Principal LifeTime Portfolios The Convenience of Choosing a Single Portfolio

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1 Principal LifeTime Portfolios The Convenience of Choosing a Single Portfolio

2 Principal LifeTime Portfolios Principal LifeTime portfolios can help take the guesswork out of asset allocation. For plan participants who aren t comfortable or aren t interested in making a lot of investment decisions or tracking numerous holdings, lifecycle investment options are an extremely popular investment choice. Lifecycle funds currently hold nearly $400 billion in retirement plan assets, an increase from $150 billion at the end of Nearly 90% of mid and large defined contribution plans in a recent study have at least one lifecycle investment option and more than 60% of those plans are using target-date funds. 2 The Principal Financial Group can help you meet this growing demand with Principal LifeTime portfolios our target date lifecycle investment options. The Principal is the fourth largest provider of target date investment options in the United States, 3 with over $11 billion in assets and almost one million participants as of March 31, ,3 Financial Research Corporation Lifecycle Fund Analytic Report, First Quarter RiverSource Investments / PLANSPONSOR Research Study July/August 2007

3 Principal LifeTime Portfolios Helping Participants Take Action Principal LifeTime portfolios invest in underlying Principal Funds* and each is managed toward a particular target date, or retirement date. Participants simply choose the portfolio that most closely matches their approximate retirement timeline one portfolio for life. For example, if a participant s retirement is anticipated near the year 2020, he or she would choose the Principal LifeTime 2020 portfolio. There s even a Principal LifeTime portfolio for participants who are approximately 15 years beyond normal retirement age: Principal LifeTime Strategic Income. A LOOK AT THE LIFETIME PORTFOLIOS** LIFETIME STRATEGIC INCOME wish to consider this option if approximately 15 years beyond normal retirement age 6% 1 5% 75% LIFETIME 2010 between now and the end of % 7% 3 4 LIFETIME 2015 between 2013 and the end of % 6% 40% 37% LIFETIME 2020 between 2018 and the end of % 30% 19% 45% LIFETIME 2025 between 2023 and the end of % 26% 21% 48% LIFETIME 2030 between 2028 and the end of % 21% 22% 52% LIFETIME 2035 between 2033 and the end of % 2 55% LIFETIME 2040 between 2038 and the end of % 57% LIFETIME 2045 between 2043 and the end of % 25% 59% LIFETIME 2050 between 2048 and the end of % 26% 60% LIFETIME 2055 beyond % 26% 60% Fixed Income Non-U.S. Equity U.S. Equity Real Estate * Each Principal LifeTime portfolio is available through a Separate Account or Principal Funds, Inc. mutual fund. Principal LifeTime Separate Accounts are made available through a group annuity contract with the Principal Life Insurance Company, Des Moines, IA May not be available in all states or U.S. Commonwealths. ** As of March 2008

4 A Consistent Philosophy and Process The Principal LifeTime portfolios are designed to cover a broad range of participants retirement needs. Each portfolio follows three basic principles: Broad diversification across multiple traditional and specialty asset classes; Professional investment managers representing a wide range of asset classes, investment styles and money management firms; and A structured investment process with disciplined risk management at each stage of the investment process. Diversifying Portfolios Across a Variety of Asset Classes As each Principal LifeTime portfolio approaches its target date, the investment mix becomes more conservative by increasing its exposure to fixed income investment options and reducing its exposure to equity investment options. The portfolio continues to be managed for approximately 15 years beyond the original target date, to help participants better manage their retirement income. % of Equities in Portfolio q 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% LIFETIME PORTFOLIOS EQUITY GLIDE PATH 0% Strategic Income Principal LifeTime Portfolios No investment strategy, such as asset allocation or diversification, can guarantee a profit or protect against loss.

5 Premier Investment Managers Principal LifeTime portfolios provide a variety of investment styles and complementary approaches. Managers chosen for the underlying mix of investment options for the portfolio are monitored through the Principal Due Diligence Program SM, our rigorous process for ongoing quantitative and qualitative monitoring. MULTIPLE SUB-ADVISORS OF UNDERLYING FUNDS LOS A NGELES C APITAL M A N A G E M E N T Principal Real Estate Investors MULTIPLE ASSET CLASSES AND STYLES U.S. Equities Non-U.S. Equities Fixed Income Real Estate Large Cap Growth Large Cap Blend Large Cap Value Mid Cap Growth Mid Cap Value Small Cap Growth Small Cap Blend Small Cap Value Foreign Large Value Foreign Large Blend International Emerging Markets Intermediate Term Bond Treasury-Inflation Protected Securities (TIPS) Ultra Short Bond Preferred Securities Real Estate Investment Trusts (REITs) The managers used within the Principal LifeTime portfolios can change at any time.

6 Managing Your Fiduciary Responsibility This lifecycle approach not only helps participants maximize their return for the amount of risk taken, it also helps you manage your fiduciary responsibility. Acting as a fiduciary can be one of the greatest challenges plan sponsors face. Giving plan participants a choice of diversified investment options, such as Principal LifeTime portfolios, can help. Also, with the passage of the Pension Protection Act, the Department of Labor (DOL) issued regulations that would allow plan fiduciaries to select certain investment types as a Qualified Default Investment Alternative (QDIA) a default under their retirement plan that allows them to receive fiduciary relief with respect to the investment outcomes of those options. The regulations do not relieve the fiduciary of their responsibility to prudently select and monitor the retirement plan s QDIA. The Pension Protection Act will generally shield employers from liability issues if they default workers retirement funds into certain types of investments, including target-date funds. 5 While this determination is ultimately a plan fiduciary responsibility, it is the opinion of Principal Life Insurance Company that the Principal LifeTime portfolios meet the DOL regulations of a QDIA. 5 Target-Date Funds Shake Up the Mix - WSJ.com, August 2007

7 A Strategy for Success A thorough due diligence process. Premier investment managers providing broad diversification. A sound, structured investment process. For these reasons and more, the Principal LifeTime portfolios can help you give your participants an edge when it comes to saving for retirement.

8 WE LL GIVE YOU AN EDGE The Principal Financial Group, Des Moines, Iowa Equity investment options involve greater risk, including heightened volatility, than fixed-income investment options. Fixed-income investment options are subject to interest rate risk, and their value will decline as interest rates rise. Asset allocation does not guarantee a profit or protect against a loss. Investing in real estate, small-cap, international, and high-yield investment options involves additional risks. Fixed-income and asset allocation investment options that invest in mortgage securities are subject to increased risk due to real estate exposure. Insurance products and plan administrative services are provided by Principal Life Insurance Company. Principal mutual funds are part of the Principal Funds, Inc. series. Principal Funds, Inc. is distributed by Principal Funds Distributor, Inc. Securities are offered through Princor Financial Services Corporation, , member SIPC and/or independent broker/dealers. Securities sold by a Princor Registered Representative are offered through Princor. Principal Funds Distributor, Princor and Principal Life are members of the Principal Financial Group, Des Moines, IA Certain investment options may not be available in all states or U.S. commonwealths. Each Principal LifeTime portfolio may not be available in all share classes. An investment option s value and investment return will fluctuate so that values upon redemption may be worth more or less than original cost. Before investing in mutual funds, investors should carefully consider the investment objectives, risks, charges and expenses of the funds. This and other information is contained in the free prospectus, which can be obtained from your local representative or by contacting us at Please read the prospectus carefully before investing. PQ FIA/ADV 2008 Principal Financial Services, Inc. # /2008