal
than it originally invested. A fund may also receive interest payments on
the note that are less than the stated coupon interest
payments. |
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|
• |
Credit Default Swap Agreements
may be entered into by a fund as a "buyer" or "seller" of credit
protection. Credit default swap agreements involve special risks because
they may be difficult to value, are highly susceptible to liquidity and
credit risk, and generally pay a return to the party that has paid the
premium only in the event of an actual default by the issuer of the
underlying obligation (as opposed to a credit downgrade or other
indication of financial difficulty). Credit default swaps can increase
credit risk because a fund has exposure to both the issuer of the
referenced obligation and the counterparty to the credit default
swap. |
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• |
Foreign Currency Contracts
(such as foreign currency options and foreign currency forward and swap
agreements) may be used by funds to increase exposure to a foreign
currency or to shift exposure to foreign currency fluctuations from one
country to another. A forward currency contract involves a privately
negotiated obligation to purchase or sell a specific currency at a future
date at a price set in the contract. For currency contracts, there is also
a risk of government action through exchange controls that would restrict
the ability of a fund to deliver or receive
currency. |
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• |
Forwards, futures contracts
and options thereon (including commodities futures); options (including
put or call options); and swap agreements and over-the-counter swap
agreements (e.g., interest rate swaps, total return swaps and credit
default swaps) may be used by funds for hedging purposes in order to try
to mitigate or protect against potential losses due to changing interest
rates, securities prices, asset values, currency exchange rates, and other
market conditions; non-hedging purposes to seek to increase the fund’s
income or otherwise enhance return; and as a low-cost method of gaining
exposure to a particular market without investing directly in those
securities or assets. |
These derivative investments are
subject to special risk considerations, particularly the imperfect correlation
between the change in market value of the instruments held by a fund and the
price of the derivative instrument. If a fund has insufficient cash, it may have
to sell securities from its portfolio to meet daily variation margin
requirements, even when it may be disadvantageous to do so. Options and Swap
Agreements also involve counterparty risk. With respect to options, there may be
difference in trading hours for the options markets and the markets for the
underlying securities (rate movements can take place in the underlying markets
that cannot be reflected in the options markets) and an insufficient liquid
secondary market for particular options.
|
|
• |
Index/structured securities.
Certain derivative securities are described more accurately as
index/structured securities, which are derivative securities whose value
or performance is linked to other equity securities (such as depositary
receipts), currencies, interest rates, indices, or other financial
indicators (reference indices). |
Emerging
Markets
The Accounts consider a security to
be tied economically to an emerging market country (an “emerging market
security”) if the issuer of the security has its principal place of business or
principal office in an emerging market country, has its principal securities
trading market in an emerging market country, or derives a majority of its
revenue from emerging market countries.
Usually, the term “emerging market
country” (also called a "developing country") means any country that is
considered to be an emerging country by the international financial community
(including the MSCI Emerging Markets Index or Bloomberg Barclays Emerging
Markets USD Aggregate Bond Index). These countries generally exclude the U.S.,
Canada, Japan, Hong Kong, Singapore, Australia, New Zealand, and most nations
located in Western Europe.
Investments in companies of emerging
market countries are subject to higher risks than investments in companies in
more developed countries. These risks include:
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• |
increased social, political,
and economic instability; |
|
|
• |
a smaller market for these
securities and low or nonexistent trading volume that results in a lack of
liquidity and greater price volatility; |
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|
• |
lack of publicly available
information, including reports of payments of dividends or interest on
outstanding securities; |
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|
• |
foreign government policies
that may restrict opportunities, including restrictions on investment in
issuers or industries deemed sensitive to national
interests; |
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|
• |
relatively new capital market
structure or market-oriented economy; |
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|
• |
the possibility that recent
favorable economic developments may be slowed or reversed by unanticipated
political or social events in these
countries; |
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|
• |
restrictions that may make it
difficult or impossible for a fund to vote proxies, exercise shareholder
rights, pursue legal remedies, and obtain judgments in foreign courts;
and |
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|
• |
possible losses through the
holding of securities in domestic and foreign custodial banks and
depositories. |
In addition, many developing
countries have experienced substantial and, in some periods, extremely high
rates of inflation for many years. Inflation and rapid fluctuations in inflation
rates have had and may continue to have negative effects on the economies,
currencies, interest rates, and securities markets of those
countries.
Repatriation of investment income,
capital, and proceeds of sales by foreign investors may require governmental
registration and/or approval in some developing countries. A fund could be
adversely affected by delays in or a refusal to grant any required governmental
registration or approval for repatriation.
Further, the economies of developing
countries generally are heavily dependent upon international trade and,
accordingly, have been and may continue to be adversely affected by trade
barriers, exchange controls, managed adjustments in relative currency values and
other protectionist measures imposed or negotiated by the countries with which
they trade.
Equity
Securities
Equity securities include common
stocks, convertible securities, depositary receipts, rights (an offering of
common stock to investors who currently own shares which entitle them to buy
subsequent issues at a discount from the offering price), and warrants (the
right to purchase securities from the issuer at a specified price, normally
higher than the current market price). Common stocks, the most familiar type,
represent an equity (ownership) interest in a corporation. The value of a
company's stock may fall as a result of factors directly relating to that
company, such as decisions made by its management or lower demand for the
company's products or services. A stock's value may also fall because of factors
affecting not just the company, but also companies in the same industry or in a
number of different industries, such as increases in production costs. The value
of a company's stock may also be affected by changes in financial markets that
are relatively unrelated to the company or its industry, such as changes in
interest rates or currency exchange rates. In addition, a company's stock
generally pays dividends only after the company invests in its own business and
makes required payments to holders of its bonds and other debt. For this reason,
the value of a company's stock will usually react more strongly than its bonds
and other debt to actual or perceived changes in the company's financial
condition or prospects.
Some funds focus their investments
on certain market capitalization ranges. Market capitalization is defined as
total current market value of a company's outstanding equity securities. The
market capitalization of companies in a fund’s portfolios and their related
indexes will change over time, and a fund will not automatically sell a security
just because it falls outside of the market capitalization range of its
index(es).
Growth
Stock
The prices of growth stocks may be
based largely on expectations of future earnings, and their prices can decline
rapidly and significantly in reaction to negative news about such factors as
earnings, revenues, the economy, political developments, or other news. Growth
stocks may underperform value stocks and stocks in other broad style categories
(and the stock market as a whole) over any period of time and may shift in and
out of favor with investors generally, sometimes rapidly, depending on changes
in market, economic, and other factors. As a result, a fund that holds
substantial investments in growth stocks may underperform other funds that
invest more broadly or favor different investment styles. Because growth
companies typically reinvest their earnings, growth stocks typically do not pay
dividends at levels associated with other types of stocks, if at
all.
Small
and Medium Market Capitalization Companies
Investments in companies with
smaller market capitalizations may involve greater risks and price volatility
(wide, rapid fluctuations) than investments in larger, more mature companies.
Small company stocks may decline in price as large company stocks rise, or rise
in price while larger company stocks decline. The net asset value of a fund that
invests a substantial portion of its assets in small company stocks may
therefore be more volatile than the shares of a fund that invests solely in
larger company stocks. Small companies may be less significant within their
industries and may be at a competitive disadvantage relative to their larger
competitors. Smaller companies may be less mature than larger companies. At this
earlier stage of development, the companies may have limited product lines,
reduced market liquidity for their shares, limited financial resources, or less
depth in management than larger or more established companies. While smaller
companies may be subject to these additional risks, they may also realize more
substantial growth than larger or more established companies.
Unseasoned issuers are companies
with a record of less than three years continuous operation, including the
operation of predecessors and parents. Many unseasoned issuers also may be small
companies and involve the risks and price volatility associated with smaller
companies. Unseasoned issuers by their nature have only a limited operating
history that can be used for evaluating the company's growth prospects. As a
result, these securities may place a greater emphasis on current or planned
product lines and the reputation and experience of the company's management and
less emphasis on fundamental valuation factors than would be the case for more
mature growth companies.
Value
Stock
Value stocks present the risk that
they may decline in price or never reach their expected full market value
because the market fails to recognize the stock's intrinsic worth. Value stocks
may underperform growth stocks and stocks in other broad style categories (and
the stock market as a whole) over any period of time and may shift in and out of
favor with investors generally, sometimes rapidly, depending on changes in
market, economic, and other factors. As a result, a fund that holds substantial
investments in value stocks may underperform other funds that invest more
broadly or favor different investment styles.
Fixed-Income
Securities
Fixed-income securities include
bonds and other debt instruments that are used by issuers to borrow money from
investors (examples include corporate bonds, convertible securities,
mortgage-backed securities, U.S. government securities and asset-backed
securities). The issuer of a fixed-income security generally pays the investor a
fixed, variable, or floating rate of interest. The amount borrowed must be
repaid at maturity. Some debt securities, such as zero coupon bonds, do not pay
current interest, but are sold at a discount from their face
values.
Fixed-income securities are
sensitive to changes in interest rates. In general, fixed-income security prices
rise when interest rates fall and fall when interest rates rise. An increase in
interest rates from the current, historically low interest rate environment may
lead to heightened volatility and redemptions alongside reduced liquidity and
dealer market-making capacity in fixed income markets. If interest rates fall,
issuers of callable bonds may call (repay) securities with high interest rates
before their maturity dates; this is known as call risk. In this case, a fund
would likely reinvest the proceeds from these securities at lower interest
rates, resulting in a decline in the fund's income. Floating rate securities
generally are less sensitive to interest rate changes but may decline in value
if their interest rates do not rise as much, or as quickly, as interest rates in
general. Conversely, floating rate securities will not generally increase in
value if interest rates decline.
Fixed-income securities are also
affected by the credit quality of the issuer. Investment-grade debt securities
are medium and high quality securities. Some bonds, such as lower grade or
"junk" bonds, may have speculative characteristics and may be particularly
sensitive to economic conditions and the financial condition of the issuers.
Credit risk refers to the
possibility that the issuer of the security will not be able to make principal
and interest payments when due.
Funds may invest in fixed-income
securities of companies with small- or medium-sized market capitalizations.
Investments in companies with smaller market capitalizations may involve greater
risks, price volatility (wide, rapid fluctuations), and less liquidity than
investments in larger, more mature companies.
Foreign
Currency
Certain of a fund’s investments will
be denominated in foreign currencies or traded in securities markets in which
settlements are made in foreign currencies. Any income on such investments is
generally paid to a fund in foreign currencies. In addition, funds may engage in
foreign currency transactions for both hedging and investment purposes, as well
as to increase exposure to a foreign currency or to shift exposure to foreign
currency fluctuations from one country to another.
The value of foreign currencies
relative to the U.S. dollar varies continually, causing changes in the dollar
value of a fund’s portfolio investments (even if the local market price of the
investments is unchanged) and changes in the dollar value of a fund’s income
available for distribution to its shareholders. The effect of changes in the
dollar value of a foreign currency on the dollar value of a fund’s assets and on
the net investment income available for distribution may be favorable or
unfavorable. Transactions in non-U.S. currencies are also subject to many of the
risks of investing in foreign (non-U.S.) securities; for example, changes in
foreign economies and political climates are more likely to affect a fund that
has foreign currency exposure than a fund that invests exclusively in U.S.
companies and currency. There also may be less government supervision of foreign
markets, resulting in non-uniform accounting practices and less publicly
available information. Transactions in foreign currencies, foreign currency
denominated debt and certain foreign currency options, futures contracts and
forward contracts (and similar instruments) may give rise to ordinary income or
loss to the extent such income or loss results from fluctuations in the value of
the foreign currency concerned.
A fund may incur costs in connection
with conversions between various currencies. In addition, a fund may be required
to liquidate portfolio assets, or may incur increased currency conversion costs,
to compensate for a decline in the dollar value of a foreign currency occurring
between the time when a fund declares and pays a dividend, or between the time
when a fund accrues and pays an operating expense in U.S. dollars. To protect
against a change in the foreign currency exchange rate between the date on which
a fund contracts to purchase or sell a security and the settlement date for the
purchase or sale, to gain exposure to one or more foreign currencies or to “lock
in” the equivalent of a dividend or interest payment in another currency, a fund
might purchase or sell a foreign currency on a spot (i.e., cash) basis at the prevailing
spot rate.
Currency hedging involves some of
the same general risks and considerations as other transactions with similar
instruments (i.e., derivative instruments) and hedging. Currency transactions
are also subject to additional risks. Because currency control is of great
importance to the issuing governments and influences economic planning and
policy, purchases and sales of currency and related instruments can be adversely
affected by government exchange controls, limitations or restrictions on
repatriation of currency, and manipulations or exchange restrictions imposed by
governments. These forms of governmental actions can result in losses to a fund
if it is unable to deliver or receive currency or monies in settlement of
obligations. They could also cause hedges the fund has entered into to be
rendered useless, resulting in full currency exposure as well as incurring
transaction costs. Settlement of a currency forward contract for the purchase of
most currencies must occur at a bank based in the issuing nation. The ability to
establish and close out positions on trading options on currency futures
contracts is subject to the maintenance of a liquid market that may not always
be available.
Foreign
Securities
The Accounts consider a security to
be tied economically to countries outside the U.S. (a “foreign security”) if the
issuer of the security has its principal place of business or principal office
outside the U.S., has its principal securities trading market outside the U.S.,
or derives a majority of its revenue from outside the U.S.
Foreign companies may not be subject
to the same uniform accounting, auditing, and financial reporting practices as
are required of U.S. companies. In addition, there may be less publicly
available information about a foreign company than about a U.S. company.
Securities of many foreign companies are less liquid and more volatile than
securities of comparable U.S. companies. Commissions on foreign securities
exchanges may be generally higher than those on U.S. exchanges.
Foreign markets also have different
clearance and settlement procedures than those in U.S. markets. In certain
markets there have been times when settlements have been unable to keep pace
with the volume of securities transactions, making it difficult to conduct these
transactions. Delays in settlement could result in temporary periods when a
portion of fund assets is not invested and earning no return. If a fund is
unable to make intended security purchases due to settlement problems, the fund
may miss attractive investment opportunities. In addition, a fund may incur a
loss as a result of a decline in the value of its portfolio if it is unable to
sell a security.
With respect to certain foreign
countries, there is the possibility of nationalization, expropriation or
confiscatory taxation, political or social instability, or diplomatic
developments that could affect a fund's investments in those countries. In
addition, a fund may also suffer losses due to differing accounting practices
and treatments. Investments in foreign securities are subject to laws of the
foreign country that may limit the amount and types of foreign investments.
Changes of governments or of economic or monetary policies, in the U.S. or
abroad, changes in dealings between nations, currency convertibility or exchange
rates could result in investment losses for a fund.
Foreign securities are often traded
with less frequency and volume, and therefore may have greater price volatility,
than is the case with many U.S. securities. Brokerage commissions, custodial
services, and other costs relating to investment in foreign countries are
generally more expensive than in the U.S. Though the fund intends to acquire the
securities of foreign issuers where there are public trading markets, economic
or political turmoil in a country in which a fund has a significant portion of
its assets or deterioration of the relationship between the U.S. and a foreign
country may reduce the liquidity of a fund's portfolio. The fund may have
difficulty meeting a large number of redemption requests. Furthermore, there may
be difficulties in obtaining or enforcing judgments against foreign
issuers.
A fund may invest in a foreign
company by purchasing depositary receipts. Depositary receipts are certificates
of ownership of shares in a foreign-based issuer held by a bank or other
financial institution. They are alternatives to purchasing the underlying
security but are subject to the foreign securities risks to which they
relate.
If a fund’s portfolio is
over-weighted in a certain geographic region, any negative development affecting
that region will have a greater impact on the fund than a fund that is not
over-weighted in that region.
Fund of
Funds
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.
As of December 31, 2017, the PVC
Principal LifeTime Accounts’, PVC SAM Portfolios’, Diversified Balanced Account,
Diversified Balanced Managed Volatility Account, Diversified Balanced Volatility
Control Account, Diversified Growth Account, Diversified Growth Managed
Volatility Account, Diversified Growth Volatility Control Account, Diversified
Income Account and Multi-Asset Income Account assets were allocated among the
underlying funds as identified in the tables below.
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|
|
|
|
|
|
|
Underlying
Fund |
Diversified
Balanced
Account |
Diversified
Balanced
Managed Volatility
Account |
Diversified
Balanced Volatility Control Account |
Diversified
Growth
Account |
Diversified
Growth
Managed Volatility
Account |
Diversified
Growth Volatility Control Account |
Diversified
Income
Account |
Bond Market Index
Account |
50.2% |
50.2% |
48.6% |
35.1% |
35.1% |
33.9% |
65.2% |
International Equity Index
Fund |
7.0% |
7.0% |
7.2% |
10.0% |
10.0% |
10.1% |
4.0% |
iShares Core S&P 500
ETF |
— |
— |
20.3% |
— |
— |
20.1% |
— |
LargeCap S&P 500 Index
Account |
34.8% |
— |
15.6% |
44.9% |
— |
25.7% |
24.8% |
LargeCap S&P 500 Managed
Volatility Index Account |
— |
34.8% |
— |
— |
44.9% |
— |
— |
MidCap S&P 400 Index
Fund |
4.0% |
4.0% |
4.1% |
5.0% |
5.0% |
5.1% |
3.0% |
SmallCap S&P 600 Index
Fund |
4.0% |
4.0% |
4.2% |
5.0% |
5.0% |
5.1% |
3.0% |
Total |
100% |
100% |
100% |
100% |
100% |
100% |
100% |
|
|
|
|
|
|
|
|
|
Underlying
Fund |
Principal
LifeTime
Strategic
Income
Account |
Principal
LifeTime
2010
Account |
Principal
LifeTime
2020
Account |
Principal
LifeTime
2030
Account |
Principal
LifeTime
2040
Account |
Principal
LifeTime
2050
Account |
Principal
LifeTime
2060
Account |
Blue Chip Fund |
3.5% |
2.6% |
4.0% |
2.6% |
3.3% |
3.5% |
3.6% |
Bond Market Index
Fund |
11.1% |
9.0% |
6.5% |
5.4% |
4.3% |
2.4% |
1.4% |
Core Plus Bond
Account |
22.0% |
17.4% |
16.1% |
11.7% |
8.5% |
4.4% |
2.6% |
Diversified International
Fund |
3.2% |
4.9% |
7.4% |
9.0% |
11.2% |
12.2% |
12.5% |
Diversified Real Asset
Fund |
2.5% |
2.8% |
2.5% |
2.4% |
— |
— |
— |
Equity Income
Fund |
3.4% |
2.5% |
3.9% |
2.5% |
3.2% |
3.5% |
3.6% |
Global Diversified Income
Fund |
10.3% |
9.0% |
6.6% |
4.6% |
— |
— |
— |
Global Multi-Strategy
Fund |
6.3% |
5.1% |
4.5% |
3.6% |
— |
— |
— |
Global Opportunities
Fund |
1.8% |
3.4% |
5.1% |
6.6% |
— |
— |
— |
High Yield Fund
I |
— |
— |
— |
— |
2.7% |
1.6% |
1.8% |
Inflation Protection
Fund |
4.6% |
5.2% |
3.4% |
2.0% |
— |
— |
— |
International Emerging Markets
Fund |
— |
— |
— |
0.6% |
1.5% |
1.6% |
1.7% |
International Small Company
Fund |
1.1% |
1.6% |
2.5% |
3.0% |
3.7% |
4.0% |
4.1% |
LargeCap Growth Fund
I |
— |
2.6% |
4.0% |
7.6% |
9.9% |
10.8% |
10.9% |
LargeCap S&P 500 Index
Fund |
3.3% |
5.1% |
7.6% |
10.0% |
12.6% |
13.9% |
14.3% |
LargeCap Value
Fund |
— |
— |
— |
— |
— |
— |
— |
LargeCap Value Fund
III |
— |
2.4% |
3.8% |
7.3% |
9.5% |
10.4% |
10.6% |
MidCap Fund |
2.7% |
2.4% |
3.6% |
4.6% |
— |
— |
— |
MidCap Growth Fund
III |
— |
— |
— |
— |
5.3% |
5.7% |
5.9% |
MidCap Value Fund
III |
— |
1.8% |
2.7% |
3.6% |
5.2% |
5.6% |
5.9% |
Origin Emerging Markets
Fund |
— |
— |
— |
0.6% |
1.5% |
1.6% |
1.6% |
Overseas Fund |
3.2% |
4.8% |
7.3% |
9.0% |
11.1% |
12.1% |
12.4% |
Real Estate Securities
Fund |
— |
— |
— |
— |
2.3% |
2.2% |
2.3% |
Short-Term Income
Account |
20.0% |
15.8% |
6.0% |
— |
— |
— |
— |
SmallCap Growth Fund
I |
0.5% |
0.8% |
1.3% |
1.7% |
2.1% |
2.3% |
2.4% |
SmallCap Value Fund
II |
0.5% |
0.8% |
1.2% |
1.6% |
2.1% |
2.2% |
2.4% |
Total |
100% |
100% |
100% |
100% |
100% |
100% |
100% |
|
|
|
|
|
|
|
|
Underlying
Fund |
SAM
Balanced Portfolio |
SAM
Conservative
Balanced
Portfolio |
SAM
Conservative
Growth
Portfolio |
SAM
Flexible
Income
Portfolio |
SAM
Strategic
Growth
Portfolio |
Multi-Asset
Income Account |
Blue Chip Fund |
6.2% |
3.2% |
7.7% |
— |
4.3% |
— |
Diversified International
Fund |
11.7% |
7.8% |
17.5% |
0.6% |
20.9% |
— |
Diversified Real Asset
Fund |
3.5% |
3.0% |
3.9% |
— |
— |
— |
EDGE MidCap
Fund |
2.9% |
2.2% |
5.4% |
0.6% |
4.0% |
— |
Equity Income
Account |
11.8% |
7.4% |
12.7% |
8.4% |
11.5% |
— |
Equity Income
Fund |
— |
— |
— |
— |
— |
6.6% |
Global Diversified Income
Fund |
— |
2.6% |
— |
5.0% |
— |
44.4% |
Global Multi-Strategy
Fund |
4.6% |
4.1% |
1.7% |
— |
1.6% |
— |
Global Real Estate Securities
Fund |
2.8% |
1.7% |
2.0% |
3.5% |
4.4% |
6.2% |
Government & High Quality
Bond Account |
5.4% |
9.7% |
2.8% |
11.2% |
— |
— |
High Yield Fund |
1.5% |
2.5% |
— |
4.4% |
— |
14.7% |
Income Account |
12.4% |
18.6% |
5.3% |
25.9% |
— |
— |
Inflation Protection
Fund |
1.6% |
2.6% |
— |
6.5% |
— |
— |
International Emerging Markets
Fund |
2.3% |
1.7% |
— |
0.4% |
— |
— |
International Fund
I |
— |
— |
— |
— |
— |
6.8% |
International Small Company
Fund |
1.4% |
0.9% |
1.8% |
— |
2.1% |
— |
LargeCap Growth
Fund |
1.5% |
1.2% |
2.9% |
0.9% |
4.1% |
— |
LargeCap Value
Fund |
3.9% |
3.4% |
6.4% |
1.4% |
5.8% |
— |
Multi-Manager Equity Long/Short
Fund |
— |
— |
2.7% |
— |
2.3% |
— |
Origin Emerging Markets
Fund |
— |
— |
3.4% |
— |
6.5% |
— |
Preferred Securities
Fund |
2.6% |
4.0% |
1.5% |
5.1% |
— |
14.8% |
Principal Active Global
Dividend Income ETF |
4.0% |
2.2% |
3.0% |
4.4% |
4.8% |
— |
Principal Capital Appreciation
Fund |
1.5% |
1.0% |
2.7% |
— |
7.3% |
— |
Principal EDGE Active Income
ETF |
1.1% |
2.6% |
— |
2.8% |
3.7% |
— |
Principal Government Money
Market Fund |
0.3% |
0.3% |
0.1% |
0.4% |
0.1% |
— |
Principal U.S. Mega-Cap
Multi-Factor Index ETF |
4.8% |
3.0% |
6.4% |
2.4% |
6.3% |
— |
Principal U.S. Small Cap Index
ETF |
1.9% |
1.3% |
2.6% |
— |
3.9% |
— |
Real Estate Debt Income
Fund |
0.9% |
0.9% |
— |
1.9% |
2.4% |
6.5% |
Short-Term Income
Fund |
7.0% |
11.1% |
4.6% |
12.7% |
1.8% |
— |
Small-MidCap Dividend Income
Fund |
2.4% |
1.0% |
2.9% |
1.5% |
2.2% |
— |
Total |
100% |
100% |
100% |
100% |
100% |
100% |
A fund of funds indirectly bears its
pro-rata share of the expenses of the underlying funds in which it invests, as
well as directly incurring expenses. Therefore, investment in a fund of funds is
more costly than investing directly in shares of the underlying funds.
Generally, if an underlying fund offers multiple classes of shares for
investment by funds of funds, the Funds will purchase shares of the class with
the lowest expense ratio (expressed as a percent of average net assets on an
annualized basis) at the time of purchase.
If you are considering investing in
a Principal LifeTime Account, you should take into account your estimated
retirement date and risk tolerance. In general, each Principal LifeTime Account
is managed with the assumption that the investor will invest in a Principal
LifeTime Account whose stated date is closest to the date the shareholder
retires. Choosing a fund targeting an earlier date represents a more
conservative choice; choosing a fund with a later date represents a more
aggressive choice. It is important to note that the retirement year of the fund
you select should not necessarily represent the specific year you intend to
start drawing retirement assets. It should be a guide only. Generally, the
potential for higher returns over time is accompanied by the higher risk of a
decline in the value of your principal. Investors should realize that the
Principal LifeTime Accounts are not a complete solution to their retirement
needs. Investors must weigh many factors when considering when to retire, what
their retirement needs will be, and what sources of income they may
have.
There are five Strategic Asset
Management ("SAM") Portfolios: Flexible Income, Conservative Balanced, Balanced,
Conservative Growth and Strategic Growth. The SAM Portfolios offer long-term
investors different asset allocation strategies having different levels of
potential investment risk and reward. The SAM Portfolios share the same risks
but often with different levels of exposure. In general, relative to the other
Portfolios:
|
|
• |
the Balanced Portfolio should
offer investors the potential for a medium level of income and a medium
level of capital growth, while exposing them to a medium level of
principal risk, |
|
|
• |
the Conservative Balanced
Portfolio should offer investors the potential for a medium to high level
of income and a medium to low level of capital growth, while exposing them
to a medium to low level of principal
risk, |
|
|
• |
the Conservative Growth
Portfolio should offer investors the potential for a low to medium level
of income and a medium to high level of capital growth, while exposing
them to a medium to high level of principal
risk, |
|
|
• |
the Flexible Income Portfolio
should offer investors the potential for a high level of income and a low
level of capital growth, while exposing them to a low level of principal
risk, and |
|
|
• |
the Strategic Growth Portfolio
should offer investors the potential for a high level of capital growth,
and a corresponding level of principal
risk. |
Funds of funds can be subject to
payment in kind liquidity risk: If an underlying fund pays a redemption request
by the fund wholly or partly by a distribution-in-kind of portfolio securities
rather than in cash, the fund may hold such portfolio securities until those
managing the investments of the fund determine that it is appropriate to dispose
of them.
Management of funds of funds entails
potential conflicts of interest: a fund of fund may invest in affiliated
underlying funds; and those who manage the fund's investments and their
affiliates may earn different fees from different underlying funds and may have
an incentive to allocate more fund of fund assets to underlying funds from which
they receive higher fees.
Hedging
Hedging is a strategy that can be
used to limit or offset investment risk. The success of a fund’s hedging
strategy will be subject to the ability of those managing the fund's investments
to correctly assess the degree of correlation between the performance of the
instruments used in the hedging strategy and the performance of the investments
in the portfolio being hedged. Since the characteristics of many securities
change as markets change or time passes, the success of a fund’s hedging
strategy will also be subject to the ability of those managing the fund's
investments to continually recalculate, readjust, and execute hedges in an
efficient and timely manner. For a variety of reasons, those managing the fund's
investments may not seek to establish a perfect correlation between such hedging
instruments and the portfolio holdings being hedged. Such imperfect correlation
may prevent a fund from achieving the intended hedge or expose a fund to risk of
loss. In addition, it is not possible to hedge fully or perfectly against any
risk, and hedging entails its own costs.
High Yield
Securities
Below investment grade bonds, which
are rated at the time of purchase Ba1 or lower by Moody's Investors Service,
Inc. ("Moody's") and BB+ or lower by S&P Global Ratings ("S&P Global")
(if the bond has been rated by only one of those agencies, that rating will
determine if the bond is below investment grade; if the bond has not been rated
by either of those agencies, those managing investments of the fund will
determine whether the bond is of a quality comparable to those rated below
investment grade), are sometimes referred to as high yield or "junk bonds" and
are considered speculative. Such securities could be in default at time of
purchase. Each fund of funds may invest in underlying funds that may invest in
such securities.
Investment in high yield bonds
involves special risks in addition to the risks associated with investment in
highly rated debt securities. High yield bonds may be regarded as predominantly
speculative with respect to the issuer's continuing ability to meet principal
and interest payments. Moreover, under certain circumstances, such securities
may be less liquid than higher rated debt securities.
Analysis of the creditworthiness of
issuers of high yield securities may be more complex than for issuers of higher
quality debt securities. The ability of a fund to achieve its investment
objective may, to the extent of its investment in high yield bonds, be more
dependent on such credit analysis than would be the case if the fund were
investing in higher quality bonds.
High yield bonds may be more
susceptible to real or perceived adverse economic and competitive industry
conditions than higher-grade bonds. The prices of high yield bonds have been
found to be less sensitive to interest rate changes than more highly rated
investments, but more sensitive to adverse economic downturns or individual
corporate developments. If the issuer of high yield bonds defaults, a fund may
incur additional expenses to seek recovery. To the extent that such high yield
issuers undergo a corporate restructuring, such high yield securities may become
exchanged for or converted into reorganized equity of the underlying issuer.
High yield bonds oftentimes include complex legal covenants that impose various
degrees of restriction on the issuer’s ability to take certain actions, such as
distribute cash to equity holders, incur additional indebtedness, and dispose of
assets. To the extent that a bond indenture or loan agreement does not contain
sufficiently protective covenants or otherwise permits the issuer to take
certain actions to the detriment of the holder of the fixed-income security, the
underlying value of such fixed-income security may decline.
The secondary market on which high
yield bonds are traded may be less liquid than the market for higher-grade
bonds. Less liquidity in the secondary trading market could adversely affect the
price at which a fund could sell a high yield bond and could adversely affect
and cause large fluctuations in the daily price of the fund's shares. Adverse
publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the value and liquidity of high yield bonds, especially
in a thinly traded market.
The use of credit ratings for
evaluating high yield bonds also involves certain risks. For example, credit
ratings evaluate the safety of principal and interest payments, not the market
value risk of high yield bonds. Also, credit rating agencies may fail to change
credit ratings in a timely manner to reflect subsequent events. If a credit
rating agency changes the rating of a portfolio security held by a fund, the
fund may retain the security if those managing the investments of the fund think
it is in the best interest of shareholders.
Industry
Concentration
A fund that concentrates its
investments (invests more than 25% of its net assets) in a particular industry
(or group of industries) is more exposed to the overall condition of the
particular industry than a fund that invests in a wider variety of industries. A
particular industry could be affected by economic, business, supply-and-demand,
political, or regulatory factors. Companies within the same industry could react
similarly to such factors. As a result, a fund’s concentration in a particular
industry would increase the possibility that the fund’s performance will be
affected by such factors.
Investment
Company Securities
Securities of other investment
companies, including shares of closed-end investment companies, unit investment
trusts, various exchange-traded funds ("ETFs"), and other open-end investment
companies, represent interests in professionally managed portfolios that may
invest in a variety of instruments. Certain types of investment companies, such
as closed-end investment companies, issue a fixed number of shares that trade on
a stock exchange or over-the-counter at a premium or a discount to their net
asset value. Others are continuously offered at net asset value, but may also be
traded in the secondary market. ETFs are often structured to perform in a
similar fashion to a broad-based securities index. Investing in ETFs involves
generally the same risks as investing directly in the underlying instruments.
Investing in ETFs involves the risk that they will not perform in exactly the
same fashion, or in response to the same factors, as the index or underlying
instruments. Shares of ETFs may trade at prices other than NAV.
A fund that invests in another
investment company is subject to the risks associated with direct ownership of
the securities in which such investment company invests. Fund shareholders
indirectly bear their proportionate share of the expenses of each such
investment company, including its advisory and administrative fees. The Fund
would also continue to pay its own advisory fees and other expenses.
Consequently, the Fund and its shareholders would, in effect, absorb two levels
of fees with respect to investments in other investment companies.
A fund may invest in affiliated
underlying funds, and those who manage such fund's investments and their
affiliates may earn different fees from different underlying funds and may have
an incentive to allocate more fund assets to underlying funds from which they
receive higher fees.
Leverage
If a fund makes investments in
futures contracts, forward contracts, swaps and other derivative instruments,
these instruments provide the economic effect of financial leverage by creating
additional investment exposure, as well as the potential for greater loss. If a
fund uses leverage through activities such as borrowing, entering into short
sales, purchasing securities on margin or on a “when-issued” basis or purchasing
derivative instruments in an effort to increase its returns, the fund has the
risk of magnified capital losses that occur when losses affect an asset base,
enlarged by borrowings or the creation of liabilities, that exceeds the net
assets of the fund. The net asset value of a fund employing leverage will be
more volatile and sensitive to market movements. Leverage may involve the
creation of a liability that requires the fund to pay interest. Leveraging may
cause a fund to liquidate portfolio positions to satisfy its obligations or to
meet segregation requirements when it may not be advantageous to do so. To the
extent that a fund is not able to close out a leveraged position because of
market illiquidity, a fund’s liquidity may be impaired to the extent that it has
a substantial portion of liquid assets segregated or earmarked to cover
obligations.
Master Limited
Partnerships ("MLPs")
A master limited partnership ("MLP")
that invests in a particular industry (e.g., oil and gas) will be harmed by
detrimental economic events within that industry. For example, the business of
certain MLPs is affected by supply and demand for energy commodities because
such MLPs derive revenue and income based upon the volume of the underlying
commodity produced, transported, processed, distributed, and/or marketed. Many
MLPs are also subject to various federal, state and local environmental laws and
health and safety laws as well as laws and regulations specific to their
particular activities.
MLPs tend to pay relatively higher
distributions than other types of companies. The amount of cash that an MLP can
distribute to its partners will depend on the amount of cash it generates from
operations, which will vary from quarter to quarter depending on factors
affecting the market generally and on factors affecting the particular business
lines of the MLP. Available cash will also depend on the MLP's level of
operating costs (including incentive distributions to the general partner),
level of capital expenditures, debt service requirements, acquisition costs (if
any), fluctuations in working capital needs and other factors.
Certain benefits derived from
investment in MLPs depend largely on the MLPs being treated as partnerships for
federal income tax purposes. As a partnership, an MLP has no federal income tax
liability at the entity level. MLPs taxed as partnerships file a partnership tax
return for U.S. federal, state, and local income tax purposes and communicate
the Fund's allocable share of the MLP's income, gains, losses, deductions, and
expenses via a "Schedule K-1."
If, as a result of a change in
current law or a change in an MLP's business, an MLP was treated as a
corporation for federal income tax purposes, the MLP would be obligated to pay
federal income tax on its income at the corporate tax rate. If an MLP was
classified as a corporation for federal income tax purposes, the amount of cash
available for distribution would be reduced and the distributions received might
be taxed entirely as dividend income.
To the extent a distribution
received by a fund from an MLP is treated as a return of capital, the fund's
adjusted tax basis in the interests of the MLP will be reduced, which may
increase the fund's tax liability upon the sale of the interests in the MLP or
upon subsequent distributions in respect of such interests.
Municipal
Obligations and AMT-Subject Bonds
The term “municipal obligations”
generally is understood to include debt obligations issued by municipalities to
obtain funds for various public purposes. The two principal classifications of
municipal bonds are "general obligation" and "revenue" bonds. General obligation
bonds are secured by the issuer's pledge of its full faith and credit, with
either limited or unlimited taxing power for the payment of principal and
interest. Revenue bonds are not supported by the issuer's full taxing authority;
generally, they are payable only from the revenues of a particular facility, a
class of facilities, or the proceeds of another specific revenue
source.
AMT-subject bonds are municipal
obligations issued to finance certain "private activities," such as bonds used
to finance airports, housing projects, student loan programs, and water and
sewer projects. Interest on AMT-subject bonds is an item of tax preference for
purposes of the federal individual alternative minimum tax ("AMT"). See "Tax
Considerations" for a discussion of the tax consequences of investing in the
fund.
Current federal income tax laws
limit the types and volume of bonds qualifying for the federal income tax
exemption of interest, which may have an effect upon the ability of the fund to
purchase sufficient amounts of tax-exempt securities.
Portfolio
Duration
Average duration is a mathematical
calculation of the average life of a bond (or for a bond fund, the average life
of the fund's underlying bonds, weighted by the percentage of the fund's assets
that each represents) that serves as a useful measure of its price risk.
Duration is an estimate of how much the value of the bonds held by a fund will
fluctuate in response to a change in interest rates. For example, if a fund has
an average duration of 4 years and interest rates rise by 1%, the value of the
bonds held by the fund will decline by approximately 4%, and if the interest
rates decline by 1%, the value of the bonds held by the fund will increase by
approximately 4%. Longer term bonds and zero coupon bonds are generally more
sensitive to interest rate changes. Duration, which measures price sensitivity
to interest rate changes, is not necessarily equal to average
maturity.
Portfolio
Turnover (Active Trading)
"Portfolio Turnover" is the term
used in the industry for measuring the amount of trading that occurs in a fund's
portfolio during the year. For example, a 100% turnover rate means that on
average every security in the portfolio has been replaced once during the year.
Funds with high turnover rates (more than 100%) are considered actively-traded
and often have higher transaction costs (which are paid by the fund), and may
lower the fund's performance. High portfolio turnover can result in a lower
capital gain distribution due to higher transaction costs added to the basis of
the assets or can result in lower ordinary income distributions to shareholders
when the transaction costs cannot be added to the basis of assets. Both events
reduce fund performance.
Please consider all the factors when
you compare the turnover rates of different funds. You should also be aware that
the "total return" line in the Financial Highlights section reflects portfolio
turnover costs.
Preferred
Securities
Preferred securities include
preferred stock and various types of junior subordinated debt and trust
preferred securities. Preferred securities may pay fixed rate or adjustable rate
distributions and generally have a payment "preference" over common stock, but
are junior to the issuer's senior debt in a liquidation of the issuer’s assets.
Preference would mean that a company must pay on its preferred securities before
paying on its common stock, and that any claims of the preferred security holder
would typically be ahead of common stockholders' claims on assets in a corporate
liquidation.
Holders of preferred securities
usually have no right to vote for corporate directors or on other matters. The
market value of preferred securities is sensitive to changes in interest rates
as they are typically fixed income securities; the fixed-income payments are
expected to be the primary source of long-term investment return. While some
preferred securities are issued with a final maturity date, others are perpetual
in nature. In certain instances, a final maturity date may be extended and/or
the final payment of principal may be deferred at the issuer’s option for a
specified time without triggering an event of default for the issuer. In
addition, an issuer of preferred securities may have the right to redeem the
securities before their stated maturity date. For instance, for certain types of
preferred securities, a redemption may be triggered by a change in federal
income tax or securities laws. As with call provisions, a redemption by the
issuer may reduce the return of the security held by the fund. Preferred
securities may be subject to provisions that allow an issuer, under certain
circumstances to skip (indefinitely) or defer (possibly up to 10 years)
distributions. If a fund owns a preferred security that is deferring its
distribution, the fund may be required to report income for tax purposes while
it is not receiving any income.
Preferred securities are typically
issued by corporations, generally in the form of interest or dividend bearing
instruments, or by an affiliated business trust of a corporation, generally in
the form of beneficial interests in subordinated debentures or similarly
structured securities. The preferred securities market is generally divided into
the $25 par “retail” and the $1,000 par “institutional” segments. The $25 par
segment includes securities that are listed on the New York Stock Exchange
(exchange traded), which trade and are quoted with accrued dividend or interest
income, and which are often callable at par value five years after their
original issuance date. The institutional segment includes $1,000 par value
securities that are not exchange-listed (over the counter), which trade and are
quoted on a “clean” price, i.e., without accrued dividend or interest income,
and which often have a minimum of 10 years of call protection from the date of
their original issuance. Preferred securities can also be issued by real estate
investment trusts and involve risks similar to those associated with investing
in real estate investment trust companies.
Real Estate
Investment Trusts ("REITs")
REITs involve certain unique risks
in addition to the risks associated with investing in the real estate industry
in general (such as possible declines in the value of real estate, lack of
availability of mortgage funds, or extended vacancies of property). REITs are
characterized as: equity REITs, which primarily own property and generate
revenue from rental income; mortgage REITs, which invest in real estate
mortgages; and hybrid REITs, which combine the characteristics of both equity
and mortgage REITs. Equity REITs may be affected by changes in the value of the
underlying property owned by the REITs, while mortgage REITs may be affected by
the quality of any credit extended. REITs are dependent upon management skills,
are not diversified, and are subject to heavy cash flow dependency, risks of
default by borrowers, and self-liquidation. A fund that invests in a REIT is
subject to the REIT’s expenses, including management fees, and will remain
subject to the fund's advisory fees with respect to the assets so invested.
REITs are also subject to the possibilities of failing to qualify for the
special tax treatment accorded REITs under the Code, and failing to maintain
their exemptions from registration under the 1940 Act.
Regular REIT dividends received by
an Account from a REIT will not qualify for the corporate dividends-received
deduction and generally will not constitute qualified dividend income for U.S.
income tax purposes. Any distribution of income attributable to regular REIT
dividends from a Fund's investment in a REIT will not qualify for the deduction
that would be available to a non-corporate shareholder were the shareholder to
own such REIT directly.
Investment in REITs also involves
risks similar to those associated with investing in small market capitalization
companies. REITs may have limited financial resources, may trade less frequently
and in a limited volume, and may be subject to more abrupt or erratic price
movements than larger company securities.
Real Estate
Securities
Investing in securities of companies
in the real estate industry subjects a fund to the special risks associated with
the real estate market and the real estate industry in general. Generally,
companies in the real estate industry are considered to be those that have
principal activity involving the development, ownership, construction,
management or sale of real estate; have significant real estate holdings, such
as hospitality companies, healthcare facilities, supermarkets, mining, lumber
and/or paper companies; and/or provide products or services related to the real
estate industry, such as financial institutions that make and/or service
mortgage loans and manufacturers or distributors of building supplies.
Securities of companies in the real estate industry are sensitive to 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. Companies in the
real estate industry may also be subject to liabilities under environmental and
hazardous waste laws.
Redemption
Risk
An underlying fund to a fund of
funds may experience relatively large redemptions or purchases as the fund of
funds periodically reallocates or rebalances its assets. These transactions may
accelerate the realization of taxable income if sales of portfolio securities
result in gains and could increase transaction costs. In addition, when a fund
of funds reallocates or redeems significant assets away from an underlying fund,
the loss of assets to the underlying fund could result in increased expense
ratios for that fund. Moreover, a fund of fund’s redemptions or reallocations
among share classes of an underlying fund may result in changes to the expense
ratios of affected classes, which may increase the expenses paid by shareholders
of the class that experienced the redemption.
Principal Global Investors, LLC
("PGI") is the advisor to the Global Diversified Income Fund, Principal LifeTime
Funds, Principal LifeTime Hybrid Funds, Real Estate Allocation Fund, SAM
Portfolios, PVC Diversified Balanced Account, PVC Diversified Balanced Managed
Volatility Account, PVC Diversified Balanced Volatility Control Account, PVC
Diversified Growth Account, PVC Diversified Growth Managed Volatility Account,
PVC Diversified Growth Volatility Control Account, PVC Diversified Income
Account, PVC Multi-Asset Income Account and each of the underlying funds.
Principal Real Estate Investors, LLC ("Principal-REI") is sub-advisor to the
Real Estate Allocation Fund. Principal-REI also serves as Sub-Advisor to some of
the underlying funds. PGI and Principal-REI are committed to minimizing the
potential impact of underlying fund risk on underlying funds to the extent
consistent with pursuing the investment objectives of the fund of funds that it
manages. Each may face conflicts of interest in fulfilling its responsibilities
to all such funds.
As of December 31, 2017, PVC SAM
Portfolios, PVC Principal LifeTime Accounts, PVC Diversified Balanced Account,
PVC Diversified Balanced Managed Volatility Account, PVC Diversified Balanced
Volatility Control Account, PVC Diversified Growth Account, PVC Diversified
Growth Managed Volatility Account, PVC Diversified Growth Volatility Control
Account, PVC Diversified Income Account and Multi-Asset Income Account own the
following percentages, in the aggregate, of the outstanding shares of the
underlying Accounts listed below:
|
|
|
Account |
Total
Percentage of Outstanding Shares Owned |
Bond Market
Index |
99.68% |
Core Plus Bond |
23.76% |
Equity Income |
33.90% |
Government & High Quality
Bond |
39.29% |
Income |
93.72% |
LargeCap S&P 500 Index
|
89.30% |
LargeCap S&P 500 Managed
Volatility Index |
100.00% |
Short-Term Income
|
14.60% |
Securitized
Products
Securitized products are fixed
income instruments that represent interests in underlying pools of collateral or
assets. The value of the securitized product is derived from the performance,
value, and cash flows of the underlying asset(s). The specific securitized
products that are principal strategies of each Account are listed in its Account
Summary. A fund’s investments in securitized products are subject to risks
similar to traditional fixed income securities, such as credit, interest rate,
liquidity, prepayment, extension, and default risk, as well as additional risks
associated with the nature of the assets and the servicing of those assets.
Prepayment risk may make it difficult to calculate the average life of a fund’s
investment in securitized products. Securitized products are generally issued as
pass-through certificates, which represent the right to receive principal and
interest payments collected on the underlying pool of assets, which are passed
through to the security holder. Therefore, repayment depends on the cash flows
generated by the underlying pool of assets. The securities may be rated as
investment-grade or below-investment-grade.
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• |
Mortgage-backed
securities (“MBS”) represent an interest in a pool of underlying mortgage
loans secured by real property. MBS are sensitive to changes in interest
rates, but may respond to these changes differently from other fixed
income securities due to the possibility of prepayment of the underlying
mortgage loans. If interest rates fall and the underlying loans are
prepaid faster than expected, the fund may have to reinvest the prepaid
principal in lower yielding securities, thus reducing the fund’s income.
Conversely, rising interest rates tend to discourage refinancings and the
underlying loans may be prepaid more slowly than expected, reducing a
fund’s potential to reinvest the principal in higher yielding securities
and extending the duration of the underlying loans. In addition, when
market conditions result in an increase in default rates on the underlying
loans and the foreclosure values of the underlying real estate is less
than the outstanding amount due on the underlying loan, collection of the
full amount of accrued interest and principal on these investments may be
doubtful. The risk of such defaults is generally higher in the case of
underlying mortgage pools that include sub-prime mortgages (mortgages
granted to borrowers whose credit histories would not support conventional
mortgages). |
|
|
• |
Commercial
mortgage-backed securities (“CMBS”) represent an interest in a pool of
underlying commercial mortgage loans secured by real property such as
retail, office, hotel, multi-family, and industrial properties. Certain
CMBS are issued in several classes with different levels of yield and
credit protection, and the CMBS class in which a fund invests usually
influences the interest rate, credit, and prepayment
risks. |
|
|
• |
Asset-backed
securities (“ABS”) are backed by non-mortgage assets such as company
receivables, truck and auto loans, student loans, leases and credit card
receivables. ABS entail credit risk. They also may present a risk that, in
the event of default, the liquidation value of the underlying assets may
be inadequate to pay any unpaid interest or
principal. |
Short
Sales
A fund enters into a short sale by
selling a security it has borrowed (typically from a broker or other
institution) with the hope of purchasing the same security at a later date at a
lower price. A fund may also take a short position in a derivative instrument,
such as a future, forward or swap. If the market price of the security or
derivatives increases, the fund will suffer a (potentially unlimited) loss when
it replaces the security or derivative at the higher price. In certain cases,
purchasing a security to cover a short position can itself cause the price of
the security to rise further, thereby exacerbating the loss. In addition, a fund
may not always be able to borrow the security at a particular time or at an
acceptable price. Before a fund replaces a borrowed security, it is required to
designate on its books cash or liquid assets as collateral to cover the fund’s
short position, marking the collateral to market daily. This obligation limits a
fund’s investment flexibility, as well as its ability to meet redemption
requests or other current obligations. A short position in a derivative
instrument involves the risk of a theoretically unlimited increase in the value
of the underlying instrument. Short sales also involve transaction and other
costs that will reduce potential fund gains and increase potential fund
losses.
Certain funds may also invest the
proceeds received from short selling securities, which creates additional
leverage. Using such leverage allows the fund to use the proceeds to purchase
additional securities, thereby increasing its exposure to assets, such that its
total assets may be greater than its capital. Leverage also magnifies the
volatility of changes in the value of the fund’s portfolio. The effect of the
use of leverage by the fund in a market that moves adversely to its investments
could result in substantial losses to the fund, which would be greater than if
the fund were not leveraged. Because a short position loses value as the
security’s price increases, the loss on a short sale is theoretically
unlimited.
The short sale proceeds utilized by
a fund to leverage investments are collateralized by all or a portion of such
fund’s portfolio. Accordingly, a fund may pledge securities in order to effect
short sales, utilize short sale proceeds or otherwise obtain leverage for
investment or other purposes. Should the securities pledged to brokers to secure
the fund’s margin accounts decline in value, the fund could be subject to a
“margin call”, pursuant to which the fund must either deposit additional funds
or securities with the broker or suffer mandatory liquidation of all or a
portion of the pledged securities to compensate for the decline in value. The
banks and dealers that provide leverage to the fund have discretion to change
the fund’s margin requirements at any time. Changes by counterparties in the
foregoing may result in large margin calls, loss of leverage and forced
liquidations of positions at disadvantageous prices. The utilization of short
sale proceeds for leverage will cause the fund to be subject to higher
transaction fees and other costs.
U.S. Government
and U.S. Government-Sponsored Securities
U.S. Government securities, such as
Treasury bills, notes and bonds and mortgage-backed securities guaranteed by the
Government National Mortgage Association (Ginnie Mae), are supported by the full
faith and credit of the United States; others are supported by the right of the
issuer to borrow from the U.S. Treasury; others are supported by the
discretionary authority of the U.S. Government to purchase the agency's
obligations; and still others are supported only by the credit of the issuing
agency, instrumentality, or enterprise.
Although U.S. Government-sponsored
enterprises such as the Federal Home Loan Mortgage Corporation (Freddie Mac) and
the Federal National Mortgage Association (Fannie Mae) may be chartered or
sponsored by Congress, they are not funded by Congressional appropriations, and
their securities are not issued by the U.S. Treasury nor supported by the full
faith and credit of the U.S. Government.
There is no assurance that the U.S.
Government would provide financial support to its agencies and instrumentalities
if not required to do so. In addition, certain governmental entities have been
subject to regulatory scrutiny regarding their accounting policies and practices
and other concerns that may result in legislation, changes in regulatory
oversight and/or other consequences that could adversely affect the credit
quality, availability, or investment character of securities issued by these
entities. The value and liquidity of U.S. Government securities may be affected
adversely by changes in the ratings of those securities.
Volatility
Mitigation
Volatility mitigation strategies may
increase fund transaction costs, which could increase losses or reduce gains.
These strategies may not protect the fund from market declines and may reduce
the fund’s participation in market gains.
PORTFOLIO
HOLDINGS INFORMATION
A description of the Fund's policies
and procedures with respect to disclosure of the Fund's portfolio securities is
available in the Fund's Statement of Additional Information.
MANAGEMENT OF THE
FUND
The Manager and
Advisor
Principal Global Investors, LLC
(“PGI”), an indirect subsidiary of Principal Financial Group, Inc.
("Principal®"), serves as the manager and
advisor for the Fund. Through the Management Agreement with the Fund, PGI
provides investment advisory services and certain corporate administrative
services for the Fund.
|
|
Advisor: |
Principal
Global Investors, LLC ("PGI"), 711 High Street, Des Moines,
IA 50392, is part of a diversified global asset management organization
which utilizes a multi-boutique strategy of specialized investment groups
and affiliates to provide institutional investors and individuals with
diverse investment capabilities, including fixed income, equities, real
estate, currency, asset allocation and stable value. PGI also has asset
management offices of affiliate advisors in non-U.S. locations including
London, Singapore, Tokyo, Hong Kong and Sydney. PGI has been an investment
advisor since 1998. |
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Accounts: |
In fulfilling its investment
advisory responsibilities, PGI provides day-to-day discretionary
investment services (directly making decisions to purchase or sell
securities) for the following Accounts: |
- Core Plus Bond
- Diversified Balanced
- Diversified Balanced Managed
Volatility
- Diversified Growth
- Diversified Growth Managed
Volatility
- Diversified Income
- Diversified
International
- Equity Income (services provided
by "Edge Asset Management", a specialized boutique of PGI)
- Government & High Quality
Bond
- Income
- International Emerging
Markets
- a portion of LargeCap Growth I
(services provided by “Principal Portfolio StrategiesSM”, a specialized boutique of
PGI)
- LargeCap S&P 500
Index
- a portion of LargeCap S&P 500
Managed Volatility Index (passive index strategy portion)
- LargeCap Value
- MidCap (services provided by
"Aligned Investors", a specialized boutique of PGI)
- Multi-Asset Income
- Principal Capital Appreciation
(services provided
by Edge Asset Management)
- Principal LifeTime Funds (services
provided by Principal Portfolio StrategiesSM)
- Short-Term Income
- SmallCap
- SAM (Strategic Asset Management)
Portfolios (services provided by Principal Portfolio StrategiesSM)
Several of the Accounts have
multiple Sub-Advisors. For those Accounts, a team at PGI consisting of James
Fennessey and Randy Welch, determines the portion of the Fund's assets each
Sub-Advisor will manage and may, from time-to-time, reallocate Fund assets
between PGI acting in a discretionary advisory capacity and the Sub- Advisors.
The decision to do so may be based on a variety of factors, including but not
limited to: the investment capacity of PGI and each Sub-Advisor, portfolio
diversification, volume of net cash flows, fund liquidity, investment
performance, investment strategies, changes in PGI or each Sub-Advisor's firm or
investment professionals or changes in the number of Sub-Advisors. Ordinarily,
reallocations of Fund assets among Sub-Advisors occur as a Sub-Advisor
liquidates assets in the normal course of portfolio management or with net new
cash flows; however, at times existing Fund assets may be reallocated among
Sub-Advisors. This team shares equally in the day-to-day portfolio management
responsibility and agrees on allocation decisions.
The Account summaries identified the
portfolio managers and the funds they manage. Additional information about the
portfolio managers follows. References to Principal include the entire
Principal® organization.
As reflected in the Account
summaries, the day-to-day portfolio management, for some Accounts, is shared by
multiple portfolio managers. In each such case, except the MidCap Account and
the Principal LifeTime Accounts, the portfolio managers operate as a team,
sharing authority and responsibility for research and the day-to-day management
of the portfolio with no limitation on the authority of one portfolio manager in
relation to another. For the MidCap Account, Mr. Nolin and Mr. Rozycki work as a
team, sharing day-to-day management of the Account; however, Mr. Nolin has
ultimate decision making authority. Mr. Rozycki may execute trades in Mr.
Nolin’s absence. The day-to-day portfolio management for the Principal LifeTime
Accounts is shared by multiple portfolio managers. Those Portfolio Managers and
any Associate Portfolio Managers operate as a team, sharing authority and
responsibility for research and the day-to-day management of the portfolio;
however, Associate Portfolio Managers’ authority is more limited than that of
Portfolio Managers.
Matthew D.
Annenberg has been with
Principal® since 2012. He earned a bachelor's degree in Finance from Harvard
College. Mr. Annenberg has earned the right to use the Chartered Financial
Analyst designation.
William C.
Armstrong has been with
Principal® since 1992. He earned a bachelor’s degree from Kearney State College
and an M.B.A. from the University of Iowa. Mr. Armstrong has earned the right to
use the Chartered Financial Analyst designation.
Charles D.
Averill has been with
Principal® since1990. He earned a bachelor’s degree in Economics from Reed
College and an M.A. in Economics from Princeton University. Mr. Averill has
earned the right to use the Chartered Financial Analyst
designation.
Paul H.
Blankenhagen has been
with Principal® since 1992. He earned a bachelor’s degree in Finance from Iowa
State University and a master’s degree from Drake University. Mr. Blankenhagen
has earned the right to use the Chartered Financial Analyst
designation.
Juliet Cohn
has been with
Principal® since 2003. Ms. Cohn is an employee of Principal Global Investors
(Europe) Limited and manages Fund assets through PGI pursuant to a participating
affiliate arrangement. She earned a bachelor's degree in Mathematics from
Trinity College, Cambridge, England.
Daniel R.
Coleman has been with
Principal® since 2001, holding various investment management roles on the Edge
Asset Management equity team, including Portfolio Manager and some senior
management roles. He earned a bachelor's degree in Finance from the University
of Washington and an M.B.A. from New York University.
Mihail
Dobrinov has been with
Principal® since 1995. He earned an M.B.A. in Finance from the University of
Iowa and a law degree from Sofia University, Bulgaria. Mr. Dobrinov has
earned the right to use the Chartered Financial Analyst
designation.
James W.
Fennessey has been with
Principal® since 2000. He is the Head of the Manager Research Team that is
responsible for analyzing, interpreting, and coordinating investment performance
data and evaluation of the investment managers under the due diligence process
that monitors investment managers used by the Principal Funds. Mr. Fennessey
earned a B.S. in Business Administration, with an emphasis in Finance, and a
minor in Economics from Truman State University. He has earned the right to use
the Chartered Financial Analyst designation.
John R.
Friedl has been with
Principal® since 1998. He earned a B.A. in Communications and History from the
University of Washington and a master's degree in Finance from Seattle
University. Mr. Friedl has earned the right to use the Chartered Financial
Analyst designation.
Christopher
Ibach has been with
Principal® since 2000. He earned a bachelor's degree in Electrical Engineering
and an M.B.A. in Finance from the University of Iowa. Mr. Ibach has earned the
right to use the Chartered Financial Analyst designation.
Todd A.
Jablonski has been with
Principal® since 2010. He earned a bachelor’s degree in Economics from the
University of Virginia and an M.B.A. with an emphasis in Quantitative Finance
from New York University's Stern School of Business. Mr. Jablonski has earned
the right to use the Chartered Financial Analyst designation.
Theodore
Jayne has been with
Principal® since 2015. Prior to that, he was a Managing Director and Portfolio
Manager at Wellington Management Company, LLP from 1998 to 2014. He earned a
bachelor’s degree in Anthropology from Harvard University. Mr. Jayne has earned
the right to use the Chartered Financial Analyst designation.
Thomas L.
Kruchten has been with
Principal® since 2005. He earned a B.A. in Finance from the University of
Northern Iowa. Mr. Kruchten has earned the right to use the Chartered Financial
Analyst designation and is a member of the CFA Society of Iowa.
Ryan P.
McCann has been with
Principal® since 2010. He earned a B.A. in Business Administration from
Washington State University. Mr. McCann has earned the right to use the
Chartered Financial Analyst designation.
Mark R.
Nebelung has been with Principal® since 1997.
Mr. Nebelung is an employee of Principal Global Investors (Europe) Limited and
manages Fund assets through PGI pursuant to a participating affiliate
arrangement. He earned his bachelor's degree in Actuarial Science and Statistics
from the University of Waterloo, Canada. He has earned the right to use the
Chartered Financial Analyst designation.
K. William
Nolin has been with
Principal® since 1993. He earned a bachelor’s degree in Finance from the
University of Iowa and an M.B.A. from the Yale School of Management. Mr. Nolin
has earned the right to use the Chartered Financial Analyst
designation.
Phil
Nordhus has been with
Principal® since 1990. He earned a bachelor’s degree in Economics from Kansas
State University and an M.B.A. from Drake University. Mr. Nordhus has earned the
right to use the Chartered Financial Analyst designation.
Tina Paris
has been with
Principal® since 2001. She earned a bachelor's degree in Finance and Economics
from the University of Northern Iowa and an M.B.A with an emphasis in Finance
from the University of Iowa. Ms. Paris has earned the right to use the Chartered
Financial Analyst designation.
Brian W.
Pattinson has been with
Principal® since 1994. He earned a bachelor's degree and an M.B.A. in Finance
from the University of Iowa. Mr. Pattinson has earned the right to use the
Chartered Financial Analyst designation.
Scott J.
Peterson has been with
Principal® since 2002. He earned a bachelor’s degree in Mathematics from Brigham
Young University and an M.B.A. from New York University’s Stern School of
Business. Mr. Peterson has earned the right to use the Chartered Financial
Analyst designation.
Tom
Rozycki has been with
Principal® since 2001. He earned a bachelor’s degree in Finance from Drake
University. Mr. Rozycki has earned the right to use the Chartered Financial
Analyst designation.
Jeffrey A.
Schwarte has been with
Principal® since 1993. He earned a bachelor’s
degree in Accounting from the University of Northern Iowa. Mr. Schwarte is a CPA
and has earned the right to use the Chartered Financial Analyst
designation.
David W.
Simpson has been with
Principal® since 2003. He earned a bachelor's degree from the University of
Illinois and an M.B.A. in Finance from the University of Wisconsin. Mr. Simpson
has earned the right to use the Chartered Financial Analyst
designation.
Scott Smith
has been with
Principal® since 1999. He earned a bachelor’s degree in Finance from Iowa State
University.
Gregory L.
Tornga has been with
Principal® since 2011. He earned a bachelor’s degree from the University of
Michigan and an M.B.A. from the Argyros School of Business at Chapman
University. Mr. Tornga has earned the right to use the Chartered Financial
Analyst designation.
Nedret
Vidinli has been with
Principal® since 2010. He earned his bachelor’s degree in Business
Administration at Drake University and an M.B.A. at Benedictine University. Mr.
Vidinli has earned the right to use the Chartered Financial Analyst
designation.
Alan
Wang has been with
Principal® since 2012. Mr. Wang is an employee of Principal Global Investors
(Hong Kong) Limited and manages Fund assets through PGI pursuant to a
participating affiliate arrangement. He earned a bachelor’s degree in
Economics and International Finance from Renmin University of China and an
M.B.A. from the University of Iowa. Mr. Wang has earned the right to use
the Chartered Financial Analyst designation.
Timothy R.
Warrick has been with
Principal® since 1990. He earned a bachelor’s degree in Accounting and Economics
from Simpson College and an M.B.A. in Finance from Drake University. Mr. Warrick
has earned the right to use the Chartered Financial Analyst
designation.
Randy L. Welch
has been with
Principal® since 1989 and oversees the functions of the Manager Selection &
Investment Support Team, which includes investment manager research, investment
consulting, performance analysis, and attribution. He is also responsible for
the due diligence process that monitors investment managers on Principal's
platform. Mr. Welch is an affiliate member of the Chartered Financial
Analysts (CFA) Institute. Mr. Welch earned a B.A. in Business/Finance from
Grand View College and an M.B.A. from Drake University.
Mohammed
Zaidi has been with
Principal® since 2012. Mr. Zaidi is an employee of Principal Global Investors
(Europe) Limited and manages Principal Fund assets through PGI pursuant to a
participating affiliate arrangement. He earned a bachelor’s degree in Economics
from the Wharton School of the University of Pennsylvania and an M.B.A. from
Massachusetts Institute of Technology, Sloan School of Management.
Cash Management
Program
For each Account, PGI may invest
uninvested cash in money market funds, including the Principal Funds, Inc.
Government Money Market Fund, or lend it to other Accounts pursuant to the
Accounts’ interfund lending facility.
In addition, the LargeCap Growth
Account I has adopted a special cash management program, executed by PGI.
Pursuant to the program, the Account may, in an attempt to provide returns
similar to its benchmark, invest its uninvested cash in stock index futures
contracts. PGI believes that, over the long term, this strategy will enhance the
investment performance of the Account.
The
Sub-Advisors
PGI has signed contracts with
various Sub-Advisors. Under the sub-advisory agreements, the Sub-Advisor agrees
to assume the obligations of PGI to provide investment advisory services to the
portion of the assets of a specific Account allocated to it by PGI. For these
services, PGI pays the Sub-Advisor a fee.
PGI or the Sub-Advisor provides the
Fund's Board with a recommended investment program. The program must be
consistent with the Account’s investment objective and policies. Within the
scope of the approved investment program, the Sub-Advisor advises the Account on
its investment policy and determines which securities are bought or sold, and in
what amounts.
The Account summaries identified the
sub-advisors and portfolio managers and the Accounts they manage. Additional
information follows.
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Sub-Advisor: |
BNY Mellon
Asset Management North America Corporation (“BNY Mellon
AMNA”), BNY
Mellon Center, One Boston Place, Boston, MA 02108, is a multi-asset
investment adviser providing clients with a wide range of investment
solutions. |
Account: Bond Market Index
The day-to-day portfolio management
is shared by multiple portfolio managers who work as a team. Gregg Lee is the
lead portfolio manager.
Paul Benson
joined BNY Mellon AMNA
in 2005. He earned a B.A. from the University of Michigan, Ann Arbor. He has
earned the right to use the Chartered Financial Analyst
designation.
Gregg Lee
joined BNY Mellon AMNA
in 1989. He earned a B.S. from the University of California at Davis in
Managerial Economics. He has earned the right to use the Chartered Financial
Analyst designation.
Nancy G. Rogers
joined BNY Mellon AMNA
in 1987. She earned a B.S. in Marketing and Finance and an M.B.A. from Drexel
University. She has earned the right to use the Chartered Financial Analyst
designation.
Stephanie Shu
joined BNY Mellon AMNA
in 2001. She earned a B.S. in Operations Research and Statistics from Fudan
University, Shanghai, China and an M.S. from Texas A&M University. She has
earned the right to use the Chartered Financial Analyst
designation.
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Sub-Advisor: |
Brown
Advisory, LLC (“Brown”), 901 South Bond Street, Suite
400, Baltimore, Maryland 21231, is a registered investment adviser that
works with institutions, corporations, nonprofits, families and
individuals. |
Account: a portion of LargeCap Growth
I
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Sub-Advisor: |
Columbus
Circle Investors (“CCI”), Metro Center, One Station
Place, Stamford, CT 06902, founded in 1975, manages growth-oriented
portfolios in Large Cap, Mid Cap, SMID, and Small Cap categories for
domestic equities. CCI specializes in the management of discretionary
accounts for a variety of organizations. CCI also offers advisory services
for mutual funds and high net worth
individuals. |
Account: LargeCap Growth
Anthony Rizza is the lead Portfolio
Manager, and Thomas J. Bisighini, as Portfolio Manager, has responsibility for
research and supports Mr. Rizza on the day-to-day management of the
Account.
Thomas J.
Bisighini has been with
CCI since 2004. He earned a B.S. from Bentley College and an M.B.A. in Finance
from Fordham University. Mr. Bisighini has earned the right to use the Chartered
Financial Analyst designation.
Anthony
Rizza has been with CCI
since 1991. He earned a B.S. in Business from the University of Connecticut. Mr.
Rizza has earned the right to use the Chartered Financial Analyst
designation.
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Sub-Advisor: |
Principal
Real Estate Investors, LLC (“Principal - REI”), 711 High Street, Des Moines,
IA 50392, was founded in 2000 and manages commercial real estate across
the spectrum of public and private equity and debt investments, primarily
for institutional investors. |
Account: Real Estate Securities
The portfolio managers operate as a
team, sharing authority and responsibility for research and the day-to-day
management of the portfolio with no limitation on the authority of one portfolio
manager in relation to another.
Keith Bokota
has been with Principal
- REI since 2007. He earned a bachelor’s degree in Finance and International
Business from Georgetown University. Mr. Bokota has earned the right to use the
Chartered Financial Analyst designation.
Anthony
Kenkel has been with
Principal - REI since 2005. He earned a bachelor’s degree in Finance from Drake
University and an M.B.A. from the University of Chicago Graduate School of
Business. Mr. Kenkel has earned the right to use the Chartered Financial Analyst
and Financial Risk Manager designations.
Kelly D.
Rush has been with
Principal - REI since 2000 and the predecessor firms since 1987. He earned a
B.A. in Finance and an M.B.A. in Business Administration from the University of
Iowa. Mr. Rush has earned the right to use the Chartered Financial Analyst
designation.
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Sub-Advisor: |
Spectrum
Asset Management, Inc. (“Spectrum”), 2 High Ridge Park, Stamford,
CT 06905, founded in 1987, manages portfolios of preferred securities for
corporate, pension fund, insurance and endowment clients, open-end and
closed-end mutual funds, and separately managed account programs for high
net worth individual investors as well as providing volatility mitigation
solutions for some client portfolios. |
Account: a portion of LargeCap S&P 500
Managed Volatility Index (active volatility mitigation strategy)
Mr. Nugent is the primary portfolio
manager and is responsible for the overall volatility mitigation strategy and
day-to-day portfolio management of this strategy.
L. Phillip
Jacoby, IV joined
Spectrum in 1995 and is Chief Investment Officer of Spectrum and Chairman of the
Investment Committee. Mr. Jacoby earned a B.S. in Finance from the Boston
University School of Management.
Manu Krishnan
joined Spectrum in
2004. Mr. Krishnan earned a B.S. in Mechanical Engineering from the College of
Engineering, Osmania University, India, an M.S. in Mechanical Engineering from
the University of Delaware, and an M.B.A. in Finance from Cornell University.
Mr. Krishnan has earned the right to use the Chartered Financial Analyst
designation.
Kevin
Nugent joined Spectrum
in 2012. He earned a B.A. from Ohio Wesleyan University.
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Sub-Advisor: |
T. Rowe
Price Associates, Inc. (“T. Rowe Price”), 100 East Pratt Street,
Baltimore, MD 21202, has over 75 years of investment management
experience. |
Account: a portion of LargeCap Growth
I
The SAI provides additional
information about each portfolio manager’s compensation, other accounts managed
by the portfolio manager, and the portfolio manager’s ownership of securities in
the Account.
Fees Paid to
PGI
Each Account pays PGI a fee for its
services, which includes the fee PGI pays to Sub-Advisors, as
applicable.
The fee each Account paid (as a
percentage of the Account’s average daily net assets) for the fiscal year ended
December 31, 2017 was:
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Bond Market
Index |
0.25% |
MidCap |
0.53% |
Core Plus Bond |
0.45% |
Multi-Asset
Income |
0.03% |
Diversified
Balanced |
0.05% |
Principal Capital
Appreciation |
0.62% |
Diversified Balanced Managed
Volatility |
0.05% |
Principal LifeTime 2010
|
0.00% |
Diversified Balanced Volatility
Control |
0.12% |
Principal LifeTime 2020
|
0.00% |
Diversified
Growth |
0.05% |
Principal LifeTime 2030
|
0.00% |
Diversified Growth Managed
Volatility |
0.05% |
Principal LifeTime 2040
|
0.00% |
Diversified Growth Volatility
Control |
0.12% |
Principal LifeTime 2050
|
0.00% |
Diversified
Income |
0.05% |
Principal LifeTime 2060
|
0.00% |
Diversified
International |
0.84% |
Principal LifeTime Strategic
Income |
0.00% |
Equity Income |
0.49% |
Real Estate
Securities |
0.88% |
Government & High Quality
Bond |
0.50% |
SAM Balanced |
0.23% |
Income |
0.50% |
SAM Conservative
Balanced |
0.23% |
International Emerging
Markets |
1.25% |
SAM Conservative
Growth |
0.23% |
LargeCap Growth |
0.68% |
SAM Flexible
Income |
0.23% |
LargeCap Growth
I |
0.75% |
SAM Strategic
Growth |
0.23% |
LargeCap S&P 500
Index |
0.25% |
Short-Term
Income |
0.50% |
LargeCap S&P 500 Index
Managed Volatility |
0.45% |
SmallCap |
0.82% |
LargeCap Value |
0.60% |
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The management fee schedules for the
Accounts that have not completed a full fiscal year are as follows:
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Management
Fee Schedule
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Account |
All
Assets |
Diversified Balanced Volatility
Control |
0.12% |
Diversified Growth Volatility
Control |
0.12% |
Availability of the discussions
regarding the basis for the Board of Directors approval of various management
and sub-advisory agreements is as follows:
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Annual
Report
to
Shareholders
for the
period ending
December 31,
2017 |
Account |
Management
Agreement |
Sub-Advisory
Agreement |
All Accounts |
X |
X |
Voluntary
Waivers
PGI has voluntarily agreed to limit
the expenses of Diversified Balanced Account, Diversified Growth Account, and
Diversified Income Account by paying, if necessary, expenses normally payable by
the Account, (excluding interest expense, expenses related to fund investments,
acquired fund fees and expenses, and other extraordinary expenses). The expense
limits will maintain a total level of operating expenses (expressed as a percent
of average net assets on an annualized basis) not to exceed 0.31% for all
Accounts. The expense limits may be terminated at any time.
Manager of
Managers
The Fund operates as a Manager of
Managers. Under the conditions of an order previously received from the SEC (the
"unaffiliated order"), the Fund and PGI may enter into and materially amend
agreements with Sub-Advisors, other than those affiliated with PGI, without
obtaining shareholder approval. PGI may, without obtaining shareholder
approval:
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hire one or more
Sub-Advisors; |
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change
Sub-Advisors; and |
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reallocate management fees
between itself and Sub-Advisors. |
The SEC has granted an amended
exemptive order that expands the relief of the unaffiliated order to allow PGI
to enter into and materially amend agreements with wholly-owned affiliated
sub-advisors (affiliated sub-advisors which are at least 95% owned, directly or
indirectly, by PGI or an affiliated person of PGI) (the "wholly-owned
order").
Further, the Fund has applied to the
SEC for another amended exemptive order, which if granted
would allow PGI to also enter into and materially amend agreements with
majority-owned affiliated sub-advisors (affiliated sub-advisors which are at
least 50% owned, directly or indirectly, by PGI or an affiliated person of PGI)
(the "majority-owned order"). There is no assurance, however, that the SEC will
grant the majority-owned order.
PGI has ultimate responsibility for
the investment performance of each Account that utilizes a Sub-Advisor due to
its responsibility to oversee Sub-Advisors and recommend their hiring,
termination, and replacement. No Account will rely on the unaffiliated order,
the wholly-owned order, the majority-owned order, or any future order until it
receives approval from its shareholders (or, in the case of a new Account, the
Account’s sole initial shareholder before the Account is available to the other
purchasers).
The shareholders of the Diversified
Balanced Volatility Control, Diversified Growth Volatility Control, and
Multi-Asset Income Accounts have approved reliance, and the Accounts have
approved reliance on the majority-owned order, should the SEC grant that relief
in the future, and the wholly-owned order. The shareholders of all other
Accounts have approved the Accounts' reliance on the unaffiliated
order.
PRICING OF
ACCOUNT SHARES
Each Account’s shares are bought and
sold at the current net asset value (“NAV”) per share. Each Account’s NAV is
calculated each day the New York Stock Exchange (“NYSE”) is open (shares are not
priced on the days on which the NYSE is closed for trading). The NYSE is closed
on the following holidays: New Year’s Day, Martin Luther King, Jr. Day,
Washington’s Birthday/Presidents’ Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day, and Christmas. The NAV is determined at the
close of business of the NYSE (normally 3:00 p.m. Central Time). When an order
to buy or sell shares is received, the share price used to fill the order is the
next price calculated after we receive the order in proper form.
The Accounts will not treat an
intraday unscheduled disruption in NYSE trading as a closure of the NYSE and
will
price its shares as of 3:00 p.m.
Central Time, if the particular disruption directly affects only the
NYSE.
For all Accounts the NAV is
calculated by:
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taking the current market
value of the total assets of the Account |
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subtracting liabilities of the
Account |
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dividing the remainder
proportionately into the classes of the
Account |
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subtracting the liability of
each class |
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dividing the remainder by the
total number of shares outstanding for that
class |
With respect to any portion of an
Account’s assets invested in other registered investment companies, that portion
of the Account's NAV is calculated based on the price (NAV or market, as
applicable) of such other registered investment companies.
Notes:
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If market quotations are not
readily available for a security owned by an Account, its fair value is
determined using a policy adopted by the Directors. Fair valuation pricing
is subjective and creates the possibility that the fair value determined
for a security may differ materially from the value that could be realized
upon the sale of the security. |
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An Account's securities may be
traded on foreign securities markets that generally complete trading at
various times during the day before the close of the NYSE. Foreign
securities and currencies are converted to U.S. dollars using the exchange
rate in effect at the close of the NYSE. Securities traded outside of the
Western Hemisphere are valued using a fair value policy adopted by the
Fund. These fair valuation procedures are intended to discourage
shareholders from investing in the Account for the purpose of engaging in
market timing or arbitrage transactions. |
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The trading of foreign
securities generally or in a particular country or countries may not take
place on all days the NYSE is open, or may trade on days the NYSE is
closed. Thus, the value of the foreign securities held by the Account or
by an underlying Account or Fund may change on days when shareholders are
unable to purchase or redeem shares. |
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Certain securities issued by
companies in emerging market countries may have more than one quoted
valuation at any point in time. These may be referred to as local price
and premium price. The premium price is often a negotiated price that may
not consistently represent a price at which a specific transaction can be
effected. The Fund has a policy to value such securities at a price at
which the Advisor expects the securities may be
sold. |
DIVIDENDS AND
DISTRIBUTIONS
The Accounts earn dividends,
interest, and other income from investments and distribute this income (less
expenses) as dividends. The Accounts also realize capital gains from investments
and distribute these gains (less any losses) as capital gain distributions. The
Diversified Balanced Volatility Control and Diversified Growth Volatility
Control Accounts normally make dividends and capital gain distributions at least
biannually, in August and December. The other Accounts normally make dividends
and capital gain distributions at least annually, in August. Dividends and
capital gain distributions are automatically reinvested in additional shares of
the Account making the distribution.
To the extent that distributions the
Account pays are derived from a source other than net income (such as a return
of capital), you will receive a notice disclosing the source of such
distributions. You may request a copy of all such notices, free of charge, by
telephoning 1-800-222-5852. The amounts and sources of distributions included in
such notices are estimates only and you should not rely upon them for purposes
of reporting income taxes. The Account will send shareholders a Form 1099-DIV
for the calendar year that will tell shareholders how to report these
distributions for federal income tax purposes.
TAX
CONSIDERATIONS
The Accounts intend to comply with
applicable variable asset diversification regulations. If an Account fails to
comply with such regulations, contracts invested in the Account will not be
treated as annuity, endowment, or life insurance contracts under the Internal
Revenue Code.
Contract owners should review the
applicable contract prospectus for information concerning the federal income tax
treatment of their contracts and distributions from the Account to the separate
accounts.
Contract owners are urged to consult
their tax advisors regarding the status of their contracts under state and local
tax laws.
DISTRIBUTION PLAN
AND ADDITIONAL INFORMATION REGARDING INTERMEDIARY COMPENSATION
Distribution
and/or Service (12b-1) Fees. Principal Funds Distributor, Inc.
("PFD" or the "Distributor") is the distributor for the shares of the Fund. The
Distributor is an affiliate of Principal Life Insurance Company, a subsidiary of
Principal Financial Group, Inc. and a member of Principal®.
The Fund has adopted a distribution
plan pursuant to Rule 12b-1 under the Investment Company Act for the Class 2
shares of the Accounts. Under the 12b-1 Plan, each Account makes payments from
its assets attributable to the Class 2 shares to the Fund's Distributor for
distribution-related expenses and for providing services to shareholders
of that share class. Payments under
the 12b-1 plan are made by the Fund to the Distributor pursuant to the 12b-1
Plan regardless of the expenses incurred by the Distributor.
When the Distributor receives Rule
12b-1 fees, it may pay some or all of them to financial intermediaries whose
customers are Class 2 shareholders for sales support services and for providing
services to shareholders of that share class. Financial intermediaries may
include, among others, broker-dealers, registered investment advisers, banks,
trust companies, pension plan consultants, retirement plan administrators, and
insurance companies.
Because Rule 12b-1 fees are paid out
of Account assets and are ongoing fees, over time they will increase the cost of
your investment in the Accounts and may cost you more than other types of sales
charges.
The maximum annualized Rule 12b-1
fee for distribution related expenses and/or for providing services to
shareholders (as a percentage of average daily net assets) for the Class 2
shares of each of the Accounts is 0.25%.
Payments under the 12b-1 Plan will
not automatically terminate for Accounts that are closed to new investors or to
additional purchases by existing shareholders. The Fund Board will determine
whether to terminate, modify, or leave unchanged the 12b-1 Plan if the Board
directs the closure of an Account.
Payments to
Financial Professionals and Their Firms. Financial intermediaries receive
compensation from the Distributor and its affiliates for marketing, selling,
and/or providing services to variable annuities and variable life insurance
contracts that invest in the Accounts. Financial intermediaries also receive
compensation for marketing, selling, and/or providing services to certain
retirement plans that offer the Accounts as investment options. Financial
intermediaries may include, among others, broker/dealers, registered investment
advisors, banks, trust companies, pension plan consultants, retirement plan
administrators, and insurance companies. Financial Professionals who deal with
investors on an individual basis are typically associated with a financial
intermediary. The Distributor and its affiliates may fund this compensation from
various sources, including any Rule 12b-1 Plan fee that the Accounts pay to the
Distributor. Individual Financial Professionals may receive some or all of the
amounts paid to the financial intermediary with which he or she is
associated.
Ongoing
Payments. In the case
of Class 2 shares, and pursuant to the Rule 12b-1 Plan applicable to the Class 2
shares, the Distributor generally makes ongoing payments to your financial
intermediary at an annual rate of 0.25% of average net assets attributable to
your indirect investment in the Accounts. In addition, the Distributor or PGI
may make from its own resources ongoing payments to an insurance company, which
payments will generally not exceed 0.27% of the average net assets of the
Accounts held by the insurance company in its separate accounts. The payments
are for distribution support and/or administrative services and may be made with
respect to either or both classes of shares of the Accounts.
Other Payments to
Intermediaries. In
addition to any commissions that may be paid at the time of sale and ongoing
payments, the Distributor and its affiliates, at their expense, currently
provide additional payments to financial intermediaries that sell variable
annuities and variable life insurance contracts that may be funded by shares of
the Accounts, or may sell shares of the Accounts to retirement plans for
distribution services. Although payments made to each qualifying financial
intermediary in any given year may vary, such payments will generally not exceed
0.25% of the current year’s sales of applicable variable annuities and variable
life insurance contracts that may be funded by account shares, or 0.25% of the
current year’s sales of Account shares to retirement plans by that financial
intermediary.
Additionally, in some cases the
Distributor and its affiliates will provide payments or reimbursements in
connection with the costs of conferences, educational seminars, due diligence
trips, training and marketing efforts related to the Accounts for the financial
intermediary's personnel and/or their clients and potential clients. Such
activities may be sponsored by financial intermediaries or the Distributor. The
costs associated with such activities may include travel, lodging,
entertainment, and meals. In some cases the Distributor will also provide
payment or reimbursement for expenses associated with transactions ("ticket")
charges and general marketing expenses.
For more information, see the
Statement of Additional Information (SAI). See also the section titled "Payments
to Broker-Dealers and Other Financial Intermediaries" in each Account
Summary.
Your variable life insurance or
variable annuity contract or your retirement plan may impose other charges and
expenses, some of which may also be used in connection with the sale of such
contracts in addition to those described in the Prospectus. The amount and
applicability of any insurance contract fee are determined and disclosed
separately within the prospectus for your insurance contract.
The payments described in this
prospectus may create a conflict of interest by influencing your Financial
Professional or your financial intermediary to recommend one variable annuity,
variable life insurance policy or mutual fund over another, or to recommend one
Account or share class of the Fund over another Account or share class. Ask your
Financial Professional or visit your financial intermediary's website for more
information about the total amounts paid to them by PGI and its affiliates, and
by sponsors of other investment companies your Financial Professional may
recommend to you.
Your financial intermediary may
charge you additional fees other than those disclosed in this prospectus. Ask
your Financial Professional about any fees and commissions they
charge.
ONGOING
FEES
Ongoing Fees reduce the value of
each share. Because they are ongoing, they increase the cost of investing in the
Accounts.
The Accounts that operate as funds
of funds, as shareholders in the underlying funds, bear their pro rata share of
the operating expenses incurred by each underlying fund. The investment return
of each fund of funds is net of the underlying funds’ operating
expenses.
Each Account pays ongoing fees to
the Manager and others who provide services to the Account. These fees
include:
|
|
• |
Management Fee - Through the
Management Agreement with the Account, PGI has agreed to provide
investment advisory services and corporate administrative services to the
Account. |
|
|
• |
Distribution Fee - Each of the
Accounts with Class 2 shares has adopted a distribution plan under
Rule 12b-1 of the Investment Company Act of 1940 for its Class 2
shares. Under the plan, Class 2 shares of each Account pay a
distribution fee based on the average daily net asset value (NAV) of the
Account. These fees pay distribution and other expenses for sale of
Account shares and for services provided to shareholders. Because they are
ongoing fees, over time they will increase the cost of your investment and
may cost you more than paying other types of sales
charges. |
|
|
• |
Other Expenses - A portion of
expenses that are allocated to all classes of the
Account. |
|
|
• |
Acquired Fund Fees and
Expenses - fees and expenses charged by other investment companies in
which an Account invests a portion of its
assets. |
GENERAL
INFORMATION ABOUT AN ACCOUNT
Frequent Trading
and Market Timing (Abusive Trading Practices)
The Accounts are not designed for,
and do not knowingly accommodate, frequent purchases and redemptions (“excessive
trading”) of Account shares by investors. If you intend to trade frequently
and/or use market timing investment strategies, do not purchase shares of these
Accounts.
Frequent purchases and redemptions
pose a risk to the Accounts because they may:
|
|
• |
Disrupt the management of the
Accounts by: |
|
|
• |
forcing the Account to hold
short-term (liquid) assets rather than investing for long-term growth,
which results in lost investment opportunities for the Account
and |
|
|
• |
causing unplanned portfolio
turnover; |
|
|
• |
Hurt the portfolio performance
of the Account; and |
|
|
• |
Increase expenses of the
Account due to: |
|
|
• |
increased broker-dealer
commissions and |
|
|
• |
increased recordkeeping and
related costs. |
If we are not able to identify such
excessive trading practices, the Accounts and their shareholders may be harmed.
The harm of undetected excessive trading in shares of the underlying Accounts in
which the funds of funds invest could flow through to the funds of funds as they
would for any fund shareholder.
Certain Accounts may be at greater
risk of harm due to frequent purchase and redemptions. For example, those
Accounts that invest in foreign securities may appeal to investors attempting to
take advantage of time-zone arbitrage. This risk is particularly relevant to the
Diversified International and International Emerging Market Accounts. The Fund
has adopted fair valuation procedures. These procedures are intended to
discourage market timing transactions in shares of the Accounts.
As the Accounts are only available
through variable annuity or variable life contracts or to qualified retirement
plans, the Fund must rely on the insurance company that issues the contract, or
the trustees or administrators of qualified retirement plans, (“intermediary”)
to monitor customer trading activity to identify and take action against
excessive trading. There can be no certainty that the intermediary will identify
and prevent excessive trading in all instances. When an intermediary identifies
excessive trading, it will act to curtail such trading in a fair and uniform
manner. If an intermediary is unable to identify such abusive trading practices,
the abuses described above may negatively impact the Accounts.
If an intermediary, or the Fund,
deems excessive trading practices to be occurring, it will take action that may
include, but is not limited to:
|
|
• |
Rejecting exchange
instructions from a shareholder or other person authorized by the
shareholder to direct exchanges; |
|
|
• |
Restricting submission of
exchange requests by, for example, allowing exchange requests to be
submitted by 1st class U.S. mail only and disallowing requests made via
the internet, by facsimile, by overnight courier, or by
telephone; |
|
|
• |
Limiting the dollar amount of
an exchange and/or the number of exchanges during a
year; |
|
|
• |
Requiring a holding period of
a minimum of 30 days before permitting exchanges among the Accounts where
there is evidence of at least one round-trip exchange (exchange or
redemption of shares that were purchased within 30 days of the
exchange/redemption); and |
|
|
• |
Taking such other action as
directed by the Fund. |
The Fund Board of Directors has
found the imposition of a redemption fee with respect to redemptions from Class
1 and Class 2 shares of the Accounts is neither necessary nor appropriate in
light of measures taken by intermediaries through which such shares are
currently available. Each intermediary’s excessive trading policies and
procedures will be reviewed by Fund management prior to making shares of the
Fund available through such intermediary to determine whether, in management’s
opinion, such procedures are reasonably designed to prevent excessive trading in
Fund shares.
In order to prevent excessive
trading, the Fund has reserved the right to accept or reject, without prior
written notice, any exchange requests (an exchange request is a redemption
request coupled with a request to purchase shares with the proceeds of the
redemption; such restriction applies to the purchase of fund shares in an
exchange request and does not restrict a shareholder from requesting a
redemption). In some instances, an exchange may be completed prior to a
determination of abusive trading. In those instances, the intermediary will
reverse an exchange (within one business day of the exchange) and return the
account holdings to the positions held prior to the exchange. The intermediary
will give you notice in writing in this instance.
Eligible
Purchasers
Only certain eligible purchasers may
buy shares of the Accounts. Eligible purchasers are limited to 1) separate
accounts of Principal Life or of other insurance companies, 2) Principal Life or
any of its subsidiaries or affiliates, 3) trustees of other managers of any
qualified profit sharing, incentive, or bonus plan established by Principal Life
or any subsidiary or affiliate of such company, for employees of such company,
subsidiary, or affiliate. Such trustees or managers may buy Account shares only
in their capacities as trustees or managers and not for their personal accounts.
The Board of Directors of the Fund reserves the right to broaden or limit the
designation of eligible purchaser.
Each Account serves as the
underlying investment vehicle for variable annuity contracts and variable life
insurance policies that are funded through separate accounts established by
Principal Life and by other insurance companies as well as for certain qualified
plans. It is possible that in the future, it may not be advantageous for
variable life insurance separate accounts, variable annuity separate accounts,
and qualified plan investors to invest in the Accounts at the same time.
Although neither Principal Life nor the Fund currently foresees any such
disadvantage, the Fund’s Board of Directors monitors events in order to identify
any material conflicts between such policy owners, contract holders, and
qualified plan investors. Material conflict could result from, for example, 1)
changes in state insurance laws, 2) changes in Federal income tax law, 3)
changes in the investment management of an Account, or 4) differences in voting
instructions between those given by policy owners, those given by contract
holders, and those given by qualified plan investors. Should it be necessary,
the Board would determine what action, if any, should be taken. Such action
could include the sale of Account shares by one or more of the separate accounts
or qualified plans, which could have adverse consequences.
PGI may recommend to the Board, and
the Board may elect, to close certain Accounts or share classes to new investors
or close certain Accounts or share classes to new and existing
investors.
Purchase of
Account Shares
Principal Variable Contracts Funds,
Inc. offers funds in two share classes: 1 and 2. Funds available in multiple
share classes have the same investments, but differing expenses. Classes 1 and 2
shares are available in this prospectus.
Shares are purchased from the Fund’s
principal underwriter (“Distributor”) on any business day (normally any day when
the New York Stock Exchange is open for regular trading) upon request through
the insurance company issuing the variable annuity, variable life contract, or
the trustees or administrators of the qualified retirement plan offering the
Account. There are no sales charges on shares of the Accounts; however, your
variable contract may impose a charge. There are no restrictions on amounts to
be invested in shares of the Accounts.
The Fund, at its discretion, may
permit the purchase of shares using securities as consideration (a purchase
in-kind) in accordance with procedures approved by the Fund’s Board of
Directors. Each Account will value securities used to purchase its shares using
the same method the Account uses to value its portfolio securities as described
in this prospectus.
Shareholder accounts for each
Account are maintained under an open account system. Under this system, an
account is opened and maintained for each investor. Each investment is confirmed
by sending the investor a statement of account showing the current purchase and
the total number of shares owned. The statement of account is treated by each
Account as evidence of ownership of Account shares. Share certificates are not
issued.
|
|
Note: |
No salesperson, broker-dealer
or other person is authorized to give information or make representations
about an Account other than those contained in
this Prospectus. Information or representations not contained in this
prospectus may not be relied upon as having been provided or made by
Principal Variable Contracts Funds, Inc., an Account, PGI, any
Sub-Advisor, or Principal Funds Distributor,
Inc. |
MidCap
Account
Effective as of the close of the New
York Stock Exchange on August 15, 2013, the MidCap Account (the “Account”) was
no longer available for purchases from new contract holders of variable products
invested in the Account.
|
|
• |
Contract holders as of August
15, 2013, may continue to select this investment
option. |
|
|
• |
Funds of funds may continue to
invest in the Account. |
|
|
• |
Investors who have a direct
investment in the MidCap Strategy may, subject to the approval of the
Distributor, purchase shares in the
Account. |
At the sole discretion of the
Distributor, the Account may permit certain types of investors to open new
accounts, impose further restrictions on purchases, or reject any purchase
orders, all without prior notice.
Sale of Account
Shares
Variable contracts owners should
refer to the variable contract product prospectus for details on how to allocate
policy or contract value. Qualified plan participants should refer to the
qualified plan documents.
Each Account sells its shares on any
business day (normally any day when the New York Stock Exchange is open for
regular trading) upon request through the insurance company issuing the variable
annuity, variable life contract, or the trustees or administrators of the
qualified retirement plan offering the Account. There is no charge for the
redemption. Shares are redeemed at the NAV per share next computed after the
request is received by the Account in proper and complete form.
Sale proceeds are generally sent
within three business days after the request is received in proper form.
However, the right to sell shares may be suspended up to seven days, as
permitted by federal securities law, during any period when 1) trading on the
NYSE is restricted as determined by the SEC or when the NYSE is closed for
reasons other than weekends and holidays or 2) an emergency exists, as
determined by the SEC, as a result of which a) disposal by a fund of securities
owned by it is not reasonably practicable, b) it is not reasonably practicable
for a fund to fairly determine the value of its net assets, or c) the SEC
permits suspension for the protection of security holders.
If payments are delayed and the
instruction is not canceled by the shareholder’s written instruction, the amount
of the transaction is determined as of the first valuation date following the
expiration of the permitted delay. The transaction occurs within five days
thereafter.
In addition, payments on surrender
requests submitted before a related premium payment made by check has cleared
may be delayed up to seven days. This permits payment to be collected on the
check.
Distributions in
Kind. The Fund may
determine that it would be detrimental to the remaining shareholders of an
Account to make payment of a redemption order wholly or partly in cash. Under
certain circumstances, therefore, each of the accounts may pay the redemption
proceeds in whole or in part by a distribution “in kind” of securities from the
Account’s portfolio in lieu of cash. If an Account pays the redemption proceeds
in kind, the redeeming shareholder might incur brokerage or other costs in
selling the securities for cash. Each Account will value securities used to pay
redemptions in kind using the same method the Account uses to value its
portfolio securities as described in this prospectus.
Under normal
circumstances, the Accounts expect to meet redemption requests through holdings
of cash or the sale of investments held in cash equivalents. Accounts that are
included in the cash management program (as described under MANAGEMENT OF THE
FUND-Cash Management Program) may also meet such requests by selling liquid
index futures. In situations in which investment holdings in cash, cash
equivalents, or, with respect to Accounts in the cash management program, index
futures are not sufficient to meet redemption requests, an Account will
typically borrow money through the Account’s interfund lending facility or
through a bank line-of-credit. Accounts may also choose to sell portfolio assets
for the purpose of meeting such requests. Each Account further reserves the
right to distribute “in kind” securities from the Account’s portfolio in lieu
(in whole or in part) of cash under certain circumstances, including under
stressed market conditions.
The agreement for
the above-mentioned line of credit is with The Bank of New York Mellon. The Bond
Market Index Account will not be permitted to use the line of credit because an
affiliate of The Bank of New York Mellon serves as a sub-advisor for the
Account. The Account expects to meet requests using the other methods outlined
above.
Restricted
Transfers
Shares of each of the Accounts may
be transferred to an eligible purchaser. However, if an Account is requested to
transfer shares to other than an eligible purchaser, the Account has the right,
at its election, to purchase the shares at the net asset value next calculated
after the receipt of the transfer request. However, the Account must give
written notification to the transferee(s) of the shares of the election to buy
the shares within seven days of the request. Settlement for the shares shall be
made within the seven-day period.
Financial
Statements
Shareholders will receive an annual
financial statement for the Fund, audited by the Fund’s independent registered
public accounting firm. Shareholders will also receive a semiannual financial
statement that is unaudited.
APPENDIX A –
INDEX ABBREVIATIONS
Some of the indices in the
prospectus are identified with abbreviations. The abbreviations for those
indices are spelled out below:
|
|
|
Index Name
shown in the
Average
Annual Total Returns Table |
Full Index
Name |
Bloomberg Barclays MBS Fixed
Rate Index |
Bloomberg Barclays Mortgage
Backed Securities Index |
MSCI Emerging Markets NR
Index |
Morgan Stanley Capital
International Emerging Markets Net Dividend Total Return Dollar Index
|
MSCI EAFE Index
NR |
Morgan Stanley Capital
International Europe, Australasia, and Far East Index Net Dividend Total
Return Dollar Index |
MSCI ACWI
Ex-U.S |
Morgan Stanley Capital
International All Country World Index Ex-U.S. |
MSCI US REIT
Index |
Morgan Stanley Capital
International United States Real Estate Investment Trust
Index |
APPENDIX B –
DESCRIPTION OF BOND RATINGS
Moody's
Investors Service, Inc. Rating Definitions:
Long-Term Obligation
Ratings
Ratings assigned on Moody's global
long-term obligation rating scales are forward-looking opinions of the relative
credit risk of financial obligations issued by non-financial corporates,
financial institutions, structured finance vehicles, project finance vehicles,
and public sector entities. Long-term ratings are assigned to issuers or
obligations with an original maturity of one year or more and reflect both on
the likelihood of default on contractually promised payments and the expected
financial loss suffered in the event of default.1
1
For certain
structured finance, preferred stock and hybrid securities in which payment
default events are either not defined or do not match investor’s expectations
for timely payment, the ratings reflect the likelihood of impairment and the
expected financial loss in the event of impairment.
|
|
Aaa: |
Obligations rated Aaa are
judged to be of the highest quality, subject to the lowest level of credit
risk. |
|
|
Aa: |
Obligations rated Aa are
judged to be of high quality and are subject to very low credit
risk. |
|
|
A: |
Obligations rated A are
considered upper-medium grade and are subject to low credit
risk. |
|
|
Baa: |
Obligations rated Baa are
subject to moderate credit risk. They are considered medium-grade and as
such may possess certain speculative
characteristics. |
|
|
Ba: |
Obligations rated Ba are
judged to be speculative and are subject to substantial credit
risk. |
|
|
B: |
Obligations rated B are
considered speculative and are subject to high credit
risk. |
|
|
Caa: |
Obligations rated Caa are
judged to be speculative of poor standing and are subject to very high
credit risk. |
|
|
Ca: |
Obligations rated Ca are
highly speculative and are likely in, or very near, default, with some
prospect of recovery of principal and
interest. |
|
|
C: |
Obligations rated C are the
lowest rated class of bonds and are typically in default, with little
prospect for recovery of principal or
interest. |
NOTE: Moody's appends numerical
modifiers, 1, 2, and 3 to each generic rating classification from Aa through
Caa. The modifier 1 indicates that the obligation ranks in the higher end of its
generic rating category, the modifier 2 indicates a mid-range ranking, and the
modifier 3 indicates a ranking in the lower end of that generic rating category.
Additionally, a “(hyb)” indicator is appended to all ratings of hybrid
securities issued by banks, issuers, financial companies, and securities
firms.*
* By their
terms, hybrid securities allow for the omission of scheduled dividends,
interest, or principal payments, which can potentially result in impairment if
such an omission occurs. Hybrid securities may also be subject to contractually
allowable write-downs of principal that could result in impairment. Together the
hybrid indicator, the long-term obligation rating assigned to a hybrid security
is an expression of the relative credit risk associated with that
security.
SHORT-TERM NOTES: Short-term ratings
are assigned to obligations with an original maturity of thirteen months or less
and reflect both on the likelihood of a default on contractually promised
payments and the expected financial loss suffered in the event of default.
Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:
Issuers rated Prime-1 (or related
supporting institutions) have a superior ability to repay short-term debt
obligations.
Issuers rated Prime-2 (or related
supporting institutions) have a strong ability to repay short-term debt
obligations.
Issuers rated Prime-3 (or related
supporting institutions) have an acceptable ability to repay short-term
promissory obligations.
Issuers rated Not Prime do not fall
within any of the Prime rating categories.
US MUNICIPAL SHORT-TERM DEBT: The
Municipal Investment Grade (MIG) scale is used to rate US municipal bonds of up
to three years maturity. MIG ratings are divided into three levels - MIG 1
through MIG 3 - while speculative grade short-term obligations are designated
SG.
MIG 1 denotes superior credit
quality, afforded excellent protection from highly reliable liquidity support,
or demonstrated broad-based access to the market for refinancing.
MIG 2 denotes strong credit quality
with ample margins of protection, although not as large as in the preceding
group.
MIG 3 notes are of acceptable credit
quality. Liquidity and cash-flow protection may be narrow and market access for
refinancing is likely to be less well-established
SG denotes speculative-grade credit
quality and may lack sufficient margins of protection.
Description
of S&P Global Ratings' Credit Rating Definitions:
S&P Global's credit rating, both
long-term and short-term, is a forward-looking opinion of the creditworthiness
of an obligor with respect to a specific obligation. This assessment takes into
consideration the creditworthiness of guarantors, insurers, or other forms of
credit enhancement on the obligation.
The credit rating is not a
recommendation to purchase, sell or hold a security, inasmuch as it does not
comment as to market price or suitability for a particular
investor.
The ratings are statements of
opinion as of the date they are expressed furnished by the issuer or obtained by
S&P Global from other sources S&P Global considers reliable. S&P
Global does not perform an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be changed,
suspended, or withdrawn as a result of changes in, or unavailability of, such
information, or for other circumstances.
The ratings are based, in varying
degrees, on the following considerations:
|
|
• |
Likelihood of payment -
capacity and willingness of the obligor to meet its financial commitment
on an obligation in accordance with the terms of the
obligation; |
|
|
• |
Nature of and provisions of
the obligation; |
|
|
• |
Protection afforded by, and
relative position of, the obligation in the event of bankruptcy,
reorganization, or other arrangement under the laws of bankruptcy and
other laws affecting creditor's rights. |
LONG-TERM CREDIT
RATINGS:
|
|
AAA: |
Obligations rated ‘AAA’ have
the highest rating assigned by S&P Global. The obligor’s capacity to
meet its financial commitment on the obligation is extremely
strong. |
|
|
AA: |
Obligations rated ‘AA’ differ
from the highest-rated issues only in small degree. The obligor’s capacity
to meet its financial commitment on the obligation is very
strong. |
|
|
A: |
Obligations rated ‘A’ have a
strong capacity to meet financial commitment on the obligation although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than obligations in higher-rated
categories. |
|
|
BBB: |
Obligations rated ‘BBB’
exhibit adequate protection parameters; however, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to meet financial commitment on the
obligation. |
|
|
BB, B, CCC, |
Obligations rated ‘BB’, ‘B’,
‘CCC’, ‘CC’, and ‘C’ are regarded, on balance, as having
significant |
|
|
CC, and C: |
speculative characteristics.
‘BB’ indicates the lowest degree of speculation and ‘C’ the highest degree
of speculation. While such obligations will likely have some quality and
protective characteristics, these may be outweighed by large uncertainties
or major risk exposures to adverse
conditions. |
|
|
BB: |
Obligations rated ‘BB’ are
less vulnerable to nonpayment than other speculative issues. However it
faces major ongoing uncertainties or exposure to adverse business,
financial, or economic conditions which could lead to the obligor’s
inadequate capacity to meet its financial commitment on the
obligation. |
|
|
B: |
Obligations rated ‘B’ are more
vulnerable to nonpayment than ‘BB’ but the obligor currently has the
capacity to meet its financial commitment on the obligation. Adverse
business, financial, or economic conditions will likely impair this
capacity. |
|
|
CCC: |
Obligations rated ‘CCC’ are
currently vulnerable to nonpayment and is dependent upon favorable
business, financial, and economic conditions for the obligor to meet its
financial commitment on the obligation. If adverse business, financial, or
economic conditions occur, the obligor is not likely to have the capacity
to meet its financial commitment on the
obligation. |
|
|
CC: |
Obligations rated ‘CC’ are
currently highly vulnerable to nonpayment. The ‘CC’ rating is used when a
default has not yet occurred but S&P Global expects default to be a
virtual certainty, regardless of anticipated time to
default. |
|
|
C: |
The rating ‘C’ is highly
vulnerable to nonpayment, the obligation is expected to have lower
relative seniority or lower ultimate recovery compared to higher rated
obligations. |
|
|
D: |
Obligations rated ‘D’ are in
default, or in breach of an imputed promise. For non-hybrid capital
instruments, the ‘D’ rating category is used when payments on an
obligation are not made on the date due, unless S&P Global believes
that such payments will be made within five business days in the absence
of a stated grace period or within the earlier of the stated grace period
or 30 calendar days. The rating will also be used upon filing for
bankruptcy petition or the taking of similar action and where default is a
virtual certainty. If an obligation is subject to a distressed exchange
offer the rating is lowered to ‘D’. |
Plus (+) or Minus (-): The ratings
from ‘AA’ to ‘CCC’ may be modified by the addition of a plus or minus sign to
show relative standing within the major rating categories.
|
|
NR: |
Indicates that no rating has
been requested, that there is insufficient information on which to base a
rating or that S&P Global does not rate a particular type of
obligation as a matter of policy. |
SHORT-TERM CREDIT RATINGS: Ratings
are graded into four categories, ranging from ‘A-1’ for the highest quality
obligations to ‘D’ for the lowest.
|
|
A-1: |
This is the highest category.
The obligor’s capacity to meet its financial commitment on the obligation
is strong. Within this category, certain obligations are designated with a
plus sign (+). This indicates that the obligor’s capacity to meet its
financial commitment on these obligations is extremely
strong. |
|
|
A-2: |
Issues carrying this
designation are somewhat more susceptible to the adverse effects of the
changes in circumstances and economic conditions than obligations in
higher rating categories. However, the obligor’s capacity to meet its
financial commitment on the obligation is
satisfactory. |
|
|
A-3: |
Issues carrying this
designation exhibit adequate capacity to meet their financial obligations.
However, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity of the obligor to meet it financial
commitment on the obligation. |
|
|
B: |
Issues rated ‘B’ are regarded
as vulnerable and have significant speculative characteristics. The
obligor has capacity to meet financial commitments; however, it faces
major ongoing uncertainties which could lead to obligor’s inadequate
capacity to meet its financial
obligations. |
|
|
C: |
This rating is assigned to
short-term debt obligations that are currently vulnerable to nonpayment
and is dependent upon favorable business, financial, and economic
conditions to meet its financial commitment on the
obligation. |
|
|
D: |
This rating indicates that the
issue is either in default or in breach of an imputed promise. For
non-hybrid capital instruments, the ‘D’ rating category is used when
payments on an obligation are not made on the date due, unless S&P
Global believes that such payments will be made within five business days
in the absence of a stated grace period or within the earlier of the
stated grace period or 30 calendar days. The rating will also be used upon
filing for bankruptcy petition or the taking of similar action and where
default is a virtual certainty. If an obligation is subject to a
distressed exchange offer the rating is lowered to
‘D’. |
MUNICIPAL SHORT-TERM NOTE RATINGS:
S&P Global rates U.S. municipal notes with a maturity of less than three
years as follows:
|
|
SP-1: |
A strong capacity to pay
principal and interest. Issues that possess a very strong capacity to pay
debt service is given a "+" designation. |
|
|
SP-2: |
A satisfactory capacity to pay
principal and interest, with some vulnerability to adverse financial and
economic changes over the terms of the
notes. |
|
|
SP-3: |
A speculative capacity to pay
principal and interest. |
Fitch,
Inc. Rating Definitions:
Fitch’s credit ratings are forward
looking and typically attempt to assess the likelihood of repayment by the
obligor at “ultimate/final maturity” and thus material changes in economic
conditions and expectations (for a particular issuer) may result in a rating
change. Credit ratings are opinions on relative credit quality and not a
predictive measure of specific default probability.
Investment Grade
|
|
AAA: |
Highest credit quality. ‘AAA’
ratings denote the lowest expectation of credit risk. They are assigned
only in case of exceptionally strong capacity for payment of financial
commitments. This capacity is highly unlikely to be adversely affected by
foreseeable events. |
|
|
AA: |
Very high credit quality. ‘AA’
ratings denote expectations of very low credit risk. They indicate very
strong capacity for timely payment of financial commitments. This capacity
is not significantly vulnerable to foreseeable
events. |
|
|
A: |
High credit quality. ‘A’
ratings denote low expectation of credit risk. The capacity for timely
payment of financial commitments is considered strong. This capacity may,
nevertheless, be more vulnerable to adverse business or economic
conditions than is the case for higher
ratings. |
|
|
BBB: |
Good credit quality. ‘BBB’
ratings indicate that expectations of credit risk are currently low. The
capacity for payment of financial commitments is considered adequate, but
adverse business or economic conditions are more likely to impair this
capacity. |
Speculative Grade
|
|
BB: |
Speculative. ‘BB’ ratings
indicate an elevated vulnerability to credit risk, particularly in the
event of adverse changes in business or economic conditions over time;
however, business or financial alternatives may be available to allow
financial commitments to be met. |
|
|
B: |
Highly speculative. ‘B’
ratings indicate that material credit risk is
present. |
|
|
CCC: |
Substantial credit risk. ‘CCC’
ratings indicate that substantial credit risk is
present. |
|
|
CC: |
Very high levels of credit
risk. ‘CC’ ratings indicate very high levels of credit
risk. |
|
|
C: |
Exceptionally high levels of
credit risk. ‘C’ indicates exceptionally high levels of credit
risk. |
|
|
D: |
Default. ‘D’ ratings indicate
an issuer has entered into bankruptcy filings, administration,
receivership, liquidation or which has otherwise ceased
business. |
Note: The
modifiers “+” or “-“may be appended to a rating to denote relative status within
major rating categories. Such suffixes are not added to the ‘AAA’ obligation
rating category, or to corporate finance obligation ratings in the categories
below ‘B’.
Short-Term Credit
Ratings
A short-term issuer or obligation
rating is based in all cases on the short-term vulnerability to default of the
rated entity or security stream, and relates to the capacity to meet financial
obligations in accordance with the documentation governing the relevant
obligation. Short-Term Ratings are assigned to obligations whose initial
maturity is viewed as “short term” based on market convention. Typically, this
means up to 13 months for corporate, structured and sovereign obligations, and
up to 36 months for obligations in US public finance markets.
|
|
F1: |
Highest short-term credit
quality. Indicates the strongest intrinsic capacity for timely payment of
financial commitments; may have an added “+” to denote any exceptionally
strong credit feature. |
|
|
F2: |
Good short-term credit
quality. Good intrinsic capacity for timely payment of financial
commitments. |
|
|
F3: |
Fair short-term credit
quality. The intrinsic capacity for timely payment of financial
commitments is adequate. |
|
|
B: |
Speculative short-term credit
quality. Minimal capacity for timely payment of financial commitments,
plus heightened vulnerability to near term adverse changes in financial
and economic conditions. |
|
|
C: |
High short-term default risk.
Default is a real possibility. |
|
|
RD: |
Restricted default. Indicates
an entity that has defaulted on one or more of its financial commitments,
although it continues to meet other financial obligations. Typically
applicable to entity ratings only. |
|
|
D: |
Default. Indicates a
broad-based default event for an entity, or the default of a specific
short-term obligation. |
Recovery Ratings
Recovery Ratings are assigned to
selected individual securities and obligations, most frequently for individual
obligations of corporate issuers with speculative grade ratings.
Among the factors that affect
recovery rates for securities are the collateral, the seniority relative to
other obligations in the capital structure (where appropriate), and the expected
value of the company or underlying collateral in distress.
The Recovery Rating scale is based
upon the expected relative recovery characteristics of an obligation upon the
curing of a default, emergence from insolvency or following the liquidation or
termination of the obligor or its associated collateral. Recovery Ratings are an
ordinal scale and do not attempt to precisely predict a given level of recovery.
As a guideline in developing the rating assessments, the agency employs broad
theoretical recovery bands in its ratings approach based on historical averages
and analytical judgment, but actual recoveries for a given security may deviate
materially from historical averages.
|
|
RR1: |
Outstanding recovery prospects
given default. ‘RR1’ rated securities have characteristics consistent with
securities historically recovering 91%-100% of current principal and
related interest. |
|
|
RR2: |
Superior recovery prospects
given default. ‘RR2’ rated securities have characteristics consistent with
securities historically recovering 71%-90% of current principal and
related interest. |
|
|
RR3: |
Good recovery prospects given
default. ‘RR3’ rated securities have characteristics consistent with
securities historically recovering 51%-70% of current principal and
related interest. |
|
|
RR4: |
Average recovery prospects
given default. ‘RR4’ rated securities have characteristics consistent with
securities historically recovering 31%-50% of current principal and
related interest. |
|
|
RR5: |
Below average recovery
prospects given default. ‘RR5’ rated securities have characteristics
consistent with securities historically recovering 11%-30% of current
principal and related interest. |
|
|
RR6: |
Poor recovery prospects given
default. ‘RR6’ rated securities have characteristics consistent with
securities historically recovering 0%-10% of current principal and related
interest. |
APPENDIX C –
FINANCIAL HIGHLIGHTS
The following financial highlights
tables are intended to help you understand the Account's financial performance
for the periods shown. Certain information reflects returns for a single Account
share. The total returns in each table represent the rate that an investor would
have earned or lost each period on an investment in the Account (assuming
reinvestment of all distributions). This information has been audited by Ernst
& Young LLP, Independent Registered Public Accounting Firm, whose report,
along with each Account's financial statements, is included in Principal
Variable Contracts Funds, Inc. Annual Report to Shareholders for the fiscal year
ended December 31, 2017, which is available upon request, and incorporated by
reference into the SAI.
To request a free copy of the latest
annual or semiannual report for the Fund, you may telephone
1-800-222-5852.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL
HIGHLIGHTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRINCIPAL VARIABLE
CONTRACTS FUNDS, INC. |
|
|
|
|
|
|
|
|
|
|
Selected data for a
share of Capital Stock outstanding throughout each year ended December 31
(except as noted): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset |
|
Net |
|
Net Realized |
|
|
|
|
|
Dividends |
|
Distributions |
|
|
Total |
|
|
|
|
Value, |
|
Investment
|
|
and
Unrealized |
|
|
Total
From |
|
|
from
Net |
|
from |
|
|
Dividends |
|
|
|
|
Beginning of |
|
Income |
Gain (Loss)
on |
|
|
Investment |
|
|
Investment |
|
Realized |
|
|
and |
|
|
|
|
Period |
|
(Loss)(a) |
|
Investments |
|
|
Operations |
|
|
Income |
|
Gains |
|
|
Distributions |
|
BOND MARKET INDEX
ACCOUNT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class 1
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
$ |
10.25 |
$ |
0.22 |
$ |
0.11 |
|
$ |
0.33 |
|
|
($0.19 |
) |
$– |
|
|
($0.19 |
) |
2016 |
|
|
10.20 |
|
0.19 |
|
0.05 |
|
|
0.24 |
|
|
(0.19 |
) |
– |
|
|
(0.19 |
) |
2015 |
|
|
10.34 |
|
0.18 |
|
(0.17 |
) |
|
0.01 |
|
|
(0.15 |
) |
– |
|
|
(0.15 |
) |
2014 |
|
|
9.88 |
|
0.17 |
|
0.40 |
|
|
0.57 |
|
|
(0.11 |
) |
– |
|
|
(0.11 |
) |
2013 |
|
|
10.21 |
|
0.13 |
|
(0.39 |
) |
|
(0.26 |
) |
|
(0.07 |
) |
– |
|
|
(0.07 |
) |
CORE PLUS BOND
ACCOUNT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class 1
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
|
11.15 |
|
0.35 |
|
0.18 |
|
|
0.53 |
|
|
(0.33 |
) |
– |
|
|
(0.33 |
) |
2016 |
|
|
11.05 |
|
0.32 |
|
0.14 |
|
|
0.46 |
|
|
(0.36 |
) |
– |
|
|
(0.36 |
) |
2015 |
|
|
11.46 |
|
0.32 |
|
(0.37 |
) |
|
(0.05 |
) |
|
(0.36 |
) |
– |
|
|
(0.36 |
) |
2014 |
|
|
11.24 |
|
0.31 |
|
0.28 |
|
|
0.59 |
|
|
(0.37 |
) |
– |
|
|
(0.37 |
) |
2013 |
|
|
11.74 |
|
0.32 |
|
(0.43 |
) |
|
(0.11 |
) |
|
(0.39 |
) |
– |
|
|
(0.39 |
) |
Class 2
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
|
11.11 |
|
0.32 |
|
0.18 |
|
|
0.50 |
|
|
(0.33 |
) |
– |
|
|
(0.33 |
) |
2016 |
|
|
11.03 |
|
0.29 |
|
0.14 |
|
|
0.43 |
|
|
(0.35 |
) |
– |
|
|
(0.35 |
) |
2015 |
(d) |
|
11.62 |
|
0.19 |
|
(0.42 |
) |
|
(0.23 |
) |
|
(0.36 |
) |
– |
|
|
(0.36 |
) |
DIVERSIFIED
BALANCED ACCOUNT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class 1
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
(g) |
|
15.36 |
|
0.45 |
|
0.65 |
|
|
1.10 |
|
|
(0.26 |
) |
(0.22 |
) |
|
(0.48 |
) |
Class 2
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
|
14.76 |
|
0.35 |
|
1.32 |
|
|
1.67 |
|
|
(0.22 |
) |
(0.22 |
) |
|
(0.44 |
) |
2016 |
|
|
14.11 |
|
0.22 |
|
0.75 |
|
|
0.97 |
|
|
(0.18 |
) |
(0.14 |
) |
|
(0.32 |
) |
2015 |
|
|
14.39 |
|
0.19 |
|
(0.17 |
) |
|
0.02 |
|
|
(0.14 |
) |
(0.16 |
) |
|
(0.30 |
) |
2014 |
|
|
13.66 |
|
0.16 |
|
0.85 |
|
|
1.01 |
|
|
(0.13 |
) |
(0.15 |
) |
|
(0.28 |
) |
2013 |
|
|
12.28 |
|
0.15 |
|
1.43 |
|
|
1.58 |
|
|
(0.04 |
) |
(0.16 |
) |
|
(0.20 |
) |
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL
HIGHLIGHTS (Continued) |
|
|
|
|
|
|
|
|
|
PRINCIPAL VARIABLE
CONTRACTS FUNDS, INC. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset |
|
|
|
Net Assets, End
of |
Ratio of
Expenses |
|
Ratio of Gross |
|
Ratio of Net |
|
|
|
|
Value, End |
Total |
|
|
Period (in |
to Average Net |
|
Expenses to
Average |
|
Investment Income
to |
|
Portfolio |
|
|
of
Period |
Return(b) |
|
|
thousands) |
Assets |
|
Net
Assets |
|
Average Net Assets
|
|
Turnover
Rate |
|
|
|
$ |
10.39 |
3.27 |
% |
$ |
2,448,068 |
0.23% |
(c) |
–% |
|
2.10 |
% |
108.9 |
% |
|
10.25 |
2.29 |
|
|
2,184,608 |
0.25 |
|
– |
|
1.86 |
|
118.5 |
|
|
10.20 |
0.13 |
|
|
1,937,655 |
0.25 |
|
– |
|
1.77 |
|
154.0 |
|
|
10.34 |
5.75 |
|
|
1,734,803 |
0.26 |
|
– |
|
1.68 |
|
195.7 |
|
|
9.88 |
(2.56 |
) |
|
1,264,213 |
0.26 |
|
– |
|
1.26 |
|
225.8 |
|
|
|
|
11.35 |
4.81 |
|
|
293,662 |
0.46 |
|
– |
|
3.08 |
|
123.5 |
|
|
11.15 |
4.09 |
|
|
292,436 |
0.46 |
|
– |
|
2.79 |
|
155.1 |
|
|
11.05 |
(0.48 |
) |
|
290,032 |
0.46 |
|
– |
|
2.80 |
|
177.2 |
|
|
11.46 |
5.24 |
|
|
321,735 |
0.45 |
|
– |
|
2.74 |
|
205.6 |
|
|
11.24 |
(0.86 |
) |
|
316,177 |
0.45 |
|
– |
|
2.79 |
|
204.8 |
|
|
|
11.28 |
4.50 |
|
|
592 |
0.71 |
|
– |
|
2.80 |
|
123.5 |
|
|
11.11 |
3.82 |
|
|
232 |
0.71 |
|
– |
|
2.55 |
|
155.1 |
|
|
11.03 |
(2.03) |
(e) |
|
28 |
0.71 |
(f) |
– |
|
2.58 |
(f) |
177.2 |
(f) |
|
|
|
15.98 |
7.27 |
(e) |
|
42,702 |
0.05 (f), |
(h) |
0.05 (f), |
(h) |
4.27 |
(f) |
13.9 |
(f) |
|
|
15.99 |
11.43 |
|
|
1,131,373 |
0.30 |
(h) |
0.30 (h) |
,(i) |
2.27 |
|
13.9 |
|
|
14.76 |
6.90 |
|
|
1,099,647 |
0.30 |
(h) |
0.30 (h) |
,(i) |
1.51 |
|
14.1 |
|
|
14.11 |
0.16 |
|
|
1,031,111 |
0.30 |
(h) |
0.30 (h) |
,(i) |
1.29 |
|
14.3 |
|
|
14.39 |
7.41 |
|
|
1,011,106 |
0.30 |
(h) |
0.30 (h) |
,(i) |
1.11 |
|
9.0 |
|
|
13.66 |
12.95 |
|
|
856,784 |
0.30 |
(h) |
0.30 (h) |
,(i) |
1.16 |
|
10.1 |
|
(a)
|
Calculated based on
average shares outstanding during the period. |
(b)
|
Total return does not
reflect charges attributable to separate accounts. Inclusion of these
charges would reduce the amounts shown. |
(c)
|
Reflects Manager's
contractual expense limit. |
(d)
|
Period from May 1, 2015
date operations commenced, through December 31, 2015. |
(e)
|
Total return amounts
have not been annualized. |
(f)
|
Computed on an
annualized basis. |
(g)
|
Period from May 1, 2017
date operations commenced, through December 31, 2017. |
(h)
|
Does not include
expenses of the investment companies in which the Account invests.
|
(i)
|
Excludes expense
reimbursement from Manager. |
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL
HIGHLIGHTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRINCIPAL VARIABLE
CONTRACTS FUNDS, INC. |
|
|
|
|
|
|
|
|
|
|
Selected data for a
share of Capital Stock outstanding throughout each year ended December 31
(except as noted): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset |
|
Net |
|
Net Realized |
|
|
|
|
Dividends |
|
|
Distributions |
|
|
Total |
|
|
|
|
Value, |
|
Investment
|
|
and
Unrealized |
|
|
Total
From |
|
from
Net |
|
|
from |
|
|
Dividends |
|
|
|
|
Beginning of |
|
Income |
|
Gain (Loss)
on |
|
|
Investment |
|
Investment |
|
|
Realized |
|
|
and |
|
|
|
|
Period |
|
(Loss)(a) |
|
Investments |
|
|
Operations |
|
Income |
|
|
Gains |
|
|
Distributions |
|
DIVERSIFIED
BALANCED MANAGED VOLATILITY ACCOUNT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class 2
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
$ |
11.27 |
$ |
0.43 |
$ |
0.78 |
|
$ |
1.21 |
|
($0.15 |
) |
|
($0.08 |
) |
|
($0.23 |
) |
2016 |
|
|
10.72 |
|
0.16 |
|
0.53 |
|
|
0.69 |
|
(0.08 |
) |
|
(0.06 |
) |
|
(0.14 |
) |
2015 |
|
|
10.88 |
|
0.10 |
|
(0.09 |
) |
|
0.01 |
|
(0.09 |
) |
|
(0.08 |
) |
|
(0.17 |
) |
2014 |
|
|
10.18 |
|
0.27 |
|
0.43 |
|
|
0.70 |
|
– |
|
|
– |
|
|
– |
|
2013 |
(e) |
|
10.00 |
|
0.13 |
|
0.05 |
|
|
0.18 |
|
– |
|
|
– |
|
|
– |
|
DIVERSIFIED
BALANCED VOLATILITY CONTROL ACCOUNT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class 2
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
(h) |
|
10.00 |
|
0.27 |
|
0.53 |
|
|
0.80 |
|
– |
|
|
– |
|
|
– |
|
DIVERSIFIED GROWTH
ACCOUNT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class 2
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
|
15.93 |
|
0.43 |
|
1.79 |
|
|
2.22 |
|
(0.23 |
) |
|
(0.26 |
) |
|
(0.49 |
) |
2016 |
|
|
15.08 |
|
0.24 |
|
0.98 |
|
|
1.22 |
|
(0.19 |
) |
|
(0.18 |
) |
|
(0.37 |
) |
2015 |
|
|
15.40 |
|
0.21 |
|
(0.18 |
) |
|
0.03 |
|
(0.16 |
) |
|
(0.19 |
) |
|
(0.35 |
) |
2014 |
|
|
14.60 |
|
0.19 |
|
0.94 |
|
|
1.13 |
|
(0.14 |
) |
|
(0.19 |
) |
|
(0.33 |
) |
2013 |
|
|
12.54 |
|
0.20 |
|
2.04 |
|
|
2.24 |
|
(0.06 |
) |
|
(0.12 |
) |
|
(0.18 |
) |
DIVERSIFIED GROWTH
MANAGED VOLATILITY ACCOUNT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class 2
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
|
11.46 |
|
0.52 |
|
0.99 |
|
|
1.51 |
|
(0.15 |
) |
|
(0.10 |
) |
|
(0.25 |
) |
2016 |
|
|
10.79 |
|
0.16 |
|
0.66 |
|
|
0.82 |
|
(0.07 |
) |
|
(0.08 |
) |
|
(0.15 |
) |
2015 |
|
|
10.99 |
|
0.09 |
|
(0.08 |
) |
|
0.01 |
|
(0.11 |
) |
|
(0.10 |
) |
|
(0.21 |
) |
2014 |
|
|
10.27 |
|
0.31 |
|
0.41 |
|
|
0.72 |
|
– |
|
|
– |
|
|
– |
|
2013 |
(e) |
|
10.00 |
|
0.26 |
|
0.01 |
|
|
0.27 |
|
– |
|
|
– |
|
|
– |
|
DIVERSIFIED GROWTH
VOLATILITY CONTROL ACCOUNT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class 2
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
(h) |
|
10.00 |
|
0.30 |
|
0.67 |
|
|
0.97 |
|
– |
|
|
– |
|
|
– |
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL
HIGHLIGHTS (Continued) |
|
|
|
|
|
|
|
|
|
PRINCIPAL VARIABLE
CONTRACTS FUNDS, INC. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset |
|
|
|
Net Assets, End
of |
Ratio of
Expenses |
|
Ratio of Gross |
|
Ratio of Net |
|
|
|
|
Value, End |
Total |
|
|
Period (in |
to Average Net |
|
Expenses to
Average |
|
Investment Income
to |
|
Portfolio |
|
|
of
Period |
Return(b) |
|
|
thousands) |
Assets |
|
Net
Assets |
|
Average Net Assets
|
|
Turnover
Rate |
|
|
|
$ |
12.25 |
10.90 |
% |
$ |
181,005 |
0.31%(c),(d) |
|
–% |
|
3.65 |
% |
13.6 |
% |
|
11.27 |
6.42 |
|
|
168,756 |
0.31 (c) |
,(d) |
– |
|
1.48 |
|
13.6 |
|
|
10.72 |
0.01 |
|
|
138,384 |
0.31 (c) |
,(d) |
– |
|
0.90 |
|
14.1 |
|
|
10.88 |
6.89 |
|
|
84,527 |
0.31 (c) |
,(d) |
– |
|
2.54 |
|
8.1 |
|
|
10.18 |
1.80 |
(f) |
|
887 |
0.31
(c),(d),(g) |
|
– |
|
7.97 |
(g) |
6.6 |
(g) |
|
|
|
10.80 |
8.10 (f) |
,(i) |
|
36,522 |
0.39
(c),(d),(g) |
|
– |
|
3.36 |
(g) |
8.0 |
(g) |
|
|
|
17.66 |
14.21 |
(i) |
|
3,945,713 |
0.30 |
(d) |
0.30 (d) |
,(j) |
2.52 |
|
10.9 |
|
|
15.93 |
8.14 |
|
|
3,588,901 |
0.30 |
(d) |
0.30 (d) |
,(j) |
1.53 |
|
11.1 |
|
|
15.08 |
0.17 |
|
|
3,201,495 |
0.30 |
(d) |
0.30 (d) |
,(j) |
1.37 |
|
10.7 |
|
|
15.40 |
7.83 |
|
|
2,880,722 |
0.30 |
(d) |
0.30 (d) |
,(j) |
1.25 |
|
7.1 |
|
|
14.60 |
17.95 |
|
|
2,202,857 |
0.30 |
(d) |
0.30 (d) |
,(j) |
1.49 |
|
7.7 |
|
|
|
|
12.72 |
13.34 |
|
|
355,062 |
0.30 (c) |
,(d) |
– |
|
4.30 |
|
12.5 |
|
|
11.46 |
7.56 |
|
|
313,672 |
0.30 (c) |
,(d) |
– |
|
1.49 |
|
11.7 |
|
|
10.79 |
0.06 |
|
|
252,611 |
0.30 (c) |
,(d) |
– |
|
0.82 |
|
11.5 |
|
|
10.99 |
7.06 |
|
|
151,672 |
0.31 (c) |
,(d) |
– |
|
2.92 |
|
8.0 |
|
|
10.27 |
2.70 |
(f) |
|
3,988 |
0.31
(c),(d),(g) |
|
– |
|
15.10 |
(g) |
127.3 |
(g) |
|
|
|
10.97 |
9.70 |
(f) |
|
171,769 |
0.38
(c),(d),(g) |
|
– |
|
3.80 |
(g) |
0.9 |
(g) |
(a)
|
Calculated based on
average shares outstanding during the period. |
(b)
|
Total return does not
reflect charges attributable to separate accounts. Inclusion of these
charges would reduce the amounts shown. |
(c)
|
Reflects Manager's
contractual expense limit. |
(d)
|
Does not include
expenses of the investment companies in which the Account invests.
|
(e)
|
Period from October 31,
2013 date operations commenced, through December 31, 2013. |
(f)
|
Total return amounts
have not been annualized. |
(g)
|
Computed on an
annualized basis. |
(h)
|
Period from March 30,
2017 date operations commenced, through December 31, 2017. |
(i)
|
Total return is
calculated using the traded net asset value which may differ from the
reported net asset value. The traded net asset value is the net asset
value which a shareholder would have paid or received from a subscription
or redemption. |
(j)
|
Excludes expense
reimbursement from Manager. |
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL
HIGHLIGHTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRINCIPAL VARIABLE
CONTRACTS FUNDS, INC. |
|
|
|
|
|
|
|
|
|
|
|
Selected data for a
share of Capital Stock outstanding throughout each year ended December 31
(except as noted): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset |
|
Net |
|
Net Realized |
|
|
|
|
|
Dividends |
|
|
Distributions |
|
|
Total |
|
|
|
Value, |
|
Investment
|
|
and
Unrealized |
|
|
Total
From |
|
|
from
Net |
|
|
from |
|
|
Dividends |
|
|
|
Beginning of |
|
Income |
|
Gain (Loss)
on |
|
|
Investment |
|
|
Investment |
|
|
Realized |
|
|
and |
|
|
|
Period |
|
(Loss)(a) |
|
Investments |
|
|
Operations |
|
|
Income |
|
|
Gains |
|
|
Distributions |
|
DIVERSIFIED INCOME
ACCOUNT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class 2
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
$ |
12.34 |
$ |
0.26 |
$ |
0.82 |
|
$ |
1.08 |
|
|
($0.18 |
) |
|
($0.12 |
) |
|
($0.30 |
) |
2016 |
|
11.87 |
|
0.19 |
|
0.47 |
|
|
0.66 |
|
|
(0.12 |
) |
|
(0.07 |
) |
|
(0.19 |
) |
2015 |
|
12.03 |
|
0.15 |
|
(0.12 |
) |
|
0.03 |
|
|
(0.10 |
) |
|
(0.09 |
) |
|
(0.19 |
) |
2014 |
|
11.38 |
|
0.12 |
|
0.66 |
|
|
0.78 |
|
|
(0.06 |
) |
|
(0.07 |
) |
|
(0.13 |
) |
2013 |
|
10.54 |
|
0.11 |
|
0.75 |
|
|
0.86 |
|
|
(0.01 |
) |
|
(0.01 |
) |
|
(0.02 |
) |
DIVERSIFIED
INTERNATIONAL ACCOUNT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class 1
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
13.42 |
|
0.21 |
|
3.67 |
|
|
3.88 |
|
|
(0.29 |
) |
|
– |
|
|
(0.29 |
) |
2016 |
|
13.68 |
|
0.24 |
|
(0.18 |
) |
|
0.06 |
|
|
(0.32 |
) |
|
– |
|
|
(0.32 |
) |
2015 |
|
14.08 |
|
0.26 |
|
(0.29 |
) |
|
(0.03 |
) |
|
(0.37 |
) |
|
– |
|
|
(0.37 |
) |
2014 |
|
14.87 |
|
0.24 |
|
(0.70 |
) |
|
(0.46 |
) |
|
(0.33 |
) |
|
– |
|
|
(0.33 |
) |
2013 |
|
12.89 |
|
0.24 |
|
2.09 |
|
|
2.33 |
|
|
(0.35 |
) |
|
– |
|
|
(0.35 |
) |
Class 2
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
13.52 |
|
0.17 |
|
3.71 |
|
|
3.88 |
|
|
(0.26 |
) |
|
– |
|
|
(0.26 |
) |
2016 |
|
13.78 |
|
0.20 |
|
(0.18 |
) |
|
0.02 |
|
|
(0.28 |
) |
|
– |
|
|
(0.28 |
) |
2015 |
|
14.19 |
|
0.21 |
|
(0.29 |
) |
|
(0.08 |
) |
|
(0.33 |
) |
|
– |
|
|
(0.33 |
) |
2014 |
|
14.97 |
|
0.21 |
|
(0.70 |
) |
|
(0.49 |
) |
|
(0.29 |
) |
|
– |
|
|
(0.29 |
) |
2013 |
|
12.96 |
|
0.22 |
|
2.10 |
|
|
2.32 |
|
|
(0.31 |
) |
|
– |
|
|
(0.31 |
) |
EQUITY INCOME
ACCOUNT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class 1
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
23.20 |
|
0.56 |
|
4.14 |
|
|
4.70 |
|
|
(0.58 |
) |
|
(1.24 |
) |
|
(1.82 |
) |
2016 |
|
21.67 |
|
0.57 |
|
2.77 |
|
|
3.34 |
|
|
(0.64 |
) |
|
(1.17 |
) |
|
(1.81 |
) |
2015 |
|
23.12 |
|
0.58 |
|
(1.46 |
) |
|
(0.88 |
) |
|
(0.57 |
) |
|
– |
|
|
(0.57 |
) |
2014 |
|
21.00 |
|
0.57 |
|
2.09 |
|
|
2.66 |
|
|
(0.54 |
) |
|
– |
|
|
(0.54 |
) |
2013 |
|
17.03 |
|
0.54 |
|
4.04 |
|
|
4.58 |
|
|
(0.61 |
) |
|
– |
|
|
(0.61 |
) |
Class 2
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
23.03 |
|
0.49 |
|
4.11 |
|
|
4.60 |
|
|
(0.52 |
) |
|
(1.24 |
) |
|
(1.76 |
) |
2016 |
|
21.52 |
|
0.51 |
|
2.75 |
|
|
3.26 |
|
|
(0.58 |
) |
|
(1.17 |
) |
|
(1.75 |
) |
2015 |
|
22.96 |
|
0.52 |
|
(1.45 |
) |
|
(0.93 |
) |
|
(0.51 |
) |
|
– |
|
|
(0.51 |
) |
2014 |
|
20.87 |
|
0.51 |
|
2.07 |
|
|
2.58 |
|
|
(0.49 |
) |
|
– |
|
|
(0.49 |
) |
2013 |
|
16.92 |
|
0.49 |
|
4.02 |
|
|
4.51 |
|
|
(0.56 |
) |
|
– |
|
|
(0.56 |
) |
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL
HIGHLIGHTS (Continued) |
|
|
|
|
|
|
|
|
|
PRINCIPAL VARIABLE
CONTRACTS FUNDS, INC. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset |
|
|
|
|
Ratio of
Expenses |
|
Ratio of Gross |
|
Ratio of Net |
|
|
|
|
Value, End |
Total |
|
|
Net Assets, End
of |
to Average Net |
|
Expenses to
Average |
|
Investment Income
to |
|
Portfolio |
|
|
of
Period |
Return(b) |
|
|
Period (in
thousands) |
Assets |
|
Net
Assets |
|
Average Net
Assets |
|
Turnover Rate |
|
|
|
$ |
13.12 |
8.81 |
% |
$ |
268,135 |
0.30 |
%(c) |
0.30%(c),(d) |
|
2.06 |
% |
21.2 |
% |
|
12.34 |
5.56 |
|
|
254,001 |
0.30 |
(c) |
0.30 (c) |
,(d) |
1.56 |
|
19.3 |
|
|
11.87 |
0.16 |
|
|
198,762 |
0.30 |
(c) |
0.30 (c) |
,(d) |
1.25 |
|
20.1 |
|
|
12.03 |
6.89 |
|
|
168,562 |
0.31 |
(c) |
0.31 (c) |
,(d) |
1.06 |
|
18.7 |
|
|
11.38 |
8.14 |
|
|
112,037 |
0.31 |
(c) |
0.31 (c) |
,(d) |
0.96 |
|
27.0 |
|
|
|
|
17.01 |
29.06 |
|
|
292,975 |
0.91 |
|
– |
|
1.37 |
|
42.8 |
|
|
13.42 |
0.36 |
|
|
243,997 |
0.91 |
|
– |
|
1.77 |
|
56.8 |
|
|
13.68 |
(0.35 |
) |
|
273,300 |
0.88 |
|
– |
|
1.80 |
|
48.2 |
|
|
14.08 |
(3.21 |
) |
|
429,194 |
0.86 |
|
– |
|
1.64 |
|
62.1 |
|
|
14.87 |
18.40 |
|
|
501,094 |
0.87 |
|
– |
|
1.78 |
|
79.5 |
|
|
|
17.14 |
28.79 |
|
|
1,868 |
1.16 |
|
– |
|
1.10 |
|
42.8 |
|
|
13.52 |
0.11 |
|
|
1,362 |
1.16 |
|
– |
|
1.50 |
|
56.8 |
|
|
13.78 |
(0.65 |
) |
|
1,360 |
1.13 |
|
– |
|
1.47 |
|
48.2 |
|
|
14.19 |
(3.41 |
) |
|
1,266 |
1.11 |
|
– |
|
1.38 |
|
62.1 |
|
|
14.97 |
18.18 |
|
|
1,458 |
1.12 |
|
– |
|
1.61 |
|
79.5 |
|
|
|
|
26.08 |
21.08 |
|
|
572,629 |
0.50 |
|
– |
|
2.26 |
|
15.9 |
|
|
23.20 |
15.72 |
|
|
525,829 |
0.50 |
|
– |
|
2.54 |
|
17.1 |
|
|
21.67 |
(3.93 |
) |
|
513,126 |
0.49 |
|
– |
|
2.54 |
|
10.7 |
|
|
23.12 |
12.80 |
|
|
599,407 |
0.48 |
|
– |
|
2.57 |
|
11.6 |
|
|
21.00 |
27.30 |
|
|
630,542 |
0.48 |
|
– |
|
2.83 |
|
18.0 |
|
|
|
25.87 |
20.77 |
|
|
27,469 |
0.75 |
|
– |
|
2.00 |
|
15.9 |
|
|
23.03 |
15.43 |
|
|
24,197 |
0.75 |
|
– |
|
2.29 |
|
17.1 |
|
|
21.52 |
(4.15 |
) |
|
23,215 |
0.74 |
|
– |
|
2.29 |
|
10.7 |
|
|
22.96 |
12.46 |
|
|
25,491 |
0.73 |
|
– |
|
2.32 |
|
11.6 |
|
|
20.87 |
27.02 |
|
|
24,810 |
0.73 |
|
– |
|
2.58 |
|
18.0 |
|
(a)
|
Calculated based on
average shares outstanding during the period. |
(b)
|
Total return does not
reflect charges attributable to separate accounts. Inclusion of these
charges would reduce the amounts shown. |
(c)
|
Does not include
expenses of the investment companies in which the Account invests.
|
(d)
|
Excludes expense
reimbursement from Manager. |
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL
HIGHLIGHTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRINCIPAL VARIABLE
CONTRACTS FUNDS, INC. |
|
|
|
|
|
|
|
|
|
|
Selected data for a
share of Capital Stock outstanding throughout each year ended December 31
(except as noted): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset |
|
Net |
|
Net Realized |
|
|
|
|
|
Dividends |
|
Distributions |
|
|
Total |
|
|
|
Value, |
|
Investment
|
|
and
Unrealized |
|
|
Total
From |
|
|
from
Net |
|
from |
|
|
Dividends |
|
|
|
Beginning of |
|
Income |
|
Gain (Loss)
on |
|
|
Investment |
|
|
Investment |
|
Realized |
|
|
and |
|
|
|
Period |
|
(Loss)(a) |
|
Investments |
|
|
Operations |
|
|
Income |
|
Gains |
|
|
Distributions |
|
GOVERNMENT &
HIGH QUALITY BOND ACCOUNT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class 1
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
$ |
9.98 |
$ |
0.31 |
|
($0.12 |
) |
$ |
0.19 |
|
|
($0.41 |
) |
$– |
|
|
($0.41 |
) |
2016 |
|
10.16 |
|
0.33 |
|
(0.14 |
) |
|
0.19 |
|
|
(0.37 |
) |
– |
|
|
(0.37 |
) |
2015 |
|
10.44 |
|
0.27 |
|
(0.19 |
) |
|
0.08 |
|
|
(0.35 |
) |
(0.01 |
) |
|
(0.36 |
) |
2014 |
|
10.33 |
|
0.27 |
|
0.25 |
|
|
0.52 |
|
|
(0.41 |
) |
– |
|
|
(0.41 |
) |
2013 |
|
10.87 |
|
0.27 |
|
(0.39 |
) |
|
(0.12 |
) |
|
(0.42 |
) |
– |
|
|
(0.42 |
) |
Class 2
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
9.98 |
|
0.28 |
|
(0.13 |
) |
|
0.15 |
|
|
(0.38 |
) |
– |
|
|
(0.38 |
) |
2016 |
|
10.17 |
|
0.31 |
|
(0.15 |
) |
|
0.16 |
|
|
(0.35 |
) |
– |
|
|
(0.35 |
) |
2015 |
|
10.45 |
|
0.25 |
|
(0.18 |
) |
|
0.07 |
|
|
(0.34 |
) |
(0.01 |
) |
|
(0.35 |
) |
2014 |
|
10.34 |
|
0.24 |
|
0.25 |
|
|
0.49 |
|
|
(0.38 |
) |
– |
|
|
(0.38 |
) |
2013 |
|
10.88 |
|
0.25 |
|
(0.39 |
) |
|
(0.14 |
) |
|
(0.40 |
) |
– |
|
|
(0.40 |
) |
INCOME
ACCOUNT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class 1
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
10.34 |
|
0.36 |
|
0.16 |
|
|
0.52 |
|
|
(0.47 |
) |
– |
|
|
(0.47 |
) |
2016 |
|
10.24 |
|
0.38 |
|
0.21 |
|
|
0.59 |
|
|
(0.49 |
) |
– |
|
|
(0.49 |
) |
2015 |
|
10.78 |
|
0.39 |
|
(0.46 |
) |
|
(0.07 |
) |
|
(0.47 |
) |
– |
|
|
(0.47 |
) |
2014 |
|
10.68 |
|
0.43 |
|
0.16 |
|
|
0.59 |
|
|
(0.49 |
) |
– |
|
|
(0.49 |
) |
2013 |
|
11.22 |
|
0.46 |
|
(0.43 |
) |
|
0.03 |
|
|
(0.57 |
) |
– |
|
|
(0.57 |
) |
Class 2
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
10.30 |
|
0.34 |
|
0.16 |
|
|
0.50 |
|
|
(0.45 |
) |
– |
|
|
(0.45 |
) |
2016 |
|
10.20 |
|
0.36 |
|
0.21 |
|
|
0.57 |
|
|
(0.47 |
) |
– |
|
|
(0.47 |
) |
2015 |
|
10.73 |
|
0.36 |
|
(0.45 |
) |
|
(0.09 |
) |
|
(0.44 |
) |
– |
|
|
(0.44 |
) |
2014 |
|
10.63 |
|
0.40 |
|
0.16 |
|
|
0.56 |
|
|
(0.46 |
) |
– |
|
|
(0.46 |
) |
2013 |
|
11.17 |
|
0.43 |
|
(0.43 |
) |
|
– |
|
|
(0.54 |
) |
– |
|
|
(0.54 |
) |
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL
HIGHLIGHTS (Continued) |
|
|
|
|
|
|
|
PRINCIPAL VARIABLE
CONTRACTS FUNDS, INC. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset |
|
|
|
|
Ratio of
Expenses |
|
Ratio of Net |
|
|
|
|
Value, End |
Total |
|
|
Net Assets, End
of |
to Average Net |
|
Investment Income
to |
|
Portfolio |
|
|
of
Period |
Return(b) |
|
|
Period (in
thousands) |
Assets |
|
Average Net
Assets |
|
Turnover Rate |
|
|
|
$ |
9.76 |
1.88 |
% |
$ |
241,839 |
0.51 |
% |
3.09 |
% |
24.3 |
% |
|
9.98 |
1.80 |
|
|
247,620 |
0.51 |
|
3.25 |
|
25.8 |
|
|
10.16 |
0.79 |
|
|
286,659 |
0.51 |
|
2.61 |
|
21.9 |
|
|
10.44 |
5.08 |
|
|
314,509 |
0.51 |
|
2.56 |
|
19.1 |
|
|
10.33 |
(1.03 |
) |
|
379,351 |
0.51 |
|
2.58 |
|
45.3 |
|
|
|
9.75 |
1.50 |
|
|
2,302 |
0.76 |
|
2.83 |
|
24.3 |
|
|
9.98 |
1.54 |
|
|
2,307 |
0.76 |
|
3.02 |
|
25.8 |
|
|
10.17 |
0.67 |
|
|
1,837 |
0.76 |
|
2.37 |
|
21.9 |
|
|
10.45 |
4.75 |
|
|
916 |
0.76 |
|
2.31 |
|
19.1 |
|
|
10.34 |
(1.30 |
) |
|
931 |
0.76 |
|
2.33 |
|
45.3 |
|
|
|
|
10.39 |
5.12 |
|
|
220,194 |
0.51 |
|
3.47 |
|
8.7 |
|
|
10.34 |
5.72 |
|
|
228,874 |
0.51 |
|
3.66 |
|
8.1 |
|
|
10.24 |
(0.71 |
) |
|
254,751 |
0.51 |
|
3.62 |
|
12.6 |
|
|
10.78 |
5.55 |
|
|
275,597 |
0.51 |
|
3.95 |
|
16.6 |
|
|
10.68 |
0.40 |
|
|
269,330 |
0.51 |
|
4.22 |
|
12.8 |
|
|
|
10.35 |
4.87 |
|
|
2,869 |
0.76 |
|
3.22 |
|
8.7 |
|
|
10.30 |
5.52 |
|
|
2,695 |
0.76 |
|
3.40 |
|
8.1 |
|
|
10.20 |
(0.92 |
) |
|
2,445 |
0.76 |
|
3.38 |
|
12.6 |
|
|
10.73 |
5.26 |
|
|
3,036 |
0.76 |
|
3.71 |
|
16.6 |
|
|
10.63 |
0.10 |
|
|
3,390 |
0.76 |
|
3.97 |
|
12.8 |
|
(a)
|
Calculated based on
average shares outstanding during the period. |
(b)
|
Total return does not
reflect charges attributable to separate accounts. Inclusion of these
charges would reduce the amounts shown. |
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL
HIGHLIGHTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRINCIPAL VARIABLE
CONTRACTS FUNDS, INC. |
|
|
|
|
|
|
|
|
|
|
Selected data for a
share of Capital Stock outstanding throughout each year ended December 31
(except as noted): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net |
|
|
Net Realized |
|
|
|
|
|
Dividends |
|
|
Total |
|
|
|
|
|
|
Net Asset Value,
|
|
Investment |
|
|
and Unrealized |
|
|
Total From |
|
|
from Net |
|
|
Dividends |
|
|
Net Asset |
|
|
|
Beginning of |
|
Income |
|
|
Gain (Loss)
on |
|
|
Investment |
|
|
Investment |
|
|
and |
|
|
Value, End |
|
|
|
Period |
|
(Loss)(a) |
|
|
Investments |
|
|
Operations |
|
|
Income |
|
|
Distributions |
|
|
of
Period |
INTERNATIONAL
EMERGING MARKETS ACCOUNT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class 1
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
$ |
13.94 |
$ |
0.15 |
|
$ |
5.53 |
|
$ |
5.68 |
|
|
($0.22 |
) |
|
($0.22 |
) |
$ |
19.40 |
2016 |
|
|
12.88 |
|
0.14 |
|
|
1.08 |
|
|
1.22 |
|
|
(0.16 |
) |
|
(0.16 |
) |
|
13.94 |
2015 |
|
|
15.21 |
|
0.17 |
|
|
(2.25 |
) |
|
(2.08 |
) |
|
(0.25 |
) |
|
(0.25 |
) |
|
12.88 |
2014 |
|
|
15.94 |
|
0.20 |
|
|
(0.78 |
) |
|
(0.58 |
) |
|
(0.15 |
) |
|
(0.15 |
) |
|
15.21 |
2013 |
|
|
17.14 |
|
0.19 |
|
|
(1.07 |
) |
|
(0.88 |
) |
|
(0.32 |
) |
|
(0.32 |
) |
|
15.94 |
Class 2
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
|
13.89 |
|
0.10 |
|
|
5.51 |
|
|
5.61 |
|
|
(0.21 |
) |
|
(0.21 |
) |
|
19.29 |
2016 |
|
|
12.86 |
|
0.12 |
|
|
1.06 |
|
|
1.18 |
|
|
(0.15 |
) |
|
(0.15 |
) |
|
13.89 |
2015 |
(e) |
|
16.74 |
|
0.08 |
|
|
(3.71 |
) |
|
(3.63 |
) |
|
(0.25 |
) |
|
(0.25 |
) |
|
12.86 |
LARGECAP GROWTH
ACCOUNT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class 1
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
|
24.40 |
|
0.07 |
|
|
8.43 |
|
|
8.50 |
|
|
(0.11 |
) |
|
(0.11 |
) |
|
32.79 |
2016 |
|
|
25.79 |
|
0.11 |
|
|
(1.43 |
) |
|
(1.32 |
) |
|
(0.07 |
) |
|
(0.07 |
) |
|
24.40 |
2015 |
|
|
24.60 |
|
0.06 |
|
|
1.17 |
|
|
1.23 |
|
|
(0.04 |
) |
|
(0.04 |
) |
|
25.79 |
2014 |
|
|
22.26 |
|
0.03 |
|
|
2.44 |
|
|
2.47 |
|
|
(0.13 |
) |
|
(0.13 |
) |
|
24.60 |
2013 |
|
|
16.87 |
|
0.07 |
|
|
5.61 |
|
|
5.68 |
|
|
(0.29 |
) |
|
(0.29 |
) |
|
22.26 |
Class 2
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
|
24.29 |
|
(0.02 |
) |
|
8.40 |
|
|
8.38 |
|
|
(0.04 |
) |
|
(0.04 |
) |
|
32.63 |
2016 |
|
|
25.69 |
|
0.04 |
|
|
(1.42 |
) |
|
(1.38 |
) |
|
(0.02 |
) |
|
(0.02 |
) |
|
24.29 |
2015 |
|
|
24.53 |
|
– |
|
|
1.16 |
|
|
1.16 |
|
|
– |
|
|
– |
|
|
25.69 |
2014 |
|
|
22.20 |
|
(0.03 |
) |
|
2.44 |
|
|
2.41 |
|
|
(0.08 |
) |
|
(0.08 |
) |
|
24.53 |
2013 |
|
|
16.83 |
|
0.02 |
|
|
5.59 |
|
|
5.61 |
|
|
(0.24 |
) |
|
(0.24 |
) |
|
22.20 |
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL
HIGHLIGHTS (Continued) |
|
|
|
|
|
|
|
PRINCIPAL VARIABLE
CONTRACTS FUNDS, INC. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Assets, End
of |
Ratio of
Expenses |
|
Ratio of Net |
|
|
|
Total |
|
|
Period (in |
to Average Net |
|
Investment Income
to |
|
Portfolio |
|
Return(b) |
|
|
thousands) |
Assets |
|
Average Net Assets
|
|
Turnover
Rate |
|
|
|
40.84 |
% |
$ |
114,735 |
1.35 |
%(c) |
0.91 |
% |
98.6 |
% |
9.40 |
(d) |
|
85,677 |
1.40 |
(c) |
1.07 |
|
115.0 |
|
(13.81 |
) |
|
85,434 |
1.37 |
|
1.18 |
|
97.3 |
|
(3.75 |
) |
|
103,091 |
1.38 |
|
1.28 |
|
106.9 |
|
(5.03 |
) |
|
113,305 |
1.39 |
|
1.19 |
|
118.2 |
|
|
40.51 |
|
|
935 |
1.60 |
(c) |
0.56 |
|
98.6 |
|
9.13 |
(d) |
|
125 |
1.65 |
(c) |
0.90 |
|
115.0 |
|
(21.81 |
)
(f) |
|
41 |
1.62 |
(g) |
0.90 |
(g) |
97.3 |
(g) |
|
|
34.89 |
|
|
119,450 |
0.69 |
|
0.23 |
|
72.3 |
|
(5.13 |
) |
|
96,198 |
0.69 |
|
0.43 |
|
78.2 |
|
4.98 |
|
|
118,385 |
0.69 |
|
0.23 |
|
47.1 |
|
11.12 |
|
|
123,091 |
0.69 |
|
0.13 |
|
67.2 |
|
33.91 |
|
|
100,140 |
0.69 |
|
0.37 |
|
70.1 |
|
|
34.54 |
|
|
1,452 |
0.94 |
|
(0.06 |
) |
72.3 |
|
(5.38 |
) |
|
923 |
0.94 |
|
0.17 |
|
78.2 |
|
4.73 |
|
|
1,090 |
0.94 |
|
(0.01 |
) |
47.1 |
|
10.85 |
|
|
661 |
0.94 |
|
(0.11 |
) |
67.2 |
|
33.64 |
(h) |
|
712 |
0.94 |
|
0.10 |
|
70.1 |
|
(a)
|
Calculated based on
average shares outstanding during the period. |
(b)
|
Total return does not
reflect charges attributable to separate accounts. Inclusion of these
charges would reduce the amounts shown. |
(c)
|
Reflects Manager's
contractual expense limit. |
(d)
|
During 2016, the Account
experienced a significant one-time gain of approximately $0.07/share as
the result of a settlement in a litigation proceeding. If such gain had
not been recognized, the total return amounts expressed herein would have
been lower. |
(e)
|
Period from May 1, 2015
date operations commenced, through December 31, 2015. |
(f)
|
Total return amounts
have not been annualized. |
(g)
|
Computed on an
annualized basis. |
(h)
|
Total return is
calculated using the traded net asset value which may differ from the
reported net asset value. The traded net asset value is the net asset
value which a shareholder would have paid or received from a subscription
or redemption. |
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL
HIGHLIGHTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRINCIPAL VARIABLE
CONTRACTS FUNDS, INC. |
|
|
|
|
|
|
|
|
|
|
|
Selected data for a
share of Capital Stock outstanding throughout each year ended December 31
(except as noted): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset |
|
Net |
|
|
Net Realized |
|
|
|
|
|
Dividends |
|
|
Distributions |
|
|
Total |
|
|
|
|
Value, |
|
Investment
|
|
|
and
Unrealized |
|
|
Total
From |
|
|
from
Net |
|
|
from |
|
|
Dividends |
|
|
|
|
Beginning of |
|
Income |
|
|
Gain (Loss)
on |
|
|
Investment |
|
|
Investment |
|
|
Realized |
|
|
and |
|
|
|
|
Period |
|
(Loss)(a) |
|
|
Investments |
|
|
Operations |
|
|
Income |
|
|
Gains |
|
|
Distributions |
|
LARGECAP GROWTH
ACCOUNT I |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class 1
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
$ |
24.55 |
$ |
0.01 |
|
$ |
8.13 |
|
$ |
8.14 |
|
|
($0.01 |
) |
|
($1.50 |
) |
|
($1.51 |
) |
2016 |
|
|
26.33 |
|
0.01 |
|
|
0.34 |
|
|
0.35 |
|
|
– |
|
|
(2.13 |
) |
|
(2.13 |
) |
2015 |
|
|
28.70 |
|
0.02 |
|
|
2.26 |
|
|
2.28 |
|
|
(0.07 |
) |
|
(4.58 |
) |
|
(4.65 |
) |
2014 |
|
|
32.58 |
|
0.03 |
|
|
2.46 |
|
|
2.49 |
|
|
(0.04 |
) |
|
(6.33 |
) |
|
(6.37 |
) |
2013 |
|
|
24.77 |
|
0.04 |
|
|
8.75 |
|
|
8.79 |
|
|
(0.11 |
) |
|
(0.87 |
) |
|
(0.98 |
) |
Class 2
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
|
24.46 |
|
(0.07 |
) |
|
8.10 |
|
|
8.03 |
|
|
– |
|
|
(1.50 |
) |
|
(1.50 |
) |
2016 |
|
|
26.29 |
|
(0.05 |
) |
|
0.35 |
|
|
0.30 |
|
|
– |
|
|
(2.13 |
) |
|
(2.13 |
) |
2015 |
(d) |
|
30.30 |
|
(0.03 |
) |
|
0.67 |
|
|
0.64 |
|
|
(0.07 |
) |
|
(4.58 |
) |
|
(4.65 |
) |
LARGECAP S&P
500 INDEX ACCOUNT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class 1
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
|
15.44 |
|
0.29 |
|
|
2.97 |
|
|
3.26 |
|
|
(0.29 |
) |
|
(0.35 |
) |
|
(0.64 |
) |
2016 |
|
|
14.41 |
|
0.29 |
|
|
1.36 |
|
|
1.65 |
|
|
(0.25 |
) |
|
(0.37 |
) |
|
(0.62 |
) |
2015 |
|
|
14.63 |
|
0.27 |
|
|
(0.09 |
) |
|
0.18 |
|
|
(0.22 |
) |
|
(0.18 |
) |
|
(0.40 |
) |
2014 |
|
|
13.38 |
|
0.24 |
|
|
1.51 |
|
|
1.75 |
|
|
(0.18 |
) |
|
(0.32 |
) |
|
(0.50 |
) |
2013 |
|
|
10.34 |
|
0.22 |
|
|
3.07 |
|
|
3.29 |
|
|
(0.15 |
) |
|
(0.10 |
) |
|
(0.25 |
) |
Class 2
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
|
15.38 |
|
0.25 |
|
|
2.95 |
|
|
3.20 |
|
|
(0.28 |
) |
|
(0.35 |
) |
|
(0.63 |
) |
2016 |
|
|
14.39 |
|
0.26 |
|
|
1.35 |
|
|
1.61 |
|
|
(0.25 |
) |
|
(0.37 |
) |
|
(0.62 |
) |
2015 |
(d) |
|
15.07 |
|
0.17 |
|
|
(0.45 |
) |
|
(0.28 |
) |
|
(0.22 |
) |
|
(0.18 |
) |
|
(0.40 |
) |
LARGECAP S&P
500 MANAGED VOLATILITY INDEX ACCOUNT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class 1
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
|
12.15 |
|
0.18 |
|
|
2.11 |
|
|
2.29 |
|
|
(0.18 |
) |
|
(0.84 |
) |
|
(1.02 |
) |
2016 |
|
|
11.27 |
|
0.19 |
|
|
0.96 |
|
|
1.15 |
|
|
(0.12 |
) |
|
(0.15 |
) |
|
(0.27 |
) |
2015 |
|
|
11.22 |
|
0.16 |
|
|
(0.07 |
) |
|
0.09 |
|
|
– |
|
|
(0.04 |
) |
|
(0.04 |
) |
2014 |
|
|
10.46 |
|
0.14 |
|
|
1.09 |
|
|
1.23 |
|
|
(0.08 |
) |
|
(0.39 |
) |
|
(0.47 |
) |
2013 |
(g) |
|
10.00 |
|
0.03 |
|
|
0.45 |
|
|
0.48 |
|
|
(0.02 |
) |
|
– |
|
|
(0.02 |
) |
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL
HIGHLIGHTS (Continued) |
|
|
|
|
|
|
|
PRINCIPAL VARIABLE
CONTRACTS FUNDS, INC. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset |
|
|
|
Net Assets, End
of |
Ratio of
Expenses |
|
Ratio of Net |
|
|
|
|
Value, End |
Total |
|
|
Period (in |
to Average Net |
|
Investment Income
to |
|
Portfolio |
|
|
of
Period |
Return(b) |
|
|
thousands) |
Assets |
|
Average Net Assets
|
|
Turnover
Rate |
|
|
|
$ |
31.18 |
33.71 |
% |
$ |
302,147 |
0.75 |
%(c) |
0.03 |
% |
36.2 |
% |
|
24.55 |
1.26 |
|
|
244,058 |
0.76 |
(c) |
0.04 |
|
36.8 |
|
|
26.33 |
7.77 |
|
|
252,386 |
0.76 |
(c) |
0.07 |
|
38.6 |
|
|
28.70 |
8.61 |
|
|
239,629 |
0.76 |
(c) |
0.11 |
|
38.9 |
|
|
32.58 |
36.14 |
|
|
260,034 |
0.75 |
(c) |
0.12 |
|
36.9 |
|
|
|
30.99 |
33.38 |
|
|
702 |
1.00 |
(c) |
(0.25 |
) |
36.2 |
|
|
24.46 |
1.07 |
|
|
127 |
1.01 |
(c) |
(0.21 |
) |
36.8 |
|
|
26.29 |
1.94 |
(e) |
|
501 |
1.01 (c) |
,(f) |
(0.19 |
)
(f) |
38.6 |
(f) |
|
|
|
18.06 |
21.49 |
|
|
2,563,986 |
0.25 |
|
1.71 |
|
3.0 |
|
|
15.44 |
11.59 |
|
|
2,262,283 |
0.25 |
|
1.96 |
|
6.4 |
|
|
14.41 |
1.14 |
|
|
2,033,459 |
0.25 |
|
1.82 |
|
6.3 |
|
|
14.63 |
13.29 |
|
|
1,863,035 |
0.25 |
|
1.74 |
|
2.8 |
|
|
13.38 |
32.04 |
|
|
1,490,352 |
0.25 |
|
1.81 |
|
7.4 |
|
|
|
17.95 |
21.20 |
|
|
3,234 |
0.50 |
|
1.46 |
|
3.0 |
|
|
15.38 |
11.30 |
|
|
766 |
0.50 |
|
1.74 |
|
6.4 |
|
|
14.39 |
(1.95 |
)
(e) |
|
161 |
0.50 |
(f) |
1.78 |
(f) |
6.3 |
(f) |
|
|
|
13.42 |
19.55 |
|
|
222,026 |
0.46 |
(c) |
1.40 |
|
3.0 |
|
|
12.15 |
10.33 |
|
|
198,548 |
0.46 |
(c) |
1.63 |
|
4.8 |
|
|
11.27 |
0.83 |
|
|
161,654 |
0.47 |
(c) |
1.46 |
|
5.5 |
|
|
11.22 |
11.77 |
|
|
97,236 |
0.49 |
(c) |
1.29 |
|
24.6 |
|
|
10.46 |
4.85 |
(e) |
|
7,339 |
0.49 (c) |
,(f) |
1.82 |
(f) |
74.7 |
(f) |
(a)
|
Calculated based on
average shares outstanding during the period. |
(b)
|
Total return does not
reflect charges attributable to separate accounts. Inclusion of these
charges would reduce the amounts shown. |
(c)
|
Reflects Manager's
contractual expense limit. |
(d)
|
Period from May 1, 2015
date operations commenced, through December 31, 2015. |
(e)
|
Total return amounts
have not been annualized. |
(f)
|
Computed on an
annualized basis. |
(g)
|
Period from October 31,
2013 date operations commenced, through December 31, 2013.
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL
HIGHLIGHTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRINCIPAL VARIABLE
CONTRACTS FUNDS, INC. |
|
|
|
|
|
|
|
|
|
|
|
Selected data for a
share of Capital Stock outstanding throughout each year ended December 31
(except as noted): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset |
|
Net |
|
Net Realized |
|
|
|
|
|
Dividends |
|
|
Distributions |
|
|
Total |
|
|
|
|
Value, |
|
Investment
|
|
and
Unrealized |
|
|
Total
From |
|
|
from
Net |
|
|
from |
|
|
Dividends |
|
|
|
|
Beginning of |
|
Income |
|
Gain (Loss)
on |
|
|
Investment |
|
|
Investment |
|
|
Realized |
|
|
and |
|
|
|
|
Period |
|
(Loss)(a) |
|
Investments |
|
|
Operations |
|
|
Income |
|
|
Gains |
|
|
Distributions |
|
LARGECAP VALUE
ACCOUNT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class 1
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
$ |
30.03 |
$ |
0.51 |
$ |
4.30 |
|
$ |
4.81 |
|
|
($0.62 |
) |
|
($1.81 |
) |
|
($2.43 |
) |
2016 |
|
|
29.19 |
|
0.55 |
|
1.76 |
|
|
2.31 |
|
|
(0.56 |
) |
|
(0.91 |
) |
|
(1.47 |
) |
2015 |
|
|
33.80 |
|
0.53 |
|
(0.80 |
) |
|
(0.27 |
) |
|
(0.53 |
) |
|
(3.81 |
) |
|
(4.34 |
) |
2014 |
|
|
36.13 |
|
0.51 |
|
3.19 |
|
|
3.70 |
|
|
(0.80 |
) |
|
(5.23 |
) |
|
(6.03 |
) |
2013 |
|
|
28.33 |
|
0.53 |
|
8.11 |
|
|
8.64 |
|
|
(0.84 |
) |
|
– |
|
|
(0.84 |
) |
Class 2
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
|
29.93 |
|
0.43 |
|
4.28 |
|
|
4.71 |
|
|
(0.60 |
) |
|
(1.81 |
) |
|
(2.41 |
) |
2016 |
|
|
29.14 |
|
0.45 |
|
1.78 |
|
|
2.23 |
|
|
(0.53 |
) |
|
(0.91 |
) |
|
(1.44 |
) |
2015 |
(d) |
|
34.24 |
|
0.31 |
|
(1.07 |
) |
|
(0.76 |
) |
|
(0.53 |
) |
|
(3.81 |
) |
|
(4.34 |
) |
MIDCAP
ACCOUNT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class 1
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
|
50.96 |
|
0.19 |
|
12.48 |
|
|
12.67 |
|
|
(0.32 |
) |
|
(3.89 |
) |
|
(4.21 |
) |
2016 |
|
|
55.24 |
|
0.33 |
|
5.30 |
|
|
5.63 |
|
|
(0.24 |
) |
|
(9.67 |
) |
|
(9.91 |
) |
2015 |
|
|
60.79 |
|
0.22 |
|
1.19 |
|
|
1.41 |
|
|
(0.32 |
) |
|
(6.64 |
) |
|
(6.96 |
) |
2014 |
|
|
59.37 |
|
0.36 |
|
6.96 |
|
|
7.32 |
|
|
(0.32 |
) |
|
(5.58 |
) |
|
(5.90 |
) |
2013 |
|
|
47.20 |
|
0.28 |
|
15.31 |
|
|
15.59 |
|
|
(0.82 |
) |
|
(2.60 |
) |
|
(3.42 |
) |
Class 2
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
|
50.69 |
|
0.05 |
|
12.39 |
|
|
12.44 |
|
|
(0.19 |
) |
|
(3.89 |
) |
|
(4.08 |
) |
2016 |
|
|
54.97 |
|
0.20 |
|
5.27 |
|
|
5.47 |
|
|
(0.08 |
) |
|
(9.67 |
) |
|
(9.75 |
) |
2015 |
|
|
60.54 |
|
0.07 |
|
1.17 |
|
|
1.24 |
|
|
(0.17 |
) |
|
(6.64 |
) |
|
(6.81 |
) |
2014 |
|
|
59.16 |
|
0.21 |
|
6.93 |
|
|
7.14 |
|
|
(0.18 |
) |
|
(5.58 |
) |
|
(5.76 |
) |
2013 |
|
|
47.06 |
|
0.15 |
|
15.25 |
|
|
15.40 |
|
|
(0.70 |
) |
|
(2.60 |
) |
|
(3.30 |
) |
MULTI-ASSET INCOME
ACCOUNT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class 1
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
|
10.24 |
|
0.46 |
|
0.76 |
|
|
1.22 |
|
|
(0.19 |
) |
|
(0.03 |
) |
|
(0.22 |
) |
2016 |
|
|
9.72 |
|
0.66 |
|
0.11 |
|
|
0.77 |
|
|
(0.23 |
) |
|
(0.02 |
) |
|
(0.25 |
) |
2015 |
(h) |
|
10.00 |
|
0.24 |
|
(0.52 |
) |
|
(0.28 |
) |
|
– |
|
|
– |
|
|
– |
|
Class 2
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
|
10.20 |
|
0.49 |
|
0.71 |
|
|
1.20 |
|
|
(0.19 |
) |
|
(0.03 |
) |
|
(0.22 |
) |
2016 |
|
|
9.71 |
|
0.46 |
|
0.28 |
|
|
0.74 |
|
|
(0.23 |
) |
|
(0.02 |
) |
|
(0.25 |
) |
2015 |
(h) |
|
10.00 |
|
0.23 |
|
(0.52 |
) |
|
(0.29 |
) |
|
– |
|
|
– |
|
|
– |
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL
HIGHLIGHTS (Continued) |
|
|
|
|
|
|
|
PRINCIPAL VARIABLE
CONTRACTS FUNDS, INC. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset |
|
|
|
Net Assets, End
of |
Ratio of
Expenses |
|
Ratio of Net |
|
Portfolio |
|
|
Value, End |
Total |
|
|
Period (in |
to Average Net |
|
Investment Income
to |
|
Turnover |
|
|
of
Period |
Return(b) |
|
|
thousands) |
Assets |
|
Average Net
Assets |
|
Rate |
|
|
|
$ |
32.41 |
16.83 |
%(c) |
$ |
150,184 |
0.61 |
% |
1.65 |
% |
109.8 |
% |
|
30.03 |
8.17 |
|
|
140,994 |
0.61 |
|
1.90 |
|
106.3 |
|
|
29.19 |
(1.09 |
) |
|
153,060 |
0.61 |
|
1.66 |
|
81.3 |
|
|
33.80 |
11.17 |
|
|
170,673 |
0.61 |
|
1.45 |
|
104.3 |
|
|
36.13 |
30.83 |
|
|
167,702 |
0.61 |
|
1.64 |
|
140.8 |
|
|
|
32.23 |
16.53 |
|
|
325 |
0.86 |
|
1.38 |
|
109.8 |
|
|
29.93 |
7.89 |
|
|
66 |
0.86 |
|
1.58 |
|
106.3 |
|
|
29.14 |
(2.52 |
)
(e) |
|
20 |
0.86 |
(f) |
1.56 |
(f) |
81.3 |
(f) |
|
|
|
59.42 |
25.51 |
|
|
575,104 |
0.54 |
|
0.34 |
|
13.4 |
|
|
50.96 |
10.37 |
|
|
576,634 |
0.54 |
|
0.62 |
|
13.6 |
|
|
55.24 |
1.64 |
|
|
617,437 |
0.53 |
|
0.37 |
|
26.3 |
|
|
60.79 |
12.99 |
|
|
676,836 |
0.53 |
|
0.60 |
|
21.6 |
|
|
59.37 |
33.93 |
|
|
649,893 |
0.53 |
|
0.52 |
|
12.4 |
|
|
|
59.05 |
25.19 |
(c) |
|
17,792 |
0.79 |
|
0.09 |
|
13.4 |
|
|
50.69 |
10.11 |
|
|
14,985 |
0.79 |
|
0.38 |
|
13.6 |
|
|
54.97 |
1.37 |
|
|
15,243 |
0.78 |
|
0.12 |
|
26.3 |
|
|
60.54 |
12.70 |
|
|
15,960 |
0.78 |
|
0.35 |
|
21.6 |
|
|
59.16 |
33.58 |
|
|
15,105 |
0.78 |
|
0.27 |
|
12.4 |
|
|
|
|
11.24 |
11.99 |
|
|
241 |
0.08 |
(g) |
4.23 |
|
22.7 |
|
|
10.24 |
7.96 |
|
|
183 |
0.08 |
(g) |
6.46 |
|
61.0 |
|
|
9.72 |
(2.80 |
)
(e) |
|
10 |
0.08 (f) |
,(g) |
5.67 |
(f) |
0.0 |
(f) |
|
|
11.18 |
11.84 |
|
|
26 |
0.33 |
(g) |
4.56 |
|
22.7 |
|
|
10.20 |
7.65 |
|
|
10 |
0.33 |
(g) |
4.57 |
|
61.0 |
|
|
9.71 |
(2.90 |
)
(e) |
|
10 |
0.33 (f) |
,(g) |
5.41 |
(f) |
0.0 |
(f) |
(a)
|
Calculated based on
average shares outstanding during the period. |
(b)
|
Total return does not
reflect charges attributable to separate accounts. Inclusion of these
charges would reduce the amounts shown. |
(c)
|
Total return is
calculated using the traded net asset value which may differ from the
reported net asset value. The traded net asset value is the net asset
value which a shareholder would have paid or received from a subscription
or redemption. |
(d)
|
Period from May 1, 2015
date operations commenced, through December 31, 2015. |
(e)
|
Total return amounts
have not been annualized. |
(f)
|
Computed on an
annualized basis. |
(g)
|
Reflects Manager's
contractual expense limit. |
(h)
|
Period from July 28,
2015 date operations commenced, through December 31, 2015.
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL
HIGHLIGHTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRINCIPAL VARIABLE
CONTRACTS FUNDS, INC. |
|
|
|
|
|
|
|
|
|
|
Selected data for a
share of Capital Stock outstanding throughout each year ended December 31
(except as noted): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset |
|
|
|
Net Realized |
|
|
|
|
|
Dividends |
|
Distributions |
|
|
Total |
|
|
|
|
Value, |
|
|
|
and Unrealized
|
|
|
Total
From |
|
|
from
Net |
|
from |
|
|
Dividends |
|
|
|
|
Beginning of
|
|
Net
Investment |
|
Gain (Loss)
on |
|
|
Investment
|
|
|
Investment
|
|
Realized |
|
|
and |
|
|
|
|
Period |
|
Income (Loss)(a)
|
|
Investments |
|
|
Operations |
|
|
Income |
|
Gains |
|
|
Distributions |
|
PRINCIPAL CAPITAL
APPRECIATION ACCOUNT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class 1
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
$ |
23.94 |
$ |
0.28 |
$ |
4.66 |
|
$ |
4.94 |
|
|
($0.34 |
) |
$– |
|
|
($0.34 |
) |
2016 |
|
|
22.35 |
|
0.30 |
|
1.73 |
|
|
2.03 |
|
|
(0.26 |
) |
(0.18 |
) |
|
(0.44 |
) |
2015 |
|
|
22.31 |
|
0.30 |
|
0.20 |
|
|
0.50 |
|
|
(0.06 |
) |
(0.40 |
) |
|
(0.46 |
) |
2014 |
|
|
24.45 |
|
0.24 |
|
2.52 |
|
|
2.76 |
|
|
(0.81 |
) |
(4.09 |
) |
|
(4.90 |
) |
2013 |
|
|
23.75 |
|
0.30 |
|
6.63 |
|
|
6.93 |
|
|
(1.86 |
) |
(4.37 |
) |
|
(6.23 |
) |
Class 2
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
|
23.71 |
|
0.22 |
|
4.60 |
|
|
4.82 |
|
|
(0.28 |
) |
– |
|
|
(0.28 |
) |
2016 |
|
|
22.14 |
|
0.24 |
|
1.72 |
|
|
1.96 |
|
|
(0.21 |
) |
(0.18 |
) |
|
(0.39 |
) |
2015 |
|
|
22.11 |
|
0.23 |
|
0.21 |
|
|
0.44 |
|
|
(0.01 |
) |
(0.40 |
) |
|
(0.41 |
) |
2014 |
|
|
24.27 |
|
0.18 |
|
2.50 |
|
|
2.68 |
|
|
(0.75 |
) |
(4.09 |
) |
|
(4.84 |
) |
2013 |
|
|
23.62 |
|
0.21 |
|
6.60 |
|
|
6.81 |
|
|
(1.79 |
) |
(4.37 |
) |
|
(6.16 |
) |
PRINCIPAL LIFETIME
2010 ACCOUNT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class 1
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
|
12.48 |
|
0.34 |
|
1.07 |
|
|
1.41 |
|
|
(0.29 |
) |
(0.19 |
) |
|
(0.48 |
) |
2016 |
|
|
12.18 |
|
0.27 |
|
0.37 |
|
|
0.64 |
|
|
(0.27 |
) |
(0.07 |
) |
|
(0.34 |
) |
2015 |
|
|
12.60 |
|
0.25 |
|
(0.39 |
) |
|
(0.14 |
) |
|
(0.28 |
) |
– |
|
|
(0.28 |
) |
2014 |
|
|
12.29 |
|
0.25 |
|
0.34 |
|
|
0.59 |
|
|
(0.28 |
) |
– |
|
|
(0.28 |
) |
2013 |
|
|
11.36 |
|
0.27 |
|
0.94 |
|
|
1.21 |
|
|
(0.28 |
) |
– |
|
|
(0.28 |
) |
PRINCIPAL LIFETIME
2020 ACCOUNT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class 1
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
|
12.66 |
|
0.36 |
|
1.52 |
|
|
1.88 |
|
|
(0.27 |
) |
(0.16 |
) |
|
(0.43 |
) |
2016 |
|
|
12.64 |
|
0.26 |
|
0.47 |
|
|
0.73 |
|
|
(0.25 |
) |
(0.46 |
) |
|
(0.71 |
) |
2015 |
|
|
13.77 |
|
0.24 |
|
(0.37 |
) |
|
(0.13 |
) |
|
(0.36 |
) |
(0.64 |
) |
|
(1.00 |
) |
2014 |
|
|
13.62 |
|
0.33 |
|
0.44 |
|
|
0.77 |
|
|
(0.33 |
) |
(0.29 |
) |
|
(0.62 |
) |
2013 |
|
|
12.00 |
|
0.30 |
|
1.59 |
|
|
1.89 |
|
|
(0.27 |
) |
– |
|
|
(0.27 |
) |
Class 2
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
|
12.62 |
|
0.86 |
|
0.98 |
|
|
1.84 |
|
|
(0.27 |
) |
(0.16 |
) |
|
(0.43 |
) |
2016 |
|
|
12.61 |
|
0.23 |
|
0.48 |
|
|
0.71 |
|
|
(0.24 |
) |
(0.46 |
) |
|
(0.70 |
) |
2015 |
(f) |
|
14.26 |
|
0.27 |
|
(0.92 |
) |
|
(0.65 |
) |
|
(0.36 |
) |
(0.64 |
) |
|
(1.00 |
) |
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL
HIGHLIGHTS (Continued) |
|
|
|
|
|
|
|
PRINCIPAL VARIABLE
CONTRACTS FUNDS, INC. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset |
|
|
|
Net Assets, End
of |
Ratio of
Expenses |
|
Ratio of Net |
|
|
|
|
Value, End |
Total |
|
|
Period (in |
to Average Net |
|
Investment Income
to |
|
Portfolio |
|
|
of
Period |
Return(b) |
|
|
thousands) |
Assets |
|
Average Net Assets
|
|
Turnover
Rate |
|
|
|
$ |
28.54 |
20.75 |
% |
$ |
154,472 |
0.63 |
% |
1.07 |
% |
28.5 |
% |
|
23.94 |
9.11 |
|
|
147,193 |
0.63 |
|
1.31 |
|
33.7 |
|
|
22.35 |
2.18 |
|
|
154,732 |
0.64 |
|
1.33 |
|
22.1 |
(c) |
|
22.31 |
12.45 |
|
|
33,190 |
0.66 |
|
1.02 |
|
8.6 |
|
|
24.45 |
32.65 |
|
|
32,077 |
0.65 |
|
1.18 |
|
6.7 |
|
|
|
28.25 |
20.46 |
(d) |
|
8,526 |
0.88 |
|
0.83 |
|
28.5 |
|
|
23.71 |
8.85 |
|
|
7,420 |
0.88 |
|
1.06 |
|
33.7 |
|
|
22.14 |
1.94 |
|
|
7,517 |
0.89 |
|
1.05 |
|
22.1 |
(c) |
|
22.11 |
12.19 |
|
|
6,891 |
0.91 |
|
0.77 |
|
8.6 |
|
|
24.27 |
32.27 |
|
|
6,362 |
0.90 |
|
0.85 |
|
6.7 |
|
|
|
|
13.41 |
11.42 |
|
|
41,836 |
0.01 |
(e) |
2.57 |
|
21.7 |
|
|
12.48 |
5.25 |
|
|
42,641 |
0.02 |
(e) |
2.16 |
|
28.9 |
|
|
12.18 |
(1.17 |
) |
|
41,132 |
0.04 |
(e) |
2.00 |
|
24.6 |
|
|
12.60 |
4.81 |
|
|
47,312 |
0.04 |
(e) |
2.02 |
|
41.3 |
|
|
12.29 |
10.81 |
|
|
48,775 |
0.04 |
(e) |
2.25 |
|
36.5 |
|
|
|
|
14.11 |
15.00 |
|
|
197,935 |
0.00 |
(e) |
2.64 |
|
23.6 |
|
|
12.66 |
5.76 |
|
|
186,646 |
0.01 |
(e) |
2.03 |
|
17.7 |
|
|
12.64 |
(1.13 |
) |
|
190,987 |
0.03 |
(e) |
1.79 |
|
27.6 |
|
|
13.77 |
5.75 |
|
|
211,470 |
0.03 |
(e) |
2.40 |
|
31.9 |
|
|
13.62 |
15.97 |
|
|
227,985 |
0.03 |
(e) |
2.35 |
|
49.6 |
|
|
|
14.03 |
14.70 |
|
|
674 |
0.25 |
(e) |
6.24 |
|
23.6 |
|
|
12.62 |
5.56 |
|
|
26 |
0.26 |
(e) |
1.83 |
|
17.7 |
|
|
12.61 |
(4.74 |
)
(g) |
|
25 |
0.28 (e) |
,(h) |
3.11 |
(h) |
27.6 |
(h) |
(a)
|
Calculated based on
average shares outstanding during the period. |
(b)
|
Total return does not
reflect charges attributable to separate accounts. Inclusion of these
charges would reduce the amounts shown. |
(c)
|
Portfolio turnover rate
excludes approximately $1,237,000 of purchases from portfolio realignment
from the acquisition of LargeCap Blend Account II. |
(d)
|
Total return is
calculated using the traded net asset value which may differ from the
reported net asset value. The traded net asset value is the net asset
value which a shareholder would have paid or received from a subscription
or redemption. |
(e)
|
Does not include
expenses of the investment companies in which the Account invests.
|
(f)
|
Period from May 1, 2015
date operations commenced, through December 31, 2015. |
(g)
|
Total return amounts
have not been annualized. |
(h)
|
Computed on an
annualized basis. |
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL
HIGHLIGHTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRINCIPAL VARIABLE
CONTRACTS FUNDS, INC. |
|
|
|
|
|
|
|
|
|
|
|
Selected data for a
share of Capital Stock outstanding throughout each year ended December 31
(except as noted): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset |
|
Net |
|
Net Realized |
|
|
|
|
|
Dividends |
|
|
Distributions |
|
|
Total |
|
|
|
|
Value, |
|
Investment
|
|
and
Unrealized |
|
|
Total
From |
|
|
from
Net |
|
|
from |
|
|
Dividends |
|
|
|
|
Beginning of |
|
Income |
|
Gain (Loss)
on |
|
|
Investment |
|
|
Investment |
|
|
Realized |
|
|
and |
|
|
|
|
Period |
|
(Loss)(a) |
|
Investments |
|
|
Operations |
|
|
Income |
|
|
Gains |
|
|
Distributions |
|
PRINCIPAL LIFETIME
2030 ACCOUNT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class 1
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
$ |
11.45 |
$ |
0.34 |
$ |
1.73 |
|
$ |
2.07 |
|
|
($0.20 |
) |
|
($0.15 |
) |
|
($0.35 |
) |
2016 |
|
|
11.45 |
|
0.22 |
|
0.45 |
|
|
0.67 |
|
|
(0.19 |
) |
|
(0.48 |
) |
|
(0.67 |
) |
2015 |
|
|
12.34 |
|
0.20 |
|
(0.30 |
) |
|
(0.10 |
) |
|
(0.32 |
) |
|
(0.47 |
) |
|
(0.79 |
) |
2014 |
|
|
14.05 |
|
0.36 |
|
0.45 |
|
|
0.81 |
|
|
(0.31 |
) |
|
(2.21 |
) |
|
(2.52 |
) |
2013 |
|
|
12.10 |
|
0.32 |
|
1.95 |
|
|
2.27 |
|
|
(0.25 |
) |
|
(0.07 |
) |
|
(0.32 |
) |
Class 2
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
|
11.40 |
|
0.56 |
|
1.47 |
|
|
2.03 |
|
|
(0.20 |
) |
|
(0.15 |
) |
|
(0.35 |
) |
2016 |
|
|
11.43 |
|
0.27 |
|
0.37 |
|
|
0.64 |
|
|
(0.19 |
) |
|
(0.48 |
) |
|
(0.67 |
) |
2015 |
(d) |
|
12.85 |
|
0.25 |
|
(0.88 |
) |
|
(0.63 |
) |
|
(0.32 |
) |
|
(0.47 |
) |
|
(0.79 |
) |
PRINCIPAL LIFETIME
2040 ACCOUNT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class 1
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
|
13.52 |
|
0.36 |
|
2.41 |
|
|
2.77 |
|
|
(0.20 |
) |
|
(0.12 |
) |
|
(0.32 |
) |
2016 |
|
|
13.53 |
|
0.22 |
|
0.51 |
|
|
0.73 |
|
|
(0.20 |
) |
|
(0.54 |
) |
|
(0.74 |
) |
2015 |
|
|
14.50 |
|
0.22 |
|
(0.31 |
) |
|
(0.09 |
) |
|
(0.36 |
) |
|
(0.52 |
) |
|
(0.88 |
) |
2014 |
|
|
14.94 |
|
0.42 |
|
0.49 |
|
|
0.91 |
|
|
(0.31 |
) |
|
(1.04 |
) |
|
(1.35 |
) |
2013 |
|
|
12.39 |
|
0.35 |
|
2.41 |
|
|
2.76 |
|
|
(0.21 |
) |
|
– |
|
|
(0.21 |
) |
Class 2
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
|
13.47 |
|
0.41 |
|
2.32 |
|
|
2.73 |
|
|
(0.20 |
) |
|
(0.12 |
) |
|
(0.32 |
) |
2016 |
|
|
13.51 |
|
0.45 |
|
0.24 |
|
|
0.69 |
|
|
(0.19 |
) |
|
(0.54 |
) |
|
(0.73 |
) |
2015 |
(d) |
|
15.14 |
|
0.18 |
|
(0.93 |
) |
|
(0.75 |
) |
|
(0.36 |
) |
|
(0.52 |
) |
|
(0.88 |
) |
PRINCIPAL LIFETIME
2050 ACCOUNT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class 1
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
|
13.06 |
|
0.32 |
|
2.55 |
|
|
2.87 |
|
|
(0.19 |
) |
|
(0.12 |
) |
|
(0.31 |
) |
2016 |
|
|
13.07 |
|
0.21 |
|
0.52 |
|
|
0.73 |
|
|
(0.18 |
) |
|
(0.56 |
) |
|
(0.74 |
) |
2015 |
|
|
14.18 |
|
0.20 |
|
(0.26 |
) |
|
(0.06 |
) |
|
(0.38 |
) |
|
(0.67 |
) |
|
(1.05 |
) |
2014 |
|
|
14.96 |
|
0.40 |
|
0.50 |
|
|
0.90 |
|
|
(0.34 |
) |
|
(1.34 |
) |
|
(1.68 |
) |
2013 |
|
|
12.28 |
|
0.34 |
|
2.55 |
|
|
2.89 |
|
|
(0.21 |
) |
|
– |
|
|
(0.21 |
) |
Class 2
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
|
13.01 |
|
0.58 |
|
2.24 |
|
|
2.82 |
|
|
(0.18 |
) |
|
(0.12 |
) |
|
(0.30 |
) |
2016 |
|
|
13.05 |
|
0.31 |
|
0.37 |
|
|
0.68 |
|
|
(0.16 |
) |
|
(0.56 |
) |
|
(0.72 |
) |
2015 |
(d) |
|
14.84 |
|
0.18 |
|
(0.92 |
) |
|
(0.74 |
) |
|
(0.38 |
) |
|
(0.67 |
) |
|
(1.05 |
) |
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL
HIGHLIGHTS (Continued) |
|
|
|
|
|
|
|
PRINCIPAL VARIABLE
CONTRACTS FUNDS, INC. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset |
|
|
|
Net Assets, End
of |
Ratio of
Expenses |
|
Ratio of Net |
|
|
|
|
Value, End |
Total |
|
|
Period (in |
to Average Net |
|
Investment Income
to |
|
Portfolio |
|
|
of
Period |
Return(b) |
|
|
thousands) |
Assets |
|
Average Net Assets
|
|
Turnover
Rate |
|
|
|
$ |
13.17 |
18.26 |
% |
$ |
152,469 |
0.01 |
%(c) |
2.77 |
% |
31.0 |
% |
|
11.45 |
5.87 |
|
|
123,825 |
0.01 |
(c) |
1.89 |
|
22.4 |
|
|
11.45 |
(1.05 |
) |
|
116,691 |
0.04 |
(c) |
1.67 |
|
31.3 |
|
|
12.34 |
6.06 |
|
|
116,965 |
0.04 |
(c) |
2.67 |
|
23.9 |
|
|
14.05 |
18.96 |
|
|
108,794 |
0.04 |
(c) |
2.43 |
|
58.6 |
|
|
|
13.08 |
17.95 |
|
|
852 |
0.26 |
(c) |
4.45 |
|
31.0 |
|
|
11.40 |
5.56 |
|
|
92 |
0.26 |
(c) |
2.37 |
|
22.4 |
|
|
11.43 |
(5.14 |
)
(e) |
|
26 |
0.29 (c) |
,(f) |
3.22 |
(f) |
31.3 |
(f) |
|
|
|
15.97 |
20.68 |
|
|
63,759 |
0.01 |
(c) |
2.43 |
|
28.3 |
|
|
13.52 |
5.45 |
|
|
49,980 |
0.02 |
(c) |
1.68 |
|
30.4 |
|
|
13.53 |
(0.85 |
) |
|
45,261 |
0.04 |
(c) |
1.52 |
|
24.2 |
|
|
14.50 |
6.21 |
|
|
42,304 |
0.05 |
(c) |
2.83 |
|
21.1 |
|
|
14.94 |
22.42 |
|
|
36,934 |
0.05 |
(c) |
2.55 |
|
67.2 |
|
|
|
15.88 |
20.41 |
|
|
377 |
0.26 |
(c) |
2.74 |
|
28.3 |
|
|
13.47 |
5.16 |
|
|
131 |
0.27 |
(c) |
3.34 |
|
30.4 |
|
|
13.51 |
(5.18 |
)
(e) |
|
10 |
0.29 (c) |
,(f) |
1.97 |
(f) |
24.2 |
(f) |
|
|
|
15.62 |
22.14 |
|
|
31,610 |
0.02 |
(c) |
2.23 |
|
36.5 |
|
|
13.06 |
5.58 |
|
|
26,674 |
0.03 |
(c) |
1.64 |
|
33.1 |
|
|
13.07 |
(0.69 |
) |
|
23,502 |
0.05 |
(c) |
1.46 |
|
26.6 |
|
|
14.18 |
6.21 |
|
|
21,796 |
0.06 |
(c) |
2.70 |
|
28.5 |
|
|
14.96 |
23.72 |
|
|
22,002 |
0.06 |
(c) |
2.48 |
|
68.0 |
|
|
|
15.53 |
21.89 |
|
|
777 |
0.27 |
(c) |
3.90 |
|
36.5 |
|
|
13.01 |
5.24 |
|
|
94 |
0.28 |
(c) |
2.39 |
|
33.1 |
|
|
13.05 |
(5.25 |
)
(e) |
|
35 |
0.30 (c) |
,(f) |
2.03 |
(f) |
26.6 |
(f) |
(a)
|
Calculated based on
average shares outstanding during the period. |
(b)
|
Total return does not
reflect charges attributable to separate accounts. Inclusion of these
charges would reduce the amounts shown. |
(c)
|
Does not include
expenses of the investment companies in which the Account invests.
|
(d)
|
Period from May 1, 2015
date operations commenced, through December 31, 2015. |
(e)
|
Total return amounts
have not been annualized. |
(f)
|
Computed on an
annualized basis. |
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL
HIGHLIGHTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRINCIPAL VARIABLE
CONTRACTS FUNDS, INC. |
|
|
|
|
|
|
|
|
|
|
|
Selected data for a
share of Capital Stock outstanding throughout each year ended December 31
(except as noted): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset |
|
Net |
|
Net Realized |
|
|
|
|
|
Dividends |
|
|
Distributions |
|
|
Total |
|
|
|
|
Value, |
|
Investment
|
|
and
Unrealized |
|
|
Total
From |
|
|
from
Net |
|
|
from |
|
|
Dividends |
|
|
|
|
Beginning of |
|
Income |
|
Gain (Loss)
on |
|
|
Investment |
|
|
Investment |
|
|
Realized |
|
|
and |
|
|
|
|
Period |
|
(Loss)(a) |
|
Investments |
|
|
Operations |
|
|
Income |
|
|
Gains |
|
|
Distributions |
|
PRINCIPAL LIFETIME
2060 ACCOUNT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class 1
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
$ |
11.88 |
$ |
0.40 |
$ |
2.29 |
|
$ |
2.69 |
|
|
($0.12 |
) |
|
($0.07 |
) |
|
($0.19 |
) |
2016 |
|
|
11.75 |
|
0.18 |
|
0.46 |
|
|
0.64 |
|
|
(0.13 |
) |
|
(0.38 |
) |
|
(0.51 |
) |
2015 |
|
|
12.19 |
|
0.20 |
|
(0.28 |
) |
|
(0.08 |
) |
|
(0.15 |
) |
|
(0.21 |
) |
|
(0.36 |
) |
2014 |
|
|
11.58 |
|
0.39 |
|
0.25 |
|
|
0.64 |
|
|
(0.01 |
) |
|
(0.02 |
) |
|
(0.03 |
) |
2013 |
(e) |
|
10.00 |
|
0.38 |
|
1.20 |
|
|
1.58 |
|
|
– |
|
|
– |
|
|
– |
|
PRINCIPAL LIFETIME
STRATEGIC INCOME ACCOUNT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class 1
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
|
11.40 |
|
0.30 |
|
0.69 |
|
|
0.99 |
|
|
(0.28 |
) |
|
– |
|
|
(0.28 |
) |
2016 |
|
|
11.15 |
|
0.26 |
|
0.27 |
|
|
0.53 |
|
|
(0.28 |
) |
|
– |
|
|
(0.28 |
) |
2015 |
|
|
11.51 |
|
0.25 |
|
(0.35 |
) |
|
(0.10 |
) |
|
(0.26 |
) |
|
– |
|
|
(0.26 |
) |
2014 |
|
|
11.29 |
|
0.23 |
|
0.29 |
|
|
0.52 |
|
|
(0.30 |
) |
|
– |
|
|
(0.30 |
) |
2013 |
|
|
11.04 |
|
0.26 |
|
0.29 |
|
|
0.55 |
|
|
(0.30 |
) |
|
– |
|
|
(0.30 |
) |
REAL ESTATE
SECURITIES ACCOUNT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class 1
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
|
21.30 |
|
0.25 |
|
1.62 |
|
|
1.87 |
|
|
(0.39 |
) |
|
(2.16 |
) |
|
(2.55 |
) |
2016 |
|
|
22.20 |
|
0.31 |
|
1.09 |
|
|
1.40 |
|
|
(0.32 |
) |
|
(1.98 |
) |
|
(2.30 |
) |
2015 |
|
|
22.33 |
|
0.34 |
|
0.57 |
|
|
0.91 |
|
|
(0.34 |
) |
|
(0.70 |
) |
|
(1.04 |
) |
2014 |
|
|
17.08 |
|
0.29 |
|
5.28 |
|
|
5.57 |
|
|
(0.32 |
) |
|
– |
|
|
(0.32 |
) |
2013 |
|
|
16.63 |
|
0.35 |
|
0.33 |
|
|
0.68 |
|
|
(0.23 |
) |
|
– |
|
|
(0.23 |
) |
Class 2
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
|
21.36 |
|
0.19 |
|
1.64 |
|
|
1.83 |
|
|
(0.33 |
) |
|
(2.16 |
) |
|
(2.49 |
) |
2016 |
|
|
22.29 |
|
0.28 |
|
1.06 |
|
|
1.34 |
|
|
(0.29 |
) |
|
(1.98 |
) |
|
(2.27 |
) |
2015 |
|
|
22.45 |
|
0.34 |
|
0.53 |
|
|
0.87 |
|
|
(0.33 |
) |
|
(0.70 |
) |
|
(1.03 |
) |
2014 |
|
|
17.18 |
|
0.27 |
|
5.27 |
|
|
5.54 |
|
|
(0.27 |
) |
|
– |
|
|
(0.27 |
) |
2013 |
|
|
16.72 |
|
0.30 |
|
0.34 |
|
|
0.64 |
|
|
(0.18 |
) |
|
– |
|
|
(0.18 |
) |
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL
HIGHLIGHTS (Continued) |
|
|
|
|
|
|
|
PRINCIPAL VARIABLE
CONTRACTS FUNDS, INC. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset |
|
|
|
|
Ratio of
Expenses |
|
Ratio of Net |
|
|
|
|
Value, End |
Total |
|
|
Net Assets, End
of |
to Average Net |
|
Investment Income
to |
|
Portfolio |
|
|
of
Period |
Return(b) |
|
|
Period (in
thousands) |
Assets |
|
Average Net
Assets |
|
Turnover Rate |
|
|
|
$ |
14.38 |
22.74 |
% |
$ |
5,712 |
0.10%(c),(d) |
|
2.98 |
% |
33.1 |
% |
|
11.88 |
5.52 |
|
|
2,644 |
0.10 (c) |
,(d) |
1.55 |
|
43.1 |
|
|
11.75 |
(0.75 |
) |
|
2,097 |
0.13 (c) |
,(d) |
1.65 |
|
30.3 |
|
|
12.19 |
5.58 |
|
|
825 |
0.13 (c) |
,(d) |
3.28 |
|
43.2 |
|
|
11.58 |
15.80 |
(f) |
|
28 |
0.13 (c) |
,(d),(g) |
5.31 |
(g) |
79.4 |
(g) |
|
|
|
12.11 |
8.76 |
|
|
24,630 |
0.02 |
(d) |
2.56 |
|
20.0 |
|
|
11.40 |
4.77 |
|
|
24,741 |
0.03 |
(d) |
2.29 |
|
28.5 |
|
|
11.15 |
(0.95 |
) |
|
24,452 |
0.05 |
(d) |
2.21 |
|
24.4 |
|
|
11.51 |
4.57 |
|
|
30,016 |
0.05 |
(d) |
2.01 |
|
39.8 |
|
|
11.29 |
5.11 |
|
|
31,164 |
0.05 |
(d) |
2.35 |
|
25.1 |
|
|
|
|
20.62 |
9.19 |
|
|
154,615 |
0.89 |
|
1.19 |
|
19.6 |
|
|
21.30 |
5.85 |
|
|
158,760 |
0.89 |
|
1.38 |
|
31.3 |
|
|
22.20 |
4.21 |
|
|
159,292 |
0.89 |
|
1.54 |
|
22.8 |
|
|
22.33 |
32.82 |
|
|
166,701 |
0.89 |
|
1.48 |
|
15.7 |
|
|
17.08 |
4.10 |
|
|
128,601 |
0.89 |
|
1.96 |
|
22.1 |
|
|
|
20.70 |
8.94 |
|
|
2,830 |
1.14 |
|
0.89 |
|
19.6 |
|
|
21.36 |
5.53 |
|
|
4,215 |
1.14 |
|
1.26 |
|
31.3 |
|
|
22.29 |
4.00 |
|
|
1,994 |
1.14 |
|
1.56 |
|
22.8 |
|
|
22.45 |
32.44 |
|
|
492 |
1.14 |
|
1.37 |
|
15.7 |
|
|
17.18 |
3.87 |
|
|
271 |
1.14 |
|
1.72 |
|
22.1 |
|
(a)
|
Calculated based on
average shares outstanding during the period. |
(b)
|
Total return does not
reflect charges attributable to separate accounts. Inclusion of these
charges would reduce the amounts shown. |
(c)
|
Reflects Manager's
contractual expense limit. |
(d)
|
Does not include
expenses of the investment companies in which the Account invests.
|
(e)
|
Period from May 1, 2013
date operations commenced, through December 31, 2013. |
(f)
|
Total return amounts
have not been annualized. |
(g)
|
Computed on an
annualized basis. |
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL
HIGHLIGHTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRINCIPAL VARIABLE
CONTRACTS FUNDS, INC. |
|
|
|
|
|
|
|
|
|
|
|
Selected data for a
share of Capital Stock outstanding throughout each year ended December 31
(except as noted): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset |
|
Net |
|
Net Realized |
|
|
|
|
|
Dividends |
|
|
Distributions |
|
|
Total |
|
|
|
Value, |
|
Investment
|
|
and
Unrealized |
|
|
Total
From |
|
|
from
Net |
|
|
from |
|
|
Dividends |
|
|
|
Beginning of |
|
Income |
|
Gain (Loss)
on |
|
|
Investment |
|
|
Investment |
|
|
Realized |
|
|
and |
|
|
|
Period |
|
(Loss)(a) |
|
Investments |
|
|
Operations |
|
|
Income |
|
|
Gains |
|
|
Distributions |
|
SAM BALANCED
PORTFOLIO |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class 1
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
$ |
14.44 |
$ |
0.45 |
$ |
1.71 |
|
$ |
2.16 |
|
|
($0.34 |
) |
|
($0.37 |
) |
|
($0.71 |
) |
2016 |
|
14.69 |
|
0.30 |
|
0.70 |
|
|
1.00 |
|
|
(0.32 |
) |
|
(0.93 |
) |
|
(1.25 |
) |
2015 |
|
16.51 |
|
0.30 |
|
(0.38 |
) |
|
(0.08 |
) |
|
(0.49 |
) |
|
(1.25 |
) |
|
(1.74 |
) |
2014 |
|
18.53 |
|
0.47 |
|
0.73 |
|
|
1.20 |
|
|
(0.52 |
) |
|
(2.70 |
) |
|
(3.22 |
) |
2013 |
|
16.33 |
|
0.47 |
|
2.37 |
|
|
2.84 |
|
|
(0.43 |
) |
|
(0.21 |
) |
|
(0.64 |
) |
Class 2
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
14.30 |
|
0.42 |
|
1.67 |
|
|
2.09 |
|
|
(0.30 |
) |
|
(0.37 |
) |
|
(0.67 |
) |
2016 |
|
14.55 |
|
0.27 |
|
0.69 |
|
|
0.96 |
|
|
(0.28 |
) |
|
(0.93 |
) |
|
(1.21 |
) |
2015 |
|
16.37 |
|
0.26 |
|
(0.38 |
) |
|
(0.12 |
) |
|
(0.45 |
) |
|
(1.25 |
) |
|
(1.70 |
) |
2014 |
|
18.39 |
|
0.43 |
|
0.73 |
|
|
1.16 |
|
|
(0.48 |
) |
|
(2.70 |
) |
|
(3.18 |
) |
2013 |
|
16.22 |
|
0.41 |
|
2.35 |
|
|
2.76 |
|
|
(0.38 |
) |
|
(0.21 |
) |
|
(0.59 |
) |
SAM CONSERVATIVE
BALANCED PORTFOLIO |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class 1
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
11.50 |
|
0.38 |
|
0.92 |
|
|
1.30 |
|
|
(0.34 |
) |
|
(0.13 |
) |
|
(0.47 |
) |
2016 |
|
11.52 |
|
0.31 |
|
0.42 |
|
|
0.73 |
|
|
(0.30 |
) |
|
(0.45 |
) |
|
(0.75 |
) |
2015 |
|
12.60 |
|
0.29 |
|
(0.36 |
) |
|
(0.07 |
) |
|
(0.41 |
) |
|
(0.60 |
) |
|
(1.01 |
) |
2014 |
|
13.39 |
|
0.41 |
|
0.40 |
|
|
0.81 |
|
|
(0.42 |
) |
|
(1.18 |
) |
|
(1.60 |
) |
2013 |
|
12.49 |
|
0.40 |
|
1.00 |
|
|
1.40 |
|
|
(0.37 |
) |
|
(0.13 |
) |
|
(0.50 |
) |
Class 2
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
11.38 |
|
0.36 |
|
0.89 |
|
|
1.25 |
|
|
(0.31 |
) |
|
(0.13 |
) |
|
(0.44 |
) |
2016 |
|
11.41 |
|
0.27 |
|
0.42 |
|
|
0.69 |
|
|
(0.27 |
) |
|
(0.45 |
) |
|
(0.72 |
) |
2015 |
|
12.48 |
|
0.27 |
|
(0.36 |
) |
|
(0.09 |
) |
|
(0.38 |
) |
|
(0.60 |
) |
|
(0.98 |
) |
2014 |
|
13.28 |
|
0.38 |
|
0.38 |
|
|
0.76 |
|
|
(0.38 |
) |
|
(1.18 |
) |
|
(1.56 |
) |
2013 |
|
12.39 |
|
0.36 |
|
1.00 |
|
|
1.36 |
|
|
(0.34 |
) |
|
(0.13 |
) |
|
(0.47 |
) |
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL
HIGHLIGHTS (Continued) |
|
|
|
|
|
|
|
PRINCIPAL VARIABLE
CONTRACTS FUNDS, INC. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset |
|
|
|
|
Ratio of
Expenses |
|
Ratio of Net |
|
|
|
|
Value, End |
Total |
|
|
Net Assets, End
of |
to Average Net |
|
Investment Income
to |
|
Portfolio |
|
|
of
Period |
Return(b) |
|
|
Period (in
thousands) |
Assets |
|
Average Net
Assets |
|
Turnover Rate |
|
|
|
$ |
15.89 |
15.21 |
% |
$ |
678,409 |
0.23 |
%(c) |
2.92 |
% |
27.4 |
% |
|
14.44 |
6.82 |
|
|
672,562 |
0.23 |
(c) |
2.07 |
|
16.5 |
|
|
14.69 |
(0.81 |
) |
|
732,937 |
0.23 |
(c) |
1.88 |
|
26.1 |
|
|
16.51 |
6.82 |
|
|
826,908 |
0.23 |
(c) |
2.64 |
|
16.4 |
|
|
18.53 |
17.68 |
|
|
913,823 |
0.23 |
(c) |
2.68 |
|
46.7 |
|
|
|
15.72 |
14.88 |
|
|
110,129 |
0.48 |
(c) |
2.77 |
|
27.4 |
|
|
14.30 |
6.62 |
|
|
97,047 |
0.48 |
(c) |
1.88 |
|
16.5 |
|
|
14.55 |
(1.08 |
) |
|
96,511 |
0.48 |
(c) |
1.66 |
|
26.1 |
|
|
16.37 |
6.59 |
|
|
99,852 |
0.48 |
(c) |
2.44 |
|
16.4 |
|
|
18.39 |
17.32 |
|
|
102,716 |
0.48 |
(c) |
2.37 |
|
46.7 |
|
|
|
|
12.33 |
11.46 |
|
|
178,523 |
0.23 |
(c) |
3.16 |
|
26.3 |
|
|
11.50 |
6.37 |
|
|
183,830 |
0.23 |
(c) |
2.64 |
|
19.8 |
|
|
11.52 |
(0.78 |
) |
|
193,585 |
0.23 |
(c) |
2.38 |
|
28.2 |
|
|
12.60 |
6.22 |
|
|
206,621 |
0.23 |
(c) |
3.10 |
|
21.2 |
|
|
13.39 |
11.53 |
|
|
212,247 |
0.23 |
(c) |
3.10 |
|
35.6 |
|
|
|
12.19 |
11.14 |
|
|
20,541 |
0.48 |
(c) |
3.06 |
|
26.3 |
|
|
11.38 |
6.08 |
|
|
17,477 |
0.48 |
(c) |
2.39 |
|
19.8 |
|
|
11.41 |
(0.93 |
) |
|
17,774 |
0.48 |
(c) |
2.19 |
|
28.2 |
|
|
12.48 |
5.92 |
|
|
16,731 |
0.48 |
(c) |
2.87 |
|
21.2 |
|
|
13.28 |
11.25 |
|
|
16,140 |
0.48 |
(c) |
2.77 |
|
35.6 |
|
(a)
|
Calculated based on
average shares outstanding during the period. |
(b)
|
Total return does not
reflect charges attributable to separate accounts. Inclusion of these
charges would reduce the amounts shown. |
(c)
|
Does not include
expenses of the investment companies in which the Portfolio
invests. |
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL
HIGHLIGHTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRINCIPAL VARIABLE
CONTRACTS FUNDS, INC. |
|
|
|
|
|
|
|
|
|
|
|
Selected data for a
share of Capital Stock outstanding throughout each year ended December 31
(except as noted): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset |
|
Net |
|
Net Realized |
|
|
|
|
|
Dividends |
|
|
Distributions |
|
|
Total |
|
|
|
Value, |
|
Investment
|
|
and
Unrealized |
|
|
Total
From |
|
|
from
Net |
|
|
from |
|
|
Dividends |
|
|
|
Beginning of |
|
Income |
|
Gain (Loss)
on |
|
|
Investment |
|
|
Investment |
|
|
Realized |
|
|
and |
|
|
|
Period |
|
(Loss)(a) |
|
Investments |
|
|
Operations |
|
|
Income |
|
|
Gains |
|
|
Distributions |
|
SAM CONSERVATIVE
GROWTH PORTFOLIO |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class 1
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
$ |
17.22 |
$ |
0.54 |
$ |
2.82 |
|
$ |
3.36 |
|
|
($0.30 |
) |
|
($0.42 |
) |
|
($0.72 |
) |
2016 |
|
17.22 |
|
0.30 |
|
0.90 |
|
|
1.20 |
|
|
(0.26 |
) |
|
(0.94 |
) |
|
(1.20 |
) |
2015 |
|
19.02 |
|
0.26 |
|
(0.41 |
) |
|
(0.15 |
) |
|
(0.43 |
) |
|
(1.22 |
) |
|
(1.65 |
) |
2014 |
|
20.60 |
|
0.48 |
|
0.97 |
|
|
1.45 |
|
|
(0.39 |
) |
|
(2.64 |
) |
|
(3.03 |
) |
2013 |
|
17.04 |
|
0.40 |
|
3.50 |
|
|
3.90 |
|
|
(0.34 |
) |
|
– |
|
|
(0.34 |
) |
Class 2
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
17.01 |
|
0.49 |
|
2.78 |
|
|
3.27 |
|
|
(0.26 |
) |
|
(0.42 |
) |
|
(0.68 |
) |
2016 |
|
17.02 |
|
0.25 |
|
0.89 |
|
|
1.14 |
|
|
(0.21 |
) |
|
(0.94 |
) |
|
(1.15 |
) |
2015 |
|
18.82 |
|
0.21 |
|
(0.40 |
) |
|
(0.19 |
) |
|
(0.39 |
) |
|
(1.22 |
) |
|
(1.61 |
) |
2014 |
|
20.42 |
|
0.42 |
|
0.97 |
|
|
1.39 |
|
|
(0.35 |
) |
|
(2.64 |
) |
|
(2.99 |
) |
2013 |
|
16.89 |
|
0.34 |
|
3.49 |
|
|
3.83 |
|
|
(0.30 |
) |
|
– |
|
|
(0.30 |
) |
SAM FLEXIBLE INCOME
PORTFOLIO |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class 1
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
12.45 |
|
0.47 |
|
0.56 |
|
|
1.03 |
|
|
(0.44 |
) |
|
(0.09 |
) |
|
(0.53 |
) |
2016 |
|
12.27 |
|
0.42 |
|
0.44 |
|
|
0.86 |
|
|
(0.43 |
) |
|
(0.25 |
) |
|
(0.68 |
) |
2015 |
|
13.22 |
|
0.40 |
|
(0.56 |
) |
|
(0.16 |
) |
|
(0.47 |
) |
|
(0.32 |
) |
|
(0.79 |
) |
2014 |
|
13.72 |
|
0.49 |
|
0.33 |
|
|
0.82 |
|
|
(0.52 |
) |
|
(0.80 |
) |
|
(1.32 |
) |
2013 |
|
13.38 |
|
0.49 |
|
0.51 |
|
|
1.00 |
|
|
(0.48 |
) |
|
(0.18 |
) |
|
(0.66 |
) |
Class 2
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
12.34 |
|
0.45 |
|
0.54 |
|
|
0.99 |
|
|
(0.41 |
) |
|
(0.09 |
) |
|
(0.50 |
) |
2016 |
|
12.17 |
|
0.38 |
|
0.44 |
|
|
0.82 |
|
|
(0.40 |
) |
|
(0.25 |
) |
|
(0.65 |
) |
2015 |
|
13.12 |
|
0.37 |
|
(0.56 |
) |
|
(0.19 |
) |
|
(0.44 |
) |
|
(0.32 |
) |
|
(0.76 |
) |
2014 |
|
13.62 |
|
0.45 |
|
0.33 |
|
|
0.78 |
|
|
(0.48 |
) |
|
(0.80 |
) |
|
(1.28 |
) |
2013 |
|
13.29 |
|
0.46 |
|
0.50 |
|
|
0.96 |
|
|
(0.45 |
) |
|
(0.18 |
) |
|
(0.63 |
) |
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL
HIGHLIGHTS (Continued) |
|
|
|
|
|
|
|
PRINCIPAL VARIABLE
CONTRACTS FUNDS, INC. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset |
|
|
|
|
Ratio of
Expenses |
|
Ratio of Net |
|
|
|
|
Value, End |
Total |
|
|
Net Assets, End
of |
to Average Net |
|
Investment Income
to |
|
Portfolio |
|
|
of
Period |
Return(b) |
|
|
Period (in
thousands) |
Assets |
|
Average Net
Assets |
|
Turnover Rate |
|
|
|
$ |
19.86 |
19.78 |
% |
$ |
220,054 |
0.23 |
%(c) |
2.88 |
% |
35.1 |
% |
|
17.22 |
7.00 |
|
|
194,284 |
0.23 |
(c) |
1.73 |
|
25.5 |
|
|
17.22 |
(1.09 |
) |
|
193,966 |
0.23 |
(c) |
1.40 |
|
29.1 |
|
|
19.02 |
7.43 |
|
|
198,465 |
0.23 |
(c) |
2.40 |
|
19.4 |
|
|
20.60 |
23.07 |
|
|
179,850 |
0.23 |
(c) |
2.10 |
|
48.5 |
|
|
|
19.60 |
19.46 |
|
|
127,079 |
0.48 |
(c) |
2.68 |
|
35.1 |
|
|
17.01 |
6.76 |
|
|
108,247 |
0.48 |
(c) |
1.49 |
|
25.5 |
|
|
17.02 |
(1.34 |
) |
|
103,771 |
0.48 |
(c) |
1.17 |
|
29.1 |
|
|
18.82 |
7.14 |
|
|
102,757 |
0.48 |
(c) |
2.11 |
|
19.4 |
|
|
20.42 |
22.82 |
|
|
99,013 |
0.48 |
(c) |
1.82 |
|
48.5 |
|
|
|
|
12.95 |
8.41 |
|
|
194,742 |
0.23 |
(c) |
3.69 |
|
29.3 |
|
|
12.45 |
7.04 |
|
|
196,393 |
0.23 |
(c) |
3.32 |
|
17.1 |
|
|
12.27 |
(1.31 |
) |
|
200,828 |
0.23 |
(c) |
3.05 |
|
25.2 |
|
|
13.22 |
6.03 |
|
|
215,309 |
0.23 |
(c) |
3.55 |
|
18.8 |
|
|
13.72 |
7.75 |
|
|
214,572 |
0.23 |
(c) |
3.57 |
|
29.7 |
|
|
|
12.83 |
8.13 |
|
|
23,003 |
0.48 |
(c) |
3.57 |
|
29.3 |
|
|
12.34 |
6.73 |
|
|
20,085 |
0.48 |
(c) |
3.06 |
|
17.1 |
|
|
12.17 |
(1.55 |
) |
|
21,108 |
0.48 |
(c) |
2.85 |
|
25.2 |
|
|
13.12 |
5.80 |
|
|
19,836 |
0.48 |
(c) |
3.27 |
|
18.8 |
|
|
13.62 |
7.46 |
|
|
19,464 |
0.48 |
(c) |
3.36 |
|
29.7 |
|
(a)
|
Calculated based on
average shares outstanding during the period. |
(b)
|
Total return does not
reflect charges attributable to separate accounts. Inclusion of these
charges would reduce the amounts shown. |
(c)
|
Does not include
expenses of the investment companies in which the Portfolio
invests. |
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL
HIGHLIGHTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRINCIPAL VARIABLE
CONTRACTS FUNDS, INC. |
|
|
|
|
|
|
|
|
|
|
|
Selected data for a
share of Capital Stock outstanding throughout each year ended December 31
(except as noted): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset |
|
Net |
|
Net Realized |
|
|
|
|
|
Dividends |
|
|
Distributions |
|
|
Total |
|
|
|
Value, |
|
Investment
|
|
and
Unrealized |
|
|
Total
From |
|
|
from
Net |
|
|
from |
|
|
Dividends |
|
|
|
Beginning of |
|
Income |
|
Gain (Loss)
on |
|
|
Investment |
|
|
Investment |
|
|
Realized |
|
|
and |
|
|
|
Period |
|
(Loss)(a) |
|
Investments |
|
|
Operations |
|
|
Income |
|
|
Gains |
|
|
Distributions |
|
SAM STRATEGIC
GROWTH PORTFOLIO |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class 1
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
$ |
18.54 |
$ |
0.51 |
$ |
3.54 |
|
$ |
4.05 |
|
|
($0.30 |
) |
|
($0.57 |
) |
|
($0.87 |
) |
2016 |
|
18.70 |
|
0.30 |
|
0.85 |
|
|
1.15 |
|
|
(0.28 |
) |
|
(1.03 |
) |
|
(1.31 |
) |
2015 |
|
21.00 |
|
0.29 |
|
(0.56 |
) |
|
(0.27 |
) |
|
(0.47 |
) |
|
(1.56 |
) |
|
(2.03 |
) |
2014 |
|
23.55 |
|
0.56 |
|
1.33 |
|
|
1.89 |
|
|
(0.38 |
) |
|
(4.06 |
) |
|
(4.44 |
) |
2013 |
|
18.74 |
|
0.40 |
|
4.70 |
|
|
5.10 |
|
|
(0.29 |
) |
|
– |
|
|
(0.29 |
) |
Class 2
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
18.33 |
|
0.47 |
|
3.48 |
|
|
3.95 |
|
|
(0.25 |
) |
|
(0.57 |
) |
|
(0.82 |
) |
2016 |
|
18.50 |
|
0.26 |
|
0.83 |
|
|
1.09 |
|
|
(0.23 |
) |
|
(1.03 |
) |
|
(1.26 |
) |
2015 |
|
20.80 |
|
0.24 |
|
(0.55 |
) |
|
(0.31 |
) |
|
(0.43 |
) |
|
(1.56 |
) |
|
(1.99 |
) |
2014 |
|
23.38 |
|
0.49 |
|
1.32 |
|
|
1.81 |
|
|
(0.33 |
) |
|
(4.06 |
) |
|
(4.39 |
) |
2013 |
|
18.61 |
|
0.33 |
|
4.68 |
|
|
5.01 |
|
|
(0.24 |
) |
|
– |
|
|
(0.24 |
) |
SHORT-TERM INCOME
ACCOUNT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class 1
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
2.54 |
|
0.05 |
|
0.01 |
|
|
0.06 |
|
|
(0.05 |
) |
|
– |
|
|
(0.05 |
) |
2016 |
|
2.54 |
|
0.05 |
|
– |
|
|
0.05 |
|
|
(0.05 |
) |
|
– |
|
|
(0.05 |
) |
2015 |
|
2.59 |
|
0.04 |
|
(0.02 |
) |
|
0.02 |
|
|
(0.07 |
) |
|
– |
|
|
(0.07 |
) |
2014 |
|
2.59 |
|
0.05 |
|
(0.01 |
) |
|
0.04 |
|
|
(0.04 |
) |
|
– |
|
|
(0.04 |
) |
2013 |
|
2.61 |
|
0.04 |
|
(0.01 |
) |
|
0.03 |
|
|
(0.05 |
) |
|
– |
|
|
(0.05 |
) |
Class 2
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
2.53 |
|
0.05 |
|
0.01 |
|
|
0.06 |
|
|
(0.05 |
) |
|
– |
|
|
(0.05 |
) |
2016 |
|
2.53 |
|
0.04 |
|
0.01 |
|
|
0.05 |
|
|
(0.05 |
) |
|
– |
|
|
(0.05 |
) |
2015 |
|
2.58 |
|
0.04 |
|
(0.02 |
) |
|
0.02 |
|
|
(0.07 |
) |
|
– |
|
|
(0.07 |
) |
2014 |
|
2.59 |
|
0.04 |
|
(0.01 |
) |
|
0.03 |
|
|
(0.04 |
) |
|
– |
|
|
(0.04 |
) |
2013 |
|
2.60 |
|
0.04 |
|
(0.01 |
) |
|
0.03 |
|
|
(0.04 |
) |
|
– |
|
|
(0.04 |
) |
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL
HIGHLIGHTS (Continued) |
|
|
|
|
|
|
|
PRINCIPAL VARIABLE
CONTRACTS FUNDS, INC. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset |
|
|
|
|
Ratio of
Expenses |
|
Ratio of Net |
|
|
|
|
Value, End |
Total |
|
|
Net Assets, End
of |
to Average Net |
|
Investment Income
to |
|
Portfolio |
|
|
of
Period |
Return(b) |
|
|
Period (in
thousands) |
Assets |
|
Average Net
Assets |
|
Turnover Rate |
|
|
|
$ |
21.72 |
22.22 |
% |
$ |
163,861 |
0.23 |
%(c) |
2.50 |
% |
37.7 |
% |
|
18.54 |
6.15 |
|
|
145,083 |
0.23 |
(c) |
1.61 |
|
23.4 |
|
|
18.70 |
(1.62 |
) |
|
142,227 |
0.23 |
(c) |
1.45 |
|
37.9 |
|
|
21.00 |
8.68 |
|
|
138,863 |
0.23 |
(c) |
2.50 |
|
20.4 |
|
|
23.55 |
27.40 |
|
|
121,049 |
0.23 |
(c) |
1.89 |
|
62.5 |
|
|
|
21.46 |
21.95 |
|
|
126,632 |
0.48 |
(c) |
2.33 |
|
37.7 |
|
|
18.33 |
5.90 |
|
|
103,870 |
0.48 |
(c) |
1.41 |
|
23.4 |
|
|
18.50 |
(1.87 |
) |
|
95,775 |
0.48 |
(c) |
1.19 |
|
37.9 |
|
|
20.80 |
8.35 |
|
|
96,446 |
0.48 |
(c) |
2.21 |
|
20.4 |
|
|
23.38 |
27.09 |
|
|
87,689 |
0.48 |
(c) |
1.57 |
|
62.5 |
|
|
|
|
2.55 |
2.39 |
|
|
158,446 |
0.50 |
(d) |
2.01 |
|
67.3 |
|
|
2.54 |
2.14 |
|
|
170,538 |
0.50 |
(d) |
1.91 |
|
48.6 |
|
|
2.54 |
0.71 |
|
|
160,833 |
0.49 |
(d) |
1.63 |
|
57.0 |
|
|
2.59 |
1.73 |
|
|
267,674 |
0.49 |
(d) |
1.74 |
|
54.3 |
|
|
2.59 |
1.14 |
|
|
256,561 |
0.48 |
(d) |
1.65 |
|
54.7 |
|
|
|
2.54 |
1.78 |
(e) |
|
2,300 |
0.75 |
(d) |
1.78 |
|
67.3 |
|
|
2.53 |
2.01 |
|
|
2,072 |
0.75 |
(d) |
1.65 |
|
48.6 |
|
|
2.53 |
0.59 |
|
|
1,485 |
0.74 |
(d) |
1.39 |
|
57.0 |
|
|
2.58 |
1.02 |
|
|
913 |
0.74 |
(d) |
1.49 |
|
54.3 |
|
|
2.59 |
1.25 |
|
|
838 |
0.73 |
(d) |
1.40 |
|
54.7 |
|
(a)
|
Calculated based on
average shares outstanding during the period. |
(b)
|
Total return does not
reflect charges attributable to separate accounts. Inclusion of these
charges would reduce the amounts shown. |
(c)
|
Does not include
expenses of the investment companies in which the Portfolio
invests. |
(d)
|
Reflects Manager's
contractual expense limit. |
(e)
|
Total return is
calculated using the traded net asset value which may differ from the
reported net asset value. The traded net asset value is the net asset
value which a shareholder would have paid or received from a subscription
or redemption. |
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL
HIGHLIGHTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRINCIPAL VARIABLE
CONTRACTS FUNDS, INC. |
|
|
|
|
|
|
|
|
|
|
Selected data for a
share of Capital Stock outstanding throughout each year ended December 31
(except as noted): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset |
|
Net |
|
Net Realized |
|
|
|
|
|
Dividends |
|
Distributions |
|
|
Total |
|
|
|
|
Value, |
|
Investment
|
|
and
Unrealized |
|
|
Total
From |
|
|
from
Net |
|
from |
|
|
Dividends |
|
|
|
|
Beginning of |
|
Income |
|
Gain (Loss)
on |
|
|
Investment |
|
|
Investment |
|
Realized |
|
|
and |
|
|
|
|
Period |
|
(Loss)(a) |
|
Investments |
|
|
Operations |
|
|
Income |
|
Gains |
|
|
Distributions |
|
SMALLCAP
ACCOUNT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class 1
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
$ |
15.21 |
$ |
0.06 |
$ |
1.89 |
|
$ |
1.95 |
|
|
($0.06 |
) |
$– |
|
|
($0.06 |
) |
2016 |
|
|
13.55 |
|
0.15 |
|
2.15 |
|
|
2.30 |
|
|
(0.04 |
) |
(0.60 |
) |
|
(0.64 |
) |
2015 |
|
|
13.99 |
|
0.05 |
|
(0.03 |
) |
|
0.02 |
|
|
(0.01 |
) |
(0.45 |
) |
|
(0.46 |
) |
2014 |
|
|
13.79 |
|
0.02 |
|
0.64 |
|
|
0.66 |
|
|
(0.05 |
) |
(0.41 |
) |
|
(0.46 |
) |
2013 |
|
|
9.36 |
|
0.04 |
|
4.43 |
|
|
4.47 |
|
|
(0.04 |
) |
– |
|
|
(0.04 |
) |
Class 2
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
|
15.17 |
|
0.02 |
|
1.87 |
|
|
1.89 |
|
|
(0.02 |
) |
– |
|
|
(0.02 |
) |
2016 |
|
|
13.52 |
|
0.11 |
|
2.15 |
|
|
2.26 |
|
|
(0.01 |
) |
(0.60 |
) |
|
(0.61 |
) |
2015 |
(d) |
|
14.49 |
|
0.02 |
|
(0.53 |
) |
|
(0.51 |
) |
|
(0.01 |
) |
(0.45 |
) |
|
(0.46 |
) |
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL
HIGHLIGHTS (Continued) |
|
|
|
|
|
|
|
PRINCIPAL VARIABLE
CONTRACTS FUNDS, INC. |
|
|
|
|
|
Net Asset |
|
|
|
Net Assets, End
of |
Ratio of
Expenses |
|
Ratio of Net |
|
|
|
|
Value, End |
Total |
|
|
Period (in |
to Average Net |
|
Investment Income
to |
|
Portfolio |
|
|
of
Period |
Return(b) |
|
|
thousands) |
Assets |
|
Average Net Assets
|
|
Turnover
Rate |
|
|
|
$ |
17.10 |
12.87 |
% |
$ |
208,669 |
0.83 |
% |
0.37 |
% |
64.1 |
% |
|
15.21 |
17.39 |
|
|
209,911 |
0.83 |
|
1.08 |
|
57.1 |
|
|
13.55 |
(0.10 |
) |
|
205,344 |
0.83 |
|
0.33 |
|
63.3 |
|
|
13.99 |
4.89 |
|
|
64,682 |
0.87 |
|
0.16 |
|
67.0 |
|
|
13.79 |
47.81 |
|
|
64,785 |
0.87 |
|
0.38 |
|
78.1 |
|
|
|
17.04 |
12.57 |
(c) |
|
5,371 |
1.08 |
|
0.12 |
|
64.1 |
|
|
15.17 |
17.15 |
|
|
4,938 |
1.08 |
|
0.80 |
|
57.1 |
|
|
13.52 |
(3.76 |
)
(e) |
|
4,523 |
1.08 |
(f) |
0.13 |
(f) |
63.3 |
(f) |
(a)
|
Calculated based on
average shares outstanding during the period. |
(b)
|
Total return does not
reflect charges attributable to separate accounts. Inclusion of these
charges would reduce the amounts shown. |
(c)
|
Total return is
calculated using the traded net asset value which may differ from the
reported net asset value. The traded net asset value is the net asset
value which a shareholder would have paid or received from a subscription
or redemption. |
(d)
|
Period from February 17,
2015 date operations commenced, through December 31, 2015. |
(e)
|
Total return amounts
have not been annualized. |
(f)
|
Computed on an
annualized basis. |
28
Additional information about the
Fund is available in the Statement of Additional Information dated May 1, 2018,
which is incorporated by reference into this prospectus. Additional information
about the Fund's investments is available in the Fund’s annual and semiannual
reports to shareholders. In the Fund’s annual report, you will find a discussion
of the market conditions and investment strategies that significantly affected
the Funds’ performance during the last fiscal year. The Statement of Additional
Information and the Fund’s annual and semiannual reports can be obtained free of
charge by writing Principal Funds, P.O. Box 8024, Boston, MA 02266-8024. In
addition, the Fund makes its Statement of Additional Information and annual and
semiannual reports available, free of charge, on our website
www.principalfunds.com/prospectuses-pvc. To request this and other information
about the Fund and to make shareholder inquiries, telephone
1-800-222-5852.
Information about the Fund
(including the Statement of Additional Information) can be reviewed and copied
at the Securities and Exchange Commission’s Public Reference Room in Washington,
D.C. Information on the operation of the Public Reference Room may be obtained
by calling the Commission at 1-202-551-8090. Reports and other information about
the Fund are available on the EDGAR Database on the Commission’s internet site
at www.sec.gov. Copies of this information may be obtained, upon payment of a
duplicating fee, by electronic request at the following e-mail address:
[email protected], or by writing the Commission’s Public Reference Section, 100
F Street, N.E., Washington, D.C. 20549-1520.
PVC has entered into a management
agreement with Principal Global Investors, LLC ("PGI"). PVC and/or PGI, on
behalf of the Accounts, enter into contractual arrangements with various
parties, including, among others, the Funds’ sub-advisors, distributor, transfer
agent and custodian, who provide services to the Account. These arrangements are
between PVC and/or PGI and the applicable service provider. Shareholders are not
parties to, or intended to be third-party beneficiaries of, any of these
arrangements. Such arrangements are not intended to create in any individual
shareholder or group of shareholders any right, including the right to enforce
such arrangements against the service providers or to seek any remedy thereunder
against PGI or any other service provider, either directly or on behalf of PVC
or any Account.
This prospectus provides information
that you should consider in determining whether to purchase shares of an
Account. This prospectus, the Statement of Additional Information, or the
contracts that are exhibits to PVC’s registration statement are not intended to
give rise to any agreement or contract between PVC and/or any Account and any
investor, or give rise to any contract or other rights in any individual
shareholder, group of shareholders or other person other than any rights
conferred explicitly by federal or state securities laws that may not be
waived.
The U.S. government does not insure
or guarantee an investment in any of the Accounts.
Shares of the Accounts are not
deposits or obligations of, or guaranteed or endorsed by, Principal Bank or any
other financial institution, nor are shares of the Accounts federally insured by
the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any
other agency.
Principal Variable Contracts Funds,
Inc. SEC File 811-01944