International Agricultural Research Centers Offshore Retirement Plan. Investment Guide

Transcription

1 International Agricultural Research Centers Offshore Retirement Plan Investment Guide

2 Contents Important Risk Notice... 1 About this Guide... 1 Understanding Risk... 2 Risk and Reward... 3 Diversification... 5 Your Investment Options... 7 Share Classes and Distributions... 7 Money Market and Liquidity Funds... 9 Bond Funds Global Equity Funds North American Equity Funds European Equity Funds Asian Equity and Japanese Equity Funds Emerging Markets Equity Funds Specialist Funds LifeCycle Strategy Charges Fund Charges Table Contacts Investment Research Important Information... 31

3 Important Risk Notice It is important to note that past performance is not an indicator for future performance. The value of any investment and the income from it can fall, as well as rise, and you may not get back the amount originally invested. You should specifically note the following: No investment is risk free and can result in the possibility of large and sudden falls in the prices of shares. You could get back nothing at all. The charges, expenses, and taxation of the underlying funds in this guide are varied and performance may differ. Contributions to the plan are made in U.S. dollars, so investing in non U.S. dollar denominated funds will expose you to currency exchange rate fluctuations. When investing in developing or emerging markets or in specialist funds, investors should be prepared to accept a higher degree of risk than for a fund with a broader investment objective. Some funds contained in this guide may not be appropriate for all investors due to the potential investment risks associated with these markets or asset classes. Neither AIARC nor Allianz Global Investors can give advice on the funds in this brochure. You should ensure that you understand the risks involved with investing in these funds before making your investment decision. Nothing contained in this guide should be construed as guidance to the suitability of the markets or asset classes mentioned; neither is it intended as an offer to invest. Anyone considering investing in these funds should always seek professional guidance. About this Guide This guide provides you with information about the IARC Offshore Retirement Plan, including the variables that you should consider when making investment decisions such as your personal risks, preferences, and investment time horizon; the risks associated with investing and the strategies for lessening various risks; and the available fund options. The funds offered are based on the recommendation of an external investment adviser. The available funds provide access to a broad range of asset sectors from quality fund managers to include both actively managed and passive index tracking funds. For plan participants not wishing to make a specific decision regarding fund selection, but still wanting to have their retirement account actively managed, the LifeCycle Strategy product is an option. Detailed information about each fund can be obtained via the factsheet link provided with each fund summary in this guide and on the IARCPlan.org website. Funds in this guide have been categorized by sector to include Money Market and Liquidity funds, Bond funds, Global Equity Funds, North American Equity funds, European Equity funds, and so forth. Each fund denotes management style active or passive, ISIN Code, and the link to the fund managers factsheet. IARC Plan Investment Guide 2014 Page 1 of 31

4 When saving for retirement, your allocation is the key to future returns and risk. Choose it carefully, monitor it periodically, and rebalance it when necessary. Do not evaluate your individual fund investments in isolation; think instead of your overall portfolio. The reason for holding a portfolio is that gains from one investment may help offset losses in another. In the long term, what matters is the total value of your portfolio, not short term losses in one fund. You should always focus on long term performance, rather than attempt to beat quarterly or other short term performance benchmarks. Please note that any investment decisions are ultimately made by you and your advisers, and this guide is intended only to make planning an investment strategy and constructing a portfolio easier. This guide is not intended to provide advice or act in any way as a recommendation for your investment strategy. The funds offered are not a warranty or a representation of suitability for your individual investment requirements. The fund information contained within this guide is based on available data published by the individual fund managers. Understanding Risk All investments involve taking on risk. It is important that you go into any investment with a full understanding that you could lose some or all of your money. This section discusses some of the basic concepts of investing such as risk and reward, types of risks, and the strategies for reducing exposure to risks. What level of risk is right for me? The answer depends on when you will need the money, your goals, and whether you will be able to sleep at night if you purchase a risky investment. Knowing your investment style should make it easier when selecting your investments. In determining your investment style, you should consider the following: Generally, investments that have higher risks will also have the potential for higher returns, while lower risk investments typically produce lower returns. However, higher risk investments will also have the potential for greater losses. If you have a long time before you retire, you will have more time to recover from potential market downturns and may want to be more aggressive with your investments. However, you may want to be more conservative if you are closer to retirement. Think about the amount of time you want to spend managing your account and learn which investments may require more or less hands on involvement. The Plan has a variety of investment options available, and you will have to choose the investments that are best for you based on your investment style and personal circumstances. IARC Plan Investment Guide 2014 Page 2 of 31

5 Risk and Reward It is important to understand how risk and reward interact and to determine what investments suit your risk tolerance and personal circumstances. Risk can be defined as the difference between what is expected and what actually happens. In investing, risk is the variability in the returns of an investment. Variability can be measured by volatility. Volatility measures the rate and magnitude of price changes in an investment over a period of time. If the price moves up and down rapidly over short periods of time, it has high volatility. If the price almost never changes, it has low volatility. You need to be aware of the types of investment risk and the impact that these risks may have on your investments. Although risks pose a threat, they also pose an opportunity and you need to understand the strategies for mitigating risks so that you can benefit from the potential rewards. Risk and reward go hand in hand. Generally, higher returns are associated with the higher risks. Historically, stocks have provided the highest long term returns of the various asset classes, but they have also had the largest price fluctuations; cash investments are safest when it comes to price stability, but they have provided the lowest long term returns. The chart below shows the primary investment asset types and the risks and rewards generally associated with them. This diagram is for illustration purposes only. It is a simple illustration of the risk and return relationship of different asset classes. Although this chart is by no means scientific, it provides a guideline that investors can use when selecting investments. Investments at the top of the chart offer the potential for higher returns, but this IARC Plan Investment Guide 2014 Page 3 of 31

6 potential comes with a higher risk of losses. Investments at the bottom of the chart are considered safer investments, but have lower potential for high returns. Different types of risk Inflation Risk: This risk is the risk of doing nothing. For example, if you deposit money in a savings account and the interest earned is less than the rate of inflation, you will lose purchasing power because the cost of your purchases is rising at a faster rate than the interest you have earned on your deposit. How to counteract it: Market risk: How to counteract it: Sector risk: How to counteract it: International exposure: How to counteract it: This risk may be lessened by linking your investments to real economic growth such as stocks or higher risk fixed income securities. This risk is the risk that the general prices of your stocks and bonds will fluctuate up or down dramatically. This risk may be reduced by holding an investment for a long period of time (such as 10 years) or by investing in a range of asset classes. Over certain periods of time, one or more market sectors may outperform the overall market. While it might be tempting to invest purely in such sectors, if their fortunes change for the worse, the value of a portfolio will fall with them. For example, the technology market boom of the late 1990s led to huge investments in dot com companies when the market was at its peak. However, this very suddenly gave way to bust when the markets stumbled and investors suffered large financial losses. This risk can be reduced by investing in a diverse range of sectors, so that, overall, if any sectors fall, this may be balanced or outweighed by others that rise. Just as market sectors within one country will not always perform in the same manner, stock markets across the world behave differently. For example, there may be times when European markets will be stronger than those in the U.K., or emerging markets, such as those in Asia, will perform better than large established ones, such as in the United States. Investing in funds that offer exposure to different international markets can further diversify risk. This will increase exposure to good opportunities and help to lessen the risks associated with investing in one country s stock market. Risk ratings It is important to understand the risk characteristics of the funds that you choose to invest in. Morningstar ( and the Synthetic Risk Reward Indicator (SRRI, as developed by the Committee of European Securities Regulators) are independent third party resources that can assist you in assessing the risk characteristics of the available fund options. IARC Plan Investment Guide 2014 Page 4 of 31

7 Morningstar Risk and Return Morningstar uses a detailed methodology to determine a fund s risk and return score. Funds are scored from 1 to 5, and these scores are typically expressed as word labels in Morningstar products. Score 5 High Word label 4 Above Average 3 Average 2 Below Average 1 Low Note that the word label High is generally good for Morningstar return, and Low is generally good for Morningstar risk. Full information about the methodology used in calculating the Morningstar risk and return scores can be found at the following site: ngstarfundrating_methodology.pdf Synthetic Risk Reward Indicator (SRRI) The SRRI is calculated using the volatility of a share class s performance over a five year period. Each share class will be allocated a risk category, running from 1 to 7, where 1 is the lowest level of risk and 7 the highest. Of course, no investment is risk free, but this will assist investors in deciding how much risk they are willing to take within their portfolio. Typically lower rewards Typically lower risk Typically higher rewards Typically higher risk Full information about the methodology used in calculating the SRRI scores can be found at the following site: Diversification What is diversification? Diversification is the strategy of spreading an investor s money among various investments, hoping that if one investment loses money, the other investments will more than make up for those losses. It can be neatly summed up by the old English proverb Don t put all your eggs in one basket. Diversification cannot guarantee that your investments will not suffer if the market drops, but it can improve the chances that you will not lose money or, that if you do, it will not be as much as it would be if you were not diversified. IARC Plan Investment Guide 2014 Page 5 of 31

8 Asset diversification Investments are traditionally grouped into the following asset classes: Cash or money market Bonds (represent loans made to a corporation or government) Equities (represent ownership of company shares or stocks) Alternative funds (e.g., real estate, commodities, hedge funds, private equity) These asset classes can be further broken down by geography, sector, style of investment, and size of company invested in. Over time the different asset classes have performed differently exhibiting varying levels of risk and reward. Historically, equities and real estate have outperformed bonds over the long term but with a higher degree of volatility or risk. The theory is that the different asset classes are uncorrelated (i.e., what happens in one does not affect what happens in another). Therefore risk can be reduced by diversifying across the different asset classes. Please note that there is no guarantee that equities will outperform bonds. There is also no guarantee that all asset classes will not be adversely affected at the same time and same manner. Geographical diversification Assets also react in different ways depending on their geographical location. This is because economic cycles, currency valuation, and industrial developments vary from country to country. By investing internationally, it is possible to avoid the risk associated with one country while exposing investors to investment opportunities that may exist in other countries. Time diversification A simple way to reduce risk is to invest for the long term. For example, equities held over long time periods tend to provide positive total returns. Taking a long term view allows investments more time to grow and possibly make up for any short term fluctuations. The following table outlines the average annual returns for equities, cash and bonds over a term of thirty years: Annual Returns for Stocks Bonds Cash Yearly Average Return 11.09% 7.74% 4.01% Volatility (Standard Deviation) 17.54% 5.85% 2.73% Percent of Years Positive 83% 90% 100% Percent of Years Negative 17% 10% 0% Source: Prudential Financial, Inc. Summary It is difficult to predict how asset classes, sectors, or geographies will perform; therefore, diversification is a key strategy in managing investment risk. Creating a well diversified portfolio aligned with your financial goals, time horizon, and risk tolerance should lessen your risk, yet also increase your chance for investment gains. You should understand the risks before investing and always seek professional financial advice. IARC Plan Investment Guide 2014 Page 6 of 31

9 Your Investment Options You can choose from a range of funds that includes different asset classes, currencies, management styles, and so on. These funds have been carefully selected by the Plan Directors based on recommendations from a professional investment adviser. Please note that the Directors selection of a fund is not intended to act in any way as a recommendation for your investment strategy and you should choose funds that are appropriate for your circumstances. You are able to change your investment decision at any time. Fund switches can be made via the IARCPlan.org website. Time horizon Before you make any investment, you should always determine the length of time that you can keep your money invested. For example, if you have $20,000 to invest today but need it in one year for a down payment on a new house, investing the money in higher risk equities may not be the best strategy. The riskier an investment is, the greater its volatility or price fluctuations. So if your time horizon is relatively short, you may end up selling your investments at a significant loss. With a longer time horizon, investors have more time to recoup any possible losses and are, therefore, theoretically more tolerant of higher risks. For example, if that $20,000 is meant for a lakeside house that you are planning to buy in 10 years, you might wish to invest the money in higher risk funds because there is more time available to recover any losses and less likelihood of being forced to sell out of the position too early. Style of investing Active versus passive management A fund that is actively managed has an individual fund manager that uses research and investment strategies to make stock buying and selling decisions. With these decisions the manager aims to generate performance that will beat the fund s benchmark. A fund that is passively managed has no fund managers but instead mirrors the portfolio of a market index and generates performance in line with that index. For example, the Vanguard U.S. 500 Stock Index Fund is invested in the 500 stocks of Standard & Poor s 500 Index on a market capitalization basis. Share Classes and Distributions Each fund in the Plan constitutes a group of individual investments. These individual investments generate realized income in the form of dividends and interest income and the purchase and sale of investment positions, as well as unrealized income stemming from movements in the market price of current investment holdings. The distribution policy for this income will depend upon whether the fund in question has accumulation or income (distribution) class shares. Accumulation Shares: Dividends are not declared on accumulation shares. Accordingly, the fund s income and capital gains are reinvested into the fund and are reflected in the share price. Income (Distribution) Shares: Net income is distributed on a regular basis to participants invested in the fund. This is used to purchase additional shares in the fund. IARC Plan Investment Guide 2014 Page 7 of 31

10 The price of both accumulation and income share class investment funds will fluctuate on a daily basis, depending upon various factors such as the performance of the underlying assets, and can both rise and fall. The exception to this is for participants holding the Goldman Sachs Euro Liquid Reserves Fund and the Goldman Sachs Yen Liquid Reserves Fund, where the fund prices are fixed at 1 and 10,000, respectively. Interest is accrued on a daily basis and distributed when feasible. Any earnings are used to purchase additional shares for the participant in the fund. IARC Plan Investment Guide 2014 Page 8 of 31

11 Money Market and Liquidity Funds Funds within the money market and liquidity sector invest in international, short term interest earning securities, such as certificates of deposit, with the aim of providing a flexible and stable alternative to bank deposits for investors. The sector contains funds that provide investors with a high degree of liquidity, giving them the option of consolidating any gains made while invested in other funds. These funds can also offer a short term haven to protect portfolio gains close to maturity; however, these investments cannot offer any guarantees. SSgA USD Liquidity Fund Institutional USD Accumulation Shares About the fund: The investment objectives seek to maintain a high level of liquidity; preserve capital and stability of principal expressed in the Fund s Designated Currency; and, consistent with those objectives, earn current income. The investment manager combines a relative value approach to investing with credit analysis to identify investments and issuers that it believes will provide the greatest stability of capital and the highest probability of repayment. As part of this process, the investment manager uses in depth research to identify sectors, issuers, and securities that it deems attractive for purchase in light of the risks presented. Further, the investment manager considers the liquidity of each investment and the overall investment portfolio as an important factor in investment decisions. Share class: Accumulating Fund Manager State Street Global Advisors Ltd Funds Management Style Active Fund Category USD Money Market Short Term Fund Benchmark LIBID USD 7 Day Trading Frequency Daily Settlement T + 0 ISIN (Morningstar) IE00B1XG4657 Bloomberg SGCMUSA:ID Goldman Sachs Euro Liquid Reserves Fund Institutional EUR Distribution Shares About the fund: For investors seeking to maximize current income to the extent that it is consistent with the preservation of capital and the maintenance of liquidity by investing in a diversified portfolio of high quality money market securities. Share class: Income/Distribution (Monthly) Fund Manager Goldman Sachs Asset Mngmt Intl Management Style Active Fund Category EUR Money Market Short Term Fund Benchmark BBA Libor 1 Week EUR Trading Frequency Daily Settlement T + 0 ISIN (Morningstar) IE Bloomberg GSEULQI fund_updates/mfu_elrf_ds_as_en.pdf IARC Plan Investment Guide 2014 Page 9 of 31

12 Goldman Sachs Yen Liquid Reserves Fund Institutional JPY Distribution Shares About the fund: For investors seeking to maximize current income to the extent that it is consistent with the preservation of capital and the maintenance of liquidity by investing in a diversified portfolio of high quality money market securities. Share class: Income/Distribution (Monthly) Fund Manager Goldman Sachs Asset Mngmt Intl Management Style Active Fund Category Money Market Other Fund Benchmark BBA Libor 1 Week JPY Trading Frequency Daily Settlement T + 1 ISIN (Morningstar) IE00B1VR4X79 Bloomberg GSYENLI fund_updates/mfu_ylrf_ds_en.pdf IARC Plan Investment Guide 2014 Page 10 of 31

13 Bond Funds Investors are recognizing the merits of including bonds in their portfolio because they can provide a balance to an investment portfolio that may otherwise be overly dependent on equities. As equity and bond markets have historically tended to behave differently, participants may view bond investments as an effective way to diversify their portfolio. PIMCO Global Investors Series plc. Global Bond Fund Institutional USD Accumulation Shares About the fund: The investment objective seeks to maximize total return, consistent with preservation of capital and prudent investment management. The fund invests at least two thirds of its assets in a diversified portfolio of fixed income instruments denominated in major world currencies. The average portfolio duration of this fund will normally vary within three years (plus or minus) of the Barclays Capital Global Aggregate Index. Share class: Accumulating Fund Manager PIMCO Global Advisors (Ireland) Ltd Management Style Active Fund Category Global Bond USD Hedged Fund Benchmark Barclays Global Aggregate (USD Hedged) Index Trading Frequency Daily Settlement T + 1 ISIN (Morningstar) IE Bloomberg PIMGBAI funds.com/previewpdfdocuments.aspx?id=9009e539 2eaf 4cdc 836e 02a522991ec1 Vanguard Global Bond Index Fund Institutional USD Hedged Accumulation Shares About the fund: The fund seeks to provide current returns consistent with the performance of the Barclay Capital Global Aggregate Bond Index, a market weighted index of global government, government related agencies, corporate, and securitized fixed income securities. The fund employs a passive management or indexing strategy, which is accomplished by investing in other Vanguard Investment Series plc sub funds, as well as other securities. These other funds seek to track the specific indexes, which, together and along with the individual securities, make up the Barclays Capital Global Aggregate Float Adjusted Bond Index. Share class: Accumulating Fund Manager Vanguard Group (Ireland) Ltd Management Style Passive Fund Category Global Bond USD Hedged Fund Benchmark Spliced Barclays Capital Global Agg Float Adjusted Index Hedged in USD Trading Frequency Daily Settlement T + 3 ISIN (Morningstar) IE00B18GCB14 Bloomberg VANGBUH IARC Plan Investment Guide 2014 Page 11 of 31

14 PIMCO Global Investors Series plc. Total Return Bond Fund Institutional USD Accumulation Shares About the fund: The Total Return Bond Fund is a diverse portfolio of intermediate term, investment grade securities, actively managed to maximize total return while minimizing risk relative to the benchmark. The fund invests primarily in U.S. government, mortgage, and corporate bonds, but may have tactical allocations to municipal, high yield and non U.S. markets. Share class: Accumulating Fund Manager PIMCO Global Advisors (Ireland) Ltd Management Style Active Fund Category USD Diversified Bond Fund Benchmark Barclays U.S. Aggregate Index Trading Frequency Daily Settlement T + 1 ISIN (Morningstar) IE Bloomberg PIMTRAI funds.com/previewpdfdocuments.aspx?id=68125e5d bf a034 e85a2e3a5f67 BlackRock U.S. Corporate Bond Index Fund Institutional USD Accumulation Shares About the fund: The fund will invest in a wide range of U.S. dollar denominated securities with a diversified spread of sovereign and multinational issuers, high quality financial institutions, and corporate issuers. This fund s investments will normally be listed or traded on regulated markets in the United States and the European Union, but may alternatively be listed or traded on other regulated markets as set out in Appendix I of the Prospectus. All investments will be investmentgrade rated from Moody s Investors Services or an equivalent rating from another agency or are deemed by the investment manager to be of an equivalent rating. Share class: Accumulating Fund Manager BlackRock Asset Management (Ireland) Ltd Management Style Passive Fund Category USD Corporate Bond Fund Benchmark Citigroup Eurodollar Bond Index Trading Frequency Daily Settlement T + 3 ISIN (Morningstar) IE00B1W4R501 Bloomberg BARUSCI:ID IARC Plan Investment Guide 2014 Page 12 of 31

15 Threadneedle European Bond Fund Retail EUR Accumulation Shares About the fund: To achieve capital growth, the fund invests at least two thirds of its assets in bonds (which are similar to a loan and pay a fixed or variable interest rate) priced in a range of currencies and issued by governments and companies in Europe, or companies that have significant operations there, or other bonds issued by governments and companies that are priced in euros. The fund is also able to invest in bonds from Eastern Europe. Share class: Accumulating Fund Manager Threadneedle Investment Services Ltd Management Style Active Fund Category Europe Bond Fund Benchmark Merrill Lynch Pan European Large Cap Trading Frequency Daily Settlement T + 4 ISIN (Morningstar) GB00B465TP48 Bloomberg THEBRGA:LN Vanguard Euro Government Bond Index Fund Retail USD Accumulation Shares About the fund: The fund seeks to provide returns consistent with the performance of the Barclay Capital Global Aggregate Euro Government Bond Index, which is a market weighted bond index of euro denominated government fixed income securities. Share class: Accumulating Fund Manager Vanguard Group (Ireland) Ltd Management Style Passive Fund Category EUR Government Bond Fund Benchmark Barclays Global Aggregate Euro Government Float Adjusted Bond Index Trading Frequency Daily Settlement T + 3 ISIN (Morningstar) IE Bloomberg VANEGID IARC Plan Investment Guide 2014 Page 13 of 31

16 Global Equity Funds Investing internationally can help manage risk in a portfolio and rescue it from ebbs and flows in the fortunes of one particular country s market. It is hard to tell which country is the best to invest in at a given time, bearing in mind that today s top performer may be tomorrow s laggard. As an investment portfolio grows in value, it becomes even more important to diversify. Deciding to invest internationally may be a major change from an investor s usual strategy, and the investor should bear in mind that while investing internationally can diversify his or her portfolio, it also has risks not associated with investing solely in the investor s domestic market. International diversification can be achieved by investing in overseas companies through a pooled investment fund. Investing in stock markets around the world offers access to the growth potential of the major global economies such as the United States, Europe, and Japan, as well as the smaller but potentially higher return markets across Asia. Aberdeen Global World Equity Fund Retail USD Accumulation Shares About the fund: The fund s investment objective is long term total return to be achieved by investing at least two thirds of the fund s assets in equities and equity related securities. Share class: Accumulating Fund Manager Aberdeen Asset Managers Limited Management Style Active Fund Category Global Large Cap Blend Equity Fund Benchmark MSCI World NR USD Trading Frequency Daily Settlement T + 4 ISIN (Morningstar) LU Bloomberg ABEMCAA:LX asset.co.uk/doc.nsf/lit/factsheetglobalworldequity Vanguard Global Stock Index Fund Institutional USD Accumulation Shares About the fund: The fund seeks to provide long term growth of capital by tracking the performance of the Morgan Stanley Capital International World Free Index, a market capitalization weighted index of common stocks of companies in developed countries. The fund employs a passive management or indexing investment strategy designed to track the performance of the index by investing all, or a representative sample, of the securities that make up the index, holding each stock in approximate proportion to its weighting in the index. Share class: Accumulating Fund Manager Vanguard Group (Ireland) Ltd Management Style Passive Fund Category Global Large Cap Blend Equity Fund Benchmark MSCI World Free Index Trading Frequency Daily Settlement T + 3 ISIN (Morningstar) IE00B03HD209 Bloomberg VANGISI IARC Plan Investment Guide 2014 Page 14 of 31

17 North American Equity Funds North America has one of the world s largest stock markets and remains home to some of the world s highest quality companies and strongest brands. Many of these companies are leaders in their industries and are subject to high standards of corporate governance, which offers protection to investors. The U.S. economy remains a powerhouse of the global economy and investment in this sector and provides exposure to long term growth opportunities and diversification away from domestic markets. Allianz US Equity Fund Institutional USD Accumulation Shares About the fund: The fund s investment objective is to achieve capital appreciation in the long term. The fund will seek to achieve its investment objective primarily through investment in the U.S. equity markets. Share class: Accumulating Fund Manager Allianz Global Investors Ireland Ltd Management Style Active Fund Category US Large Cap Blend Equity Fund Benchmark S&P 500 Total Return Trading Frequency Daily Settlement T + 2 ISIN (Morningstar) IE00B1CD5D15 Bloomberg AUSEWTD:ID b2b.eu/intb2b/download?isin=ie00b1cd5d15 &type=fst&lang=en&fst=factsheets_b2b voll&co=eu Vanguard U.S. 500 Stock Index Fund Retail USD Accumulation Shares About the fund: The fund seeks to track the performance of the Standard & Poor s 500 ( S&P 500 ) Index, a widely recognized benchmark of U.S. stock market performance that is dominated by the stocks of large U.S. companies. Share class: Accumulating Fund Manager Vanguard Group (Ireland) Ltd Management Style Passive Fund Category US Large Cap Blend Equity Fund Benchmark S&P 500 Total Return Trading Frequency Daily Settlement T + 3 ISIN (Morningstar) IE Bloomberg VANUIVI IARC Plan Investment Guide 2014 Page 15 of 31

18 European Equity Funds Europe presents interesting investment opportunities and, along with the United States, offers investors one of the largest and most varied markets in the world. It is home to a range of quality companies and industries from Swedish discount retailers to German car manufacturers. Europe s varied economic landscape offers a broad range of countries, from established markets to the exciting opportunities in emerging markets like the new European Union entrants. Europe s variety can provide an attractive source of diversification for investors looking to expand beyond a portfolio of purely U.S. or Asia based investments. Allianz Europe Equity Growth Fund Institutional EUR Distribution Shares About the fund: The investment policy is geared toward long term capital growth primarily through positions on European equity markets within the framework of the investment principles. To this end, fund management will acquire equities that it considers, together with all equities held in sub fund assets, to represent an equity portfolio oriented toward growth stocks. At least 75% of sub fund assets are invested in equities and participation certificates of companies that are incorporated in European Union member states, Norway, or Iceland. Share class: Income/Distribution (Yearly in December) Fund Manager Allianz Global Investors Luxembourg SA Management Style Active Fund Category Europe Large Cap Growth Equity Fund Benchmark S&P Europe Large Midcap Growth Net Total Return Trading Frequency Daily Settlement T + 2 ISIN (Morningstar) LU Bloomberg RCMEUGW:LX b2b.eu/intb2b/download?isin=lu &type=fst&lang=en &fst=factsheets_b2b voll&co=eu Vanguard European Stock Index Fund Retail USD Accumulation Shares About the fund: The fund seeks to provide long term growth of capital by tracking the performance of the Morgan Stanley Capital International Europe Index, which is made up of common stocks of companies located in Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom. Share class: Accumulating Fund Manager Vanguard Group (Ireland) Ltd Management Style Passive Fund Category Europe Large Cap Blend Equity Fund Benchmark MSCI Europe Index Trading Frequency Daily Settlement T + 3 ISIN (Morningstar) IE Bloomberg VANEIVI IARC Plan Investment Guide 2014 Page 16 of 31

19 Asian Equity and Japanese Equity Funds For many investors, Asia has become one of the most attractive destinations when looking to diversify their portfolio to countries beyond Europe and the United States. Several factors combine to build a case for investing in Asian equities, including strong economic growth, improved levels of corporate governance. and profitability. On the export front, Asia s high degree of cost competitiveness and improving productivity are helping Asian companies increase their market share of global exports. Another factor boosting the fortunes of the region is the rise of China. Following decades of rapid growth and modernization, China has become a driving force for growth in the region and is now the world s second largest economy, behind only the United States. China s economy continues to grow rapidly and is now a more important trading partner than the United States for several countries in the region. As a region, Asia presents an investment opportunity for long term investors who are comfortable with a high degree of investment risk. Asian equities should be viewed as part of a broader investment portfolio. Allianz Emerging Asia Equity Fund Retail USD Distribution Shares About the fund: The investment objective is to achieve capital appreciation in the long term. The sub fund will seek to achieve its investment objective primarily through investment in equity markets of the developing economies of Asia, within the framework of the investment principles. Note: The fund was repositioned on July 16, 2010 (formerly, Allianz RCM Philippines). Consequently, performance prior to this date is not representative of the current investment universe. Share class: Income/Distribution (Yearly in September) Fund Manager Allianz Global Investors Luxembourg SA Management Style Active Fund Category Asia ex Japan Equity Fund Benchmark MSCI Emerging Frontier Asia Total Return (Net) Trading Frequency Daily Settlement T + 2 ISIN (Morningstar) LU Bloomberg THONPHI:LX b2b.eu/intb2b/download?isin=lu &type=fst&lang=en &fst=factsheets_b2b voll&co=eu IARC Plan Investment Guide 2014 Page 17 of 31

20 Vanguard Pacific ex Japan Stock Index Fund Institutional USD Accumulation Shares About the fund: The fund seeks to provide long term growth of capital by tracking the performance of the Morgan Stanley Capital International (MSCI) Pacific ex Japan Index, which is made up of common stocks of companies located in Australia, Hong Kong, New Zealand, and Singapore. The fund employs a passive management or indexing investment strategy designed to track the performance of the index by investing in all, or a representative sample, of the securities that make up the index. Share class: Accumulating Fund Manager Vanguard Group (Ireland) Ltd Management Style Passive Fund Category Asia Pacific ex Japan Equity Fund Benchmark MSCI Pacific ex Japan Index Trading Frequency Daily Settlement T + 3 ISIN (Morningstar) IE Bloomberg VAPEJSI Allianz Japan Equity Fund Institutional USD Accumulation Shares About the fund: The investment objective is to achieve capital appreciation in the long term. The sub fund will seek to achieve its investment objective primarily through investment in the equity markets of Japan. At least 70% of sub fund assets are invested in equities of companies that are incorporated in Japan. Investments by the sub fund in warrants to subscribe for equities in companies of this type and in index certificates and other certificates whose risk profiles typically correlate with equities of such companies are also permitted and are attributed to this minimum of 70% investment in equities. Share class: Accumulating Fund Manager Allianz Global Investors Luxembourg SA Management Style Active Fund Category Japan Large Cap Equity Fund Benchmark TOPIX Total Return Index Trading Frequency Daily Settlement T + 2 ISIN (Morningstar) LU Bloomberg THONJIA:LX b2b.eu/intb2b/download?isin=lu &type=fst &lang=en&fst=factsheets_b2b voll&co=eu IARC Plan Investment Guide 2014 Page 18 of 31

21 Vanguard Japan Stock Index Fund Retail USD Accumulation Shares About the fund: The fund seeks to track the performance of the Morgan Stanley Capital International (MSCI) Japan Index, which emphasizes stocks of companies located in or traded on recognized markets in Japan. The fund employs a passive management or indexing investment strategy designed to track the performance of the index by investing in all, or a representative sample, of the securities that make up the index, holding each stock in approximate proportion to its weighting in the index. Share Class: Accumulating Fund Manager Vanguard Group (Ireland) Ltd Management Style Passive Fund Category Japan Large Cap Equity Fund Benchmark MSCI Japan Index Trading Frequency Daily Settlement T + 3 ISIN (Morningstar) IE Bloomberg VANSTOK IARC Plan Investment Guide 2014 Page 19 of 31

22 Emerging Markets Equity Funds The gains in global emerging markets have been underpinned by structural improvements to local economies, with increasing political stability and improved government finances that are expected to translate into increased investment in infrastructure. Within emerging markets, there is a growing middle class and increasing population a useful demographic trend to have. High savings rates also provide a good backdrop for robust growth in consumer spending. An increase in both wages and the quality of life is fostering consumer demand. The improved stability of these regions has also led to an improvement in the credit rating of debt issued by these governments. Despite the emergence of beneficial demographic trends and favorable political reforms in global emerging markets, it is important to understand the risks involved in investing in the region. Political instability, currency fluctuation, or a natural catastrophe can very quickly take its toll on a company s profitability; and managers of funds that invest in specialist regions, such as global emerging markets, have to manage these risks. It is important to remember that emerging markets are considered high risk investments. If as an investor you are comfortable investing in high risk markets, the funds in this sector could play a role in a wider diversified portfolio strategy. Vanguard Emerging Markets Stock Index Fund Retail USD Shares About the fund: The fund seeks to track the performance of the Morgan Stanley Capital International (MSCI) Emerging Markets Index, a market capitalization weighted index of companies in 25 emerging markets in Europe, Asia, Africa, Latin America, and Russia. The fund employs a passive management or indexing investment approach by investing all, or substantially all, of its assets in the common stocks included in the index. Share class: Accumulating Fund Manager Vanguard Group (Ireland) Ltd Management Style Passive Fund Category Global Emerging Markets Equity Fund Benchmark MSCI Emerging Markets Index Trading Frequency Daily Settlement T + 3 ISIN (Morningstar) IE Bloomberg VANEMUI IARC Plan Investment Guide 2014 Page 20 of 31

23 Specialist Funds The overall level of risk associated with a portfolio can be tempered by spreading the holdings within it around asset classes a central tenet of investing. However, in reviewing global markets, prevailing conditions can often favor one area or sector of the market more than another. While some investment funds will concentrate on one particular sector, others may diversify by allocating holdings among many different market sectors. Whether thinking about a diversified strategy or a more aggressive approach to investment, sector investing could have something to offer more sophisticated participants. Specialist sector investing involves concentrating a portion of investments into one particular segment of business activity and may help to increase overall return. The benefits of a spread of sector investments in a portfolio can be summarized as follows: Investors can increase the number of available investment opportunities as, over periods of time, one or more sectors tend to outperform the broad market. Global competition means that domestic market sectors assets operate in a wider marketplace and compete globally. Investors gain access to regional performance differences as countries experience differing levels in their growth cycles. Keep in mind that investing solely in specialist funds may not constitute a balanced investment portfolio. However, sector funds may be appropriate for an investor if: Most of the investor s portfolio is already diversified across regions and asset classes. The investor s goal is to outperform the broad stock market over time. The investor is comfortable taking a higher degree of risk in a portion of his or her portfolio in return for potentially higher than average returns over the long term. The investor can hold the sector investments for the longer term to allow the value inherent in the investment to unwind over time. Allianz Euroland Equity SRI Fund EUR Distribution Shares About the fund: The fund invests primarily in stocks of companies domiciled in the Eurozone that, in the opinion of fund management, fulfill the criteria for a sustainable and responsible investment. For this purpose, it is analyzed to what extent companies take the following sustainability criteria into account: social policy, respect for human rights, corporate governance, environmental policy, and ethics. The fund s investment objective is to attain capital growth over the long term. Share class: Income/Distribution (Yearly in December) Fund Manager Allianz Global Investors Luxembourg SA Management Style Active Fund Category Eurozone Large Cap Equity Fund Benchmark MSCI EMU Total Return (Net) Trading Frequency Daily Settlement T + 2 ISIN (Morningstar) LU Bloomberg AEURLNE:LX b2b.eu/intb2b/download?isin=lu &type=fst &lang=en&fst=factsheets_b2b voll&co=eu IARC Plan Investment Guide 2014 Page 21 of 31

24 LifeCycle Strategy LifeCycle investing is a no hassle investment option that allows participants to invest in growth assets such as equities during the early years of their pension plan, and moves participants gradually into more secure assets such as fixed interest securities during the latter years. It delivers simplicity, requires minimum engagement, and offers the peace of mind of sensible and appropriate asset allocation customized to your retirement date. Who should use this approach? This approach is suitable for people who would prefer not to make their own investment decisions and for people who perhaps do not have the time or experience to decide which funds to invest their savings in or when to change their investment choices. It takes the pressure off the individual and lets the professionals do all the work. What does the LifeCycle Strategy invest in? The LifeCycle Strategy invests in six funds in total four equity funds and two bond funds. These are: Allianz US Equity Allianz Europe Equity Growth Allianz Japan Equity Allianz Emerging Asia Equity PIMCO GIS Total Return Bond Fund PIMCO GIS Global Bond Fund What does it cost? Standard fund management charges will apply to the underlying funds within the strategy (see the Charges section for details). In addition, Allianz will charge a fee of 0.15% per year of the value of your LifeCycle funds for managing your strategy, deducted on a quarterly basis. This includes a regular rebalancing to tailor your strategy to your individual needs. How does it work? The LifeCycle Strategy is a systematic, rule based investment strategy that dynamically shifts your portfolio between different allocations according to your pre specified glide path and current age. The glide path is the forecasted asset allocation for you over your lifetime and is derived to generate an optimized retirement income for you. The chart below illustrates how this would affect the composition of a sample participant s account over his or her lifetime. IARC Plan Investment Guide 2014 Page 22 of 31

25 Are my funds locked in until retirement? No, you can switch into other investment funds or withdraw your savings from your LifeCycle Strategy at any given time (actively employed participants can only withdraw funds from their voluntary contributions). Can I invest in the LifeCycle Strategy as well as other funds? Yes, you can. However, the Lifecycle approach is not like standard investment funds; it is much more a long term investment concept. If a participant chooses to invest in other funds in addition to the LifeCycle model, he or she will skew the asset allocations (e.g., if a participant invests in an equity fund in addition to the LifeCycle Strategy, he or she will be adding more risk to his or her overall portfolio. The LifeCycle model is designed to cover all of an individual participant s retirement savings. More detailed information is available from the LifeCycle Strategy factsheet ( Charges There are primarily two types of charges that will apply to your account investment costs and platform/administration charges. Investment costs Annual management charge (AMC) / Total expense ratio (TER) The manager of each investment fund charges an annual fee to the fund. These will vary depending on the funds invested in. The AMC is not a deduction from your account but instead a cost that is factored into the calculation of the fund price on a daily basis. As is common with most investment funds, there can be additional charges and expenses incurred by the fund. These are also factored into the calculation of the fund price on a daily basis. The combined total of these costs together with the AMC is called the total expense ratio (TER). This represents the total cost charged to the fund during the previous financial year. Please note that the TER is indicative and specific to a particular year, and may change. IARC Plan Investment Guide 2014 Page 23 of 31

26 Where possible, AllianzGI has secured Institutional class shares for the selected investment funds. These are not available to individual investors and typically have significantly reduced AMCs compared to the standard retail class shares. Discounts To provide the best range of products for individual investments, the Directors have negotiated the use of non Allianz funds. AllianzGI has secured discounts on the AMCs for several of these funds. These discounts will be credited to your account as they are received by AllianzGI. Preset dilution levy on purchases and/or redemptions A fund may charge a preset dilution levy (PDL) on the purchase and/or redemption of shares to offset the costs of trading securities. The PDL ensures that these higher costs are borne by the investors making the transaction and not by the shareholders already in the fund. These are the ordinary trading costs (e.g., investment taxes) associated with investments and are normally higher for investments, for example, in companies in emerging markets. All PDLs are paid directly into the assets of the relevant fund to offset the cost to all shareholders of an individual buying or selling securities. It is not a sales charge payable to the manager or any other person. The PDLs applying to each fund are shown in the table on page 26 and are maximum charges that can be applied the actual PDL may be lower, depending upon on market conditions on the day shares are purchased. Where PDLs apply, there is a small deduction from the number of shares you would otherwise have purchased to allow for trading costs. In funds where no PDL applies, trading costs are instead included in the TER and factored into the calculation of the fund price. Non AllianzGI fund platform charge In line with standard practice for international platforms, the online service platform provider (Allianz) charges an access fee for the non Allianz products. The access fee is 0.06% per year for the use of external funds on the platform, deducted on a quarterly basis. This is applied only to the non AllianzGI funds. Please note that PIMCO Global Advisors (Ireland) Ltd is part of the Allianz Group of companies and, therefore, the 0.06% charge does not apply to the PIMCO funds available on the online service platform. AllianzGI and the Directors have agreed that should the overall value of AllianzGI and PIMCO investment funds within the Plan be greater than 50% at the end of the first year, then half of the access fee will be rebated. The access fee will also be reviewed at the end of a two year period. Please note that the AMCs and TERs shown for each fund are those charged by the individual investment manager and do not include any of the discounts negotiated by AllianzGI. A table detailing the full breakdown of fund charges and discounts as they affect each fund is provided on page 26 of this guide. Platform and administration costs AllianzGI charges each participant an annual fee of 30 per annum. This will be deducted from your account on an annual basis and covers AllianzGI s administrative costs in running the online service platform. IARC Plan Investment Guide 2014 Page 24 of 31