EMPOWER
FUNDS, INC.
(“Empower
Funds”)
Empower
Inflation-Protected Securities Fund
Institutional Class Ticker: MXIOX
Investor Class Ticker: MXIHX
(the “Fund”)
Institutional Class Ticker: MXIOX
Investor Class Ticker: MXIHX
(the “Fund”)
Fund
shares are sold to insurance company separate accounts for certain variable
annuity contracts and variable life insurance
policies (“variable contracts”), to individual retirement account (“IRA”)
custodians or trustees, to plan sponsors of qualified retirement plans
(“retirement plans”), to college savings programs (collectively, “Permitted
Accounts”), and to asset allocation funds that are series of Empower Funds.
Therefore, you cannot purchase shares of the Fund directly; rather you must
invest through a Permitted Account that makes the Fund available for
investment.
This
Prospectus contains important information about the Fund that you should
consider before investing. Please read it
carefully and save it for future reference.
This
Prospectus does not constitute an offer to sell securities in any state or other
jurisdiction to any person to whom
it is unlawful to make such an offer in such state or other
jurisdiction.
The
Securities and Exchange Commission (“SEC”) has not approved or
disapproved
these securities or passed upon the adequacy of this Prospectus.
Any representation to the contrary is a criminal offense.
these securities or passed upon the adequacy of this Prospectus.
Any representation to the contrary is a criminal offense.
The
date of this Prospectus is April
30, 2024
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Fee
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10
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Investor
Class |
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Below
is a summary of the principal investment risks of investing in the Fund. These
risks are presented in an order that reflects ECM’s
current assessment of relative importance, but this assessment could change over
time as the Fund’s portfolio changes or in light of changes in the market or the
economic environment, among other things. The Fund is not required to and will
not update this Prospectus solely because its assessment of the relative
importance of the principal risks of investing in the Fund changes. There can be
no assurance that the Fund will achieve its investment objective.
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Bloomberg
U.S. Aggregate Bond Index¹ (reflects no deduction for
fees,
expenses or taxes) |
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Bloomberg
1-10 Year U.S. Treasury Inflation-Protected Securities
Index
(reflects no deduction for fees, expenses or taxes) |
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Investment
Adviser
ECM
Sub-Adviser
GSAM
Portfolio
Managers
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Name |
Title |
Portfolio
Manager of Fund
Since |
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Jon
Calluzzo |
Managing
Director; Fixed Income Lead Portfolio Manager |
2022 |
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Peter
Stone |
Managing
Director |
2020 |
Purchase
and Sale of Fund Shares
The
Fund is not sold directly to the general public, but instead may be offered as
an underlying investment for Permitted Accounts. Permitted
Accounts may place orders on any business day to purchase and redeem shares of
the Fund based on instructions received from owners of variable contracts or
IRAs, or from participants of retirement plans or college savings programs.
Please contact your registered representative, IRA custodian or trustee,
retirement plan sponsor or administrator, or college savings program for
information concerning the procedures for purchasing and redeeming shares of the
Fund.
5
The
Fund does not have any initial or subsequent investment minimums. However,
Permitted Accounts may impose investment minimums.
Tax
Information
Currently,
Permitted Accounts generally are not subject to federal income tax on any Fund
distributions. Owners of variable contracts,
retirement plan participants, and IRA owners are also generally not subject to
federal income tax on Fund distributions until such amounts are withdrawn from
the variable contract, retirement plan, or IRA. Distributions from a college
savings program generally are not taxed provided that they are used to pay for
qualified higher education expenses. More information regarding federal taxation
of Permitted Account owners may be found in the applicable prospectus and/or
disclosure documents for that Permitted Account.
Payments
to Insurers, Broker-Dealers and Other Financial
Intermediaries
Companies
related to the Fund may make payments to insurance companies, broker-dealers and
other financial intermediaries for the sale
of Fund shares and/or other services. These payments may be a factor that an
insurance company, broker-dealer or other financial intermediary considers when
including the Fund as an investment option in a Permitted Account. These
payments also may create a conflict of interest by influencing the broker-dealer
or other intermediary and your salesperson to recommend the Fund over another
investment. Ask your salesperson, visit your financial intermediary’s website,
or consult the variable contract prospectus for more information.
More
Information About the Fund
Investment
Objective
The Fund
seeks real return consistent with the preservation of capital.
Principal
Investment Strategies
The
principal investment strategies of the Fund are summarized in the “Fund Summary”
section at the front of this Prospectus. More
detailed descriptions of the principal investment strategies are described
below. The Fund follows a distinct set of investment strategies. All percentage
limitations relating to the Fund’s investment strategies are applied at the time
the Fund acquires a security.
The
Fund will, under normal circumstances, invest at least 80% of its net assets
(plus the amount of any borrowings for investment purposes)
in IPS of varying maturities issued by the U.S. Treasury and other U.S. and
non-U.S. government agencies and corporations, and other instruments, including
inflation-linked swaps, with similar economic characteristics.
The
Fund may invest in derivatives, including but not limited to exchange-traded
futures, interest rate swaps, and inflation-linked swaps that
reference the CPI-U as well as other measures of inflation.
The
remainder of the Fund’s assets may be invested in other fixed income securities,
including, corporate bonds, asset-backed securities,
mortgage-backed securities, below investment grade securities (commonly known as
“high yield securities” or “junk bonds”), securities issued by foreign corporate
and governmental issuers and U.S. government securities.
The
Fund’s target duration range under normal interest rate conditions is expected
to approximate that of its benchmark index, the Bloomberg
1-10 Year U.S. Treasury Inflation-Protected Securities Index, plus or minus one
year. As of December 31, 2023, the duration of this index was 4.11 years.
“Duration” is a measure of a debt security’s price sensitivity to changes in
interest rates. The longer the duration of the Fund (or an individual debt
security), the more sensitive its market price will be to changes in interest
rates. For example, if market interest rates increase by 1%, the market price of
a debt security with a three-year effective duration will generally decrease by
approximately 3%. Conversely, a 1% decline in market interest rates will
generally result in an increase of approximately 3% of that security’s market
price.
The
Fund’s investment objective and 80% policy described above are non-fundamental
and can be changed by the Board without shareholder
approval. The Fund will provide 60 days’ prior written notice to shareholders of
any change made to either the investment objective or 80%
policy.
ECM,
subject to the approval of the Board, selects the Fund’s Sub-Adviser and
monitors its performance on an ongoing basis. The Fund’s
investment portfolio is managed by GSAM. GSAM seeks to generate consistent
risk-adjusted performance by capitalizing on inefficiencies in markets that
cause security prices to diverge from their fair value. GSAM has a committed
focus on security selection and expects that the Fund’s investments will tend to
be repeatable, scalable and generally exhibit high information ratios over time.
GSAM implements its investment philosophy through an investment process that
seeks to maximize risk-adjusted performance by utilizing a diverse set of
investment strategies that revolve around: (1) developing a long-term risk
budget;
6
(2)
generating investment views and strategies; (3) constructing the portfolio; and
(4) implementing dynamic adjustments based on market
conditions. GSAM may sell a security if target price levels have been achieved,
the investment rationale is compromised by new developments, or a security is
downgraded below guideline minimums.
More
Information About the Fund’s Principal Security Types
This
section provides additional information about the types of securities and other
instruments the Fund typically invests in as discussed
in the Principal Investment Strategies sections above.
Asset-backed
securities represent
interests in pools of consumer loans, auto loans, student loans, receivables, or
other assets. Payment of interest and repayment of principal may be largely
dependent upon the cash flows generated by the assets backing the securities
and, in certain cases, supported by letters of credit, surety bonds, or other
credit enhancements.
Below
investment grade securities are those
rated Ba1 or lower by Moody’s Investors Service, Inc., BB+ or lower by Standard
& Poor’s Global Ratings, have a comparable rating from another nationally
recognized statistical rating organization, or are of a comparable quality if
unrated.
Corporate
bonds are debt
obligations issued by corporations or similar entities. As with other types of
bonds, the issuer promises to repay the principal on a specific date and to make
interest payments in the meantime.
Derivatives are
financial instruments designed to achieve a certain economic result when an
underlying security, index, interest rate, currency, commodity, or other
financial instrument moves in price. If the Fund enters into a derivatives
contract, it will obligate or entitle the Fund to deliver or receive an asset or
cash payment that is based on the change in value of the underlying financial
instrument.
•Futures
contracts are
standardized, exchange-traded contracts that require a purchaser to take
delivery, and a seller to make delivery, of a specified amount of an asset at a
specified future date and price. An option on a futures contract gives the
purchaser the right, in exchange for a premium, to assume a position in a
futures contract at a specified exercise price during the term of the option.
Index futures are futures contracts for various indices that are traded on
registered securities exchanges.
•A
swap is an
agreement obligating two counterparties to exchange periodic payments at
specific dates based on a pre-determined underlying investment or notional
amount and to exchange collateral to secure the obligations of each
counterparty. The notional amount is used to calculate the payment stream but is
generally not exchanged.
Foreign
government securities generally
consist of obligations issued or backed by national, state or provincial
governments or similar political subdivisions or central banks in foreign
countries. Foreign government securities also include debt obligations of
supranational entities, which include international organizations designated or
backed by governmental entities to promote economic reconstruction or
development, international banking institutions and related government
agencies.
Foreign
fixed income securities are
issued by entities organized outside the U.S., may be denominated in a foreign
currency and are traded primarily in markets outside the U.S.
IPS are
income-generating instruments whose interest and principal payments are
periodically adjusted according to the rate of inflation. The interest rate on
IPS is fixed at issuance, but over the life of the bond this interest may be
paid on an increasing or decreasing principal value that has been adjusted for
inflation. Although repayment of the original bond principal upon maturity is
guaranteed, the market value of IPS is not guaranteed, and will fluctuate. The
inflation adjustment, which is typically applied monthly to the principal of a
bond, follows a designated inflation index. The U.S. Treasury uses the CPI-U as
the measurement of inflation, while other issuers of IPS may use other indices
as the measure of inflation. A fixed coupon rate is applied to the
inflation-adjusted principal so that as inflation rises, both the principal
value and the interest payments increase. This can provide investors with a
hedge against inflation, as it helps preserve the purchasing power of an
investment. Because of this inflation adjustment feature, inflation-protected
securities typically have lower yields than conventional fixed income
bonds.
Mortgage-backed
securities are
obligations of the issuer backed by a commercial or residential mortgage or pool
of mortgages or a direct interest in an underlying pool of mortgages. These
securities generally are “pass-through” instruments, through which the holders
receive a share of all interest and principal payments from the mortgages
underlying the securities, net of certain fees. Mortgage-backed securities may
be issued by government and non-government entities such as banks, mortgage
lenders, or other financial institutions.
7
U.S.
government securities are
issued by the U.S. government, its agencies or instrumentalities. Certain U.S.
government securities are guaranteed as to principal and interest and are backed
by the full faith and credit of the U.S. government. Other U.S. government
securities are backed by the issuer’s right to borrow from the U.S. Treasury and
some are backed only by the credit of the issuing organization. Securities of
GSEs are not issued or guaranteed by the U.S. Treasury and are not backed by the
full faith and credit of the U.S. government.
Temporary
Investment Strategies
The
Fund may hold cash or cash equivalents and, if deemed appropriate by the
Sub-Adviser, may invest up to 100% of its assets in money
market instruments for temporary defensive purposes to respond to adverse
market, economic or political conditions. Should the Fund take this action, it
may be inconsistent with the Fund’s principal investment strategies and the Fund
may not achieve its investment objective. Money market instruments include a
variety of short-term fixed income securities, usually with a maturity of less
than 13 months. Some common types of money market instruments include Treasury
bills and notes, which are securities issued by the U.S. government, commercial
paper, which is a promissory note issued by a company, bankers’ acceptances,
which are credit instruments guaranteed by a bank, and negotiable certificates
of deposit, which are issued by banks in large denominations.
Securities
Lending
Although
not considered a principal investment strategy, the Fund may lend its securities
to broker-dealers and financial institutions
to realize additional income. The Fund will not lend securities or other assets
if, as a result, more than 33 1∕3% of the
Fund’s total assets would be lent to other parties. When the Fund loans its
portfolio securities, it will receive collateral equal to at least 102% of the
market value of domestic securities and 105% of the market value of foreign
securities. Nevertheless, the Fund risks a delay in the recovery of the loaned
securities, or even the loss of rights in the collateral deposited by the
borrower if the borrower should fail financially.
Principal
Investment Risks
The
principal investment risks associated with investing in the Fund are summarized
in the “Fund Summary” section at the front of this
Prospectus. More detailed descriptions of the principal investment risks are set
forth below. These risks are presented in an order that reflects ECM’s current
assessment of relative importance, but this assessment could change over time as
the Fund’s portfolio changes or in light of changes in the market or the
economic environment, among other things. The Fund is not required to and will
not update this Prospectus solely because its assessment of the relative
importance of the principal risks of investing in the Fund changes. There can be
no assurance that the Fund will achieve its investment objective.
Inflation-Protected
Securities Risk - The
value of IPS generally fluctuates in response to changes in real interest rates,
which are in turn tied to the relationship between nominal interest rates and
the rate of inflation. If inflation was to rise at a faster rate than nominal
interest rates, real interest rates might decline, leading to an increase in the
value of IPS. In contrast, if nominal interest rates were to increase at a
faster rate than inflation, real interest rates might rise, leading to a
decrease in the value of IPS. The market for IPS may be less developed or
liquid, and more volatile, than certain other securities markets. If inflation
is lower than expected during the period the Fund holds IPS, the Fund may earn
less on the IPS than on a conventional bond. If interest rates rise due to
reasons other than inflation (for example, due to changes in the currency
exchange rates), investors in IPS may not be protected to the extent that the
increase is not reflected in the bonds’ inflation measure. Additionally, there
can be no assurance that the inflation index for IPS will accurately measure the
real rate of inflation in the prices of goods and services.
Interest
Rate Risk - The
market value of a fixed income security is affected significantly by changes in
interest rates. When interest rates rise, the market value of a fixed income
security will generally decline and when interest rates decline, the market
values of such securities will generally rise. In general, the longer the
maturity or duration of a fixed income security, the greater its sensitivity to
changes in interest rates. The maturity of a security is a measure of the time
remaining until the final payment of the security is due. Duration is a measure
of a portfolio’s price sensitivity to changes in prevailing interest rates. For
example, if interest rates rise by 1%, a portfolio with a two-year effective
duration would expect the value of its portfolio to decrease by 2% and a
portfolio with a ten-year effective duration would expect the value of its
portfolio to decrease by 10%, all other factors being equal. Recent and
potential future changes in monetary policy by central banks may affect the
level of interest rates. Changes in interest rates may have unpredictable
effects on the markets and the Fund’s investments, including negatively
affecting yield, value and/or liquidity. Actions taken by the Federal Reserve
Board or foreign central banks to stimulate or stabilize economic growth, such
as increases or decreases in short-term interest rates, may adversely affect
markets, which could, in turn, negatively impact the Fund’s
performance.
Inflation-linked
Swaps Risk -
Inflation-linked swaps may expose the Fund to additional volatility in
comparison to investing directly in bonds and other fixed income securities.
Inflation-linked swaps can be illiquid, difficult to value and may involve
leverage so that small changes produce disproportionate losses for the Fund.
Since inflation-linked swaps are not traded on an exchange, they are subject to
the risk that a counterparty to the transaction will fail to meet its
obligations. Inflation-linked swaps
8
involve
the risk that the level of inflation and consumer prices will not be accurately
predicted, which could significantly harm the Fund’s
performance. The value of an inflation-linked swap is expected to change in
response to changes in the rate of inflation. If inflation increases at a faster
rate than anticipated at the time the swap is entered into, the swap will
increase in value. Similarly, if inflation increases at a rate slower than
anticipated at the time the swap is entered into, the swap will decrease in
value.
Market
Risk - The
value of the Fund's investments may decrease, sometimes rapidly or unexpectedly,
due to factors affecting specific issuers held by the Fund, particular
industries represented in the Fund's portfolio, or the overall securities
markets. A variety of factors can increase the volatility of the Fund's holdings
and markets generally, including political or regulatory developments,
recessions, inflation, rapid interest rate changes, war or acts of terrorism,
sanctions, natural disasters, outbreaks of infectious illnesses or other
widespread public health issues, or adverse investor sentiment generally.
Certain events may cause instability across global markets, including reduced
liquidity and disruptions in trading markets, while some events may affect
certain geographic regions, countries, sectors, and industries more
significantly than others. These adverse developments may cause broad declines
in an issuer’s value due to short-term market movements or for significantly
longer periods during more prolonged market downturns. During such a general
downturn in the markets, multiple asset classes may decline in value. In recent
years, war, acts of terrorism, recessions, rising inflation, social and
political discord, debt crises and downgrades have resulted in extreme
volatility in the global economy and financial markets. These events could be
prolonged and could adversely affect the value and liquidity of the Fund’s
investments and negatively impact the Fund’s performance.
Derivatives
Risk - The use
of derivatives, including but not limited to exchange-traded futures, interest
rate swaps, and inflation-linked swaps, may expose the Fund to additional risks
that it would not be subject to if it invested directly in the securities
underlying those derivatives. These risks include imperfect correlations with
underlying investments or the Fund’s other portfolio holdings, the risk that a
derivative could expose the Fund to the risk of magnified losses resulting from
leverage, the risk that a counterparty may be unwilling or unable to meet its
obligations, high price volatility, liquidity risk, segregation risk, valuation
risk and legal restrictions. A derivatives contract will obligate or entitle the
Fund to deliver or receive an asset or cash payment that is based on the change
in value of one or more securities, currencies or indices. Even a small
investment in a derivatives contract could have a big impact on the Fund’s stock
market, currency and interest rate exposure. Therefore, using derivatives can
disproportionately increase losses and reduce opportunities for gains when
security prices, currency rates or interest rates are changing. The Fund may not
fully benefit from or may lose money on derivatives if changes in their value do
not correspond accurately to changes in the value of the Fund’s holdings. The
other parties to certain derivative contracts present the same types of credit
risk as issuers of fixed income securities. Derivatives can also make a fund
less liquid and harder to value, especially in declining markets, and may
increase the Fund’s volatility. There can be no assurance that the Fund’s use of
derivatives will work as intended, and it is possible for the Fund to lose more
than its original investment.
•Futures
Contracts Risk. Certain
futures contract markets are highly volatile, and futures contracts may be
illiquid. Futures exchanges may limit fluctuations in futures contract prices by
imposing a maximum permissible daily price movement. The Fund may be
disadvantaged if it is prohibited from executing a trade outside the daily
permissible price movement. At or prior to maturity of a futures contract, the
Fund may enter into an offsetting contract and may incur a loss to the extent
there has been adverse movement in futures contract prices. The liquidity of the
futures market depends on participants entering into offsetting transactions
rather than making or taking delivery. To the extent participants make or take
delivery, liquidity in the futures market could be reduced. Because of the low
margin deposits normally required in futures trading, it is possible that the
Fund may employ a high degree of leverage in the portfolio. As a result, a
relatively small price movement in a futures contract may result in substantial
losses to the Fund, exceeding the amount of the margin paid. For certain types
of futures contracts, losses are potentially unlimited. Futures markets are
highly volatile and the use of futures may increase the volatility of the Fund’s
net asset value. Futures contracts executed (if any) on foreign exchanges may
not provide the same protection as U.S. exchanges. Futures contracts can
increase the Fund’s risk exposure to underlying references and their attendant
risks, such as credit risk, market risk, foreign currency risk and interest rate
risk, while also exposing the Fund to correlation risk, counterparty risk,
hedging risk, inflation risk, leverage risk, liquidity risk, pricing risk and
volatility risk.
•Swaps
Risk. Swaps
may be difficult to value and may be illiquid. Swaps could result in Fund losses
if the underlying asset or reference index does not perform as anticipated.
Swaps create significant investment leverage such that a relatively small price
movement in a swap may result in immediate and substantial losses to the Fund.
The Fund may only close out a swap with its particular counterparty and may only
transfer a position with the consent of that counterparty. Certain swaps, such
as short swap transactions and total return swaps, have the potential for
unlimited losses, regardless of the size of the initial investment. Swaps can
increase the Fund’s risk exposure to underlying reference assets and their
attendant risks, such as credit risk, market risk, foreign currency risk and
interest rate risk, while also exposing the Fund to correlation risk,
counterparty risk, hedging risk, inflation risk, leverage risk, liquidity risk,
pricing risk and volatility risk.
Counterparty
Risk - A
counterparty to a transaction may be unwilling or unable to make timely
interest, principal or settlement payments or otherwise honor its obligations.
Counterparty risk may arise because of a counterparty’s financial condition
(i.e.,
9
financial
difficulties, bankruptcy, or insolvency), market activities and developments, or
other reasons, whether foreseen or not. To the extent
that a counterparty defaults on its obligations and the Fund is delayed or
prevented from exercising its rights with respect to the investments in its
portfolio, it may experience a decline in the value of its position, lose income
and incur costs associated with asserting its rights.
Liquidity
Risk - The
Fund may not be able to sell a security at or near its perceived value in a
timely manner because of unusual market conditions, an unusually high volume of
redemption requests, little or no active trading market for a specific type of
security, legal or contractual restrictions on resale, or a reduced number or
capacity of market participants to make a market in such security. Liquidity
risk may also refer to the risk that the Fund will not be able to pay redemption
proceeds within the allowable time period or without significant dilution to the
remaining investors’ interest due to market conditions or other factors.
Difficulty in selling less liquid securities may result in sales at
disadvantageous prices affecting the value of the Fund. Additionally, the sale
of less liquid or illiquid investments may involve substantial delays (including
delays in settlement) and additional costs, and the Fund may be unable to sell
such securities when necessary to meet its liquidity needs. Extraordinary and
sudden changes in interest rates could disrupt the market for fixed income
securities and result in fluctuations in the Fund’s net asset value. Increased
redemptions due to a rise in interest rates may require the Fund to liquidate
its holdings at an unfavorable time and/or under adverse or disadvantageous
conditions which may negatively affect the Fund. Investments in many, but not
all, foreign securities tend to have greater exposure to liquidity risk than
domestic securities because secondary trading markets for these securities may
be smaller and less well-developed and the securities may trade less
frequently.
U.S.
Government Securities Risk -
U.S.
government securities may be adversely affected by changes in interest rates
(interest rate risk) or a default by or decline in the credit rating of the U.S.
government (credit risk). U.S. government securities backed by the U.S. Treasury
or the full faith and credit of the U.S. government are guaranteed only as to
the timely payment of interest and principal when the security is held to
maturity. Accordingly, the market values of these securities will fluctuate with
changes in interest rates and the credit rating of the U.S. government. 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 GSEs, such as the Federal Home Loan Mortgage Corporation,
the Federal National Mortgage Association and the Federal Home Loan Banks, may
be adversely affected by changes in interest rates (interest rate risk) or a
default by or decline in the credit rating of the applicable GSE (credit risk).
Securities of GSEs are not issued or guaranteed by the U.S. Treasury and are not
backed by the full faith and credit of the U.S. government. The U.S. government
has provided financial support to GSEs in the past, but there can be no
assurance that it will support these or other GSEs in the future and, as such,
GSE securities may involve risk of loss of principal and
interest.
Call
Risk - An
issuer may redeem a fixed income security before maturity (a “call”) at a price
below its current market value. An increase in the likelihood of a call may
reduce a security's price. If a fixed income security is called, the Fund may
have to reinvest the proceeds in other securities with lower interest rates,
higher credit risks or other less favorable characteristics. The Fund may also
lose any premium it paid to purchase the securities.
Credit
Risk - An
issuer of a security may default on its obligations to pay principal and/or
interest. A security’s value may be affected by changes in its credit quality
rating or its issuer’s financial conditions. Changes in an issuer’s financial
strength, the market’s perception of the issuer’s financial strength or in a
security’s credit rating, which reflects a third party’s assessment of the
credit risk presented by a particular issuer, may affect the security’s
value.
Asset-Backed
Securities Risk -
Asset-backed securities represent interests in pools of assets, including
consumer loans, auto loans, student loans, or receivables held in trust. The
value of asset-backed securities may be affected by certain factors such as
interest rate risk; the credit performance of the pool of underlying assets; the
creditworthiness of the servicing agent or the originator of the underlying
assets; the ability of the servicing agent to service the underlying collateral;
and the availability of information concerning the pool of underlying assets and
its structure. Certain asset-backed securities do not have the benefit of the
same security interest in the underlying financial assets as do mortgage-backed
securities, nor are they provided government guarantees of repayment.
Accordingly, issuers of asset-backed securities may have limited ability to
enforce the security interest in the underlying assets, and credit enhancements
provided to support the asset-backed securities, if any, may be inadequate to
protect investors in the event of default. Asset-backed securities are also
subject to the risk that borrowers will prepay the principal on their loans more
quickly than expected (prepayment risk) in a declining interest rate environment
or more slowly than expected (extension risk) in a rising interest rate
environment.
Mortgage-Backed
Securities Risk -
Mortgage-backed securities represent interests in pools of commercial or
residential mortgages that are subject to the risk that borrowers will prepay
the principal on their loans more quickly than expected (prepayment risk) when
mortgage rates fall or more slowly than expected (extension risk) when mortgage
rates rise, which may
10
affect
the yield, average life and price of the securities. Because of prepayment risk
and extension risk, mortgage-backed securities react
differently to changes in interest rates than other fixed income securities.
Small movements in interest rates (both increases and decreases) may quickly and
significantly reduce the value of certain mortgage-backed securities.
Mortgage-backed securities issued by a government agency are protected from
principal loss through guarantees provided by the agency, while mortgage-backed
securities issued by non-government issuers are not and therefore carry the
additional risk of default should the credit performance of the underlying loans
decline. This risk is mitigated through credit enhancements that cover losses in
stressed scenarios, however, principal loss is possible should credit conditions
deteriorate to a point where the enhancements prove to be
insufficient.
CPI-U
Measurement Risk - The
CPI-U is a measurement of changes in the cost of living, made up of components
such as housing, food, transportation and energy. There can be no assurance that
the CPI-U will accurately measure the real rate of inflation in the prices of
goods and services, which may affect the valuation of the
Fund.
Deflation
Risk - The Fund
will be subject to the risk that prices throughout the economy may decline over
time, resulting in “deflation.” In addition, deflation may have an adverse
effect on the creditworthiness of issuers and may make issuer default more
likely. If deflation occurs, the principal and income of IPS held by the Fund
would likely decline in price, which could result in losses for the
Fund.
Tax
Consequences Risk -
Adjustments for inflation to the principal amount of an inflation-indexed
security may give rise to original issue discount, which will be includable for
federal income tax purposes in the Fund’s gross income in the year accrued, even
though the Fund will not receive the principal, including any increase thereto,
until maturity. As a result, the Fund may be required to make distributions to
shareholders that exceed the cash received, which may cause the Fund to
liquidate certain investments when it is not advantageous to do so in order to
satisfy the distribution requirements for qualifying as a regulated investment
company. Also, if the principal value of an inflation-indexed security is
adjusted downward due to deflation, amounts previously distributed may be
characterized in some circumstances as a return of capital.
Below
Investment Grade Securities Risk - Below
investment grade securities (commonly known as “high yield securities” or “junk
bonds”) are speculative, have a higher degree of credit risk and interest rate
risk, and may be less liquid and subject to greater volatility in market value
than investment grade securities. The lower a security’s quality, the more it is
subject to credit risk and the more speculative it becomes with respect to the
issuer’s capacity to pay interest and repay principal in accordance with the
terms of its obligations. Changes in interest rates, the market's perception of
the issuer, and the creditworthiness of the issuer may significantly affect the
value of these bonds. Some of these securities may have a structure that makes
their reaction to interest rates and other factors difficult to predict, causing
their value to be highly volatile. The secondary market for high yield
securities may be less liquid than the markets for higher quality securities,
which may have an adverse effect on the market values of certain
securities.
Management
Risk - A
strategy, investment decision, technique, analysis, or model used by the
portfolio managers may fail to produce the intended results or imperfections,
errors or limitations in the tools and data used by the portfolio managers may
cause unintended results. If the portfolio managers are incorrect in their
expectation of the timing or level of fluctuation in securities prices, interest
rates, currency prices or other variables, this could result in losses. A lack
of correlation between changes in the value of derivatives and the value of the
portfolio assets (if any) being hedged could also result in losses. In addition,
there is a risk that the performance of derivatives or other instruments used by
the portfolio managers to replicate the performance of a particular asset class
may not accurately track the performance of that asset class. Therefore, the
Fund could underperform in comparison to other funds with similar objectives and
investment strategies and may generate losses even in a favorable
market.
Foreign
Securities Risk - Foreign
markets can be more volatile than the U.S. market due to increased risks of
adverse issuer, political, geopolitical (including war or armed conflict),
regulatory, market, currency valuation, or economic or other developments and
can perform differently than the U.S. market. Issuers of foreign securities are
usually not subject to the same degree of regulation as U.S. issuers, and
therefore, reporting, accounting and auditing standards of foreign countries
differ, in some instances significantly, from U.S. standards. As a result,
foreign securities may subject the Fund to greater risk of potential loss and
volatility than U.S. securities. Adverse conditions in a certain region can
adversely affect securities of other countries whose economies appear unrelated.
Foreign countries can prevent or delay the Fund from selling its investments and
taking money out of the country. In addition, foreign securities may be less
liquid and more difficult to value than U.S. securities which could result in
the Fund being unable to sell its investments in a timely manner. Current
sanctions or the threat of potential sanctions or other similar measures may
also impair the value or liquidity of affected securities and negatively impact
the Fund.
Foreign
Government Securities Risk - Foreign
government securities may involve risks similar to those of foreign securities.
They also may present additional risks, such as the ability of a foreign
government or government-related issuer to make timely principal
11
and
interest payments on its external debt obligations. This ability to make
payments may be influenced by the issuer’s balance of payments,
its access to international credits and investments, fluctuations in foreign
interest rates, as well as the government’s foreign currency reserves and
currency devaluations.
Portfolio
Turnover Risk - High
portfolio turnover rates generally result in higher transaction costs (which are
borne directly by the Fund and indirectly by shareholders). These effects of
higher-than-normal portfolio turnover may adversely affect Fund
performance.
Underlying
Fund Risk
Certain
asset allocation funds that are series of Empower Funds are permitted to invest
in the Fund. As a result, the Fund may have large
inflows or outflows of cash from time to time. This could have adverse effects
on the Fund's performance if the Fund is required to sell securities or invest
cash at times when it otherwise would not do so. This activity could also
increase the Fund's transaction costs.
A
complete listing of the Fund’s investment limitations and more detailed
information about its investment policies and practices are
contained in the Statement of Additional Information (“SAI”).
Portfolio
Holdings Disclosure
A
description of the policies and procedures of Empower Funds with respect to the
disclosure of the Fund's portfolio securities is available
in the SAI. The back cover of this Prospectus explains how you can obtain a copy
of the SAI.
Management
and Organization
Investment
Adviser
ECM,
a Colorado limited liability company with its principal business address at 8515
East Orchard Road, Greenwood Village, Colorado
80111, is registered as an investment adviser pursuant to the Investment
Advisers Act of 1940, as amended (the “Advisers Act”). ECM provides investment
advisory, accounting and administrative services to Empower Funds, and is the
investment adviser of the Fund. ECM is a subsidiary of Empower Annuity Insurance
Company of America (“Empower of America”) and an affiliate of Empower
Retirement, LLC (“Empower”). As of December 31, 2023, ECM provided investment
management services for mutual funds and other investment portfolios
representing assets of $64.1 billion. ECM and its affiliates have been providing
investment management services since 1969.
Advisory
Fees
For
its services, ECM is entitled to a fee, which is calculated daily and paid
monthly, at an annual rate of 0.33% of the Fund’s average
daily net assets up to $1 billion dollars, 0.28% of the average daily net assets
over $1 billion and 0.23% of the average daily net assets over $2 billion.
Pursuant to the investment advisory agreement, ECM is responsible for all of its
fees and expenses incurred in performing the services set forth in the
agreement. The Fund pays all other fees and expenses incurred in its operation,
all of its general administrative expenses, all shareholder services fees with
respect to Investor Class shares, and any extraordinary expenses, including
litigation costs. ECM has contractually agreed to waive advisory fees or
reimburse expenses if total annual Fund operating expenses of any Class exceed
0.35% of the Class's average daily net assets, excluding shareholder services
fees, brokerage expenses, taxes, dividend interest on short sales, interest
expenses, and any extraordinary expenses, including litigation costs (the
“Expense Limit”). The agreement’s current term ends on April 30,
2025, and
automatically renews for one-year terms unless it is terminated upon termination
of the investment advisory agreement or by Empower Funds or ECM upon written
notice within 90 days of the end of the current term. Under the agreement, ECM
may recoup, subject to Board approval, these waivers and reimbursements in
future periods, not exceeding three years following the particular
waiver/reimbursement, provided total annual Fund operating expenses of the Class
plus such recoupment do not exceed the lesser of the Expense Limit that was in
place at the time of the waiver/reimbursement or the Expense Limit in place at
the time of recoupment.
A
discussion regarding the basis for the Board approving the investment advisory
agreement and sub-advisory agreement is available
in the Fund’s Semi-Annual Report to shareholders for the period ended June 30,
2023, and will be available in the Fund’s Semi-Annual Report to shareholders for
the period ending June 30, 2024.
Sub-Adviser
Listed
below is the Sub-Adviser and its portfolio managers who have responsibility for
the day-to-day management of the Fund.
GSAM, a
Delaware limited partnership with its principal business address at 200 West
Street, New York, New York 10282, is registered as an investment adviser
pursuant to the Advisers Act. GSAM is an indirect wholly-owned subsidiary of The
Goldman Sachs Group, Inc., and an affiliate of Goldman Sachs & Co.
LLC.
12
•Jon
Calluzzo, Managing Director; Fixed Income Lead Portfolio Manager, has served as
portfolio manager of the Fund since 2022
and joined GSAM in 2016.
•Peter
Stone, Managing Director, has served as portfolio manager of the Fund since 2020
and joined GSAM in 2007.
Please
see the SAI for additional information about the portfolio managers’
compensation, other accounts managed by the portfolio
managers and the portfolio managers’ ownership of shares of the
Fund.
The
Sub-Adviser may manage other mutual funds having similar names, investment
objectives, and policies as the Fund. While the Fund may
be similar to, and may in fact be modeled after, other mutual funds, you should
understand that the Fund is not otherwise directly related to any other mutual
funds. Consequently, the investment performance of such other mutual funds and
the Fund may differ substantially.
The
Sub-Adviser is responsible for the investment and reinvestment of the assets of
the Fund and for making decisions to buy, sell, or hold
any particular security. The Sub-Adviser bears all expenses in connection with
the performance of its services, such as compensating and furnishing office
space for its officers and employees connected with investment and economic
research, trading and investment management of the Fund. ECM, in turn, pays
sub-advisory fees to the Sub-Adviser for its services out of ECM’s advisory fee
described above.
Empower
Funds and ECM operate under a manager-of-managers structure under an order
issued by the SEC. The current order permits
ECM to enter into, terminate or materially amend sub-advisory agreements without
shareholder approval, unless the sub-adviser is an affiliated person. This means
ECM is responsible for monitoring the Sub-Adviser's performance through
quantitative and qualitative analysis and will periodically report to the Board
as to whether the Sub-Adviser's agreement should be renewed, terminated or
modified. ECM will not enter into a sub-advisory agreement with any sub-adviser
that is an affiliated person, as defined in Section 2(a)(3) of the Investment
Company Act of 1940, as amended (the “1940 Act”), of Empower Funds or ECM other
than by reason of serving as a sub-adviser to one or more funds without such
agreement, including the compensation to be paid thereunder, being approved by
the shareholders of the Fund. Empower Funds will furnish to shareholders of the
Fund all information about a new sub-adviser or sub-advisory agreement that
would be included in a proxy statement within 90 days after the addition of the
new sub-adviser or the implementation of any material change in the sub-advisory
agreement.
The
Fund enters into contractual arrangements with various parties, including, among
others, the Fund’s investment adviser, who provide
services to the Fund. Shareholders are not parties to or intended (or
“third-party”) beneficiaries of those contractual arrangements.
This
Prospectus and the SAI provide information concerning the Fund that you should
consider in determining whether to purchase
shares of the Fund. The Fund may make changes to this information from time to
time. Neither this Prospectus nor the SAI is intended to give rise to any
contract rights or other rights in any shareholder, other than any rights
conferred by federal or state securities laws.
Shareholder
Information
Investing
in the Fund
Shares
of the Fund are not for sale directly to the public. Currently, Empower Funds
may sell Fund shares to Permitted Accounts. For
information concerning your rights and for information on how to purchase or
redeem shares of the Fund offered as an investment option under a Permitted
Account, please refer to the applicable prospectus and/or disclosure documents
for that Permitted Account. The Fund may stop offering shares completely or may
offer shares only on a limited basis, for a period of time or permanently. With
certain exceptions, the Fund is generally available only to shareholders
residing in the U.S. However, the Fund may not be offered in your
state.
Pricing
Shares
The
transaction price for buying, selling, or exchanging the Fund’s shares is the
net asset value of the Fund. The Fund’s net asset value is
generally calculated as of the close of regular trading on the New York Stock
Exchange (“NYSE”) (generally 4:00 p.m. Eastern Time) every day the NYSE is open.
However, the time at which the Fund’s net asset value is calculated may be
changed if trading on the NYSE is restricted, the NYSE closes at a different
time (for example, a scheduled early closing), or as permitted by the SEC. To
the extent that the Fund’s assets are traded in other markets on days when the
NYSE is closed, the value of the Fund’s assets may be affected on days when
Empower Funds is not open for business. In addition, trading in some of the
Fund’s assets may not occur on days when Empower Funds is open for business.
Your share price will be the next net asset value calculated after the order is
received in “good order.” This means that the requests must be accompanied by
proper payment and sufficient information, documentation and detail before the
close of regular trading on the NYSE to enable the Fund to allocate assets
properly.
13
A
separate net asset value is calculated for each share class of the Fund. Net
asset value is determined by dividing net assets of each of the
Fund’s share classes (the total value of assets allocated to the class, minus
liabilities allocated to that class) by the number of the Fund’s outstanding
shares for the applicable share class.
The
net asset value of the Fund is based on the market value of the securities in
the Fund. Short-term securities with a maturity of 60 days or
less are valued on the basis of amortized cost provided such amount approximates
market value. The Fund values its assets at current market prices where current
market prices are readily available. If current market prices are not readily
available or if a security’s value has been materially affected by events
occurring after the close of the exchange or market on which the security is
principally traded (for example, a foreign exchange or market), assets will be
valued at fair value as determined in good faith in accordance with procedures
approved by the Board. The Board has designated ECM as the valuation designee
pursuant to Rule 2a-5 under the 1940 Act and delegated to ECM the responsibility
of making fair value determinations, subject to the oversight of the Board. With
respect to foreign securities, ECM utilizes a third-party fair valuation service
daily to adjust closing prices. This process is performed in order to more
accurately consider projected market movements related to the time lapse between
when foreign exchanges or markets close and when the Fund computes its net asset
value. Fair value determinations involve judgments that are inherently
subjective. The effect of fair value pricing as described above is that
securities may not be priced on the basis of quotations from the primary market
in which they are traded, but rather may be priced by another method that ECM
believes reflects fair value. This policy is intended to ensure that the Fund’s
net asset value fairly reflects security values at the time of
pricing.
Exchanging
Shares
Participants
in, or owners of, Permitted Accounts that purchased shares of the Fund on their
behalf may, in accordance with the applicable
Permitted Account rules, exchange shares of the Fund.
The
Fund may refuse exchange purchases by any person or group if, in ECM’s judgment,
the Fund would be unable to invest the money
effectively in accordance with its investment objective and policies or would
otherwise potentially be adversely affected.
Redeeming
Shares
The
Fund will normally send redemption proceeds within one business day following
the receipt of a redemption request that is in good
order. The Fund may, however, delay payment of redemption proceeds for up to
seven days and may suspend redemptions and/or further postpone payment proceeds
when the NYSE is closed (other than weekends or holidays) or when trading
thereon is restricted or during emergency or other circumstances if it is not
reasonably practicable for the Fund to liquidate its portfolio securities or
fairly determine the value of its net assets, each as determined by the SEC, or
as otherwise permitted by an order issued by the SEC. When a shareholder places
a request to redeem shares for which the purchase money has not yet been
collected, the request is not considered to be in good order until the purchase
has been cleared. Following clearance, the request will be executed at the next
determined net asset value.
Under
normal conditions, the Fund typically expects to meet daily shareholder
redemptions by monitoring the Fund’s portfolio and redemption
activities and by holding a reserve of highly liquid assets, such as cash or
cash equivalents. The Fund may use additional methods to meet shareholder
redemptions, if they become necessary. These methods may include, but are not
limited to, the sale of portfolio assets, the use of overdraft protection
afforded by the Fund’s custodian bank or borrowing from a line of
credit.
Dividends
and Capital Gains Distributions
The
Fund earns dividends, interest and other income from its investments, and
ordinarily distributes this income (less expenses), if any, to
shareholders as dividends annually. The Fund also realizes capital gains from
its investments, and distributes these gains (less any losses), if any, to
shareholders as capital gains distributions at least once annually. Both
dividends and capital gains distributions are reinvested in additional shares of
the Fund at net asset value.
Frequent
Purchases and Redemptions of Fund Shares
The
Fund is not intended for the purpose of market timing or excessive trading
activity. Market timing activity may dilute the interests
of shareholders in the Fund. (As used in this section, “shareholders” include
individual holders of variable contracts investing in the Fund through
subaccount units, IRA owners, retirement plan participants, and college savings
program participants.) Market timing generally involves frequent or unusually
large trades that are intended to take advantage of short-term fluctuations in
the value of the Fund’s securities and the reflection of that change in the
Fund’s share price. In addition, frequent or unusually large trades may harm
performance by increasing Fund expenses and disrupting Fund management
strategies. For example, excessive trading may result in forced liquidations of
Fund securities or cause the Fund to keep a relatively higher cash position,
resulting in increased brokerage costs and lost investment
opportunities.
The
Fund invests to varying degrees in securities that trade infrequently or may be
more difficult to value, such as lower-rated securities,
and which may be susceptible to trading by short-term traders who seek to
exploit perceived price inefficiencies in the
14
Fund’s
investments. In addition, the market for lower-rated securities may at times
show “market momentum,” in which positive or negative
performance may continue from one day to the next for reasons unrelated to the
fundamentals of the issuer. Short-term traders may seek to capture this momentum
by trading frequently in the Fund’s shares, which will reduce the Fund’s
performance and may dilute the interests of other shareholders. Because
lower-rated securities may be less liquid than higher-rated debt, the Fund may
also be unable to buy or sell these securities at desirable prices when the need
arises (for example, in response to volatile cash flows caused by short-term
trading). Similar risks may apply if the Fund holds other types of less liquid
securities.
When
the Fund invests in foreign securities, its performance may be adversely
impacted and the interests of longer-term shareholders
may be diluted as a result of time-zone arbitrage, a short-term trading practice
that seeks to exploit changes in the value of the Fund’s investments that result
from events occurring after the close of the foreign markets on which the
investments trade, but prior to the later close of trading on the NYSE, the time
as of which the Fund determines its net asset value. If an arbitrageur is
successful, he or she may dilute the interests of other shareholders by trading
shares at prices that do not fully reflect their fair value.
Empower
Funds maintains policies and procedures, approved by the Board, which are
designed to discourage market timing and excessive
trading activity by shareholders. As part of the procedures, all transaction
requests (received in good order, as described above under Pricing Shares) will
be processed at the Fund’s next determined net asset value. In all cases, if the
order is received from the shareholder before the close of regular trading on
the NYSE, generally 4:00 p.m. Eastern Time, it is processed with that day’s
trade date at that day’s net asset value.
It
is Empower Funds’ practice and policy to identify any shareholder who initiates
a transfer into the Fund, then initiates a transfer out of the
Fund within a 30-day calendar period (a “round trip”) and to notify such
shareholder that a second round trip within the Fund will result in the
shareholder being restricted from initiating a transfer of any portion of the
shareholder’s assets (not including purchases into the Fund made with new assets
contributed or rolled into the shareholder’s account) into the Fund for a 30-day
period. In addition, if the Fund identifies a shareholder that has been subject
to the purchase restriction more than once because of repeated frequent trading,
the Fund may provide written direction to the shareholder’s financial
intermediary to implement special restrictions on such
shareholder.
Empower
Funds has also adopted pricing procedures and guidelines, including procedures
for fair value pricing of Fund securities to reflect
significant market events occurring after the close of a foreign or domestic
exchange on which securities held by the Fund are traded, or which otherwise may
not be reflected in the market price of a foreign or domestic security. One of
the objectives of Empower Funds’ fair value pricing procedures is to minimize
the possibilities of the type of market timing described above. The procedures
are designed to limit dilution to the Fund that may be caused by market timing
activities following a significant market event that occurs prior to the Fund's
pricing time.
Empower
Funds has entered into agreements with financial intermediaries, including
insurance companies, that are designees of Permitted
Accounts (“record keepers”) that require the record keepers to monitor trading
and/or provide certain information to help identify frequent trading activity
and to prohibit further purchases or exchanges by a shareholder identified as
having engaged in frequent trades. Empower Funds will rely on the record keepers
to identify and notify shareholders who have engaged in frequent or excessive
trading. The application of frequent or excessive trading limitations may vary
among record keepers. There are no assurances that record keepers will properly
administer frequent-trading limitations. If you invest with Empower Funds
through record keepers, please read that firm’s materials carefully to learn of
any other rules or fees that may apply.
The
practices and policies described above are intended to deter and curtail market
timing and excessive trading in the Fund. However,
there can be no assurance that these policies, individually or collectively,
will be totally effective in this regard because of various factors. In
particular, it may not be possible to identify market timing or excessive
trading activity until a trading pattern is established. Shareholders seeking to
engage in market timing or excessive trading practices may deploy a variety of
strategies to avoid detection, and there is no guarantee that the Fund or its
agents will be able to identify such shareholders or curtail their trading
practices. The ability of the Fund and its agents to detect and curtail market
timing or excessive trading practices may also be limited by operational systems
and technological limitations. Further, all Fund purchase, redemption and
exchange orders are received through omnibus accounts. Omnibus accounts, in
which shares are held in the name of an intermediary on behalf of multiple
beneficial owners, are a common form of holding shares among Permitted Accounts.
The Fund typically is not able to identify trading by a particular beneficial
owner through an omnibus account, which may make it difficult or impossible to
determine if a particular account is engaged in market timing prior to
completion of a specific Fund trade. Also, certain Permitted Accounts have
different policies regarding monitoring and restricting market timing in the
underlying beneficial owner accounts maintained through an omnibus account, that
may be more or less restrictive than Empower Funds’ practices discussed above.
To the extent the Fund does not detect market timing and/or excessive trading,
it is possible that a market timer may be able to make
15
market
timing and/or excessive trading transactions with the result that management of
the Fund may be disrupted, and shareholders
may suffer detrimental effects such as increased costs, reduced performance, and
dilution of their interests in the Fund.
Empower
Funds endeavors to ensure that its procedures are uniformly and consistently
applied to all shareholders, and it does not exempt any
persons from these procedures. In addition, Empower Funds does not enter into
agreements with shareholders whereby it permits market timing or excessive
trading. However, because of the discretionary nature of the restrictions and
given that Empower Funds reserves the right to reject orders, the possibility
exists that some shareholders may engage in market timing before restrictions
are imposed. Empower Funds may revise its market timing and excessive trading
policy and related procedures at the sole discretion of the Board, at any time
and without prior notice, as it deems necessary or appropriate to comply with
state or federal regulatory requirements or to impose additional or alternative
restrictions on shareholders engaging in market timing or excessive
trading.
Voting
Procedures for Variable Contract Owners
Shares
attributable to the Fund held in variable contracts will be voted by insurance
company separate accounts based on instructions
received from owners of variable contracts. The number of votes that an owner of
a variable contract has the right to cast will be determined by applying his/her
percentage interest in the Fund (held through a variable contract) to the total
number of votes attributable to the Fund. In determining the number of votes,
fractional shares will be recognized. Shares held in the variable contracts for
which the Fund does not receive instructions, and shares owned by ECM, which
provided initial capital to the Fund, will be voted in the same proportion as
shares for which the Fund has received instructions. As a result of such
proportionate voting a small number of variable contracts owners may determine
the outcome of the shareholder vote(s).
Federal
Income Tax Consequences
The
Fund intends to qualify as a “regulated investment company” under Subchapter M
of the Internal Revenue Code of 1986, as amended
(the “Code”). The Fund intends to qualify under the Code with respect to
diversification requirements related to variable contracts. The Fund intends to
distribute all of its net investment income and capital gains to shareholders
and, therefore, will not be required to pay any federal income tax.
If
the Fund does not meet the Code requirements and does not satisfy the cure
provisions and becomes a taxable entity, the Fund would be
required to pay federal income tax on its income and capital gains. This would
affect your investment because your return would be reduced by the taxes paid by
the Fund. In addition, if the Fund fails to qualify as a regulated investment
company, owners of variable contracts who have indirectly invested in the Fund
through their variable contracts may be taxed currently on the investment
earnings under their contracts and thereby lose the benefit of tax
deferral.
The
tax consequences of your investment in the Fund depend on the provisions of the
Permitted Account through which you invest in the
Fund. For more information, please refer to the applicable prospectus and/or
disclosure documents for the Permitted Account.
Effect
of Foreign Taxes
Dividends
and interest received by the Fund on foreign securities may be subject to
withholding and other taxes imposed by foreign governments.
These taxes will generally reduce the Fund’s return on such foreign
securities.
Share
Classes
The
Fund has two classes of shares, Institutional Class and Investor Class shares.
Each class is identical except that Investor Class shares
have a shareholder services fee which is described below.
Shareholder
Services Agreement
Empower
Funds entered into a Shareholder Services Agreement with Empower, an affiliate
of ECM and a subsidiary of Empower of
America. Pursuant to the Shareholder Services Agreement, Empower provides
various recordkeeping, administrative and shareholder services (“Shareholder
Services”) to shareholders that invest in the Fund through Permitted Accounts.
The Shareholder Services provided by Empower include but are not limited to (1)
executing purchase and redemption instructions received from shareholders; (2)
recording the ownership interest of each shareholder and maintaining a record of
the number of shares issued to each shareholder; (3) maintaining a call center
and investigating all inquiries from shareholders; (4) distributing annual
prospectus updates, supplements to the prospectus and SAI, and annual and
semi-annual shareholder reports to shareholders; (5) preparing and delivering
quarterly statements to shareholders; and (6) preparing and delivering
confirmations for each purchase, redemption or exchange transaction of a
shareholder. The Shareholder Services provided by Empower are not in the
capacity of a sub-transfer agent for the Fund. Pursuant to the Shareholder
Services Agreement, Empower receives a fee equal to 0.35% of the average daily
net asset value of the Investor Class shares of the Fund (“Shareholder Services
Fee”). To the extent the
16
Fund
is offered on other platforms and other entities provide the Shareholder
Services, Empower or its affiliates enter into a separate
agreement with such entity and pay the Shareholder Services Fee to that
entity.
Cash
and Non-Cash Incentive Arrangements
Empower
of America, Empower Financial Services, Inc., Empower Funds’ principal
underwriter and distributor (the “Distributor”),
and/or their affiliates (for purposes of this section only, “Empower of America
affiliates”), out of their own resources and without additional cost to the
Fund, may contribute to various cash and non-cash incentive arrangements to
promote the sale of shares of the Fund. These arrangements will be made
available, and applied uniformly, to registered representatives associated with
the Distributor. The Empower of America affiliates may sponsor various contests
and promotions subject to applicable Financial Industry Regulatory Authority
(“FINRA”) and SEC regulations in which registered representatives may receive
prizes such as travel awards, merchandise and cash. Subject to applicable FINRA
and SEC regulations, the Empower of America affiliates may also pay for the
travel expenses, meals, lodging and entertainment of salespersons in connection
with educational and sales promotional programs and sponsor speakers,
educational seminars and charitable events.
Cash
incentive arrangements may vary depending on the arrangement in place at any
particular time. Currently, registered representatives
associated with the Distributor are eligible to receive additional cash
incentive compensation when retirement plans invest in certain Empower of
America affiliated products, including Empower Funds. Other cash incentives
payable to participating registered representatives may be based on certain
performance measurements, including a percentage of the net amount invested in
the Fund attributable to certain Permitted Accounts. These types of arrangements
could be viewed as creating conflicts of interest. In some cases, the payment of
incentive-based compensation may create a financial incentive for a registered
representative to recommend or sell shares of the Fund instead of other funds
where payments are not received. Similarly, the receipt of such payments could
create an incentive for a registered representative to recommend certain
Permitted Accounts or investment options under the Permitted Accounts instead of
other Permitted Accounts or investment options. You should ask your registered
representative or retirement plan sponsor for details about any compensation
received in connection with the sale of shares of the Fund.
Other
Payments to Financial Intermediaries
Empower
of America and/or its affiliates (collectively, the “Empower of America Funds
Group” or “EAFG”) may make payments to
broker-dealers and other financial intermediaries, including insurance
companies, for providing marketing support services, networking, shareholder
services, and/or administrative or recordkeeping support services with respect
to the Fund. The existence or level of such payments may be based on factors
that include, without limitation, differing levels or types of services provided
by the broker-dealer or other financial intermediary, the expected level of
assets or sales of shares, the placing of the Fund on a recommended or preferred
list, and/or access to an intermediary’s personnel and other factors. Such
payments are paid from EAFG’s legitimate profits and other financial resources
(not from the Fund). To the extent permitted by SEC and FINRA rules and other
applicable laws and regulations, EAFG may pay or allow other promotional
incentives or payments to dealers and other financial
intermediaries.
The
sale of Fund shares, and/or shares of other mutual funds affiliated with Empower
Funds, is not considered a factor in the selection
of broker-dealers to execute the Fund's portfolio transactions. Accordingly, the
allocation of portfolio transactions for execution by broker-dealers that sell
Empower Funds is not considered marketing support payments to such
broker-dealers.
EAFG’s
payments to financial intermediaries could be significant to the intermediary
and may provide the intermediary with an incentive
to favor the Fund or affiliated funds. Your financial intermediary may charge
you additional fees or commissions other than those disclosed in this
Prospectus. Contact your financial intermediary for information about any
payments it receives from EAFG and any services it provides, as well as about
fees and/or commissions it charges.
Partner
Payments to Empower
Empower
may receive payments from registered investment advisers and/or their affiliates
(“Partner(s)”), including current and potential
sub-advisers to Empower Funds, as applicable, for providing services to Partners
and Partner products offered through Empower’s retirement platforms. Program
services include but are not limited to: (1) consideration for inclusion in
Empower products developed for some segments of the retirement and IRA market,
(2) inclusion on the Empower Select investment platform, which is available in
the small plan recordkeeping market, (3) a waiver of the connectivity fee, (4)
enhanced marketing opportunities, (5) additional reporting capabilities, (6)
collaboration in thought leadership opportunities, (7) access to meetings with
Empower leadership, Empower staff, and the third-party advisory and brokerage
firms through which Empower distributes its services, and (8) access to
conferences put on by Empower. The level of payments made by Partners may be
based on differing levels or types of services provided by Empower, among other
considerations.
17
Annual
and Semi-Annual Shareholder Reports
The
fiscal year of the Fund ends on December 31 of each year. Twice a year, a report
containing a summary of the Fund's performance
and other information will be made available to shareholders of the Fund. Annual
and semi-annual shareholder reports for the Fund may be accessed at the SEC’s
website at www.sec.gov and the Empower Funds’ website at
www.empower.com/investments/empower-funds/fund-documents.
18
Financial
Highlights
The
financial highlights table presented below is intended to help you understand
the financial performance of the Fund’s Institutional
Class and Investor Class shares for the past five years, or, if shorter, the
period of such class’s operations. Certain information reflects financial
results for a single Fund share. Total returns in the table represent the rate
that an investor would have earned (or lost) on an investment in the Fund
(assuming reinvestment of all dividends and distributions). Total returns do not
include expenses associated with Permitted Accounts. If such expenses were
included, total returns would be lower. The information has been derived from
financial statements audited by Deloitte & Touche LLP, an independent
registered public accounting firm, whose report, along with the Fund’s financial
statements, is included in the Fund's Annual Report, which is available upon
request.
Selected
data for a share of capital stock of the Fund throughout the periods
indicated.
|
|
|
Income
(Loss) from Investment Operations:
|
|
Less
Distributions:
|
|
| |||
|
|
Net
asset value,
beginning
of year
|
Net
investment
income(a)
|
Net
realized
and
unrealized
gain
(loss)
|
Total
from
investment
operations
|
From
net
investment
income
|
From
net
realized
gains
|
Total
Distributions
|
Net
asset value,
end
of year
|
Total
Return(b)(c)
|
|
Investor
Class
|
|
|
|
|
|
|
|
|
|
|
12/31/2023
|
$8.94
|
0.33
|
0.08
|
0.41
|
(0.38)
|
—
|
(0.38)
|
$8.97
|
4.76%
|
|
12/31/2022
|
$10.63
|
0.43
|
(1.36)
|
(0.93)
|
(0.50)
|
(0.26)
|
(0.76)
|
$8.94
|
(8.92%)
|
|
12/31/2021
|
$10.46
|
0.29
|
0.20
|
0.49
|
(0.26)
|
(0.06)
|
(0.32)
|
$10.63
|
4.76%
|
|
12/31/2020
|
$9.92
|
0.08
|
0.67
|
0.75
|
(0.10)
|
(0.11)
|
(0.21)
|
$10.46
|
7.57%
|
|
12/31/2019
|
$9.47
|
0.18
|
0.42
|
0.60
|
(0.15)
|
—
|
(0.15)
|
$9.92
|
6.35%
|
|
Institutional
Class
|
|
|
|
|
|
|
|
|
|
|
12/31/2023
|
$8.85
|
0.36
|
0.09
|
0.45
|
(0.43)
|
—
|
(0.43)
|
$8.87
|
5.13%
|
|
12/31/2022
|
$10.54
|
0.46
|
(1.35)
|
(0.89)
|
(0.54)
|
(0.26)
|
(0.80)
|
$8.85
|
(8.66%)
|
|
12/31/2021
|
$10.39
|
0.33
|
0.20
|
0.53
|
(0.32)
|
(0.06)
|
(0.38)
|
$10.54
|
5.18%
|
|
12/31/2020
|
$9.86
|
0.11
|
0.68
|
0.79
|
(0.15)
|
(0.11)
|
(0.26)
|
$10.39
|
8.02%
|
|
12/31/2019
|
$9.45
|
0.22
|
0.41
|
0.63
|
(0.22)
|
—
|
(0.22)
|
$9.86
|
6.65% |
|
|
Net
assets,
end
of year
(000)
|
Ratio
of expenses
to
average net assets
(before
reimbursement
and/or
waiver, if applicable)
|
Ratio
of expenses
to
average net assets
(after
reimbursement
and/or
waiver, if applicable)
|
|
Ratio
of net investment income
to
average net assets
(after
reimbursement
and/or
waiver, if applicable)
|
Portfolio
turnover
rate(d)(e)
|
|
Investor
Class
|
|
|
|
|
|
|
|
12/31/2023
|
$4,337
|
1.82%
|
0.70%
|
|
3.70%
|
121%
|
|
12/31/2022
|
$4,312
|
1.57%
|
0.70%
|
|
4.34%
|
49%
|
|
12/31/2021
|
$6,194
|
1.12%
|
0.70%
|
|
2.75%
|
137%
|
|
12/31/2020
|
$5,855
|
1.14%
|
0.70%
|
|
0.75%
|
98%
|
|
12/31/2019
|
$4,953
|
1.00%
|
0.70%
|
|
1.85%
|
66%
|
|
Institutional
Class
|
|
|
|
|
|
|
|
12/31/2023
|
$429,971
|
0.39%
|
0.35%
|
|
4.05%
|
121%
|
|
12/31/2022
|
$376,522
|
0.39%
|
0.35%
|
|
4.72%
|
49%
|
|
12/31/2021
|
$483,913
|
0.37%
|
0.35%
|
|
3.09%
|
137%
|
|
12/31/2020
|
$434,109
|
0.37%
|
0.35%
|
|
1.08%
|
98%
|
|
12/31/2019
|
$424,797
|
0.36%
|
0.35%
|
|
2.23%
|
66% |
|
(a)
|
Per
share amounts are based upon average shares outstanding.
|
|
(b)
|
Total
return does not include any fees or expenses of variable insurance
contracts, if applicable. If such fees or expenses were included, the
return shown
would
have been lower.
|
|
(c)
|
Total
return shown net of expenses reimbursed and/or waived, if applicable.
Without the expense reimbursement and/or waiver, the return shown would
have
been
lower.
|
|
(d)
|
Portfolio
turnover is calculated at the Fund level.
|
|
(e)
|
Portfolio
turnover includes purchases and sales related to TBA transactions,
including dollar roll transactions, which occurred during the period.
Excluding
TBA
and dollar roll transactions, the portfolio turnover would have been109%,
48%, 46%, and 84% for the years ended December 31, 2023, 2022, 2021, and
2020,
respectively. |
19
Additional
Information
The
SAI contains more details about the investment policies, practices and
limitations of the Fund. A current SAI is on file with the SEC
and is incorporated by reference into this Prospectus as a matter of law, which
means that it is legally considered a part of this Prospectus even though it is
not physically contained within this Prospectus.
Additional
information about the Fund's investments is available in the Fund's Annual and
Semi-Annual Reports to shareholders. In the
Fund's Annual Report, you will find audited financial statements and a
discussion of the market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year. Semi-Annual Reports
for the Fund include unaudited financial statements.
For
a free copy of the SAI, Annual, or Semi-Annual Reports; to request other
information; or to ask questions about the Fund, contact
your financial intermediary or call (866) 831-7129. Empower Funds’ website is
www.empower.com/investments/empower-funds/fund-documents. The SAI,
Annual, and Semi-Annual Reports are available on the website free of
charge.
The
SAI and the Annual and Semi-Annual Reports are available on the EDGAR database
on the SEC’s internet website at www.sec.gov.
You can also obtain copies of this information, upon paying a duplicating fee,
by electronic request at the following e-mail address:
[email protected].
INVESTMENT
COMPANY ACT OF 1940, FILE NUMBER 811-03364.
This
Prospectus should be read
and retained for future reference.
and retained for future reference.
20