ck0000898745-20200831
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PRINCIPAL
FUNDS, INC. (“PFI”) |
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Class
A Shares |
Class
C Shares |
Class
J Shares |
Institutional
Class Shares |
Class
R-1 Shares |
Class
R-2 Shares |
Class
R-3 Shares |
Class
R-4 Shares |
Class
R-5 Shares |
Class
R-6 Shares |
Class
S Shares |
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The
date of this Prospectus is December 31,
2020. |
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Ticker
Symbols by Share Class |
Fund |
A |
C |
J |
Inst. |
R-1 |
R-2 |
R-3 |
R-4 |
R-5 |
R-6 |
S |
Blue
Chip |
PBLAX |
PBLCX |
PBCJX |
PBCKX |
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PGBEX |
PGBFX |
PGBGX |
PGBHX |
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Bond
Market Index |
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PBIJX |
PNIIX |
PBIMX |
PBINX |
PBOIX |
PBIPX |
PBIQX |
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Capital
Securities |
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PCSFX |
Diversified
Real Asset |
PRDAX |
PRDCX |
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PDRDX |
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PGDRX |
PGDSX |
PGDTX |
PDARX |
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Edge
MidCap |
PEMCX |
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PEDGX |
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PEDMX |
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Global
Multi-Strategy |
PMSAX |
PMSCX |
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PSMIX |
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PGLSX |
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International
Equity Index |
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PIDIX |
PILIX |
PINEX |
PIIOX |
PIIPX |
PIIQX |
PFIEX |
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International
Small Company |
PICAX |
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PISMX |
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PFISX |
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Opportunistic
Municipal |
PMOAX |
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POMFX |
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Origin
Emerging Markets |
POEYX |
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POEIX |
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POEFX |
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Small-MidCap
Dividend Income |
PMDAX |
PMDDX |
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PMDIX |
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PMDHX |
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Small-MidCap
Growth |
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PSMHX |
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Spectrum
Preferred and Capital Securities Income |
PPSAX |
PRFCX |
PPSJX |
PPSIX |
PUSAX |
PPRSX |
PNARX |
PQARX |
PPARX |
PPREX |
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Beginning
on January 1, 2021, as permitted by regulations adopted by the Securities and
Exchange Commission, paper copies of the Fund’s annual and semi-annual
shareholder reports will no longer be sent by mail, unless you specifically
request paper copies of the report from the Fund or your financial intermediary,
such as a broker-dealer or bank. Instead, the reports will be made available on
a website, and you will be notified by mail each time a report is posted and
provided with a website link to access the report. If you already elected to
receive such reports electronically, you will not be affected by this change and
you do not need to take any action. If
you have not previously elected electronic delivery, you may elect to receive
reports and other communications from the Fund electronically by visiting our
website at www.principalfunds.com/edelivery for instructions on enrolling in
eDelivery or calling 1-800-222-5852. If you own these shares through a
financial intermediary, you may contact your financial intermediary. You may
elect to receive all future reports in paper free of charge. If you wish to
continue receiving paper copies of your reports, you can inform the Fund by
calling 1-800-222-5852. If
you own these shares through a financial intermediary, you may contact your
financial intermediary or follow instructions included with this disclosure to
elect to continue to receive paper copies of reports. Your election to receive
reports in paper will apply to all funds with the Fund complex or to the shares
you own through your financial intermediary.
The
Securities and Exchange Commission and the Commodity Futures Trading Commission
have not approved or disapproved these securities or passed upon the adequacy of
this prospectus. Any representation to the contrary is a criminal
offense.
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TABLE
OF CONTENTS |
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FUND
SUMMARIES |
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Blue
Chip Fund |
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Bond
Market Index Fund |
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Capital
Securities Fund |
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Diversified
Real Asset Fund |
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Edge
MidCap Fund |
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Global
Multi-Strategy Fund |
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International
Equity Index Fund |
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International
Small Company Fund |
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Opportunistic
Municipal Fund |
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Origin
Emerging Markets Fund |
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Small-MidCap
Dividend Income Fund |
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Small-MidCap
Growth Fund |
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Spectrum
Preferred and Capital Securities Income Fund |
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ADDITIONAL
INFORMATION ABOUT INVESTMENT STRATEGIES AND RISKS |
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PORTFOLIO
HOLDINGS INFORMATION |
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MANAGEMENT
OF THE FUNDS |
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PRICING
OF FUND SHARES |
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CONTACT
PRINCIPAL FUNDS, INC. |
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PURCHASE
OF FUND SHARES |
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REDEMPTION
OF FUND SHARES |
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EXCHANGE
OF FUND SHARES |
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DIVIDENDS
AND DISTRIBUTIONS |
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FREQUENT
PURCHASES AND REDEMPTIONS |
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TAX
CONSIDERATIONS |
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CHOOSING
A SHARE CLASS AND THE COSTS OF INVESTING |
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DISTRIBUTION
PLANS AND INTERMEDIARY COMPENSATION |
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FUND
ACCOUNT INFORMATION |
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APPENDIX A
– DESCRIPTION OF BOND RATINGS |
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APPENDIX
B – ADDITIONAL FUND-SPECIFIC INFORMATION |
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APPENDIX
C – INTERMEDIARY-SPECIFIC SALES CHARGE WAIVERS AND
REDUCTIONS |
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APPENDIX
D – FINANCIAL HIGHLIGHTS
ADDITIONAL
INFORMATION |
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ADDITIONAL
INFORMATION |
E |
BLUE CHIP FUND
Objective: The Fund seeks long-term
growth of capital.
Fees and Expenses of the
Fund
This
table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund. You may qualify for sales charge discounts
if you and your family invest, or agree to invest in the future, at least
$50,000 in Class A shares of Principal
Funds, Inc. More
information about these and other discounts is available from your financial
professional and in “Choosing a Share Class and The Costs of Investing”
beginning on page 112 of the Fund’s prospectus, Appendix C to the prospectus
titled "Intermediary-Specific Sales Charge Waivers and Reductions", and
“Multiple Class Structure” beginning on page 4 of the Fund’s Statement of
Additional Information.
If you purchase Institutional Class or
Class R-6 shares through certain programs offered by certain financial
intermediaries, you may be required to pay a commission and/or other forms of
compensation to the broker, or to your Financial Professional or other financial
intermediary.
Shareholder Fees (fees paid directly from your
investment)
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Share
Class |
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A |
C |
J |
Inst. |
R-3 |
R-4 |
R-5 |
R-6 |
Maximum
Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) |
5.50% |
None |
None |
None |
None |
None |
None |
None |
Maximum
Deferred Sales Charge (Load) (as a percentage of the offering price or NAV
when Sales Load is paid, whichever is less) |
1.00% |
1.00% |
1.00% |
None |
None |
None |
None |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
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Share
Class |
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A |
C |
J |
Inst. |
R-3 |
R-4 |
R-5 |
R-6 |
Management
Fees (1) |
0.60% |
0.60% |
0.60% |
0.60% |
0.60% |
0.60% |
0.60% |
0.60% |
Distribution
and/or Service (12b-1) Fees |
0.25% |
1.00% |
0.15% |
None |
0.25% |
0.10% |
None |
None |
Other
Expenses |
0.13% |
0.11% |
0.15% |
0.11% |
0.32% |
0.28% |
0.26% |
—% |
Total
Annual Fund Operating Expenses |
0.98% |
1.71% |
0.90% |
0.71% |
1.17% |
0.98% |
0.86% |
0.60% |
Fee
Waiver and Expense Reimbursement (2)(3) |
(0.04)% |
(0.04)% |
(0.04)% |
(0.05)% |
(0.04)% |
(0.04)% |
(0.04)% |
(0.04)% |
Total
Annual Fund Operating Expenses after Fee Waiver and Expense
Reimbursement |
0.94% |
1.67% |
0.86% |
0.66% |
1.13% |
0.94% |
0.82% |
0.56% |
(1) Fees have been restated to reflect
current fees.
(2) Principal
Global Investors, LLC ("PGI"), the investment advisor, has contractually agreed
to limit the Fund’s Management Fees through the period ending December 30, 2021.
The fee waiver will reduce the Fund's Management Fees by 0.04% (expressed as a
percent of average net assets on an annualized basis). It is expected that the
fee waiver will continue through the period disclosed; however, Principal Funds,
Inc. and PGI, the parties to the agreement, may mutually agree to terminate the
fee waiver prior to the end of the period.
(3) Principal
Global Investors, LLC ("PGI"), the investment advisor, has contractually agreed
to limit the Fund’s expenses by paying, if necessary, expenses normally payable
by the Fund, (excluding interest expense, expenses related to fund investments,
acquired fund fees and expenses, and other extraordinary expenses) to maintain a
total level of operating expenses (expressed as a percent of average net assets
on an annualized basis) not to exceed 0.66% for Institutional Class shares. In
addition, for Class R-6, the expense limit will maintain "Other Expenses"
(expressed as a percent of average net assets on an annualized basis) not to
exceed 0.01%, (excluding interest expense, expenses related to fund investments,
acquired fund fees and expenses, and other extraordinary expenses). It is
expected that the expense limits will continue through the period ending
December 30,
2021;
however, Principal Funds, Inc. and PGI, the parties to the agreement, may
mutually agree to terminate the expense limits prior to the end of the period.
Subject to applicable expense limits, the Fund may reimburse PGI for expenses
incurred during the current fiscal year.
Example
This Example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other mutual funds.
The Example assumes that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. The calculation of costs takes into account any applicable
contractual fee waivers and/or expense reimbursements for the period noted in
the table above. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
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1
year |
3
years |
5
years |
10
years |
Class
A |
$641 |
$841 |
$1,058 |
$1,682 |
Class
C |
270 |
535 |
924 |
2,016 |
Class
J |
188 |
283 |
495 |
1,104 |
Institutional
Class |
67 |
222 |
390 |
878 |
Class
R-3 |
115 |
368 |
640 |
1,417 |
Class
R-4 |
96 |
308 |
538 |
1,198 |
Class
R-5 |
84 |
270 |
473 |
1,057 |
Class
R-6 |
57 |
188 |
331 |
746 |
With respect to Classes C and
J shares, you would pay the following expenses if you did not redeem your shares
(all other classes would be the same as in the above
example):
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1
year |
3
years |
5
years |
10
years |
Class
C |
$170 |
$535 |
$924 |
$2,016 |
Class
J |
88 |
283 |
495 |
1,104 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
During
the most recent fiscal year, the Fund’s portfolio turnover rate was
30.0% of the average value of its
portfolio.
Principal Investment
Strategies
Under
normal circumstances, the Fund invests at least 80% of its net assets, plus any
borrowings for investment purposes, in equity securities of companies with large
market capitalizations at the time of purchase that, in the opinion of Principal
Global Investors, LLC ("PGI," the Fund’s investment advisor), display
characteristics of a “blue chip” company. For this Fund, companies with large
market capitalizations are those with market capitalizations similar to
companies in the Russell 1000 Growth®
Index (as of November 30, 2020, this range was between approximately $2.3
billion and $2.0 trillion). In PGI’s view, “blue chip”
companies typically display some or all of the following
characteristics: (1) large, well-established and financially sound
companies; (2) issuers with market capitalizations in the billions;
(3) are considered market leaders or among the top three companies in its
sector; and (4) commonly considered household names. The Fund tends to
focus on securities of companies that show potential for growth of capital as
well as an expectation for above average earnings. In selecting securities in
which to invest, the investment advisor uses a bottom-up, fundamental process,
focusing on a fundamental analysis of individual companies. The Fund invests in
securities of foreign companies, as well as companies with medium market
capitalizations.
Principal Risks
The value of your investment in the Fund changes with
the value of the Fund's investments. Many factors affect that value, and it is
possible to lose money by investing in the Fund. An investment in the Fund is not a
deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. The
principal risks of investing in the Fund are listed below in alphabetical order
and not in order of significance.
Equity
Securities Risk.
A variety of factors can negatively impact the value of equity securities held
by a fund, including a decline in the issuer’s financial condition, unfavorable
performance of the issuer's sector or industry, or changes in response to
overall market and economic conditions. A fund's principal market segment(s)
(such as market capitalization or style) may underperform other market segments
or the equity markets as a whole.
•Growth
Style Risk.
Growth investing entails the risk that if growth companies do not increase their
earnings at a rate expected by investors, the market price of their stock may
decline significantly, even if earnings show an absolute increase. Growth
company stocks also typically lack the dividend yield that can lessen price
declines in market downturns.
•Smaller
Companies Risk.
Investments in smaller companies may involve greater risk and price volatility
than investments in larger, more mature companies.
Foreign
Currency Risk.
Risks of investing in securities denominated in, or that trade in, foreign
(non-U.S.) currencies include changes in foreign exchange rates and foreign
exchange restrictions.
Foreign
Securities Risk. The
risks of foreign securities include loss of value as a result of: political or
economic instability; nationalization, expropriation or confiscatory taxation;
settlement delays; and limited government regulation (including less stringent
reporting, accounting, and disclosure standards than are required of U.S.
companies).
Redemption
and Large Transaction Risk. Ownership
of the fund's shares may be concentrated in one or a
few large investors (such as funds of funds, institutional investors,
and asset allocation programs) that may redeem or purchase shares in large
quantities. These transactions may cause the fund to sell securities to meet
redemptions or to invest additional cash at times it would not otherwise do so,
which may result in increased transaction costs, increased expenses, changes to
expense ratios, and adverse effects to fund performance. Such transactions may
also accelerate the realization of taxable income if sales of portfolio
securities result in gains. Moreover, reallocations by large shareholders among
share classes of a fund may result in changes to the expense ratios of affected
classes, which may increase the expenses paid by shareholders of the class that
experienced the redemption.
Performance
The
following information provides some indication of the risks of investing in the
Fund. Past performance (before and
after taxes) is not necessarily an indication of how the Fund will perform in
the future. You may get updated performance information online
at www.principalfunds.com.
Using
the historical performance of the Fund's Institutional Class shares, adjusted as
described below, the bar chart shows the investment returns of the Fund’s Class
A shares for each full calendar year of operations for 10 years (or, if shorter,
the life of the Fund). These annual returns do not reflect
sales charges on Class A shares; if they did, results would be
lower. The table shows for the last one, five, and ten calendar
year periods (or, if shorter, the life of the Fund), how the Fund’s average
annual total returns compare with those of one or more broad measures of market
performance.
Life
of Fund returns are measured from the date the Fund's shares were first sold
(June 14, 2012).
For
periods prior to the inception date of Classes A and C shares (September 30,
2013), Classes R-3, R-4, and R-5 shares
(March 29,
2016), Class R-6 shares
(January 3, 2017), and
Class J shares (September 11, 2017),
the performance shown in the bar chart for Class A shares and the table for
Classes A, C, J, R-3, R-4, R-5 and R-6 shares is that of the Fund's
Institutional Class shares, adjusted to reflect the respective fees and expenses
of each class. However, where this adjustment for fees and expenses results in
performance for a newer class that is higher than the historical performance of
the Institutional Class shares, the historical performance of the Institutional
Class shares is used. These adjustments for these newer classes result in
performance for such periods that is no higher than the historical performance
of the Institutional Class shares, which were first sold June 14,
2012.
Total Returns as of December 31
(1)
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Highest return for a quarter during
the period of the bar chart above: |
Q1
2019 |
17.60% |
Lowest return for a quarter during
the period of the bar chart above: |
Q4
2018 |
(12.65)% |
(1)
The year-to-date return as of
September 30, 2020
was 22.47% for Class A
shares.
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Average Annual Total Returns For the
periods ended December 31, 2019 |
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1 Year |
5
Year |
Life
of Fund |
Class A Return Before
Taxes |
30.67% |
14.32% |
15.88% |
Class A Return After Taxes on
Distributions |
29.31% |
13.39% |
15.10% |
Class A Return After Taxes on
Distributions and Sale of Fund Shares |
19.08% |
11.34% |
13.01% |
Class C Return Before
Taxes |
36.33% |
14.75% |
15.88% |
Class J Return Before
Taxes |
37.38% |
15.77% |
16.98% |
Institutional Class Return Before
Taxes |
38.79% |
16.13% |
17.37% |
Class R-3 Return Before
Taxes |
38.07% |
15.52% |
16.72% |
Class R-4 Return Before
Taxes |
38.31% |
15.75% |
16.95% |
Class R-5 Return Before
Taxes |
38.53% |
15.89% |
17.09% |
Class R-6 Return Before
Taxes |
38.87% |
16.15% |
17.35% |
Russell 1000 Growth Index
(reflects no deduction for
fees, expenses, or taxes) |
36.39% |
14.63% |
16.66% |
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns
depend on an investor’s tax situation and may differ from those shown. The
after-tax returns shown are not relevant to investors who hold their Fund shares
through tax-deferred arrangements, such as 401(k) plans or individual retirement
accounts. After-tax returns are shown
for Class A shares only and would be different for the other share
classes.
Investment
Advisor and Portfolio Managers
Principal
Global Investors, LLC
•K.
William Nolin (since 2012), Portfolio Manager
• Tom
Rozycki (since 2012), Portfolio Manager
Purchase
and Sale of Fund Shares
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Share
Class |
Investment
Type |
Purchase
Minimum
Per
Fund |
A,
C and J |
Initial
Investment |
$1,000(1) |
A,
C and J |
Initial
Investment for accounts with an Automatic Investment Plan (AIP) |
$100 |
A,
C and J |
Subsequent
Investments |
$100(1)(2) |
Institutional,
R-3, R-4, R-5 and R-6 |
There
are no minimum initial or subsequent investment requirements for eligible
purchasers. |
N/A |
(1)
Some exceptions apply; see "Purchase of Fund Shares - Minimum Investments" for
more information.
(2)
For accounts with an AIP, the subsequent automatic investments must total $1,200
annually if the initial $1,000 minimum has not been met.
You
may purchase or redeem shares on any business day (normally any day when the New
York Stock Exchange is open for regular trading) through your plan,
intermediary, or Financial Professional; by sending a written request to
Principal Funds at P.O. Box 219971, Kansas City, MO 64121-9971 (regular mail) or
430 W. 7th Street, Ste. 219971, Kansas City, MO 64105-1407 (overnight
mail); calling us at 1-800-222-5852; or accessing our website
(www.principalfunds.com).
Class
C shares are subject to a 10-year automatic conversion plan whereby Class C
shares held for ten years after purchase will automatically convert to Class A
shares of the same Fund. See “Purchase of Fund Shares” in the Prospectus for
more information.
Tax
Information
The
Fund’s distributions you receive are generally subject to federal income tax as
ordinary income or capital gain and may also be subject to state and local
taxes, unless you are tax-exempt or your account is tax-deferred in which case
your distributions would be taxed when withdrawn from the tax-deferred
account.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker-dealer or other financial intermediary
(such as a bank, insurance company, investment adviser, etc.), the Fund and its
related companies may pay the intermediary for the sale of Fund shares and
related services. These payments may create a conflict of interest by
influencing the broker-dealer or other intermediary and your salesperson to
recommend the Fund over another investment, or to recommend one share class of
the Fund over another share class. Ask your salesperson or visit your financial
intermediary's website for more information.
BOND MARKET INDEX FUND
CONVERSION
NOTICE: On
September 15, 2020, the Fund’s Board of Directors approved the conversion of
Class R-2 shares into Class R-3 shares. Following the close of business on
March 1, 2021, Class R-2 shares will automatically convert into Class R-3 shares
of the same Fund on the basis of the share classes’ relative net asset values on
such date without the imposition of a sales charge or any other charge. The Fund
expects these share class conversions will not constitute taxable sales or
exchanges to shareholders. At such time, delete references to Class R-2
shares from this prospectus.
Objective: The Fund seeks to provide
current income.
Fees and Expenses of the
Fund
This table describes the fees
and expenses that you may pay if you buy and hold shares of the
Fund.
If you purchase Institutional Class shares
through certain programs offered by certain financial intermediaries, you may be
required to pay a commission and/or other forms of compensation to the broker,
or to your Financial Professional or other financial
intermediary.
Shareholder Fees (fees paid directly from your
investment)
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Share
Class |
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J |
Inst. |
R-1 |
R-2 |
R-3 |
R-4 |
R-5 |
Maximum
Deferred Sales Charge (Load) (as a percentage of the offering price or NAV
at the time Sales Load is paid, whichever is less) |
1.00% |
None |
None |
None |
None |
None |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
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Share
Class |
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J |
Inst. |
R-1 |
R-2 |
R-3 |
R-4 |
R-5 |
Management
Fees |
0.14% |
0.14% |
0.14% |
0.14% |
0.14% |
0.14% |
0.14% |
Distribution
and/or Service (12b-1) Fees |
0.15% |
None |
0.35% |
0.30% |
0.25% |
0.10% |
None |
Other
Expenses |
0.32% |
0.01% |
0.54% |
0.46% |
0.33% |
0.29% |
0.27% |
Acquired
Fund Fees and Expenses |
0.01% |
0.01% |
0.01% |
0.01% |
0.01% |
0.01% |
0.01% |
Total
Annual Fund Operating Expenses |
0.62% |
0.16% |
1.04% |
0.91% |
0.73% |
0.54% |
0.42% |
Fee
Waiver (1) |
(0.02)% |
(0.02)% |
(0.02)% |
(0.02)% |
(0.02)% |
(0.02)% |
(0.02)% |
Total
Annual Fund Operating Expenses after Fee Waiver |
0.60% |
0.14% |
1.02% |
0.89% |
0.71% |
0.52% |
0.40% |
(1) Principal
Global Investors, LLC ("PGI"), the investment advisor, has contractually agreed
to limit the Fund’s Management Fees through the period ending December 30,
2021.
The fee waiver will reduce the Fund's Management Fees by 0.015% (expressed as a
percent of average net assets on an annualized basis). It is expected that the
fee waiver will continue through the period disclosed; however, Principal Funds,
Inc. and PGI, the parties to the agreement, may mutually agree to terminate the
fee waiver prior to the end of the period.
Example
This Example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other mutual funds.
The Example assumes that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. The calculation of costs takes into account any applicable
contractual fee waivers and/or expense reimbursements for the period noted in
the table above. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
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|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
Class
J |
$161 |
$197 |
$344 |
$772 |
Institutional
Class |
14 |
50 |
88 |
203 |
Class
R-1 |
104 |
329 |
572 |
1,269 |
Class
R-2 |
91 |
288 |
502 |
1,118 |
Class
R-3 |
73 |
231 |
404 |
905 |
Class
R-4 |
53 |
171 |
300 |
675 |
Class
R-5 |
41 |
133 |
233 |
528 |
With respect to Class J
shares, you would pay the following expenses if you did not redeem your shares
(all other classes would be the same as in the above
example):
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|
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|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
Class
J |
$61 |
$197 |
$344 |
$772 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
During
the most recent fiscal year, the Fund’s portfolio turnover rate was
94.1% of the average value of its
portfolio.
Principal Investment
Strategies
Under normal circumstances,
the Fund uses a passive investment approach known as "sampling" to invest at
least 80% of its net assets, plus any borrowings for investment purposes, in
investments designed to track the Bloomberg Barclays U.S. Aggregate Bond Index
(the "Index") at the time of purchase. The Index is composed of investment
grade, fixed rate debt issues with maturities of one year or more, including
government securities, corporate securities, and asset-backed and
mortgage-backed securities (securitized products). As of August 31, 2020, the
Index was composed of 11,780 issues. The Index is rebalanced monthly to reflect
securities that have dropped out of or entered the Index in the preceding month.
Generally, the Fund makes corresponding changes to its portfolio shortly after
Index changes are made public. Because of the practical difficulties and expense
of purchasing all of the securities in the Index, the Fund does not purchase all
of the securities in the Index. Instead, the Fund uses a sampling methodology to
purchase securities with generally the same risk and return characteristics of
the Index. Under normal circumstances, the Fund maintains an average portfolio
duration that is in line with the duration of the Index, which as of August 31,
2020 was 5.92 years. The Fund will not concentrate (i.e., invest more than 25%
of its assets) its investments in a particular industry except to the extent the
Index is so concentrated.
Principal Risks
The value of your investment in the Fund changes with
the value of the Fund's investments. Many factors affect that value, and it is
possible to lose money by investing in the Fund. An investment in the Fund is not a
deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. The
principal risks of investing in the Fund are listed below in alphabetical order
and not in order of significance.
Fixed-Income
Securities Risk.
Fixed-income securities are subject to interest rate, credit quality, and
liquidity risks. The market value of fixed-income securities generally declines
when interest rates rise and generally increases when interest rates fall.
Higher interest rates may adversely affect the liquidity of certain fixed-income
securities. Moreover, an issuer of fixed-income securities could default on its
payment obligations due to increased interest rates or for other reasons.
Index
Fund Risk.
Index funds use a passive investment approach and generally do not attempt to
manage market volatility, use defensive strategies, or reduce the effect of any
long-term periods of poor investment performance. Therefore, the Fund may hold
securities that present risks that an investment advisor researching individual
securities might seek to avoid. An index fund has operating and other expenses
while an index does not. As a result, over time, index funds tend to
underperform the index. The correlation between fund performance and index
performance may also be affected by the type of passive investment approach used
by a fund (sampling or replication), changes in securities markets, changes in
the composition of the index, and the timing of purchases and sales of fund
shares. Errors or delays in compiling or rebalancing the Index may impact the
performance of the Fund and increase transaction costs.
Industry
Concentration Risk. A
fund that concentrates investments in a particular industry or group of
industries has greater exposure than other funds to market, economic and other
factors affecting that industry or group of industries.
Portfolio
Duration Risk. Portfolio
duration is a measure of the expected life of a fixed-income security and its
sensitivity to changes in interest rates. The longer a fund's average portfolio
duration, the more sensitive the fund will be to changes in interest rates,
which means funds with longer average portfolio durations may be more volatile
than those with shorter durations.
Real
Estate Securities Risk.
Investing in real estate securities subjects the fund to the risks associated
with the real estate market (which are similar to the risks associated with
direct ownership in real estate), including declines in real estate values, loss
due to casualty or condemnation, property taxes, interest rate changes,
increased expenses, cash flow of underlying real estate assets, regulatory
changes (including zoning, land use and rents), and environmental problems, as
well as to the risks related to the management skill and creditworthiness of the
issuer.
Redemption
and Large Transaction Risk. Ownership
of the fund's shares may be concentrated in one or a
few large investors (such as funds of funds, institutional investors,
and asset allocation programs) that may redeem or purchase shares in large
quantities. These transactions may cause the fund to sell securities to meet
redemptions or to invest additional cash at times it would not otherwise do so,
which may result in increased transaction costs, increased expenses, changes to
expense ratios, and adverse effects to fund performance. Such transactions may
also accelerate the realization of taxable income if sales of portfolio
securities result in gains. Moreover, reallocations by large shareholders among
share classes of a fund may result in changes to the expense ratios of affected
classes, which may increase the expenses paid by shareholders of the class that
experienced the redemption.
Securitized
Products Risk. Investments
in securitized products are subject to risks similar to traditional fixed income
securities, such as credit, interest rate, liquidity, prepayment, extension, and
default risk, as well as additional risks associated with the nature of the
assets and the servicing of those assets. Unscheduled prepayments on securitized
products may have to be reinvested at lower rates. A reduction in prepayments
may increase the effective maturities of these securities, exposing them to the
risk of decline in market value over time (extension risk).
U.S.
Government Securities Risk. Yields
available from U.S. government securities are generally lower than yields from
many other fixed-income securities.
U.S.
Government-Sponsored Securities Risk.
Securities issued by U.S. government-sponsored enterprises such as the Federal
Home Loan Mortgage Corporation, the Federal National Mortgage Association, and
the Federal Home Loan Banks are not issued or guaranteed by the U.S.
government.
Performance
The following information
provides some indication of the risks of investing in the Fund. Past performance (before and
after taxes) is not necessarily an indication of how the Fund will perform in
the future. You may get updated performance information online
at www.principalfunds.com.
The bar chart shows the investment returns
of the Fund’s Institutional Class shares for each full calendar year of
operations for 10 years (or, if shorter, the life of the Fund). The table shows
for the last one, five, and ten calendar year periods (or, if shorter, the life
of the Fund), how the Fund’s average annual total returns compare with those of
one or more broad measures of market performance.
For
periods prior to the inception date of Class J shares (March 16, 2010), the
performance shown in the table for Class J shares is that of the Fund's
Institutional Class shares, adjusted to reflect the fees and expenses of the
Class J shares. These adjustments result in performance for such periods
that is no higher than the historical performance of the Institutional Class
shares, which were first sold on December 30,
2009.
During 2014, the Institutional Class
experienced a significant withdrawal of monies by an affiliate. As the remaining
shareholders held relatively small positions, the total return amounts expressed
herein are greater than those that would have been experienced without the
withdrawal.
Total Returns as of December 31
(1)
|
|
|
|
|
|
|
|
|
Highest return for a quarter during
the period of the bar chart above: |
Q3
2011 |
3.76% |
Lowest return for a quarter during
the period of the bar chart above: |
Q4
2016 |
(3.12)% |
(1)
The year-to-date return as of
September 30, 2020
was 6.65% for Institutional Class
shares.
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|
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|
|
|
|
|
|
Average
Annual Total Returns
For
the periods ended December 31, 2019 |
|
1 Year |
5
Years |
|
10
Years |
|
|
|
|
|
|
|
Institutional Class Return Before
Taxes |
8.47% |
2.75% |
|
3.49% |
(1) |
Institutional Class Return After Taxes
on Distributions |
7.43% |
1.81% |
|
2.57% |
(1) |
Institutional Class Return After Taxes
on Distributions and Sale of Fund Shares |
5.01% |
1.68% |
|
2.31% |
(1) |
Class J Return Before
Taxes |
6.83% |
2.27% |
|
2.79% |
(1) |
Class R-1 Return Before
Taxes |
7.54% |
1.86% |
|
2.47% |
|
Class R-2 Return Before
Taxes |
7.71% |
2.00% |
|
2.61% |
|
Class R-3 Return Before
Taxes |
7.85% |
2.18% |
|
2.79% |
|
Class R-4 Return Before
Taxes |
8.37% |
2.43% |
|
3.01% |
|
Class R-5 Return Before
Taxes |
8.19% |
2.48% |
|
3.11% |
|
Bloomberg Barclays US Aggregate Bond
Index (reflects no deduction for
fees, expenses, or taxes) |
8.72% |
3.05% |
|
3.75% |
|
(1)During 2014, the
Institutional Class experienced a significant withdrawal of monies by an
affiliate. As the remaining shareholders held relatively small positions, the
total return amounts expressed herein are greater than those that would have
been experienced without the withdrawal.
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns
depend on an investor’s tax situation and may differ from those shown. The
after-tax returns shown are not relevant to investors who hold their Fund shares
through tax-deferred arrangements, such as 401(k) plans or individual retirement
accounts. After-tax returns are shown
for Institutional Class shares only and would be different for the other share
classes.
Investment
Advisor and Portfolio Managers
Principal
Global Investors, LLC
•Jeff
Callahan (since 2020), Portfolio Manager
•Darryl
Trunnel (since 2019), Portfolio Manager
Purchase
and Sale of Fund Shares
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|
Share
Class |
Investment
Type |
Purchase
Minimum
Per
Fund |
J |
Initial
Investment |
$1,000(1) |
J |
Initial
Investment for accounts with an Automatic Investment Plan
(AIP) |
$100 |
J |
Subsequent
Investments |
$100(1)(2) |
Institutional,
R-1, R-2, R-3, R-4, and R-5 |
There
are no minimum initial or subsequent investment requirements for eligible
purchasers. |
N/A |
(1)
Some exceptions apply; see "Purchase of Fund Shares - Minimum Investments" for
more information.
(2)
For accounts with an AIP, the subsequent automatic investments must total $1,200
annually if the initial $1,000 minimum has not been met.
You
may purchase or redeem shares on any business day (normally any day when the New
York Stock Exchange is open for regular trading) through your plan,
intermediary, or Financial Professional; by sending a written request to
Principal Funds at P.O. Box 219971, Kansas City, MO 64121-9971 (regular mail) or
430 W. 7th Street, Ste. 219971, Kansas City, MO 64105-1407 (overnight mail);
calling us at 1-800-222-5852; or accessing our website
(www.principalfunds.com).
For
retirement plan investors, effective as of the close of the New York Stock
Exchange on January 31, 2017, Class R-1 and Class R-2 shares are no longer
available for purchase from new retirement plans except in limited
circumstances. See Purchase of Fund Shares for additional
information.
Tax
Information
The
Fund’s distributions you receive are generally subject to federal income tax as
ordinary income or capital gain and may also be subject to state and local
taxes, unless you are tax-exempt or your account is tax-deferred in which case
your distributions would be taxed when withdrawn from the tax-deferred
account.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker-dealer or other financial intermediary
(such as a bank, insurance company, investment adviser, etc.), the Fund and its
related companies may pay the intermediary for the sale of Fund shares and
related services. These payments may create a conflict of interest by
influencing the broker-dealer or other intermediary and your salesperson to
recommend the Fund over another investment, or to recommend one share class of
the Fund over another share class. Ask your salesperson or visit your financial
intermediary's website for more information.
CAPITAL SECURITIES FUND
Objective: The Fund seeks to provide
current income.
Fees and Expenses of the
Fund
This table describes the fees
and expenses that you may pay if you buy and hold shares of the
Fund.
Shareholder Fees (fees paid directly from your
investment): None
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
|
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|
Share
Class |
|
S |
Management
Fees |
0.00% |
Other
Expenses |
0.06% |
Total
Annual Fund Operating Expenses |
0.06% |
Expense
Reimbursement (1) |
(0.06)% |
Total
Annual Fund Operating Expenses after Expense Reimbursement (2) |
0.00% |
(1) Principal Global
Investors, LLC ("PGI"), the investment advisor, has agreed contractually to
limit the Fund's expenses attributable to Class S shares by paying, expenses
normally payable by the Fund, (excluding interest expense, expenses related to
fund investments, acquired fund fees and expenses, and other extraordinary
expenses) to maintain a total level of operating expenses (expressed as a
percent of average net assets on an annualized basis) not to exceed 0.00%. It is
expected that the expense limit will continue permanently (and in any event,
through December 30,
2021); however, Principal Funds, Inc. and PGI, the parties to
the agreement, may mutually agree to terminate the expense limit. Subject to
applicable expense limits, the Fund may reimburse PGI for expenses incurred
during the current fiscal year.
(2) The table reflects that
Principal Global Investors, LLC ("PGI"), the investment advisor, is absorbing
all expenses of the Fund. You should be aware, however, that the Fund is an
integral part of "wrap-fee" programs, including those sponsored by registered
investment advisors and broker-dealers unaffiliated with the Fund. Participants
in these programs pay a "wrap" fee to the sponsor of the program. You should
read carefully the wrap-fee brochure provided to you by your sponsor or your
registered investment advisor. The brochure is required to include information
about the fees charged to you by the sponsor and the fees paid to the registered
investment advisor.
Example
This Example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other mutual funds.
The Example assumes that you invest
$10,000 in the Fund for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Fund’s operating
expenses remain the same. The calculation of costs takes into account any
applicable contractual fee waivers and/or expense reimbursements for the period
noted in the table above. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
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|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
Class
S |
$0 |
$0 |
$0 |
$0 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund's performance.
During
the most recent fiscal year, the Fund's portfolio turnover rate was
14.0% of the average value of its
portfolio.
Principal Investment
Strategies
Under
normal circumstances, the Fund invests at least 80% of its net assets, plus any
borrowings for investment purposes, in capital securities at the time of
purchase. Capital securities include Tier 2 subordinated debt securities issued
by U.S. and non-U.S. financial institutions (including, but not limited to,
banks and insurance companies), contingent convertible securities (“Cocos”), as
well as preferred securities, including preferred stock and junior subordinated
debt, issued by U.S. and non-U.S. corporations, financial institutions, and
other issuers for purposes of satisfying regulatory capital requirements or
obtaining rating agency credit. Capital securities may pay fixed rate or
adjustable rate distributions and generally have a payment "preference" over
common stock, but are junior to the issuer's senior debt in a liquidation of the
issuer’s assets. Cocos are hybrid debt securities typically issued by banking
institutions that have contractual equity conversion or principal write-down
features that are triggered by regulatory capital thresholds or regulatory
actions calling into question the issuing banking institution’s continued
viability as a going-concern if the conversion trigger were not
exercised.
Tier 2 and preferred securities
purchased by the Fund are issued by companies with senior debt rated at the time
of purchase BBB- or higher by S&P Global Ratings ("S&P Global") or Baa3
or higher by Moody's Investors Service, Inc. ("Moody's"). The Fund may invest up
to 100% of its assets in below investment grade (sometimes called “junk”)
preferred securities which are rated at the time of purchase Ba1 or lower by
Moody's and BB+ or lower by S&P Global (if the preferred security has been
rated by only one of those agencies, that rating will determine whether the
preferred security is below investment grade; if the preferred security has not
been rated by either of those agencies, those selecting such investments will
determine whether the preferred security is of a quality comparable to those
rated below investment grade), provided that the issuer of such below investment
grade preferred securities has senior debt outstanding that is rated at the time
of purchase BBB- or higher by S&P Global or Baa3 or higher by Moody's. The
Fund is not managed to a particular maturity or
duration.
The Fund concentrates its investments
(invests more than 25% of its net assets) in securities in one or more
industries (i.e., banking, insurance and commercial finance) within the U.S. and
non-U.S. (foreign) financial services sector.
Principal Risks
The value of your investment in the Fund changes with
the value of the Fund's investments. Many factors affect that value, and it is
possible to lose money by investing in the Fund. An investment in the Fund is not a
deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. The
principal risks of investing in the Fund are listed below in alphabetical order
and not in order of significance.
Capital
Securities Risk. In
addition to the risks associated with other types of preferred securities and
fixed-income securities,
investing
in capital securities includes the risk that the value of securities may decline
in response to changes in legislation and regulations applicable to financial
institutions and financial markets, increased competition, adverse changes in
general or industry-specific economic conditions, or unfavorable interest rates.
Contingent
Convertible Securities Risk.
In addition to the general risks associated with fixed-income securities and
convertible securities, the risks of investing in contingent convertible
securities (“CoCos”) include the risk that a CoCo may be written down, written
off or converted into an equity security when the issuer’s capital ratio falls
below a specified trigger level, or in a regulator’s discretion depending on the
regulator’s judgment about the issuer’s solvency prospects. Due to these
features, CoCos may have substantially greater risk than other securities in
times of financial stress. If the trigger level is breached, the issuer’s
decision to write down, write off or convert a CoCo may result in the fund's
complete loss on an investment in CoCos with no chance of recovery even if the
issuer remains in existence.
Fixed-Income
Securities Risk.
Fixed-income securities are subject to interest rate, credit quality, and
liquidity risks. The market value of fixed-income securities generally declines
when interest rates rise and generally increases when interest rates fall.
Higher interest rates may adversely affect the liquidity of certain fixed-income
securities. Moreover, an issuer of fixed-income securities could default on its
payment obligations due to increased interest rates or for other reasons.
Foreign
Securities Risk.
The risks of foreign securities include loss of value as a result of: political
or economic instability; nationalization, expropriation or confiscatory
taxation; settlement delays; and limited government regulation (including less
stringent reporting, accounting, and disclosure standards than are required of
U.S. companies).
High
Yield Securities Risk.
High yield fixed-income securities (commonly referred to as "junk bonds") are
subject to greater credit quality risk than higher rated fixed-income securities
and should be considered speculative.
Industry
Concentration Risk. A
fund that concentrates investments in a particular industry or group of
industries has greater exposure than other funds to market, economic and other
factors affecting that industry or group of industries.
•Financial
Services. A
fund concentrating in financial services companies may be more susceptible to
adverse economic or regulatory occurrences affecting financial services
companies. Financial companies may be adversely affected in certain market
cycles, including periods of rising interest rates, which may restrict the
availability and increase the cost of capital, and declining economic
conditions, which may cause credit losses due to financial difficulties of
borrowers. Because many types of financial companies are especially vulnerable
to these economic cycles, the Fund’s investments in these companies may lose
significant value during such periods.
Portfolio
Duration Risk. Portfolio
duration is a measure of the expected life of a fixed-income security and its
sensitivity to changes in interest rates. The longer a fund's average portfolio
duration, the more sensitive the fund will be to changes in interest rates,
which means funds with longer average portfolio durations may be more volatile
than those with shorter durations.
Preferred
Securities Risk. Because
preferred securities have a lower priority claim on assets or earnings than
senior bonds and other debt instruments in a company's capital structure, they
are subject to greater credit and liquidation risk than more senior debt
instruments. In addition, preferred securities are subject to other risks, such
as limited or no voting rights, deferring or skipping distributions, interest
rate risk, and redeeming the security prior to any stated maturity
date.
Performance
The
following information provides some indication of the risks of investing in the
Fund. Past performance (before and
after taxes) is not necessarily an indication of how the Fund will perform in
the future. You may get updated performance information online
at www.principalfunds.com.
The
bar chart shows the investment returns of the Fund’s Class S shares for each
full calendar year of operations for 10 years (or, if shorter, the life of the
Fund). The table shows for the last one, five, and ten calendar year periods
(or, if shorter, the life of the Fund), how the Fund’s average annual total
returns compare with those of one or more broad measures of market
performance.
Life
of Fund returns are measured from the date the Fund's shares were first sold
(March 14,
2014).
Performance does not reflect fees charged
in the wrap-fee program.
Total Returns as of December 31
(1)
|
|
|
|
|
|
|
|
|
Highest return for a quarter during
the period of the bar chart above: |
Q1
2019 |
6.13% |
Lowest return for a quarter during
the period of the bar chart above: |
Q4
2018 |
(3.70)% |
(1)
The year-to-date return as of
September 30, 2020
was 2.68% for Class S
shares.
|
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|
|
|
|
|
|
|
|
|
|
Average Annual Total Returns For the
periods ended December 31, 2019 |
|
1 Year |
5
Years |
Life
of Fund |
Class S Return Before
Taxes |
17.41% |
6.49% |
6.24% |
Class S Return After Taxes on
Distributions |
15.35% |
4.58% |
4.29% |
Class S Return After Taxes on
Distributions and Sale of Fund Shares |
10.80% |
4.37% |
4.12% |
ICE BofA Merrill Lynch U.S. All Capital
Securities Index (reflects no deduction for
fees, expenses, or taxes) |
18.39% |
6.48% |
6.86% |
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns
depend on an investor’s tax situation and may differ from those shown. The
after-tax returns shown are not relevant to investors who hold their Fund shares
through tax-deferred arrangements, such as 401(k) plans or individual retirement
accounts. After-tax returns are shown
for Class S shares only and would be different for the other share
classes.
Investment
Advisor
Principal
Global Investors, LLC
Sub-Advisor
and Portfolio Managers
Spectrum
Asset Management, Inc.
•Fernando
(“Fred”) Diaz (since 2014), Portfolio Manager
•Roberto
Giangregorio (since 2014), Portfolio Manager
•L.
Phillip Jacoby, IV (since 2014), Chief Investment Officer and Portfolio
Manager
•Manu
Krishnan (since 2014), Portfolio Manager
•Mark
A. Lieb (since 2014), President and Chief Executive Officer
Purchase
and Sale of Fund Shares
Eligibility
to invest in the Capital Securities Fund is limited to certain wrap-fee program
accounts. Only wrap-fee program accounts as to which Spectrum and/or Principal
Global Investors, LLC (PGI) have an agreement with the wrap-fee program's
sponsor ("Sponsor") or the wrap account owner to provide investment advisory or
sub-advisory services (either directly or by providing a model investment
portfolio created and maintained by Spectrum and/or PGI to the Sponsor or one or
more Sponsor-designated investment managers) (Eligible Wrap Accounts) are
eligible to purchase shares of the Fund. References to Wrap Fee Adviser shall
mean Spectrum and/or PGI in their role providing such services to Eligible Wrap
Accounts.
A
client agreement with the Sponsor to open an account in the Sponsor's wrap-fee
program typically may be obtained by contacting the Sponsor or your financial
advisor. Purchase and sale decisions regarding Fund shares for your wrap-fee
account ordinarily will be made by the Wrap Fee Adviser, the Sponsor or a
Sponsor-designated investment manager, depending on the particular wrap-fee
program in which your wrap-fee account participates. If your wrap-fee account's
use of the Wrap Fee Adviser's investment style is terminated by you, the
Sponsor, or the Wrap Fee Adviser, your wrap-fee account will cease to be an
Eligible Wrap Account, and you will be required to redeem all your shares of the
Capital Securities Fund. Each Eligible Wrap Account, by purchasing shares,
agrees to any such redemption.
There
are no minimum initial or subsequent investment requirements for Eligible Wrap
Accounts. Eligible Wrap Accounts may purchase or redeem shares on any business
day (normally any day when the New York Stock Exchange is open for regular
trading) through its intermediary.
Tax
Information
The
Fund’s distributions you receive are generally subject to federal income tax as
ordinary income or capital gain and may also be subject to state and local
taxes, unless you are tax-exempt or your account is tax-deferred in which case
your distributions would be taxed when withdrawn from the tax-deferred
account.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker-dealer or other financial intermediary
(such as a bank, insurance company, investment adviser, etc.), the Fund and its
related companies may pay the intermediary for the sale of Fund shares and
related services. These payments may create a conflict of interest by
influencing the broker-dealer or other intermediary and your salesperson to
recommend the Fund over another investment, or to recommend one share class of
the Fund over another share class. Ask your salesperson or visit your financial
intermediary's website for more information.
DIVERSIFIED REAL ASSET
FUND
SHARE
CLASS CONVERSION NOTICE:
On
December 15, 2020, the Fund’s Board of Directors approved the conversion of the
Fund’s Class C shares into Class A shares. Following the close of business on
February 23, 2021, Class C shares of the Fund will automatically convert into
Class A shares of the Fund on the basis of the share classes’ relative net asset
values on such date. The conversion will not result in the imposition of a sales
charge or any other charge. As a result of the conversion, the affected
shareholders will be in a better position with respect to expenses, as expenses
are lower for Class A Shares than for the current Class C shares. The Fund
expects these share class conversions will not constitute taxable sales or
exchanges to shareholders. At such time, delete references to Class C
shares from this prospectus.
Objective: The Fund seeks a long-term
total return in excess of inflation.
Fees and Expenses of the
Fund
This
table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund. You may qualify for sales charge discounts
if you and your family invest, or agree to invest in the future, at least
$100,000 in Class A shares of Principal
Funds, Inc.
More information about these and other discounts is available from your
financial professional and in “Choosing a Share Class and The Costs of
Investing” beginning on page 112 of the Fund’s prospectus, Appendix C to the
prospectus titled "Intermediary-Specific Sales Charge Waivers and Reductions",
and “Multiple Class Structure” beginning on page 4 of the Fund’s Statement of
Additional Information.
If you purchase Institutional Class or
Class R-6 shares through certain programs offered by certain financial
intermediaries, you may be required to pay a commission and/or other forms of
compensation to the broker, or to your Financial Professional or other financial
intermediary.
Shareholder Fees (fees paid directly from your
investment)
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Share
Class |
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A |
C |
Inst. |
R-3 |
R-4 |
R-5 |
R-6 |
Maximum
Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) |
3.75% |
None |
None |
None |
None |
None |
None |
Maximum
Deferred Sales Charge (Load) (as a percentage of the offering price or NAV
at the time Sales Load is paid, whichever is less) |
1.00% |
1.00% |
None |
None |
None |
None |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
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Share
Class |
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A |
C |
Inst. |
R-3 |
R-4 |
R-5 |
R-6 |
Management
Fees |
0.81% |
0.81% |
0.81% |
0.81% |
0.81% |
0.81% |
0.81% |
Distribution
and/or Service (12b-1) Fees |
0.25% |
1.00% |
None |
0.25% |
0.10% |
None |
None |
Other
Expenses |
0.24% |
0.41% |
0.12% |
0.33% |
0.29% |
0.27% |
0.03% |
Acquired
Fund Fees and Expenses |
0.01% |
0.01% |
0.01% |
0.01% |
0.01% |
0.01% |
0.01% |
Total
Annual Fund Operating Expenses |
1.31% |
2.23% |
0.94% |
1.40% |
1.21% |
1.09% |
0.85% |
Fee
Waiver and Expense Reimbursement (1)(2) |
(0.10)% |
(0.27)% |
(0.10)% |
(0.05)% |
(0.05)% |
(0.05)% |
(0.06)% |
Total
Annual Fund Operating Expenses after Fee Waiver and Expense
Reimbursement |
1.21% |
1.96% |
0.84% |
1.35% |
1.16% |
1.04% |
0.79% |
(1) Principal
Global Investors, LLC ("PGI"), the investment advisor, has contractually agreed
to limit the Fund's Management Fees through the period ending December 30, 2021.
The fee waiver will reduce the Fund's Management Fees by 0.05% (expressed as a
percent of average net assets on an annualized basis). It is expected that the
fee waiver will continue through the period disclosed; however, Principal Funds,
Inc. and PGI, the parties to the agreement, may mutually agree to terminate the
fee waiver prior to the end of the period.
(2) Principal
Global Investors, LLC ("PGI"), the investment advisor, has contractually agreed
to limit the Fund's expenses by paying, if necessary, expenses normally payable
by the Fund, (excluding interest expense, expenses related to fund investments,
acquired fund fees and expenses, and other extraordinary expenses) to maintain a
total level of operating expenses (expressed as a percent of average net assets
on an annualized basis) not to exceed 1.20% for Class A, 1.95% for Class C, and
0.83% for Institutional Class shares. In addition, for Class R-6, the expense
limit will maintain "Other Expenses" (expressed as a percent of average net
assets on an annualized basis) not to exceed 0.02%, (excluding interest expense,
expenses related to fund investments, acquired fund fees and expenses, and other
extraordinary expenses). It is expected that these expense limits will continue
through the period ending December 30,
2021;
however, Principal Funds, Inc. and PGI, the parties to the agreement, may
mutually agree to terminate the expense limits prior to the end of the period.
Subject to applicable expense limits, the Fund may reimburse PGI for expenses
incurred during the current fiscal year.
Example
This Example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other mutual funds.
The Example assumes that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. The calculation of costs takes into account any applicable
contractual fee waivers and/or expense reimbursements for the period noted in
the table above. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
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1
year |
3
years |
5
years |
10
years |
Class
A |
$494 |
$765 |
$1,057 |
$1,886 |
Class
C |
299 |
671 |
1,170 |
2,544 |
Institutional
Class |
86 |
290 |
510 |
1,146 |
Class
R-3 |
137 |
438 |
761 |
1,675 |
Class
R-4 |
118 |
379 |
660 |
1,462 |
Class
R-5 |
106 |
342 |
596 |
1,324 |
Class
R-6 |
81 |
265 |
465 |
1,043 |
With respect to Class C
shares, you would pay the following expenses if you did not redeem your shares
(all other classes would be the same as in the above
example):
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1
year |
3
years |
5
years |
10
years |
Class
C |
$199 |
$671 |
$1,170 |
$2,544 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s
performance.
During the most recent fiscal year, the Fund's portfolio turnover rate was
85.4% of the average value of its
portfolio.
Principal Investment
Strategies
Under
normal circumstances, the Fund invests at least 80% of its net assets, plus any
borrowings for investment purposes, in investments related to real assets and
real asset companies. The Fund allocates its assets among general investment
categories related to real assets, which include tangible assets and investments
that are expected to perform well in periods of rising or high inflation, such
as the following: infrastructure, natural resources and timber, commodities,
real estate, inflation-indexed bonds, and floating rate debt. In pursuing these
strategies, the Fund invests in equity securities, including growth and value
securities, of any market capitalization size (small, medium, large);
fixed-income securities, which are not managed to any particular maturity or
duration; U.S. and foreign securities; and derivative instruments, such as
forwards, futures, swaps, and options. A derivative is a financial arrangement,
the value of which is derived from, or based on, a traditional security, asset,
or market index. The Fund concentrates its investments
(invests more than 25% of its net assets) in securities of one or more of the
following industries: real estate, energy, natural resources, and
infrastructure.
In
managing the Fund, Principal Global Investors, LLC (“PGI”), the Fund’s
investment advisor, determines the Fund's strategic asset allocation among
actively-managed and passively-managed (index) strategies that are executed by
PGI and multiple sub-advisors. PGI has considerable latitude in allocating the
Fund's assets. The Fund uses strategies and sub-advisors to varying degrees and
may change allocations, add new or eliminate existing strategies and
sub-advisors, and temporarily or permanently reduce allocations from time to
time such that the Fund would have little or no assets allocated to a particular
strategy or sub-advisor.
Infrastructure.
The
Fund invests in companies that own or operate infrastructure assets related to
the transportation, communications, water, electricity transmission and
distribution, and oil and gas storage, processing and transportation industries.
The Fund invests in master limited partnerships ("MLPs"), and in particular,
MLPs involved with pipelines used for natural resources such as natural gas,
crude oil, and refined petroleum products.
Natural
Resources and Timber. The
Fund invests in securities of companies that primarily own, explore, mine,
process or otherwise develop natural resources, timber and wood products, or
agricultural commodities and products, or that supply goods and services to such
companies. These include companies contributing to and/or profiting from, these
sectors, especially those active in production, processing and supply chain
services. Natural resources generally include precious metals, such as gold,
silver and platinum, ferrous and nonferrous metals, such as iron, aluminum and
copper, strategic metals such as uranium and titanium, hydrocarbons such as
coal, oil and natural gas, timberland, and undeveloped real property.
Commodities.
Commodities
are assets that have tangible properties, such as oil, coal, natural gas,
agricultural products, industrial metals, livestock and precious metals. To gain
exposure to the commodities markets without investing directly in physical
commodities, the Fund invests in commodity index-linked notes, a
wholly-owned subsidiary of the Fund organized under the laws of the Cayman
Islands (the “Cayman Subsidiary”), and fixed-income securities (primarily
short-term U.S. Treasury and Agency notes and bonds).
Commodity index-linked notes, also referred to as "structured notes," are
derivative debt instruments with principal and/or coupon payments linked to the
performance of commodity indices. In
order to gain exposure to the commodity markets within the limitations of
certain federal tax law requirements, the Cayman Subsidiary invests in
commodity-linked derivatives, including commodity-linked swaps, commodity
futures contracts and/or options on commodities, as well as instruments such as
fixed-income securities (cash, cash equivalents and/or U.S. Treasury and Agency
notes and bonds), either as investments or to serve as margin or collateral for
the Cayman Subsidiary's derivatives positions.
Real
Estate. The
Fund invests in equity securities of companies that have at least 50% of its
assets, income or profits derived from products or services related to the real
estate industry ("real estate companies"). Real estate companies include real
estate investment trusts ("REITs"), REIT-like entities, and companies with
substantial real estate holdings such as paper, lumber, hotel and entertainment
companies as well as building supply manufacturers, mortgage lenders, and
mortgage servicing companies.
Inflation-Indexed
Bonds. The
Fund invests in inflation-indexed bonds issued by the U.S. and non-U.S.
governments, their agencies or instrumentalities and by U.S. and non-U.S.
corporations. Inflation-indexed bonds are fixed-income securities that are
structured to provide protection against inflation. The value of the bond's
principal or the interest income paid on the bond is adjusted to track changes
in an official inflation measure.
Floating Rate Debt.
The Fund invests in below-investment-grade
(sometimes called “junk”) or comparable unrated floating rate debt (also known
as bank loans, syndicated loans, leveraged loans or senior floating rate
interests). Floating rate debt has a variable coupon that resets periodically,
with interest payments determined by a representative interest rate index (e.g.
LIBOR or the federal funds rate) plus a fixed spread. As a result, the coupon
payments vary, or “float” with prevailing market interest
rates.
Principal Risks
The value of your investment in the Fund changes with
the value of the Fund's investments. Many factors affect that value, and it is
possible to lose money by investing in the Fund. An investment in the Fund is not a
deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. The
principal risks of investing in the Fund are listed below in alphabetical order
and not in order of significance.
Asset
Allocation Risk. A
fund's selection and weighting of asset classes and allocation among
sub-advisors may cause it to underperform other funds with a similar investment
objective.
Bank
Loans Risk.
Changes in economic conditions are likely to cause issuers of bank loans (also
known as senior floating rate interests) to be unable to meet their obligations.
In addition, the value of the collateral securing the loan (if any) may decline,
causing a loan to be substantially unsecured. Underlying credit agreements
governing the bank loans, reliance on market makers, priority of repayment and
overall market volatility may harm the liquidity of loans.
Cayman
Subsidiary Risk. A
fund is subject to the particular risks associated with the investments of the
Fund’s wholly-owned Cayman Subsidiary, namely Commodity-Related Investments
Risk, Counterparty Risk and Derivatives Risk. The Cayman Subsidiary is not
registered under the Investment Company Act and is not subject to all the
investor protections of the Investment Company Act. The laws of the Cayman
Islands and/or the United States (including the IRS position on income earned
from wholly-owned subsidiaries described in past IRS private letter rulings) may
change, resulting in the inability of the fund and/or the Cayman Subsidiary to
operate as described in this Prospectus.
Commodity-Related
Investments Risk.
The value of commodities investments will generally be affected by overall
market movements and factors specific to a particular industry or commodity,
which may include weather, embargoes, tariffs, and economic health, political,
international regulatory and other developments. Exposure to the commodities
markets may subject the fund to greater volatility than investments in
traditional securities.
Counterparty
Risk.
Counterparty risk is the risk that the counterparty to a contract or other
obligation will be unable or unwilling to honor its obligations.
Derivatives
Risk.
Derivatives may not move in the direction anticipated by the portfolio manager.
Transactions in derivatives may increase volatility, cause the liquidation of
portfolio positions when not advantageous to do so and result in
disproportionate losses that may be substantially greater than a fund's initial
investment.
•Commodity
Index-Linked Notes.
Commodity index-linked notes expose the fund to movements in commodity prices.
They are also subject to credit, counterparty, and interest rate risk. Commodity
index-linked notes are often leveraged. At the maturity of the note, the fund
may receive more or less principal than it originally invested. The fund may
also receive interest payments on the note that are less than the stated coupon
interest payments.
•Forward
Contracts, Futures and Swaps. Forward
contracts, futures, and swaps involve specific risks, including: the imperfect
correlation between the change in market value of the instruments held by the
fund and the price of the forward contract, future or swap; possible lack of a
liquid secondary market for a forward contract, future or swap and the resulting
inability to close a forward contract, future or swap when desired; counterparty
risk; and if the fund has insufficient cash, it may have to sell securities from
its portfolio to meet daily variation margin requirements.
•Options.
Options
involve specific risks, including: imperfect correlation between the change in
market value of the instruments held by the fund and the price of the options,
counterparty risk, difference in trading hours for the options markets and the
markets for the underlying securities (rate movements can take place in the
underlying markets that cannot be reflected in the options markets), and an
insufficient liquid secondary market for particular options.
Equity
Securities Risk.
A variety of factors can negatively impact the value of equity securities held
by a fund, including a decline in the issuer’s financial condition, unfavorable
performance of the issuer's sector or industry, or changes in response to
overall market and economic conditions. A fund's principal market segment(s)
(such as market capitalization or style) may underperform other market segments
or the equity markets as a whole.
•Growth
Style Risk.
Growth investing entails the risk that if growth companies do not increase their
earnings at a rate expected by investors, the market price of their stock may
decline significantly, even if earnings show an absolute increase. Growth
company stocks also typically lack the dividend yield that can lessen price
declines in market downturns.
•Smaller
Companies Risk.
Investments in smaller companies may involve greater risk and price volatility
than investments in larger, more mature companies.
•Value
Style Risk. Value
investing entails the risk that value stocks may continue to be undervalued by
the market for extended periods, including the entire period during which the
stock is held by a fund, or the events that appears would cause the stock price
to increase may not occur as anticipated or at all. Moreover, a stock that
appears to be undervalued actually may be appropriately priced at a low level
and therefore would not be profitable for the fund.
Fixed-Income
Securities Risk.
Fixed-income securities are subject to interest rate, credit quality, and
liquidity risks. The market value of fixed-income securities generally declines
when interest rates rise and generally increases when interest rates fall.
Higher interest rates may adversely affect the liquidity of certain fixed-income
securities. Moreover, an issuer of fixed-income securities could default on its
payment obligations due to increased interest rates or for other reasons.
Foreign
Currency Risk.
Risks of investing in securities denominated in, or that trade in, foreign
(non-U.S.) currencies include changes in foreign exchange rates and foreign
exchange restrictions.
Foreign
Securities Risk.
The risks of foreign securities include loss of value as a result of: political
or economic instability; nationalization, expropriation or confiscatory
taxation; settlement delays; and limited government regulation (including less
stringent reporting, accounting, and disclosure standards than are required of
U.S. companies).
High
Yield Securities Risk.
High yield fixed-income securities (commonly referred to as "junk bonds") are
subject to greater credit quality risk than higher rated fixed-income securities
and should be considered speculative.
Industry
Concentration Risk. A
fund that concentrates investments in a particular industry or group of
industries has greater exposure than other funds to market, economic and other
factors affecting that industry or group of industries.
•Energy/Natural
Resources. A
fund concentrating in energy/natural resource companies may be affected by
numerous factors, including events occurring in nature, inflationary pressures,
international politics, the success of exploration projects, commodity prices,
energy conservation, taxes and other government regulations. In addition,
interest rates and general economic conditions may affect the demand for
energy/natural resources. For example, events occurring in nature (such as
earthquakes or fires in prime energy/natural resource areas) and political
events (such as coups, military confrontations or acts of terrorism) can affect
overall supply of energy/natural resources and the value of companies involved
in energy/natural resources.
•Infrastructure.
A fund concentrating in infrastructure related assets is subject to numerous
related risks, including the following: supply and demand for services from and
access to infrastructure; operational and technical risks; government and
political involvement, including changes in laws and regulations; environmental
claims; changes in energy prices; natural disasters, terrorist events,
under-insured or uninsurable losses; and complex legal agreements and claims.
Moreover, it may be difficult for the Fund to dispose of an infrastructure
investment at an attractive price or at the appropriate time or in response to
changing market conditions, or the Fund may otherwise be unable to complete a
favorable exit strategy.
•Real
Estate.
A fund concentrating in the real estate industry is subject to the risks
associated with direct ownership of real estate, securities of companies in the
real estate industry, and/or real estate investment trusts.
Leverage
Risk.
Leverage created by borrowing or certain types of transactions or investments
may impair the fund’s liquidity, cause it to liquidate positions at an
unfavorable time, increase volatility of the fund’s net asset value, or diminish
the fund’s performance.
Master
Limited Partnership ("MLP") Risk. MLPs
are publicly-traded limited partnership interests or units. An MLP that invests
in a particular industry (e.g., oil and gas) will be harmed by detrimental
economic events within that industry. As partnerships, MLPs may be subject to
less regulation (and less protection for investors) under state laws than
corporations. In addition, MLPs may be subject to state taxation in certain
jurisdictions, which may reduce the amount of income an MLP pays to its
investors.
Portfolio
Duration Risk.
Portfolio duration is a measure of the expected life of a fixed-income security
and its sensitivity to changes in interest rates. The longer a fund's average
portfolio duration, the more sensitive the fund will be to changes in interest
rates, which means funds with longer average portfolio durations may be more
volatile than those with shorter durations.
Real
Estate Investment Trusts (“REITs”) Risk.
In addition to risks associated with investing in real estate securities, REITs
are dependent upon management skills, are not diversified, and are subject to
heavy cash flow dependency, risks of default by borrowers, and self-liquidation.
Investment in REITs also involves risks similar to risks of investing in small
market capitalization companies, such as limited financial resources, less
frequent and limited volume trading, and may be subject to more abrupt or
erratic price movements than larger company securities. A REIT could fail to
qualify for tax-free pass-through of income under the Internal Revenue Code.
Fund shareholders will indirectly bear their proportionate share of the expenses
of REITs in which the fund invests.
Real
Estate Securities Risk.
Investing in real estate securities subjects the fund to the risks associated
with the real estate market (which are similar to the risks associated with
direct ownership in real estate), including declines in real estate values, loss
due to casualty or condemnation, property taxes, interest rate changes,
increased expenses, cash flow of underlying real estate assets, regulatory
changes (including zoning, land use and rents), and environmental problems, as
well as to the risks related to the management skill and creditworthiness of the
issuer.
Redemption
and Large Transaction Risk. Ownership
of the fund's shares may be concentrated in one or a
few large investors (such as funds of funds, institutional investors,
and asset allocation programs) that may redeem or purchase shares in large
quantities. These transactions may cause the fund to sell securities to meet
redemptions or to invest additional cash at times it would not otherwise do so,
which may result in increased transaction costs, increased expenses, changes to
expense ratios, and adverse effects to fund performance. Such transactions may
also accelerate the realization of taxable income if sales of portfolio
securities result in gains. Moreover, reallocations by large shareholders among
share classes of a fund may result in changes to the expense ratios of affected
classes, which may increase the expenses paid by shareholders of the class that
experienced the redemption.
U.S. Government Securities
Risk. Yields available from U.S. government
securities are generally lower than yields from many other fixed-income
securities.
Performance
The
following information provides some indication of the risks of investing in the
Fund. Past performance (before and
after taxes) is not necessarily an indication of how the Fund will perform in
the future. You may get updated performance information online
at www.principalfunds.com.
The
bar chart shows the investment returns of the Fund’s Class A shares for each
full calendar year of operations for 10 years (or, if shorter, the life of the
Fund). These annual returns do not reflect
sales charges on Class A shares; if they did, results would be
lower. The table shows for the last one, five, and ten calendar
year periods (or, if shorter, the life of the Fund), how the Fund’s average
annual total returns compare with those of one or more broad measures of market
performance.
Life
of Fund returns are measured from the date the Fund's shares were first sold
(March 16,
2010).
For
periods prior to the inception date of Class R-6 shares (December 31, 2014),
and Classes R-3, R-4, and R-5 shares (March 29,
2016), the performance shown in
the table for these newer classes is that of the Fund's Institutional Class
shares, adjusted to reflect the respective fees and expenses of each class.
However, where this adjustment for fees and expenses results in performance for
a newer class that is higher than the historical performance of the
Institutional Class shares, the historical performance of the Institutional
Class shares is used. These adjustments result in performance for such periods
that is no higher than the historical performance of the Institutional Class
shares, which were first sold March 16,
2010.
Total Returns as of December 31
(1)
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Highest return for a quarter during
the period of the bar chart above: |
Q1
2019 |
8.59% |
Lowest return for a quarter during
the period of the bar chart above: |
Q3
2015 |
(10.42)% |
(1)
The year-to-date return as of
September 30, 2020
was (6.51)% for Class A
shares.
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Average Annual Total Returns For the
periods ended December 31, 2019 |
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1
Year |
5
Years |
Life
of Fund |
Class A Return Before
Taxes |
10.40% |
0.45% |
3.20% |
Class A Return After Taxes on
Distributions |
9.81% |
(0.18)% |
2.61% |
Class A Return After Taxes on
Distributions and Sale of Fund Shares |
6.36% |
0.13% |
2.36% |
Class C Return Before
Taxes |
12.77% |
0.47% |
2.85% |
Institutional Class Return Before
Taxes |
15.01% |
1.59% |
4.01% |
Class R-3 Return Before
Taxes |
14.49% |
1.08% |
3.48% |
Class R-4 Return Before
Taxes |
14.75% |
1.30% |
3.69% |
Class R-5 Return Before
Taxes |
14.83% |
1.43% |
3.81% |
Class R-6 Return Before
Taxes |
15.07% |
1.64% |
4.02% |
Diversified Real Asset Strategic Index
(except as noted for the
below indexes, reflects no deduction for fees, expenses, or
taxes) |
14.86% |
3.12% |
3.27% |
Bloomberg Barclays US Treasury TIPS
Index (reflects no deduction for
fees, expenses, or taxes) |
8.43% |
2.62% |
3.32% |
S&P Global Infrastructure Index NTR
(reflects withholding taxes
on foreign dividends, but no deduction for fees, expenses, or other
taxes) |
26.99% |
6.57% |
7.94% |
S&P Global Natural Resources Index
NTR (reflects withholding taxes
on foreign dividends, but no deduction for fees, expenses, or other
taxes) |
17.20% |
4.79% |
1.83% |
Bloomberg Commodity Index
(reflects no deduction for
fees, expenses, or taxes) |
7.69% |
(3.92)% |
(4.38)% |
FTSE EPRA/NAREIT Developed Index NTR
(reflects withholding taxes
on foreign dividends, but no deduction for fees, expenses, or other
taxes) |
23.06% |
6.53% |
9.08% |
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns
depend on an investor’s tax situation and may differ from those shown. The
after-tax returns shown are not relevant to investors who hold their Fund shares
through tax-deferred arrangements, such as 401(k) plans or individual retirement
accounts. After-tax returns are shown
for Class A shares only and would be different for the other share
classes.
Performance of a blended index shows
how the Fund’s performance compares to a blend of indices with similar
investment objectives. Performance of the components of the blended index are
also shown. The weightings of the Diversified Real Asset Strategic Index are as
follows: 35% Bloomberg Barclays US Treasury TIPS Index, 20% S&P Global
Infrastructure Index NTR, 20% S&P Global Natural Resources Index NTR, 15%
Bloomberg Commodity Index, and 10% FTSE EPRA/NAREIT Developed Index NTR. The
blended index returns reflect the allocation described in the preceding
sentence.
Investment
Advisor and Portfolio Managers
Principal
Global Investors, LLC
•Jessica
S. Bush (since 2014), Portfolio Manager
•Marcus
W. Dummer (since 2014), Portfolio Manager
•Kelly
A. Grossman (since 2010), Portfolio Manager
•Benjamin
E. Rotenberg (since 2014), Portfolio Manager
Sub-Advisors
BlackRock
Financial Management, Inc.
ClearBridge
RARE Infrastructure (North America) Pty Limited
Credit
Suisse Asset Management, LLC
Delaware
Investments Fund Advisers
Mellon
Investments Corporation
Nuveen
Asset Management LLC
Pictet
Asset Management SA
Principal
Real Estate Investors, LLC
Sub-Sub-Advisor
BlackRock
International Limited
Purchase
and Sale of Fund Shares
|
|
|
|
|
|
|
|
|
Share
Class |
Investment
Type |
Purchase
Minimum
Per
Fund |
A
and C |
Initial
Investment |
$1,000(1) |
A
and C |
Initial
Investment for accounts with an Automatic Investment Plan
(AIP) |
$100 |
A
and C |
Subsequent
Investments |
$100(1)(2) |
Institutional,
R-3, R-4, R-5, and R-6 |
There
are no minimum initial or subsequent investment requirements for eligible
purchasers. |
N/A |
(1)
Some exceptions apply; see "Purchase of Fund Shares - Minimum Investments" for
more information.
(2)
For accounts with an AIP, the subsequent automatic investments must total $1,200
annually if the initial $1,000 minimum has not been met.
You
may purchase or redeem shares on any business day (normally any day when the New
York Stock Exchange is open for regular trading) through your plan,
intermediary, or Financial Professional; by sending a written request to
Principal Funds at P.O. Box 219971, Kansas City, MO 64121-9971 (regular mail) or
430 W. 7th Street, Ste. 219971, Kansas City, MO 64105-1407 (overnight mail);
calling us at 1-800-222-5852; or accessing our website
(www.principalfunds.com).
Class
C shares are subject to a 10-year automatic conversion plan whereby Class C
shares held for ten years after purchase will automatically convert to Class A
shares of the same Fund. See “Purchase of Fund Shares” in the Prospectus for
more information.
Effective
as of the close of the New York Stock Exchange on January 6, 2021, Class C
shares will no longer be available for purchase except in limited
circumstances.
Tax
Information
The
Fund’s distributions you receive are generally subject to federal income tax as
ordinary income or capital gain and may also be subject to state and local
taxes, unless you are tax-exempt or your account is tax-deferred in which case
your distributions would be taxed when withdrawn from the tax-deferred
account.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker-dealer or other financial intermediary
(such as a bank, insurance company, investment adviser, etc.), the Fund and its
related companies may pay the intermediary for the sale of Fund shares and
related services. These payments may create a conflict of interest by
influencing the broker-dealer or other intermediary and your salesperson to
recommend the Fund over another investment, or to recommend one share class of
the Fund over another share class. Ask your salesperson or visit your financial
intermediary's website for more information.
EDGE MIDCAP FUND
Objective: The Fund seeks long-term
growth of capital.
Fees and Expenses of the
Fund
This
table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund. You may qualify for sales charge discounts
if you and your family invest, or agree to invest in the future, at least
$50,000 in Class A shares of Principal
Funds, Inc. More
information about these and other discounts is available from your financial
professional and in “Choosing a Share Class and The Costs of Investing”
beginning on page 112 of the Fund’s prospectus, Appendix C to the prospectus
titled "Intermediary-Specific Sales Charge Waivers and Reductions", and
“Multiple Class Structure” beginning on page 4 of the Fund’s Statement of
Additional Information.
If you purchase Institutional Class or
Class R-6 shares through certain programs offered by certain financial
intermediaries, you may be required to pay a commission and/or other forms of
compensation to the broker, or to your Financial Professional or other financial
intermediary.
Shareholder Fees (fees paid directly from your
investment):
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
Class |
|
|
A |
Inst. |
R-6 |
Maximum
Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) |
5.50% |
None |
None |
Maximum
Deferred Sales Charge (Load) (as a percentage of the offering price or NAV
at the time Sales Load is paid, whichever is less) |
1.00% |
None |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
Class |
|
A |
Inst. |
R-6 |
Management
Fees (1) |
0.69% |
0.69% |
0.69% |
Distribution
and/or Service (12b-1) Fees |
0.25% |
None |
None |
Other
Expenses |
0.51% |
0.18% |
0.01% |
Total
Annual Fund Operating Expenses |
1.45% |
0.87% |
0.70% |
Fee
Waiver and Expense Reimbursement (2)
(3) |
(0.35)% |
(0.10)% |
(0.05)% |
Total
Annual Fund Operating Expenses after Fee Waiver and Expense
Reimbursement |
1.10% |
0.77% |
0.65% |
(1) Fees have been restated to reflect
current fees.
(2) Principal
Global Investors, LLC ("PGI"), the investment advisor, has contractually agreed
to limit the Fund’s Management Fees through the period ending December 30, 2021.
The fee waiver will reduce the Fund's Management Fees by 0.05% (expressed as a
percent of average net assets on an annualized basis). It is expected that the
fee waiver will continue through the period disclosed; however, Principal Funds,
Inc. and PGI, the parties to the agreement, may mutually agree to terminate the
fee waiver prior to the end of the period.
(3) Principal
Global Investors, LLC ("PGI"), the investment advisor, has contractually agreed
to limit the Fund’s expenses by paying, if necessary, expenses normally payable
by the Fund, (excluding interest expense, expenses related to fund investments,
acquired fund fees and expenses, and other extraordinary expenses) to maintain a
total level of operating expenses (expressed as a percent of average net assets
on an annualized basis) not to exceed 1.10% for Class A and 0.77% for
Institutional Class shares. It is expected that the expense limits will continue
through the period ending December 30,
2021; however, Principal Funds,
Inc. and PGI, the parties to the agreement, may mutually agree to terminate the
expense limits prior to the end of the period. Subject to applicable expense
limits, the Fund may reimburse PGI for expenses incurred during the current
fiscal year.
Example
This Example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other mutual funds.
The Example assumes that you invest
$10,000 in the Fund for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Fund’s operating
expenses remain the same. The calculation of costs takes into account any
applicable contractual fee waivers and/or expense reimbursements for the period
noted in the table above. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
Class
A |
$656 |
$951 |
$1,267 |
$2,161 |
Institutional
Class |
79 |
268 |
472 |
1,063 |
Class
R-6 |
66 |
219 |
385 |
866 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
During
the most recent fiscal year, the Fund’s portfolio turnover rate was
27.9% of the average value of its
portfolio.
Principal Investment
Strategies
Under
normal circumstances, the Fund invests at least 80% of its net assets, plus any
borrowings for investment purposes, in equity securities of companies with
medium market capitalizations at the time of purchase. For this Fund, companies
with medium market capitalizations are those with market capitalizations within
the range of companies comprising the Russell Midcap®
Index (as of November 30, 2020, this range was between approximately $1.5
billion and $60.3 billion). The Fund invests in real estate investment trust
("REIT") securities.
The
Fund invests in equity securities with value and/or growth characteristics and
constructs an investment portfolio that has a "blend" of equity securities with
these characteristics. Investing in value equity securities is an investment
strategy that emphasizes buying equity securities that appear to be undervalued.
The growth orientation selection emphasizes buying equity securities of
companies whose potential for growth of capital and earnings is expected to be
above average. The Fund does not have a policy of preferring one of these
categories over the other.
Principal Risks
The value of your investment in the Fund changes with
the value of the Fund's investments. Many factors affect that value, and it is
possible to lose money by investing in the Fund. An investment in the Fund is not a
deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. The
principal risks of investing in the Fund are listed below in alphabetical order
and not in order of significance.
Equity
Securities Risk.
A variety of factors can negatively impact the value of equity securities held
by a fund, including a decline in the issuer’s financial condition, unfavorable
performance of the issuer's sector or industry, or changes in response to
overall market and economic conditions. A fund's principal market segment(s)
(such as market capitalization or style) may underperform other market segments
or the equity markets as a whole.
•Growth
Style Risk.
Growth investing entails the risk that if growth companies do not increase their
earnings at a rate expected by investors, the market price of their stock may
decline significantly, even if earnings show an absolute increase. Growth
company stocks also typically lack the dividend yield that can lessen price
declines in market downturns.
•Smaller
Companies Risk.
Investments in smaller companies may involve greater risk and price volatility
than investments in larger, more mature companies.
•Value
Style Risk. Value
investing entails the risk that value stocks may continue to be undervalued by
the market for extended periods, including the entire period during which the
stock is held by a fund, or the events that appears would cause the stock price
to increase may not occur as anticipated or at all. Moreover, a stock that
appears to be undervalued actually may be appropriately priced at a low level
and therefore would not be profitable for the fund.
Real
Estate Investment Trusts (“REITs”) Risk. In
addition to risks associated with investing in real estate securities, REITs are
dependent upon management skills, are not diversified, and are subject to heavy
cash flow dependency, risks of default by borrowers, and self-liquidation.
Investment in REITs also involves risks similar to risks of investing in small
market capitalization companies, such as limited financial resources, less
frequent and limited volume trading, and may be subject to more abrupt or
erratic price movements than larger company securities. A REIT could fail to
qualify for tax-free pass-through of income under the Internal Revenue Code.
Fund shareholders will indirectly bear their proportionate share of the expenses
of REITs in which the fund invests.
Real
Estate Securities Risk.
Investing in real estate securities subjects the fund to the risks associated
with the real estate market (which are similar to the risks associated with
direct ownership in real estate), including declines in real estate values, loss
due to casualty or condemnation, property taxes, interest rate changes,
increased expenses, cash flow of underlying real estate assets, regulatory
changes (including zoning, land use and rents), and environmental problems, as
well as to the risks related to the management skill and creditworthiness of the
issuer.
Redemption
and Large Transaction Risk. Ownership
of the fund's shares may be concentrated in one or a
few large investors (such as funds of funds, institutional investors,
and asset allocation programs) that may redeem or purchase shares in large
quantities. These transactions may cause the fund to sell securities to meet
redemptions or to invest additional cash at times it would not otherwise do so,
which may result in increased transaction costs, increased expenses, changes to
expense ratios, and adverse effects to fund performance. Such transactions may
also accelerate the realization of taxable income if sales of portfolio
securities result in gains. Moreover, reallocations by large shareholders among
share classes of a fund may result in changes to the expense ratios of affected
classes, which may increase the expenses paid by shareholders of the class that
experienced the redemption.
Performance
The
following information provides some indication of the risks of investing in the
Fund. Past performance (before and
after taxes) is not necessarily an indication of how the Fund will perform in
the future. You may get updated performance information online
at www.principalfunds.com.
The
bar chart shows the investment returns of the Fund’s Class A shares for each
full calendar year of operations for 10 years (or, if shorter, the life of the
Fund),
adjusted as described below. These annual returns do not reflect
sales charges on Class A shares; if they did, results would be
lower. The table shows for the last one, five, and ten calendar
year periods (or, if shorter, the life of the Fund), how the Fund’s average
annual total returns compare with those of one or more broad measures of market
performance.
Life
of Fund returns are measured from the date the Fund's shares were first sold
(September 28, 2015).
For
periods prior to the inception date of Class A shares (December 31, 2018)
and Class R-6 shares (January 3, 2017), the
performance shown in the bar chart and table for Class A and table for R-6
shares is that of the Fund's Institutional Class shares, adjusted to reflect the
fees and expenses of each class. However, where this adjustment for fees and
expenses results in performance for a newer class that is higher than the
historical performance of the Institutional Class shares, the historical
performance of the Institutional Class shares is used. These adjustments result
in performance for such periods that is no higher than the historical
performance of the Institutional Class shares, which were first sold
September 28,
2015.
Total Returns as of December 31
(1)
|
|
|
|
|
|
|
|
|
Highest return for a quarter during
the period of the bar chart above: |
Q1
2019 |
14.86% |
Lowest return for a quarter during
the period of the bar chart above: |
Q4
2018 |
(13.61)% |
(1)
The year-to-date return as of
September 30, 2020
was (7.34)% for Class A
shares.
|
|
|
|
|
|
|
|
|
Average Annual Total Returns For the
periods ended December 31, 2019 |
|
1 Year |
Life
of Fund |
Class A Return Before
Taxes |
26.16% |
13.14% |
Class A Return After Taxes on
Distributions |
25.01% |
11.96% |
Class A Return After Taxes on
Distributions and Sale of Fund Shares |
16.30% |
10.12% |
Institutional Class Return Before
Taxes |
33.88% |
15.04% |
Class R-6 Return Before
Taxes |
34.10% |
15.26% |
Russell MidCap Index (reflects no deduction for
fees, expenses, or taxes) |
30.54% |
13.08% |
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns
depend on an investor’s tax situation and may differ from those shown. The
after-tax returns shown are not relevant to investors who hold their Fund shares
through tax-deferred arrangements, such as 401(k) plans or individual retirement
accounts. After-tax returns are shown
for Class A shares only and would be different for the other share
classes.
Investment
Advisor and Portfolio Managers
Principal
Global Investors, LLC
• Daniel
R. Coleman (since 2015), Portfolio Manager
•Theodore
Jayne (since 2015), Portfolio Manager
Purchase
and Sale of Fund Shares
|
|
|
|
|
|
|
|
|
Share
Class |
Investment
Type |
Purchase
Minimum
Per
Fund |
A
|
Initial
Investment |
$1,000(1) |
A
|
Initial
Investment for accounts with an Automatic Investment Plan
(AIP) |
$100 |
A
|
Subsequent
Investments |
$100(1)(2) |
Institutional
and R-6 |
There
are no minimum initial or subsequent investment requirements for eligible
purchasers. |
N/A |
(1)
Some exceptions apply; see "Purchase of Fund Shares - Minimum Investments" for
more information.
(2)
For accounts with an AIP, the subsequent automatic investments must total $1,200
annually if the initial $1,000 minimum has not been met.
You
may purchase or redeem shares on any business day (normally any day when the New
York Stock Exchange is open for regular trading) through your plan,
intermediary, or Financial Professional; by sending a written request to
Principal Funds at P.O. Box 219971, Kansas City, MO 64121-9971 (regular mail) or
430 W. 7th Street, Ste. 219971, Kansas City, MO 64105-1407 (overnight mail);
calling us at 1-800-222-5852; or accessing our website
(www.principalfunds.com).
Tax
Information
The
Fund’s distributions you receive are generally subject to federal income tax as
ordinary income or capital gain and may also be subject to state and local
taxes, unless you are tax-exempt or your account is tax-deferred in which case
your distributions would be taxed when withdrawn from the tax-deferred
account.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker-dealer or other financial intermediary
(such as a bank, insurance company, investment adviser, etc.), the Fund and its
related companies may pay the intermediary for the sale of Fund shares and
related services. These payments may create a conflict of interest by
influencing the broker-dealer or other intermediary and your salesperson to
recommend the Fund over another investment, or to recommend one share class of
the Fund over another share class. Ask your salesperson or visit your financial
intermediary's website for more information.
GLOBAL MULTI-STRATEGY
FUND
SHARE
CLASS CONVERSION NOTICE:
On
December 15, 2020, the Fund’s Board of Directors approved the conversion of the
Fund’s Class C shares into Class A shares. Following the close of business on
February 23, 2021, Class C shares of the Fund will automatically convert into
Class A shares of the Fund on the basis of the share classes’ relative net asset
values on such date. The conversion will not result in the imposition of a sales
charge or any other charge. As a result of the conversion, the affected
shareholders will be in a better position with respect to expenses, as expenses
are lower for Class A Shares than for the current Class C shares. The Fund
expects these share class conversions will not constitute taxable sales or
exchanges to shareholders. At such time, delete references to Class C
shares from this prospectus.
Objective: The Fund seeks to achieve
long-term capital appreciation with an emphasis on positive total returns and
managing volatility.
Fees and Expenses of the
Fund
This
table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund. You may qualify for sales charge discounts
if you and your family invest, or agree to invest in the future, at least
$100,000 in Class A shares of Principal
Funds, Inc.
More information about these and other discounts is available from your
financial professional and in “Choosing a Share Class and The Costs of
Investing” beginning on page 112 of the Fund’s prospectus, Appendix C to the
prospectus titled "Intermediary-Specific Sales Charge Waivers and Reductions",
and “Multiple Class Structure” beginning on page 4 of the Fund’s Statement of
Additional Information.
If you purchase Institutional Class or
Class R-6 shares through certain programs offered by certain financial
intermediaries, you may be required to pay a commission and/or other forms of
compensation to the broker, or to your Financial Professional or other financial
intermediary.
Shareholder Fees (fees paid directly from your
investment)
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
Share
Class |
|
|
A |
C |
Inst. |
R-6 |
Maximum
Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) |
3.75% |
None |
None |
None |
Maximum
Deferred Sales Charge (Load) (as a percentage of the offering price or NAV
at the time Sales Load is paid, whichever is less) |
1.00% |
1.00% |
None |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
Class |
|
|
A |
C |
Inst. |
R-6 |
Management
Fees |
1.59% |
1.59% |
1.59% |
1.59% |
Distribution
and/or Service (12b-1) Fees |
0.25% |
1.00% |
None |
None |
Other
Expenses: |
|
|
|
|
Dividend
and Interest Expense on Short Sales |
0.99% |
0.99% |
0.99% |
0.99% |
Reverse
Repurchase Agreement Interest Expense |
0.58% |
0.58% |
0.58% |
0.58% |
Remainder
of Other Expenses |
0.30% |
0.33% |
0.19% |
0.08% |
Total
Other Expenses |
1.87% |
1.90% |
1.76% |
1.65% |
Acquired
Fund Fees and Expenses |
0.02% |
0.02% |
0.02% |
0.02% |
Total
Annual Fund Operating Expenses |
3.73% |
4.51% |
3.37% |
3.26% |
Fee
Waiver and Expense Reimbursement (1)(2) |
(0.04)% |
(0.17)% |
(0.15)% |
(0.10)% |
Total
Annual Fund Operating Expenses after Fee Waiver and Expense
Reimbursement |
3.69% |
4.34% |
3.22% |
3.16% |
(1) Principal
Global Investors, LLC ("PGI"), the investment advisor, has contractually agreed
to limit the Fund’s Management Fees through the period ending December 30, 2021.
The fee waiver will reduce the Fund's Management Fees by 0.04% (expressed as a
percent of average net assets on an annualized basis). It is expected that the
fee waiver will continue through the period disclosed; however, Principal Funds,
Inc. and PGI, the parties to the agreement, may mutually agree to terminate the
fee waiver prior to the end of the period.
(2) Principal
Global Investors, LLC ("PGI"), the investment advisor, has contractually agreed
to limit the Fund’s expenses by paying, if necessary, expenses normally payable
by the Fund, (excluding interest expense, expenses related to fund investments,
acquired fund fees and expenses, and other extraordinary expenses) to maintain a
total level of operating expenses (expressed as a percent of average net assets
on an annualized basis) not to exceed 2.75% for Class C and 1.63% for
Institutional Class shares. In addition, for Class R-6, the expense limit will
maintain "Other Expenses" (expressed as a percent of average net assets on an
annualized basis) not to exceed 0.02%, (excluding interest expense, expenses
related to fund investments, acquired fund fees and expenses, and other
extraordinary expenses). It is expected that the expense limits will continue
through the period ending December 30,
2021; however,
Principal Funds, Inc. and PGI, the parties to the agreement, may mutually agree
to terminate the expense limits prior to the end of the period. Subject to
applicable expense limits, the Fund may reimburse PGI for expenses incurred
during the current fiscal year.
Example
This Example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other mutual funds.
The Example assumes that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. The calculation of costs takes into account any applicable
contractual fee waivers and/or expense reimbursements for the period noted in
the table above. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
Class
A |
$732 |
$1,469 |
$2,225 |
$4,199 |
Class
C |
535 |
1,348 |
2,269 |
4,612 |
Institutional
Class |
325 |
1,022 |
1,742 |
3,648 |
Class
R-6 |
319 |
995 |
1,694 |
3,551 |
With respect to Class C
shares, you would pay the following expenses if you did not redeem your shares
(all other classes would be the same as in the above
example):
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|
1
year |
3
years |
5
years |
10
years |
Class
C |
$435 |
$1,348 |
$2,269 |
$4,612 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
During
the most recent fiscal year, the Fund’s portfolio turnover rate was
439.7% of the average value of its
portfolio.
Principal Investment
Strategies
Principal
Global Investors, LLC ("PGI"), the Fund's investment advisor, seeks to combine
diversified investment strategies efficiently and systematically so that the
Fund generates a positive total return with relatively low volatility and low
sensitivity or correlation to market indices. In managing the Fund, PGI
allocates the Fund’s assets among the investment strategies described below,
which are executed by PGI or one or more of the Fund's sub-advisors.
PGI
has considerable latitude in allocating the Fund's assets. The Fund will use
strategies and sub-advisors to varying degrees and may change allocations, add
new or eliminate existing strategies and sub-advisors, and temporarily or
permanently reduce allocations from time to time such that the Fund would have
little or no assets allocated to a particular strategy or
sub-advisor.
The
Fund invests in a broad range of instruments including, but not limited to,
equities, bonds, currencies, commodities, convertible securities, and bank
loans. Under normal market conditions, the Fund invests in securities of issuers
located throughout the world, including the U.S., invests at least 30% of its
net assets in foreign and emerging market securities, and holds investments tied
economically to at least twenty countries.
The
Fund invests in equity securities regardless of market capitalization size
(small, medium, or large) and style (growth or value). The Fund invests in
investment-grade and below investment-grade bonds (sometimes called “high yield
bonds” or "junk bonds") which are rated at the time of purchase Ba1 or lower by
Moody's Investors Service, Inc. ("Moody's") and BB+ or lower by S&P Global
Ratings ("S&P Global") (if the bond has been rated by only one of those
agencies, that rating will determine whether the bond is below investment grade;
if the bond has not been rated by either of those agencies, those selecting such
investments will determine whether the bond is of a quality comparable to those
rated below investment grade). The fixed income portion of the Fund is not
managed to a particular maturity or duration. The Fund actively trades portfolio
securities.
The
Fund invests in derivative instruments. A derivative is a financial arrangement,
the value of which is derived from, or based on, a traditional security, asset,
or market index. The strategies use different types of derivative instruments
for various purposes, including to gain exposure to securities and to attempt to
reduce risk. The Fund may invest in money market funds in order to provide
collateral for certain derivative positions and other financial instruments and
to provide asset coverage for certain derivative positions and other financial
instruments that create obligations to make future payments to third
parties.
The
Fund takes long and short positions in securities and derivative instruments.
When taking a short position, the Fund may sell an instrument that it does not
own and then borrow to meet its settlement obligations. Short positions benefit
from a decrease in price of the underlying instrument and lose value if the
price of the underlying instrument increases. Long positions profit if the value
of the instrument increases. Simultaneously engaging in long investing and short
selling reduces the net exposure to general market movements. The Fund also
takes relative value positions in an effort capitalize on price differences
between similar securities or relative value among securities of the same
company. The Fund also invests a portion of the proceeds it receives from short
sales into long positions.
Credit/Distressed.
This
strategy uses a flexible approach to invest primarily in fixed income securities
and instruments related to credit, currencies and interest rates, while
employing risk management strategies. This strategy uses a variety of techniques
to obtain market exposure, such as derivative instruments, including options,
futures, forwards and swaps (including credit default swaps); entering into a
series of purchase and sale contracts; purchasing securities on a when-issued,
delayed delivery or forward commitment basis; and engaging in short sales. This
strategy may obtain investment exposure substantially through derivatives
instruments, may use such instruments in an effort to minimize volatility, and
may use equity futures for hedging purposes.
A
portion of this strategy takes long and short positions in selected emerging
market issuers when those selecting such investments identify factors (such as
macro-economic factors, country-specific factors, or credit-specific factors)
that they believe will drive substantial appreciation or depreciation of the
particular exposure. The strategy's geographic focus is derived from economic
and political developments and the specific nature of local jurisdictions in the
emerging markets.
Equity
Long/Short.
This
strategy provides long and short exposure to a diversified portfolio of U.S. and
foreign, including emerging market, equity securities. Those selecting such
investments simultaneously invest long in equities they expect to increase in
value and either short sells equities they expect to decrease in value, or
hedges equity market exposure another way (for example, by using derivatives
such as futures or options). This strategy uses two methods of analysis:
fundamental analysis, which examines a company's financial statements and
operations, especially sales, earnings, products, management and competition;
and quantitative analysis, which uses mathematical models to evaluate a
company's measurable characteristics such as revenue, earnings, margins and
market share.
Event-Driven.
This
strategy invests in securities on the basis that a specific event or catalyst
will affect future prices. This strategy attempts to capitalize on price
discrepancies and returns generated by corporate activity, such as merger
arbitrage, where the Fund holds a long/short portfolio of stocks of companies
involved in mergers.
Global
Macro.
This
strategy provides long and short exposure to a broad spectrum of global assets
(including equities, currencies, fixed income securities, bonds, commodities,
and interest rates) in an effort to profit from movement in the prices of
securities that are highly sensitive to macroeconomic conditions. The managed
futures portion of this strategy uses quantitative selection models to help
predict movements in these markets. In pursuing this strategy, the Fund, either
directly or through its wholly-owned subsidiary organized under the laws of the
Cayman Islands (the “Cayman Subsidiary”) invests in commodity-linked derivatives
and in instruments such as fixed income securities, cash and cash equivalents
and/or U.S. government securities, either as investments or to serve as margin
or collateral for derivative positions.
Commodities
are assets that have tangible properties, such as oil, coal, natural gas,
agricultural products, industrial metals, livestock and precious metals. In
pursuing certain commodity strategies, the Fund invests its assets in the Cayman
Subsidiary to gain exposure to the commodity markets within the limitations of
the federal tax law requirements applicable to regulated investment companies
(“RICs”) under the Internal Revenue Code (the “Code”). The Fund's investments in
its Cayman Subsidiary at any time will not exceed 25% of the Fund's net
assets.
Market
Neutral. This
strategy invests in long and short positions across different asset classes
(including equity and fixed income securities) in an effort to neutralize market
risk exposure. The fixed income portion seeks product types that have attractive
return characteristics with low volatility. This strategy uses arbitrage, which
is the simultaneous purchase and sale of assets in an effort to exploit price
differences of identical or similar securities on different markets or in
different forms. The fixed-income arbitrage portion seeks to exploit mispricing
of various, liquid fixed income or interest rate sensitive securities and
provides long and short exposure to developed country bond and currency markets,
investment grade and high yield credit markets, and forward mortgage-backed
securities trading in the to-be-announced ("TBA") markets. The convertible
arbitrage portion structures trades using multiple securities within a
convertible bond issuer's capital structure. This strategy may also use
derivatives to hedge against a decline in interest rates or credit
exposure.
Principal Risks
The value of your investment in the Fund changes with
the value of the Fund's investments. Many factors affect that value, and it is
possible to lose money by investing in the Fund. An investment in the Fund is not a
deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. The
principal risks of investing in the Fund are listed below in alphabetical order
and not in order of significance.
Arbitrage
Trading Risk. The
underlying relationships between securities in which the fund takes arbitrage
investment positions may change in an adverse manner, in which case the fund may
realize losses.
Asset
Allocation Risk.
A fund's selection and weighting of asset classes and allocation among
sub-advisors may cause it to underperform other funds with a similar investment
objective.
Bank
Loans Risk.
Changes in economic conditions are likely to cause issuers of bank loans (also
known as senior floating rate interests) to be unable to meet their obligations.
In addition, the value of the collateral securing the loan (if any) may decline,
causing a loan to be substantially unsecured. Underlying credit agreements
governing the bank loans, reliance on market makers, priority of repayment and
overall market volatility may harm the liquidity of loans.
Cayman
Subsidiary Risk. A
fund is subject to the particular risks associated with the investments of the
Fund’s wholly-owned Cayman Subsidiary, namely Commodity-Related Investments
Risk, Counterparty Risk and Derivatives Risk. The Cayman Subsidiary is not
registered under the Investment Company Act and is not subject to all the
investor protections of the Investment Company Act. The laws of the Cayman
Islands and/or the United States (including the IRS position on income earned
from wholly-owned subsidiaries described in past IRS private letter rulings) may
change, resulting in the inability of the fund and/or the Cayman Subsidiary to
operate as described in this Prospectus.
Commodity-Related
Investments Risk.
The value of commodities investments will generally be affected by overall
market movements and factors specific to a particular industry or commodity,
which may include weather, embargoes, tariffs, and economic health, political,
international regulatory and other developments. Exposure to the commodities
markets may subject the fund to greater volatility than investments in
traditional securities.
Convertible
Securities Risk. Convertible
securities are securities that are convertible into common stock. Convertible
securities are subject to credit and interest rate risks associated with
fixed-income securities and to stock market risk associated with equity
securities.
Counterparty
Risk. Counterparty
risk is the risk that the counterparty to a contract or other obligation will be
unable or unwilling to honor its obligations.
Derivatives
Risk.
Derivatives may not move in the direction anticipated by the portfolio manager.
Transactions in derivatives may increase volatility, cause the liquidation of
portfolio positions when not advantageous to do so and result in
disproportionate losses that may be substantially greater than a fund's initial
investment.
•Credit
Default Swaps.
Credit default swaps involve special risks in addition to those associated with
swaps generally because they are difficult to value, are highly susceptible to
liquidity and credit risk, and generally pay a return to the party that has paid
the premium only in the event of an actual default by the issuer of the
underlying obligation (as opposed to a credit downgrade or other indication of
financial difficulty). The protection “buyer” in a credit default contract may
be obligated to pay the protection “seller” an up-front payment or a periodic
stream of payments over the term of the contract provided generally that no
credit event on a reference obligation has occurred. If a credit event occurs,
the seller generally must pay the buyer the “par value” (i.e., full notional
value) of the swap in exchange for an equal face amount of deliverable
obligations of the reference entity described in the swap, or the seller may be
required to deliver the related net cash amount, if the swap is cash settled.
The Fund may be either the buyer or seller in the transaction.
•Currency
Contracts. Derivatives
related to currency contracts involve the specific risk of government action
through exchange controls that would restrict the ability of the fund to deliver
or receive currency.
•Forward
Contracts, Futures and Swaps. Forward
contracts, futures, and swaps involve specific risks, including: the imperfect
correlation between the change in market value of the instruments held by the
fund and the price of the forward contract, future or swap; possible lack of a
liquid secondary market for a forward contract, future or swap and the resulting
inability to close a forward contract, future or swap when desired; counterparty
risk; and if the fund has insufficient cash, it may have to sell securities from
its portfolio to meet daily variation margin
requirements.
•Options.
Options
involve specific risks, including: imperfect correlation between the change in
market value of the instruments held by the fund and the price of the options,
counterparty risk, difference in trading hours for the options markets and the
markets for the underlying securities (rate movements can take place in the
underlying markets that cannot be reflected in the options markets), and an
insufficient liquid secondary market for particular options.
Emerging
Markets Risk. Investments
in emerging markets may have more risk than those in developed markets because
the emerging markets are less developed and more illiquid. Emerging markets can
also be subject to increased social, economic, regulatory, and political
uncertainties and can be extremely volatile. The U.S. Securities and Exchange
Commission, the U.S. Department of Justice, and other U.S. authorities may be
limited in their ability to pursue bad actors in emerging markets, including
with respect to fraud.
Equity
Securities Risk.
A variety of factors can negatively impact the value of equity securities held
by a fund, including a decline in the issuer’s financial condition, unfavorable
performance of the issuer's sector or industry, or changes in response to
overall market and economic conditions. A fund's principal market segment(s)
(such as market capitalization or style) may underperform other market segments
or the equity markets as a whole.
•Growth
Style Risk.
Growth investing entails the risk that if growth companies do not increase their
earnings at a rate expected by investors, the market price of their stock may
decline significantly, even if earnings show an absolute increase. Growth
company stocks also typically lack the dividend yield that can lessen price
declines in market downturns.
•Smaller
Companies Risk.
Investments in smaller companies may involve greater risk and price volatility
than investments in larger, more mature companies.
•Value
Style Risk. Value
investing entails the risk that value stocks may continue to be undervalued by
the market for extended periods, including the entire period during which the
stock is held by a fund, or the events that appears would cause the stock price
to increase may not occur as anticipated or at all. Moreover, a stock that
appears to be undervalued actually may be appropriately priced at a low level
and therefore would not be profitable for the fund.
Event-Driven
Trading Risk. Event-driven
trading involves the risk that the special situation may not occur as
anticipated, if at all, and that the market price of a stock
declines.
Fixed-Income
Securities Risk.
Fixed-income securities are subject to interest rate, credit quality, and
liquidity risks. The market value of fixed-income securities generally declines
when interest rates rise and generally increases when interest rates fall.
Higher interest rates may adversely affect the liquidity of certain fixed-income
securities. Moreover, an issuer of fixed-income securities could default on its
payment obligations due to increased interest rates or for other reasons.
Foreign
Currency Risk. Risks
of investing in securities denominated in, or that trade in, foreign (non-U.S.)
currencies include changes in foreign exchange rates and foreign exchange
restrictions.
Foreign
Securities Risk.
The risks of foreign securities include loss of value as a result of: political
or economic instability; nationalization, expropriation or confiscatory
taxation; settlement delays; and limited government regulation (including less
stringent reporting, accounting, and disclosure standards than are required of
U.S. companies).
Hedging
Risk.
A fund that implements a hedging strategy using derivatives and/or securities
could expose the fund to the risk that can arise when a change in the value of a
hedge does not match a change in the value of the asset it hedges. In other
words, the change in value of the hedge could move in a direction that does not
match the change in value of the underlying asset, resulting in a risk of loss
to the fund.
High
Yield Securities Risk.
High yield fixed-income securities (commonly referred to as "junk bonds") are
subject to greater credit quality risk than higher rated fixed-income securities
and should be considered speculative.
Investment
Company Securities Risk. A
fund that invests in another investment company (for example, another fund or an
exchange-traded fund (“ETF”)) is subject to the risks associated with direct
ownership of the securities in which such investment company invests. Fund
shareholders indirectly bear their proportionate share of the expenses of each
such investment company.
Leverage
Risk.
Leverage created by borrowing or certain types of transactions or investments
may impair the fund’s liquidity, cause it to liquidate positions at an
unfavorable time, increase volatility of the fund’s net asset value, or diminish
the fund’s performance. In particular, investing the proceeds of short sales may
amplify leverage risk.
Portfolio
Duration Risk. Portfolio
duration is a measure of the expected life of a fixed-income security and its
sensitivity to changes in interest rates. The longer a fund's average portfolio
duration, the more sensitive the fund will be to changes in interest rates,
which means funds with longer average portfolio durations may be more volatile
than those with shorter durations.
Portfolio
Turnover (Active Trading) Risk. High
portfolio turnover (more than 100%) caused by actively trading portfolio
securities may result in accelerating the realization of taxable gains and
losses, lower fund performance and increased brokerage costs.
Redemption
and Large Transaction Risk. Ownership
of the fund's shares may be concentrated in one or a
few large investors (such as funds of funds, institutional investors,
and asset allocation programs) that may redeem or purchase shares in large
quantities. These transactions may cause the fund to sell securities to meet
redemptions or to invest additional cash at times it would not otherwise do so,
which may result in increased transaction costs, increased expenses, changes to
expense ratios, and adverse effects to fund performance. Such transactions may
also accelerate the realization of taxable income if sales of portfolio
securities result in gains. Moreover, reallocations by large shareholders among
share classes of a fund may result in changes to the expense ratios of affected
classes, which may increase the expenses paid by shareholders of the class that
experienced the redemption.
Securitized
Products Risk. Investments
in securitized products are subject to risks similar to traditional fixed income
securities, such as credit, interest rate, liquidity, prepayment, extension, and
default risk, as well as additional risks associated with the nature of the
assets and the servicing of those assets. Unscheduled prepayments on securitized
products may have to be reinvested at lower rates. A reduction in prepayments
may increase the effective maturities of these securities, exposing them to the
risk of decline in market value over time (extension risk). With respect to
securities that are delivered in TBA transactions, there is a risk that the
actual securities received by the Fund may be less favorable than what was
anticipated when entering into the transaction.
Short
Sale Risk.
A short sale involves the sale by the fund of a security that it does not own
with the hope of purchasing the same security at a later date at a lower price.
A fund may also enter into a short derivative position through a futures
contract or swap agreement. If the price of the security or derivative has
increased during this time, then the fund will incur a loss equal to the
increase in price from the time that the short sale was entered into plus any
premiums and interest paid to the third party. Therefore, short sales involve
the risk that losses may be exaggerated, potentially losing more money than the
actual cost of the investment. Also, there is the risk that the third party to
the short sale may fail to honor its contract terms, causing a loss to the
fund.
U.S.
Government Securities Risk. Yields
available from U.S. government securities are generally lower than yields from
many other fixed-income securities.
U.S.
Government-Sponsored Securities Risk. Securities
issued by U.S. government-sponsored enterprises such as the Federal Home Loan
Mortgage Corporation, the Federal National Mortgage Association, and the Federal
Home Loan Banks are not issued or guaranteed by the U.S.
government.
Performance
The
following information provides some indication of the risks of investing in the
Fund. Past performance (before and
after taxes) is not necessarily an indication of how the Fund will perform in
the future. You may get updated performance information online
at www.principalfunds.com.
The
bar chart shows the investment returns of the Fund’s Class A shares for each
full calendar year of operations for 10 years (or, if shorter, the life of the
Fund). These annual returns do not reflect
sales charges on Class A shares; if they did, results would be
lower. The table shows for the last one, five, and ten calendar
year periods (or, if shorter, the life of the Fund), how the Fund’s average
annual total returns compare with those of one or more broad measures of market
performance.
Life
of Fund returns are measured from the date the Fund's shares were first sold
(October 24,
2011).
For periods prior to the inception date of
Class C shares (June 14, 2012)
and Class R-6 shares (June 12, 2017), the
performance shown in the table for Classes C and R-6 shares is that of the
Fund's Institutional Class shares, adjusted to reflect the respective fees and
expenses of each class. However, where this adjustment for fees and expenses
results in performance for a newer class that is higher than the historical
performance of the Institutional Class shares, the historical performance of the
Institutional Class shares is used. These adjustments result in performance for
such periods that is no higher than the historical performance of the
Institutional Class shares, which were first sold on October 24,
2011.
Total Returns as of December 31
(1)
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Highest return for a quarter during
the period of the bar chart above: |
Q1
2019 |
3.18% |
Lowest return for a quarter during
the period of the bar chart above: |
Q4
2018 |
(4.16)% |
(1)
The year-to-date return as of
September 30, 2020
was 0.18% for Class A
shares.
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Average Annual Total Returns For the
periods ended December 31, 2019 |
|
1 Year |
5
Years |
Life
of Fund |
Class A Return Before
Taxes |
3.63% |
1.35% |
2.45% |
Class A Return After Taxes on
Distributions |
3.63% |
0.65% |
1.88% |
Class A Return After Taxes on
Distributions and Sale of Fund Shares |
2.15% |
0.85% |
1.76% |
Class C Return Before
Taxes |
5.84% |
1.34% |
2.16% |
Institutional Class Return Before
Taxes |
8.18% |
2.51% |
3.30% |
Class R-6 Return Before
Taxes |
8.19% |
2.53% |
3.30% |
HFRX Global Hedge Fund Index
(reflects no deduction for
taxes) |
8.62% |
1.19% |
1.76% |
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns
depend on an investor’s tax situation and may differ from those shown. The
after-tax returns shown are not relevant to investors who hold their Fund shares
through tax-deferred arrangements, such as 401(k) plans or individual retirement
accounts. After-tax returns are shown
for Class A shares only and would be different for the other share
classes.
Investment
Advisor and Portfolio Managers
Principal
Global Investors, LLC
•Jessica
S. Bush (since 2014), Portfolio Manager
•Marcus
W. Dummer (since 2014), Portfolio Manager
•Kelly
A. Grossman (since 2010), Portfolio Manager
•Benjamin
E. Rotenberg (since 2014), Portfolio Manager
Sub-Advisors
Gotham
Asset Management, LLC
Graham
Capital Management, L.P.
KLS
Diversified Asset Management LP
Loomis,
Sayles & Company, L.P.
Los
Angeles Capital Management and Equity Research, Inc.
Sound
Point Capital Management, LP
Wellington
Management Company LLP
York
Registered Holdings, L.P.
Purchase
and Sale of Fund Shares
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Share
Class |
Investment
Type |
Purchase
Minimum
Per
Fund |
A
and C |
Initial
Investment |
$1,000(1) |
A
and C |
Initial
Investment for accounts with an Automatic Investment Plan
(AIP) |
$100 |
A
and C |
Subsequent
Investments |
$100(1)(2) |
Institutional
and R-6 |
There
are no minimum initial or subsequent investment requirements for eligible
purchasers. |
N/A |
(1)
Some exceptions apply; see "Purchase of Fund Shares - Minimum Investments" for
more information.
(2)
For accounts with an AIP, the subsequent automatic investments must total $1,200
annually if the initial $1,000 minimum has not been met.
You
may purchase or redeem shares on any business day (normally any day when the New
York Stock Exchange is open for regular trading) through your plan,
intermediary, or Financial Professional; by sending a written request to
Principal Funds at P.O. Box 219971, Kansas City, MO 64121-9971 (regular mail) or
430 W. 7th Street, Ste. 219971, Kansas City, MO 64105-1407 (overnight mail);
calling us at 1-800-222-5852; or accessing our website
(www.principalfunds.com).
Class
C shares are subject to a 10-year automatic conversion plan whereby Class C
shares held for ten years after purchase will automatically convert to Class A
shares of the same Fund. See “Purchase of Fund Shares” in the Prospectus for
more information.
Effective
as of the close of the New York Stock Exchange on January 6, 2021, Class C
shares will no longer be available for purchase except in limited circumstances.
Tax
Information
The
Fund’s distributions you receive are generally subject to federal income tax as
ordinary income or capital gain and may also be subject to state and local
taxes, unless you are tax-exempt or your account is tax-deferred in which case
your distributions would be taxed when withdrawn from the tax-deferred
account.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker-dealer or other financial intermediary
(such as a bank, insurance company, investment adviser, etc.), the Fund and its
related companies may pay the intermediary for the sale of Fund shares and
related services. These payments may create a conflict of interest by
influencing the broker-dealer or other intermediary and your salesperson to
recommend the Fund over another investment, or to recommend one share class of
the Fund over another share class. Ask your salesperson or visit your financial
intermediary's website for more information.
INTERNATIONAL EQUITY INDEX
FUND
CONVERSION
NOTICE: On
September 15, 2020, the Fund’s Board of Directors approved the conversion of
Class R-2 shares into Class R-3 shares. Following the close of business on
March 1, 2021, Class R-2 shares will automatically convert into Class R-3 shares
of the same Fund on the basis of the share classes’ relative net asset values on
such date without the imposition of a sales charge or any other charge. The Fund
expects these share class conversions will not constitute taxable sales or
exchanges to shareholders. At such time, delete references to Class R-2
shares from this prospectus.
Objective: The Fund seeks long-term
growth of capital.
Fees and Expenses of the
Fund
This table describes the fees
and expenses that you may pay if you buy and hold shares of the
Fund.
If you purchase Institutional Class or
Class R-6 shares through certain programs offered by certain financial
intermediaries, you may be required to pay a commission and/or other forms of
compensation to the broker, or to your Financial Professional or other financial
intermediary.
Shareholder Fees (fees paid directly from your
investment): None
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
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Share
Class |
|
Inst. |
R-1 |
R-2 |
R-3 |
R-4 |
R-5 |
R-6 |
Management
Fees |
0.25% |
0.25% |
0.25% |
0.25% |
0.25% |
0.25% |
0.25% |
Distribution
and/or Service (12b-1) Fees |
None |
0.35% |
0.30% |
0.25% |
0.10% |
None |
None |
Other
Expenses |
0.19% |
0.59% |
0.51% |
0.38% |
0.34% |
0.32% |
0.06% |
Total
Annual Fund Operating Expenses |
0.44% |
1.19% |
1.06% |
0.88% |
0.69% |
0.57% |
0.31% |
Expense
Reimbursement (1) |
(0.13)% |
None |
None |
None |
None |
None |
(0.02)% |
Total
Annual Fund Operating Expenses after Expense Reimbursement |
0.31% |
1.19% |
1.06% |
0.88% |
0.69% |
0.57% |
0.29% |
(1) Principal
Global Investors, LLC ("PGI"), the investment advisor, has contractually agreed
to limit the Fund’s expenses by paying, if necessary, expenses normally payable
by the Fund, (excluding interest expense, expenses related to fund investments,
acquired fund fees and expenses, and other extraordinary expenses) to maintain a
total level of operating expenses (expressed as a percent of average net assets
on an annualized basis) not to exceed 0.31% for Institutional Class shares. In
addition, for Class R-6, the expense limit will maintain "Other Expenses"
(expressed as a percent of average net assets on an annualized basis) not to
exceed 0.04%, (excluding interest expense, expenses related to fund investments,
acquired fund fees and expenses, and other extraordinary expenses). It is
expected that the expense limits will continue through the period ending
December 30,
2021;
however, Principal Funds, Inc. and PGI, the parties to the agreement, may
mutually agree to terminate the expense limits prior to the end of the period.
Subject to applicable expense limits, the Fund may reimburse PGI for expenses
incurred during the current fiscal year.
Example
This Example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other mutual funds.
The Example assumes that you invest
$10,000 in the Fund for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Fund’s operating
expenses remain the same. The calculation of costs takes into account any
applicable contractual fee waivers and/or expense reimbursements for the period
noted in the table above. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
Institutional
Class |
$32 |
$128 |
$233 |
$542 |
Class
R-1 |
121 |
378 |
654 |
1,443 |
Class
R-2 |
108 |
337 |
585 |
1,294 |
Class
R-3 |
90 |
281 |
488 |
1,084 |
Class
R-4 |
70 |
221 |
384 |
859 |
Class
R-5 |
58 |
183 |
318 |
714 |
Class
R-6 |
30 |
98 |
172 |
391 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
During
the most recent fiscal year, the Fund’s portfolio turnover rate was
31.1% of the average value of its
portfolio.
Principal Investment
Strategies
Under normal circumstances,
the Fund invests at least 80% of its net assets, plus any borrowings for
investment purposes, in securities that compose the MSCI EAFE NTR Index (the
"Index") at the time of purchase. The Index is a market-weighted equity index
designed to measure the equity performance of developed markets (Europe,
Australia, New Zealand, and Far East, which includes Hong Kong, Japan and
Singapore), excluding the United States and Canada. The Index includes
securities of different market capitalizations (small, medium, and large) and is
rebalanced semi-annually. The Fund employs a passive investment approach
designed to attempt to track the performance of the Index. In seeking its
objective, the Fund typically employs a replication strategy which involves
investing in the securities that make up the Index, in the same approximate
proportions as the Index. The Fund utilizes exchange-traded funds ("ETFs") and
derivative strategies (including index futures) on a daily basis to gain
exposure to the Index in an effort to minimize tracking error relative to the
benchmark. A derivative is a financial arrangement, the value of which is
derived from, or based on, a traditional security, asset, or market index. The
Fund will not concentrate (invest more than 25% of its assets) its investments
in a particular industry except to the extent the Index is so
concentrated.
Principal Risks
The value of your investment in the Fund changes with
the value of the Fund's investments. Many factors affect that value, and it is
possible to lose money by investing in the Fund. An investment in the Fund is not a
deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. The
principal risks of investing in the Fund are listed below in alphabetical order
and not in order of significance.
Derivatives
Risk.
Derivatives may not move in the direction anticipated by the portfolio manager.
Transactions in derivatives may increase volatility, cause the liquidation of
portfolio positions when not advantageous to do so and result in
disproportionate losses that may be substantially greater than a fund's initial
investment.
•Futures.
Futures
contracts involve specific risks, including: the imperfect correlation between
the change in market value of the instruments held by the fund and the price of
the futures contract; possible lack of a liquid secondary market for a futures
contract and the resulting inability to close a futures contract when desired;
counterparty risk; and if the fund has insufficient cash, it may have to sell
securities from its portfolio to meet daily variation margin
requirements.
Equity
Securities Risk.
A variety of factors can negatively impact the value of equity securities held
by a fund, including a decline in the issuer’s financial condition, unfavorable
performance of the issuer's sector or industry, or changes in response to
overall market and economic conditions. A fund's principal market segment(s)
(such as market capitalization or style) may underperform other market segments
or the equity markets as a whole.
•Smaller
Companies Risk. Investments
in smaller companies may involve greater risk and price volatility than
investments in larger, more mature companies.
Foreign
Currency Risk. Risks
of investing in securities denominated in, or that trade in, foreign (non-U.S.)
currencies include changes in foreign exchange rates and foreign exchange
restrictions.
Foreign
Securities Risk.
The risks of foreign securities include loss of value as a result of: political
or economic instability; nationalization, expropriation or confiscatory
taxation; settlement delays; and limited government regulation (including less
stringent reporting, accounting, and disclosure standards than are required of
U.S. companies).
Index
Fund Risk.
Index funds use a passive investment approach and generally do not attempt to
manage market volatility, use defensive strategies, or reduce the effect of any
long-term periods of poor investment performance. Therefore, the Fund may hold
securities that present risks that an investment advisor researching individual
securities might seek to avoid. An index fund has operating and other expenses
while an index does not. As a result, over time, index funds tend to
underperform the index. The correlation between fund performance and index
performance may also be affected by the type of passive investment approach used
by a fund (sampling or replication), changes in securities markets, changes in
the composition of the index, and the timing of purchases and sales of fund
shares. Errors or delays in compiling or rebalancing the Index may impact the
performance of the Fund and increase transaction
costs.
Industry
Concentration Risk. A
fund that concentrates investments in a particular industry or group of
industries has greater exposure than other funds to market, economic and other
factors affecting that industry or group of industries.
Investment
Company Securities Risk. A
fund that invests in another investment company (for example, another fund or an
exchange-traded fund (“ETF”)) is subject to the risks associated with direct
ownership of the securities in which such investment company invests. Fund
shareholders indirectly bear their proportionate share of the expenses of each
such investment company.
Redemption
and Large Transaction Risk. Ownership
of the fund's shares may be concentrated in one or a
few large investors (such as funds of funds, institutional investors,
and asset allocation programs) that may redeem or purchase shares in large
quantities. These transactions may cause the fund to sell securities to meet
redemptions or to invest additional cash at times it would not otherwise do so,
which may result in increased transaction costs, increased expenses, changes to
expense ratios, and adverse effects to fund performance. Such transactions may
also accelerate the realization of taxable income if sales of portfolio
securities result in gains. Moreover, reallocations by large shareholders among
share classes of a fund may result in changes to the expense ratios of affected
classes, which may increase the expenses paid by shareholders of the class that
experienced the redemption.
Performance
The following information
provides some indication of the risks of investing in the Fund. Past performance (before and
after taxes) is not necessarily an indication of how the Fund will perform in
the future. You may get updated performance information online
at www.principalfunds.com.
The bar chart shows the investment returns
of the Fund’s Institutional Class shares for each full calendar year of
operations for 10 years (or, if shorter, the life of the Fund). The table shows
for the last one, five, and ten calendar year periods (or, if shorter, the life
of the Fund), how the Fund’s average annual total returns compare with those of
one or more broad measures of market performance.
For
periods prior to the inception date of Class R-6 shares (January 3, 2017), the
performance shown in the table for Class R-6 shares is that of the Fund's
Institutional Class shares, adjusted to reflect the fees and expenses of Class
R-6 shares. However, where this adjustment for fees and expenses results in
performance for Class R-6 shares that is higher than the historical performance
of the Institutional Class shares, the historical performance of the
Institutional Class shares is used. These adjustments result in performance for
such periods that is no higher than the historical performance of the
Institutional Class shares, which were first sold December 30,
2009.
Total Returns as of December
31
(1)
|
|
|
|
|
|
|
|
|
Highest return for a quarter during
the period of the bar chart above: |
Q3
2010 |
17.39% |
Lowest return for a quarter during
the period of the bar chart above: |
Q3
2011 |
(20.25)% |
(1)
The year-to-date return as of
September 30, 2020
was (6.91)% for Institutional Class
shares.
|
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|
|
|
|
|
|
|
|
|
Average Annual Total Returns For the
periods ended December 31, 2019 |
|
1 Year |
5
Years |
10
Years |
Institutional Class Return Before
Taxes |
21.40% |
5.52% |
5.07% |
Institutional Class Return After Taxes
on Distributions |
20.64% |
4.80% |
4.17% |
Institutional Class Return After Taxes
on Distributions and Sale of Fund Shares |
13.52% |
4.34% |
4.03% |
Class R-1 Return Before
Taxes |
20.30% |
4.60% |
4.15% |
Class R-2 Return Before
Taxes |
20.49% |
4.74% |
4.28% |
Class R-3 Return Before
Taxes |
20.65% |
4.92% |
4.48% |
Class R-4 Return Before
Taxes |
20.88% |
5.11% |
4.68% |
Class R-5 Return Before
Taxes |
21.10% |
5.26% |
4.80% |
Class R-6 Return Before
Taxes |
21.40% |
5.49% |
5.02% |
MSCI EAFE Index NTR (reflects withholding taxes
on foreign dividends, but no deduction for fees, expenses, or other
taxes) |
22.01% |
5.67% |
5.50% |
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns
depend on an investor’s tax situation and may differ from those shown. The
after-tax returns shown are not relevant to investors who hold their Fund shares
through tax-deferred arrangements, such as 401(k) plans or individual retirement
accounts. After-tax returns are shown
for Institutional Class shares only and would be different for the other
classes.
Investment
Advisor and Portfolio Managers
Principal
Global Investors, LLC
•Jeffrey
A. Schwarte (since 2016), Portfolio Manager
•Aaron
J. Siebel (since 2018), Portfolio Manager
Purchase
and Sale of Fund Shares
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|
Share
Class |
Investment
Type |
Purchase
Minimum
Per
Fund |
Institutional,
R-1, R-2, R-3, R-4, R-5 and R-6 |
There
are no minimum initial or subsequent investment requirements for eligible
purchasers. |
N/A |
You
may purchase or redeem shares on any business day (normally any day when the New
York Stock Exchange is open for regular trading) through your plan,
intermediary, or Financial Professional; by sending a written request to
Principal Funds at P.O. Box 219971, Kansas City, MO 64121-9971 (regular mail) or
430 W. 7th Street, Ste. 219971, Kansas City, MO 64105-1407 (overnight mail);
calling us at 1-800-222-5852; or accessing our website
(www.principalfunds.com).
For
retirement plan investors, effective as of the close of the New York Stock
Exchange on January 31, 2017, Class R-1 and Class R-2 shares are no longer
available for purchase from new retirement plans except in limited
circumstances. See Purchase of Fund Shares for additional
information.
Tax
Information
The
Fund’s distributions you receive are generally subject to federal income tax as
ordinary income or capital gain and may also be subject to state and local
taxes, unless you are tax-exempt or your account is tax-deferred in which case
your distributions would be taxed when withdrawn from the tax-deferred
account.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker-dealer or other financial intermediary
(such as a bank, insurance company, investment adviser, etc.), the Fund and its
related companies may pay the intermediary for the sale of Fund shares and
related services. These payments may create a conflict of interest by
influencing the broker-dealer or other intermediary and your salesperson to
recommend the Fund over another investment, or to recommend one share class of
the Fund over another share class. Ask your salesperson or visit your financial
intermediary's website for more information.
INTERNATIONAL SMALL COMPANY
FUND
SHARE
CLASS LIQUIDATION NOTICE: On
December 15, 2020, the Fund’s Board of Directors approved the liquidation of the
Fund’s Class A shares. Following the close of business on February 23, 2021,
outstanding Class A shares of the Fund will be redeemed at net asset value on
such date and proceeds will be sent to shareholders of record. The Fund expects
that the liquidation and redemption of Class A shares will result in capital
gain or loss to the taxable shareholders in the same manner as a voluntary
redemption. Taxable shareholders should consult their tax advisers regarding the
tax treatment of the liquidation and redemption, as well as any voluntary
redemption or exchange prior to the liquidation date. At such time, delete
references to Class A shares from this prospectus.
Objective: The Fund seeks long-term
growth of capital.
Fees and Expenses of the
Fund
This
table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund. You may qualify for sales charge discounts
if you and your family invest, or agree to invest in the future, at least
$50,000 in Class A shares of Principal
Funds, Inc. More
information about these and other discounts is available from your financial
professional and in “Choosing a Share Class and The Costs of Investing”
beginning on page 112 of the Fund’s prospectus, Appendix C to the prospectus
titled "Intermediary-Specific Sales Charge Waivers and Reductions", and
“Multiple Class Structure” beginning on page 4 of the Fund’s Statement of
Additional Information.
If you purchase Institutional Class or
Class R-6 shares through certain programs offered by certain financial
intermediaries, you may be required to pay a commission and/or other forms of
compensation to the broker, or to your Financial Professional or other financial
intermediary.
Shareholder Fees (fees paid directly from your
investment)
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|
Share
Class |
|
A |
Inst. |
R-6 |
Maximum
Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) |
5.50% |
None |
None |
Maximum
Deferred Sales Charge (Load) (as a percentage of the offering price or NAV
at the time Sales Load is paid, whichever is less) |
1.00% |
None |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
|
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|
Share
Class |
|
A |
Inst. |
R-6 |
Management
Fees |
1.04% |
1.04% |
1.04% |
Distribution
and/or Service (12b-1) Fees |
0.25% |
None |
None |
Other
Expenses |
0.96% |
0.16% |
0.04% |
Total
Annual Fund Operating Expenses |
2.25% |
1.20% |
1.08% |
Expense
Reimbursement (1)
|
(0.65)% |
—% |
—% |
Total
Annual Fund Operating Expenses after Expense Reimbursement |
1.60% |
1.20% |
1.08% |
(1) Principal Global
Investors, LLC ("PGI"), the investment advisor, has contractually agreed to
limit the Fund’s expenses by paying, if necessary, expenses normally payable by
the Fund, (excluding interest expense, expenses related to fund investments,
acquired fund fees and expenses, and other extraordinary expenses) to maintain a
total level of operating expenses (expressed as a percent of average net assets
on an annualized basis) not to exceed 1.60% for Class A and 1.20% for
Institutional Class shares. In addition, for Class R-6, the expense limit will
maintain "Other Expenses" (expressed as a percent of average net assets on an
annualized basis) not to exceed 0.04%, (excluding interest expense, expenses
related to fund investments, acquired fund fees and expenses, and other
extraordinary expenses). It is expected that the expense limits will continue
through the period ending December 30,
2021; however, Principal Funds,
Inc. and PGI, the parties to the agreement, may mutually agree to terminate the
expense limits prior to the end of the period. Subject to applicable expense
limits, the Fund may reimburse PGI for expenses incurred during the current
fiscal year.
Example
This Example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other mutual funds.
The Example assumes that you invest
$10,000 in the Fund for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Fund’s operating
expenses remain the same. The calculation of costs takes into account any
applicable contractual fee waivers and/or expense reimbursements for the period
noted in the table above. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
|
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|
|
|
|
|
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
Class
A |
$704 |
$1,156 |
$1,633 |
$2,945 |
Institutional
Class |
122 |
381 |
660 |
1,455 |
Class
R-6 |
110 |
343 |
595 |
1,317 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
During
the most recent fiscal year, the Fund's portfolio turnover rate was
44.1% of the average value of its
portfolio.
Principal Investment
Strategies
Under
normal circumstances, the Fund invests at least 80% of its net assets, plus any
borrowings for investment purposes, in equity securities of companies with small
market capitalizations at the time of purchase.
For this Fund, companies with small market capitalizations are those with market
capitalizations within the range of companies comprising the MSCI World ex-USA
Small Cap Index (as of November 30, 2020, this range was between approximately
$24.9 million and $8.3 billion).
The Fund may invest in equity securities regardless of style (growth or value).
The Fund invests primarily in foreign equity securities. The Fund typically
invests in foreign securities of more than 10 countries but has no limitation on
the percentage of assets that is invested in each country or denominated in any
currency. Primary consideration is given to securities of corporations of
developed areas, such as Japan, Western Europe, Canada, Australia, and New
Zealand.
Principal Risks
The value of your investment in the Fund changes with
the value of the Fund’s investments. Many factors affect that value, and it is
possible to lose money by investing in the Fund. An investment in the Fund is not a
deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. The
principal risks of investing in the Fund are listed below in alphabetical order
and not in order of significance.
Equity
Securities Risk.
A variety of factors can negatively impact the value of equity securities held
by a fund, including a decline in the issuer’s financial condition, unfavorable
performance of the issuer's sector or industry, or changes in response to
overall market and economic conditions. A fund's principal market segment(s)
(such as market capitalization or style) may underperform other market segments
or the equity markets as a whole.
•Growth
Style Risk.
Growth
investing entails the risk that if growth companies do not increase their
earnings at a rate expected by investors, the market price of their stock may
decline significantly, even if earnings show an absolute increase. Growth
company stocks also typically lack the dividend yield that can lessen price
declines in market downturns.
•Smaller
Companies Risk.
Investments in smaller companies may involve greater risk and price volatility
than investments in larger, more mature companies.
•Value
Style Risk. Value
investing entails the risk that value stocks may continue to be undervalued by
the market for extended periods, including the entire period during which the
stock is held by a fund, or the events that appears would cause the stock price
to increase may not occur as anticipated or at all. Moreover, a stock that
appears to be undervalued actually may be appropriately priced at a low level
and therefore would not be profitable for the fund.
Foreign
Currency Risk. Risks
of investing in securities denominated in, or that trade in, foreign (non-U.S.)
currencies include changes in foreign exchange rates and foreign exchange
restrictions.
Foreign
Securities Risk. The
risks of foreign securities include loss of value as a result of: political or
economic instability; nationalization, expropriation or confiscatory taxation;
settlement delays; and limited government regulation (including less stringent
reporting, accounting, and disclosure standards than are required of U.S.
companies).
Redemption
and Large Transaction Risk. Ownership
of the fund's shares may be concentrated in one or a
few large investors (such as funds of funds, institutional investors,
and asset allocation programs) that may redeem or purchase shares in large
quantities. These transactions may cause the fund to sell securities to meet
redemptions or to invest additional cash at times it would not otherwise do so,
which may result in increased transaction costs, increased expenses, changes to
expense ratios, and adverse effects to fund performance. Such transactions may
also accelerate the realization of taxable income if sales of portfolio
securities result in gains. Moreover, reallocations by large shareholders among
share classes of a fund may result in changes to the expense ratios of affected
classes, which may increase the expenses paid by shareholders of the class that
experienced the redemption.
Performance
The
following information provides some indication of the risks of investing in the
Fund. Past performance (before and
after taxes) is not necessarily an indication of how the Fund will perform in
the future. You may get updated performance information online
at www.principalfunds.com.
The
bar chart shows the investment returns of the Fund’s Class A shares for each
full calendar year of operations for 10 years (or, if shorter, the life of the
Fund). These annual returns do not reflect
sales charges on Class A shares; if they did, results would be
lower. The table shows for the last one, five, and ten calendar
year periods (or, if shorter, the life of the Fund), how the Fund’s average
annual total returns compare with those of one or more broad measures of market
performance.
Life
of Fund returns are measured from the date the Fund's shares were first sold
(June 11,
2014).
For
periods prior to the inception date of Institutional Class shares
(December 31, 2014)
and Class R-6 shares (January 3, 2017), the
performance shown in the table for these newer classes is that of the Fund's
Class A shares, adjusted to reflect the respective fees and expenses of each
class. However, where this adjustment for fees and expenses results in
performance for a newer class that is higher than the historical performance of
the Class A shares, the historical performance of the Class A shares is used
(without respect to sales charges, which do not apply to Institutional Class or
Class R-6 shares). These adjustments result in performance for such periods that
is no higher than the historical performance of the Class A shares, which were
first sold June 11, 2014.
Total Returns as of December 31
(1)
|
|
|
|
|
|
|
|
|
Highest return for a quarter during
the period of the bar chart above: |
Q1
2019 |
12.07% |
Lowest return for a quarter during
the period of the bar chart above: |
Q4
2018 |
(18.03)% |
(1)
The year-to-date return as of
September 30, 2020
was (7.41)% for Class A
shares.
|
|
|
|
|
|
|
|
|
|
|
|
Average Annual Total Returns For the
periods ended December 31, 2019 |
|
1 Year |
5
Years |
Life
of Fund |
Class A Return Before
Taxes |
19.16% |
6.89% |
4.44% |
Class A Return After Taxes on
Distributions |
18.49% |
6.02% |
3.66% |
Class A Return After Taxes on
Distributions and Sale of Fund Shares |
11.83% |
5.28% |
3.35% |
Institutional Class Return Before
Taxes |
26.69% |
8.50% |
5.79% |
Class R-6 Return Before
Taxes |
26.80% |
8.42% |
5.72% |
MSCI World ex USA Small Cap Index NTR
(reflects withholding taxes
on foreign dividends, but no deduction for fees, expenses, or other
taxes) |
25.41% |
8.17% |
5.24% |
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns
depend on an investor’s tax situation and may differ from those shown. The
after-tax returns shown are not relevant to investors who hold their Fund shares
through tax-deferred arrangements, such as 401(k) plans or individual retirement
accounts. After-tax returns are shown
for Class A shares only and would be different for the other share
classes.
Investment
Advisor and Portfolio Managers
Principal
Global Investors, LLC
•Tiffany
N. Lavastida (since 2014), Portfolio Manager
•Brian
W. Pattinson (since 2014), Portfolio Manager
Purchase
and Sale of Fund Shares
|
|
|
|
|
|
|
|
|
Share
Class |
Investment
Type |
Purchase
Minimum
Per
Fund |
A |
Initial
Investment |
$1,000(1) |
A |
Initial
Investment for accounts with an Automatic Investment Plan
(AIP) |
$100 |
A |
Subsequent
Investments |
$100(1)(2) |
Institutional
and R-6 |
There
are no minimum initial or subsequent investment requirements for eligible
purchasers. |
N/A |
(1)Some
exceptions apply; see "Purchase of Fund Shares - Minimum Investments" for more
information.
(2)For
accounts with an AIP, the subsequent automatic investments must total $1,200
annually if the initial $1,000 minimum has not been met.
You
may purchase or redeem shares on any business day (normally any day when the New
York Stock Exchange is open for regular trading) through your plan,
intermediary, or Financial Professional; by sending a written request to
Principal Funds at P.O. Box 219971, Kansas City, MO 64121-9971 (regular mail) or
430 W. 7th Street, Ste. 219971, Kansas City, MO 64105-1407 (overnight mail);
calling us at 1-800-222-5852; or accessing our website
(www.principalfunds.com).
Effective
as of the close of the New York Stock Exchange on January 6, 2021, Class A
shares will no longer be available for purchase except in limited circumstances.
Tax
Information
The
Fund’s distributions you receive are generally subject to federal income tax as
ordinary income or capital gain and may also be subject to state and local
taxes, unless you are tax-exempt or your account is tax-deferred in which case
your distributions would be taxed when withdrawn from the tax-deferred
account.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker-dealer or other financial intermediary
(such as a bank, insurance company, investment adviser, etc.), the Fund and its
related companies may pay the intermediary for the sale of Fund shares and
related services. These payments may create a conflict of interest by
influencing the broker-dealer or other intermediary and your salesperson to
recommend the Fund over another investment, or to recommend one share class of
the Fund over another share class. Ask your salesperson or visit your financial
intermediary's website for more information.
OPPORTUNISTIC MUNICIPAL FUND
Objective: The Fund seeks to provide a
high level of income that is exempt from federal income tax while protecting
investors’ capital.
Fees and Expenses of the
Fund
This
table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund. You may qualify for sales charge discounts
if you and your family invest, or agree to invest in the future, at least
$100,000 in Class A shares of Principal
Funds, Inc. More
information about these and other discounts is available from your financial
professional and in “Choosing a Share Class and The Costs of Investing”
beginning on page 112 of the Fund’s prospectus, Appendix C to the prospectus
titled "Intermediary-Specific Sales Charge Waivers and Reductions", and
“Multiple Class Structure” beginning on page 4 of the Fund’s Statement of
Additional Information.
If you purchase Institutional Class shares
through certain programs offered by certain financial intermediaries, you may be
required to pay a commission and/or other forms of compensation to the broker,
or to your Financial Professional or other financial
intermediary.
Shareholder Fees (fees paid directly from your
investment)
|
|
|
|
|
|
|
|
|
|
Share
Class |
|
A |
Inst. |
Maximum
Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) |
3.75% |
None |
Maximum
Deferred Sales Charge (Load) (as a percentage of the offering price or NAV
at the time Sales Load is paid, whichever is less) |
1.00% |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
|
|
|
|
|
|
|
|
|
|
Share
Class |
|
A |
Inst. |
Management
Fees |
0.50% |
0.50% |
Distribution
and/or Service (12b-1) Fees |
0.25% |
None |
Other
Expenses: |
|
|
Interest
Expenses |
0.07% |
0.07% |
Remainder
of Other Expenses |
0.17% |
0.16% |
Total
Other Expenses |
0.24% |
0.23% |
Total
Annual Fund Operating Expenses |
0.99% |
0.73% |
Fee
Waiver and Expense Reimbursement (1)(2)
|
(0.08)% |
(0.10)% |
Total
Annual Fund Operating Expenses after Fee Waiver and Expense
Reimbursement |
0.91% |
0.63% |
(1) Principal Global
Investors, LLC ("PGI"), the investment advisor, has contractually agreed to
limit the Fund’s Management Fees through the period ending December 30, 2021.
The fee waiver will reduce the Fund's Management Fees by 0.06% (expressed as a
percent of average net assets on an annualized basis). It is expected that the
fee waiver will continue through the period disclosed; however, Principal Funds,
Inc. and PGI, the parties to the agreement, may mutually agree to terminate the
fee waiver prior to the end of the period.
(2) Principal Global
Investors, LLC ("PGI"), the investment advisor, has contractually agreed to
limit the Fund’s expenses by paying, if necessary, expenses normally payable by
the Fund, (excluding interest expense, expenses related to fund investments,
acquired fund fees and expenses, and other extraordinary expenses) to maintain a
total level of operating expenses (expressed as a percent of average net assets
on an annualized basis) not to exceed 0.84% for Class A and 0.56% for
Institutional Class shares. It is expected that the expense limits will continue
through the period ending December 30,
2021; however, Principal Funds, Inc. and PGI,
the parties to the agreement, may mutually agree to terminate the expense limits
prior to the end of the period. Subject to applicable expense limits, the Fund
may reimburse PGI for expenses incurred during the current fiscal
year.
Example
This Example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other mutual funds.
The Example assumes that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. The calculation of costs takes into account any applicable
contractual fee waivers and/or expense reimbursements for the period noted in
the table above. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
Class
A |
$464 |
$671 |
$894 |
$1,536 |
Institutional
Class |
64 |
223 |
396 |
897 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
During
the most recent fiscal year, the Fund’s portfolio turnover rate was
76.6% of the average value of its
portfolio.
Principal Investment
Strategies
Under
normal circumstances, the Fund invests at least 80% of its net assets, plus any
borrowings for investment purposes, in municipal obligations (securities issued
by or on behalf of state or local governments and other public authorities).
Municipal obligations pay interest that is exempt from federal income tax. The
Fund has a flexible investment strategy and invests in obligations of any
duration and credit quality, including below investment grade bonds (sometimes
called “high yield bonds” or "junk bonds") which are rated at the time of
purchase Ba1 or lower by Moody's Investors Service, Inc. ("Moody's") and BB+ or
lower by S&P Global Ratings ("S&P Global") (if the bond has been rated
by only one of those agencies, that rating will determine whether the bond is
below investment grade; if the bond has not been rated by either of those
agencies, those selecting such investments will determine whether the bond is of
a quality comparable to those rated below investment grade). The Fund is not
managed to a particular maturity or duration.
The
Fund invests in other debt obligations, including (but not limited to) taxable
municipal obligations, U.S. Treasury securities, obligations of the U.S.
Government, its agencies and instrumentalities (“Agency Securities”) and
exchange-traded funds ("ETFs") to gain exposure to the municipal
market.
The Fund uses derivative instruments, such
as futures, for duration management purposes. A derivative is a financial
arrangement, the value of which is derived from, or based on, a traditional
security, asset, or market index. The Fund also invests in inverse floating rate
instruments, which are generally more volatile than other types of municipal
obligations and may involve leverage, to enhance investment
income.
Principal Risks
The value of your investment in the Fund changes with
the value of the Fund's investments. Many factors affect that value, and it is
possible to lose money by investing in the Fund. An investment in the Fund is not a
deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. The
principal risks of investing in the Fund are listed below in alphabetical order
and not in order of significance.
Counterparty
Risk. Counterparty
risk is the risk that the counterparty to a contract or other obligation will be
unable or unwilling to honor its obligations.
Derivatives
Risk.
Derivatives may not move in the direction anticipated by the portfolio manager.
Transactions in derivatives may increase volatility, cause the liquidation of
portfolio positions when not advantageous to do so and result in
disproportionate losses that may be substantially greater than a fund's initial
investment.
•Futures.
Futures
contracts involve specific risks, including: the imperfect correlation between
the change in market value of the instruments held by the fund and the price of
the futures contract; possible lack of a liquid secondary market for a futures
contract and the resulting inability to close a futures contract when desired;
counterparty risk; and if the fund has insufficient cash, it may have to sell
securities from its portfolio to meet daily variation margin
requirements.
Fixed-Income
Securities Risk.
Fixed-income securities are subject to interest rate, credit quality, and
liquidity risks. The market value of fixed-income securities generally declines
when interest rates rise and generally increases when interest rates fall.
Higher interest rates may adversely affect the liquidity of certain fixed-income
securities. Moreover, an issuer of fixed-income securities could default on its
payment obligations due to increased interest rates or for other reasons.
High
Yield Securities Risk.
High yield fixed-income securities (commonly referred to as "junk bonds") are
subject to greater credit quality risk than higher rated fixed-income securities
and should be considered speculative.
Inverse
Floating Rate Investments Risk.
Inverse floating rate investments are extremely sensitive to changes in interest
rates and in some cases their market value may be extremely
volatile.
Investment
Company Securities Risk. A
fund that invests in another investment company (for example, another fund or an
exchange-traded fund (“ETF”)) is subject to the risks associated with direct
ownership of the securities in which such investment company invests. Fund
shareholders indirectly bear their proportionate share of the expenses of each
such investment company.
Leverage
Risk.
Leverage created by borrowing or certain types of transactions or investments
may impair the fund’s liquidity, cause it to liquidate positions at an
unfavorable time, increase volatility of the fund’s net asset value, or diminish
the fund’s performance.
Municipal
Obligations Risk.
Principal and interest payments on municipal securities may not be guaranteed by
the issuing body and may be payable only from a particular source. That source
may not perform as expected and payment obligations may not be made or made on
time.
Portfolio
Duration Risk. Portfolio
duration is a measure of the expected life of a fixed-income security and its
sensitivity to changes in interest rates. The longer a fund's average portfolio
duration, the more sensitive the fund will be to changes in interest rates,
which means funds with longer average portfolio durations may be more volatile
than those with shorter durations.
Redemption
and Large Transaction Risk. Ownership
of the fund's shares may be concentrated in one or a
few large investors (such as funds of funds, institutional investors,
and asset allocation programs) that may redeem or purchase shares in large
quantities. These transactions may cause the fund to sell securities to meet
redemptions or to invest additional cash at times it would not otherwise do so,
which may result in increased transaction costs, increased expenses, changes to
expense ratios, and adverse effects to fund performance. Such transactions may
also accelerate the realization of taxable income if sales of portfolio
securities result in gains. Moreover, reallocations by large shareholders among
share classes of a fund may result in changes to the expense ratios of affected
classes, which may increase the expenses paid by shareholders of the class that
experienced the redemption.
U.S.
Government Securities Risk. Yields
available from U.S. government securities are generally lower than yields from
many other fixed-income securities.
U.S.
Government-Sponsored Securities Risk.
Securities issued by U.S. government-sponsored enterprises such as the Federal
Home Loan Mortgage Corporation, the Federal National Mortgage Association, and
the Federal Home Loan Banks are not issued or guaranteed by the U.S.
government.
Performance
The
following information provides some indication of the risks of investing in the
Fund. Past performance (before and
after taxes) is not necessarily an indication of how the Fund will perform in
the future. You may get updated performance information online
at www.principalfunds.com.
The
bar chart shows the investment returns of the Fund’s Class A shares for each
full calendar year of operations for 10 years (or, if shorter, the life of the
Fund). These annual returns do not reflect
sales charges on Class A shares; if they did, results would be
lower. The table shows for the last one, five, and ten calendar
year periods (or, if shorter, the life of the Fund), how the Fund’s average
annual total returns compare with those of one or more broad measures of market
performance.
Life
of Fund returns are measured from the date the Fund's shares were first sold
(June 14,
2012).
For periods prior to the inception date of
Institutional Class shares (March 10, 2015), the
performance shown in the table for Institutional Class shares is that of the
Fund's Class A shares, adjusted to reflect the fees and expenses of
Institutional Class shares. However, where this adjustment for fees and expenses
results in performance for the Institutional Class that is higher than the
historical performance of the Class A shares, the historical performance of the
Class A shares is used (without respect to sales charges, which does not apply
to Institutional Class). These adjustments result in performance for such
periods that is no higher than the historical performance of the Class A shares,
which were first sold June 14, 2012.
Total Returns as of December 31
(1)
|
|
|
|
|
|
|
|
|
Highest return for a quarter during
the period of the bar chart above: |
Q1
2014 |
6.17% |
Lowest return for a quarter during
the period of the bar chart above: |
Q4
2016 |
(6.58)% |
(1)
The year-to-date return as of
September 30, 2020
was 0.53% for Class A
shares.
|
|
|
|
|
|
|
|
|
|
|
|
Average Annual Total Returns For the
periods ended December 31, 2019 |
|
1 Year |
5
Year |
Life
of Fund |
Class A Return Before
Taxes |
6.42% |
4.71% |
4.94% |
Class A Return After Taxes on
Distributions |
6.42% |
4.71% |
4.93% |
Class A Return After Taxes on
Distributions and Sale of Fund Shares |
5.31% |
4.47% |
4.69% |
Institutional Class Return Before
Taxes |
10.89% |
5.80% |
5.65% |
Bloomberg Barclays Municipal Bond Index
(reflects no deduction for
fees, expenses, or taxes) |
7.54% |
3.53% |
3.58% |
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns
depend on an investor’s tax situation and may differ from those shown. The
after-tax returns shown are not relevant to investors who hold their Fund shares
through tax-deferred arrangements, such as 401(k) plans or individual retirement
accounts. After-tax returns are shown
for Class A shares only and would be different for the other share
classes.
Investment
Advisor and Portfolio Managers
Principal
Global Investors, LLC
• James
Noble (since 2012), Portfolio Manager
• James
Welch (since 2014), Portfolio Manager
Purchase
and Sale of Fund Shares
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|
Share
Class |
Investment
Type |
Purchase
Minimum
Per
Fund |
A
|
Initial
Investment |
$1,000(1) |
A
|
Initial
Investment for accounts with an Automatic Investment Plan
(AIP) |
$100 |
A
|
Subsequent
Investments |
$100(1)(2) |
Institutional |
There
are no minimum initial or subsequent investment requirements for eligible
purchasers. |
N/A |
(1)
Some exceptions apply; see "Purchase of Fund Shares - Minimum Investments" for
more information.
(2)
For accounts with an AIP, the subsequent automatic investments must total $1,200
annually if the initial $1,000 minimum has not been met.
You
may purchase or redeem shares on any business day (normally any day when the New
York Stock Exchange is open for regular trading) through your plan,
intermediary, or Financial Professional; by sending a written request to
Principal Funds at P.O. Box 219971, Kansas City, MO 64121-9971 (regular mail) or
430 W. 7th Street, Ste. 219971, Kansas City, MO 64105-1407 (overnight mail);
calling us at 1-800-222-5852; or accessing our website
(www.principalfunds.com).
Tax
Information
While
the Fund intends to distribute income that is exempt from regular federal and
possibly some state income taxes, a portion of the Fund’s distributions may be
subject to federal income taxes or to the federal individual alternative minimum
tax. A portion of the Fund’s distributions likely will be subject to state
income taxes depending on the state’s rules.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker-dealer or other financial intermediary
(such as a bank, insurance company, investment adviser, etc.), the Fund and its
related companies may pay the intermediary for the sale of Fund shares and
related services. These payments may create a conflict of interest by
influencing the broker-dealer or other intermediary and your salesperson to
recommend the Fund over another investment, or to recommend one share class of
the Fund over another share class. Ask your salesperson or visit your financial
intermediary’s website for more information.
ORIGIN EMERGING MARKETS
FUND
Objective: The Fund seeks long-term
growth of capital.
Fees and Expenses of the
Fund
This
table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund. You may qualify for sales charge discounts
if you and your family invest, or agree to invest in the future, at least
$50,000 in Class A shares of Principal
Funds, Inc.
More information about these and other discounts is available from your
financial professional and in “Choosing a Share Class and The Costs of
Investing” beginning on page 112 of the Fund’s prospectus, Appendix C to the
prospectus titled "Intermediary-Specific Sales Charge Waivers and Reductions",
and “Multiple Class Structure” beginning on page 4 of the Fund’s Statement of
Additional Information.
If you purchase Institutional Class or
Class R-6 shares through certain programs offered by certain financial
intermediaries, you may be required to pay a commission and/or other forms of
compensation to the broker, or to your Financial Professional or other financial
intermediary.
Shareholder Fees (fees paid directly from your
investment)
|
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|
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|
|
|
|
|
Share
Class |
|
A |
Inst. |
R-6 |
Maximum
Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) |
5.50% |
None |
None |
Maximum
Deferred Sales Charge (Load) (as a percentage of the offering price or NAV
at the time Sales Load is paid, whichever is less) |
1.00% |
None |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
Class |
|
A |
Inst. |
R-6 |
Management
Fees (1) |
1.03% |
1.03% |
1.03% |
Distribution
and/or Service (12b-1) Fees |
0.25% |
None |
None |
Other
Expenses |
1.28% |
0.26% |
0.04% |
Total
Annual Fund Operating Expenses |
2.56% |
1.29% |
1.07% |
Expense
Reimbursement (2) |
(0.96)% |
(0.09)% |
—% |
Total
Annual Fund Operating Expenses after Expense Reimbursement |
1.60% |
1.20% |
1.07% |
(1) Fees have been restated to reflect
current fees.
(2) Principal Global
Investors, LLC ("PGI"), the investment advisor, has contractually agreed to
limit the Fund’s expenses by paying, if necessary, expenses normally payable by
the Fund, (excluding interest expense, expenses related to fund investments,
acquired fund fees and expenses, and other extraordinary expenses) to maintain a
total level of operating expenses (expressed as a percent of average net assets
on an annualized basis) not to exceed 1.60% for Class A and 1.20% for
Institutional Class shares. In addition, for Class R-6, the expense limit will
maintain "Other Expenses" (expressed as a percent of average net assets on an
annualized basis) not to exceed 0.04%, (excluding interest expense, expenses
related to fund investments, acquired fund fees and expenses, and other
extraordinary expenses). It is expected that the expense limits will continue
through the period ending December 30,
2021; however, Principal Funds,
Inc. and PGI, the parties to the agreement, may mutually agree to terminate the
expense limits prior to the end of the period. Subject to applicable expense
limits, the Fund may reimburse PGI for expenses incurred during the current
fiscal year.
Example
This Example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other mutual funds.
The Example assumes that you invest
$10,000 in the Fund for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Fund’s operating
expenses remain the same. The calculation of costs takes into account any
applicable contractual fee waivers and/or expense reimbursements for the period
noted in the table above. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
Class
A |
$704 |
$1,216 |
$1,754 |
$3,218 |
Institutional
Class |
122 |
400 |
699 |
1,549 |
Class
R-6 |
109 |
340 |
590 |
1,306 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
During
the most recent fiscal year, the Fund’s portfolio turnover rate was
72.9% of the average value of its
portfolio.
Principal Investment
Strategies
Under
normal circumstances, the Fund invests at least 80% of its net assets, plus any
borrowings for investment purposes, in equity securities of emerging market
companies at the time of purchase. The Fund considers a security to be tied
economically to an emerging market (an “emerging market security”) if the issuer
of the security has its principal place of business or principal office in an
emerging market, has its principal securities trading market in an emerging
market, or derives a majority of its revenue from emerging
markets.
"Emerging
market" means any market which is considered to be an emerging market by the
international financial community (including the MSCI Emerging Markets Index or
Bloomberg Barclays Emerging Markets USD Aggregate Bond Index). The Fund invests
in equity securities of small, medium, and large market capitalization companies
and in growth and value stocks.
Principal Risks
The value of your investment in the Fund changes with
the value of the Fund's investments. Many factors affect that value, and it is
possible to lose money by investing in the Fund. An investment in the Fund is not a
deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. The
principal risks of investing in the Fund are listed below in alphabetical order
and not in order of significance.
Emerging
Markets Risk. Investments
in emerging markets may have more risk than those in developed markets because
the emerging markets are less developed and more illiquid. Emerging markets can
also be subject to increased social, economic, regulatory, and political
uncertainties and can be extremely volatile. The U.S. Securities and Exchange
Commission, the U.S. Department of Justice, and other U.S. authorities may be
limited in their ability to pursue bad actors in emerging markets, including
with respect to fraud.
•China
Investment Risk.
The Fund invests a significant portion of its assets in securities of issuers
located or operating in China. Investing in China involves certain
heightened risks and considerations, including, among others: frequent trading
suspensions and government interventions (including by nationalizing assets);
currency exchange rate fluctuations or blockages; limits on using brokers and on
foreign ownership; different financial reporting standards; higher dependence on
exports and international trade; political and social instability; infectious
disease outbreaks; regional and global conflicts; increased trade tariffs,
embargoes and other trade limitations; custody and other risks associated with
programs used to access Chinese securities; and uncertainties in tax rules that
could result in unexpected tax liabilities for the Fund. Significant portions of
the Chinese securities markets may become rapidly illiquid, as Chinese issuers
have the ability to suspend the trading of their equity securities. Moreover,
actions by the U.S. government, such as delisting of certain Chinese companies
from U.S. securities exchanges or otherwise restricting their operations in the
U.S., may negatively impact the value of such securities held by the
funds.
Equity
Securities Risk.
A variety of factors can negatively impact the value of equity securities held
by a fund, including a decline in the issuer’s financial condition, unfavorable
performance of the issuer's sector or industry, or changes in response to
overall market and economic conditions. A fund's principal market segment(s)
(such as market capitalization or style) may underperform other market segments
or the equity markets as a whole.
•Growth
Style Risk.
Growth
investing entails the risk that if growth companies do not increase their
earnings at a rate expected by investors, the market price of their stock may
decline significantly, even if earnings show an absolute increase. Growth
company stocks also typically lack the dividend yield that can lessen price
declines in market downturns.
•Smaller
Companies Risk.
Investments in smaller companies may involve greater risk and price volatility
than investments in larger, more mature companies.
•Value
Style Risk. Value
investing entails the risk that value stocks may continue to be undervalued by
the market for extended periods, including the entire period during which the
stock is held by a fund, or the events that appears would cause the stock price
to increase may not occur as anticipated or at all. Moreover, a stock that
appears to be undervalued actually may be appropriately priced at a low level
and therefore would not be profitable for the fund.
Foreign
Currency Risk.
Risks of investing in securities denominated in, or that trade in, foreign
(non-U.S.) currencies include changes in foreign exchange rates and foreign
exchange restrictions.
Foreign
Securities Risk.
The risks of foreign securities include loss of value as a result of: political
or economic instability; nationalization, expropriation or confiscatory
taxation; settlement delays; and limited government regulation (including less
stringent reporting, accounting, and disclosure standards than are required of
U.S. companies).
Redemption
and Large Transaction Risk. Ownership
of the fund's shares may be concentrated in one or a
few large investors (such as funds of funds, institutional investors,
and asset allocation programs) that may redeem or purchase shares in large
quantities. These transactions may cause the fund to sell securities to meet
redemptions or to invest additional cash at times it would not otherwise do so,
which may result in increased transaction costs, increased expenses, changes to
expense ratios, and adverse effects to fund performance. Such transactions may
also accelerate the realization of taxable income if sales of portfolio
securities result in gains. Moreover, reallocations by large shareholders among
share classes of a fund may result in changes to the expense ratios of affected
classes, which may increase the expenses paid by shareholders of the class that
experienced the redemption.
Performance
The
following information provides some indication of the risks of investing in the
Fund. Past performance (before and
after taxes) is not necessarily an indication of how the Fund will perform in
the future. You may get updated performance information online
at www.principalfunds.com.
The
bar chart shows the investment returns of the Fund’s Class A shares for each
full calendar year of operations for 10 years (or, if shorter, the life of the
Fund). These annual returns do not reflect
sales charges on Class A shares; if they did, results would be
lower. The table shows for the last one, five, and ten calendar
year periods (or, if shorter, the life of the Fund), how the Fund’s average
annual total returns compare with those of one or more broad measures of market
performance.
Life
of Fund returns are measured from the date the Fund's shares were first sold
(January 23,
2015).
During
2015, Class A experienced a significant withdrawal of monies by an affiliate. As
the remaining shareholders held relatively small positions, the total return
amounts expressed herein are greater than those that would have been experienced
without the withdrawal.
Total Returns as of December 31
(1)
|
|
|
|
|
|
|
|
|
Highest return for a quarter during
the period of the bar chart above: |
Q1
2017 |
15.13% |
Lowest return for a quarter during
the period of the bar chart above: |
Q4
2018 |
(14.12)% |
(1)
The year-to-date return as of
September 30, 2020
was 4.35% for Class A
shares.
|
|
|
|
|
|
|
|
|
|
|
|
Average Annual Total Returns For the
periods ended December 31, 2019 |
|
1 Year |
Life
of Fund |
|
|
|
|
Class A Return Before
Taxes |
18.77% |
2.91% |
(1) |
Class A Return After Taxes on
Distributions |
18.43% |
2.90% |
(1) |
Class A Return After Taxes on
Distributions and Sale of Fund Shares |
11.37% |
2.40% |
(1) |
Institutional Class Return Before
Taxes |
26.24% |
4.19% |
|
Class R-6 Return Before
Taxes |
26.36% |
4.21% |
|
MSCI Emerging Markets Index NTR
(reflects withholding taxes
on foreign dividends, but no deduction for fees, expenses, or other
taxes) |
18.42% |
4.92% |
|
(1)
During 2015, the Class
experienced a significant withdrawal of monies by an affiliate. As the remaining
shareholders held relatively small positions, the total return amounts expressed
herein are greater than those that would have been experienced without the
withdrawal.
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns
depend on an investor’s tax situation and may differ from those shown. The
after-tax returns shown are not relevant to investors who hold their Fund shares
through tax-deferred arrangements, such as 401(k) plans or individual retirement
accounts. After-tax returns are shown
for Class A shares only and would be different for the other share
classes.
Investment
Advisor
Principal
Global Investors, LLC
Sub-Advisor
and Portfolio Managers
Origin
Asset Management LLP
• Chris
Carter (since 2015), Partner
• Nigel
Dutson (since 2015), Partner
• Tarlock
Randhawa (since 2015), Partner
Purchase
and Sale of Fund Shares
|
|
|
|
|
|
|
|
|
Share
Class |
Investment
Type |
Purchase
Minimum
Per
Fund |
A |
Initial
Investment |
$1,000(1) |
A |
Initial
Investment for accounts with an Automatic Investment Plan
(AIP) |
$100 |
A |
Subsequent
Investments |
$100(1)(2) |
Institutional
and R-6 |
There
are no minimum initial or subsequent investment requirements for eligible
purchasers. |
N/A |
(1)
Some exceptions apply; see "Purchase of Fund Shares - Minimum Investments" for
more information.
(2)
For accounts with an AIP, the subsequent automatic investments must total $1,200
annually if the initial $1,000 minimum has not been met.
You
may purchase or redeem shares on any business day (normally any day when the New
York Stock Exchange is open for regular trading) through your plan,
intermediary, or Financial Professional; by sending a written request to
Principal Funds at P.O. Box 219971, Kansas City, MO 64121-9971 (regular mail) or
430 W. 7th Street, Ste. 219971, Kansas City, MO 64105-1407 (overnight mail);
calling us at 1-800-222-5852; or accessing our website
(www.principalfunds.com).
Tax
Information
The
Fund’s distributions you receive are generally subject to federal income tax as
ordinary income or capital gain and may also be subject to state and local
taxes, unless you are tax-exempt or your account is tax-deferred in which case
your distributions would be taxed when withdrawn from the tax-deferred
account.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker-dealer or other financial intermediary
(such as a bank, insurance company, investment adviser, etc.), the Fund and its
related companies may pay the intermediary for the sale of Fund shares and
related services. These payments may create a conflict of interest by
influencing the broker-dealer or other intermediary and your salesperson to
recommend the Fund over another investment, or to recommend one share class of
the Fund over another share class. Ask your salesperson or visit your financial
intermediary's website for more information.
SMALL-MIDCAP DIVIDEND INCOME
FUND
Objective: The Fund seeks to provide
current income and long-term growth of income and
capital.
Fees and Expenses of the
Fund
This
table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund. You may qualify for sales charge discounts
if you and your family invest, or agree to invest in the future, at least
$50,000 in Class A shares of Principal
Funds, Inc. More
information about these and other discounts is available from your financial
professional and in “Choosing a Share Class and The Costs of Investing”
beginning on page 112 of the Fund’s prospectus, Appendix C to the prospectus
titled "Intermediary-Specific Sales Charge Waivers and Reductions", and
“Multiple Class Structure” beginning on page 4 of the Fund’s Statement of
Additional Information.
If you purchase Institutional Class or
Class R-6 shares through certain programs offered by certain financial
intermediaries, you may be required to pay a commission and/or other forms of
compensation to the broker, or to your Financial Professional or other financial
intermediary.
Shareholder Fees (fees paid directly from your
investment)
|
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|
|
|
|
|
|
Share
Class |
|
A |
C |
Inst. |
R-6 |
Maximum
Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) |
5.50% |
None |
None |
None |
Maximum
Deferred Sales Charge (Load) (as a percentage of the offering price or NAV
at the time Sales Load is paid, whichever is less) |
1.00% |
1.00% |
None |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
Class |
|
A |
C |
Inst. |
R-6 |
Management
Fees |
0.77% |
0.77% |
0.77% |
0.77% |
Distribution
and/or Service (12b-1) Fees |
0.25% |
1.00% |
None |
None |
Other
Expenses |
0.16% |
0.16% |
0.13% |
0.22% |
Total
Annual Fund Operating Expenses |
1.18% |
1.93% |
0.90% |
0.99% |
Expense
Reimbursement (1)
|
(0.06)% |
(0.06)% |
(0.05)% |
(0.20)% |
Total
Annual Fund Operating Expenses after Expense Reimbursement |
1.12% |
1.87% |
0.85% |
0.79% |
(1) Principal Global
Investors, LLC ("PGI"), the investment advisor, has contractually agreed to
limit the Fund’s expenses by paying, if necessary, expenses normally payable by
the Fund, (excluding interest expense, expenses related to fund investments,
acquired fund fees and expenses, and other extraordinary expenses) to maintain a
total level of operating expenses (expressed as a percent of average net assets
on an annualized basis) not to exceed 1.12% for Class A, 1.87% for Class C and
0.85% for Institutional Class shares. In addition, for Class R-6, the expense
limit will maintain "Other Expenses" (expressed as a percent of average net
assets on an annualized basis) not to exceed 0.02%, (excluding interest expense,
expenses related to fund investments, acquired fund fees and expenses, and other
extraordinary expenses). It is expected that the expense limits will continue
through the period ending December 30,
2021; however,
Principal Funds, Inc. and PGI, the parties to the agreement, may mutually agree
to terminate the expense limits prior to the end of the period. Subject to
applicable expense limits, the Fund may reimburse PGI for expenses incurred
during the current fiscal year.
Example
This Example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other mutual funds.
The Example assumes that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. The calculation of costs takes into account any applicable
contractual fee waivers and/or expense reimbursements for the period noted in
the table above. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
Class
A |
$658 |
$899 |
$1,158 |
$1,898 |
Class
C |
290 |
600 |
1,036 |
2,249 |
Institutional
Class |
87 |
282 |
494 |
1,103 |
Class
R-6 |
81 |
295 |
528 |
1,195 |
With respect to Class C
shares, you would pay the following expenses if you did not redeem your shares
(all other classes would be the same as in the above
example):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
Class
C |
$190 |
$600 |
$1,036 |
$2,249 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s
performance.
During the most recent fiscal year, the Fund's portfolio turnover rate was
28.9% of the average value of its
portfolio.
Principal Investment
Strategies
Under
normal circumstances, the Fund invests at least 80% of its net assets, plus any
borrowings for investment purposes, in dividend-paying equity securities of
companies with small to medium market capitalizations at the time of purchase.
For this Fund, companies with small to medium market capitalizations are those
with market capitalizations similar to companies in the Russell 2500 Value Index
(as of November 30, 2020, the range of the index was between approximately $27.6
million and $24.7 billion).
The Fund invests in value equity securities, which emphasizes buying equity
securities that appear to be undervalued. The Fund invests in growth equity
securities, which emphasizes buying equity securities of companies whose
potential for growth of capital and earnings is expected to be above average.
The Fund's investments include the securities of foreign issuers and real estate
investment trusts.
Principal Risks
The value of your investment in the Fund changes with
the value of the Fund's investments. Many factors affect that value, and it is
possible to lose money by investing in the Fund. An investment in the Fund is not a
deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. The
principal risks of investing in the Fund are listed below in alphabetical order
and not in order of significance.
Equity
Securities Risk.
A variety of factors can negatively impact the value of equity securities held
by a fund, including a decline in the issuer’s financial condition, unfavorable
performance of the issuer's sector or industry, or changes in response to
overall market and economic conditions. A fund's principal market segment(s)
(such as market capitalization or style) may underperform other market segments
or the equity markets as a whole.
•Growth
Style Risk.
Growth
investing entails the risk that if growth companies do not increase their
earnings at a rate expected by investors, the market price of their stock may
decline significantly, even if earnings show an absolute increase. Growth
company stocks also typically lack the dividend yield that can lessen price
declines in market downturns.
•Smaller
Companies Risk.
Investments in smaller companies may involve greater risk and price volatility
than investments in larger, more mature companies.
•Value
Style Risk. Value
investing entails the risk that value stocks may continue to be undervalued by
the market for extended periods, including the entire period during which the
stock is held by a fund, or the events that appears would cause the stock price
to increase may not occur as anticipated or at all. Moreover, a stock that
appears to be undervalued actually may be appropriately priced at a low level
and therefore would not be profitable for the fund.
Foreign
Currency Risk. Risks
of investing in securities denominated in, or that trade in, foreign (non-U.S.)
currencies include changes in foreign exchange rates and foreign exchange
restrictions.
Foreign
Securities Risk.
The risks of foreign securities include loss of value as a result of: political
or economic instability; nationalization, expropriation or confiscatory
taxation; settlement delays; and limited government regulation (including less
stringent reporting, accounting, and disclosure standards than are required of
U.S. companies).
Real
Estate Investment Trusts (“REITs”) Risk. In
addition to risks associated with investing in real estate securities, REITs are
dependent upon management skills, are not diversified, and are subject to heavy
cash flow dependency, risks of default by borrowers, and self-liquidation.
Investment in REITs also involves risks similar to risks of investing in small
market capitalization companies, such as limited financial resources, less
frequent and limited volume trading, and may be subject to more abrupt or
erratic price movements than larger company securities. A REIT could fail to
qualify for tax-free pass-through of income under the Internal Revenue Code.
Fund shareholders will indirectly bear their proportionate share of the expenses
of REITs in which the fund invests.
Real
Estate Securities Risk.
Investing in real estate securities subjects the fund to the risks associated
with the real estate market (which are similar to the risks associated with
direct ownership in real estate), including declines in real estate values, loss
due to casualty or condemnation, property taxes, interest rate changes,
increased expenses, cash flow of underlying real estate assets, regulatory
changes (including zoning, land use and rents), and environmental problems, as
well as to the risks related to the management skill and creditworthiness of the
issuer.
Redemption
and Large Transaction Risk. Ownership
of the fund's shares may be concentrated in one or a
few large investors (such as funds of funds, institutional investors,
and asset allocation programs) that may redeem or purchase shares in large
quantities. These transactions may cause the fund to sell securities to meet
redemptions or to invest additional cash at times it would not otherwise do so,
which may result in increased transaction costs, increased expenses, changes to
expense ratios, and adverse effects to fund performance. Such transactions may
also accelerate the realization of taxable income if sales of portfolio
securities result in gains. Moreover, reallocations by large shareholders among
share classes of a fund may result in changes to the expense ratios of affected
classes, which may increase the expenses paid by shareholders of the class that
experienced the redemption.
Performance
The
following information provides some indication of the risks of investing in the
Fund. Past performance (before and
after taxes) is not necessarily an indication of how the Fund will perform in
the future. You may get updated performance information online
at www.principalfunds.com.
The
bar chart shows the investment returns of the Fund’s Class A shares for each
full calendar year of operations for 10 years (or, if shorter, the life of the
Fund). These annual returns do not reflect
sales charges on Class A shares; if they did, results would be
lower. The table shows for the last one, five, and ten calendar
year periods (or, if shorter, the life of the Fund), how the Fund’s average
annual total returns compare with those of one or more broad measures of market
performance.
Life
of Fund returns are measured from the date the Fund's shares were first sold
(June 6,
2011).
For
periods prior to the inception date of Class C shares (June 14, 2012) and
Class R-6 shares (January 3, 2017), the
performance shown in the table for these newer classes is that of the Fund's
Institutional Class shares, adjusted to reflect the respective fees and expenses
of each class. However, where this adjustment for fees and expenses results in
performance for a newer class that is higher than the historical performance of
the Institutional Class shares, the historical performance of the Institutional
Class shares is used. These adjustments result in performance for such periods
that is no higher than the historical performance of the Institutional Class
shares, which were first sold on June 6, 2011.
Total Returns as of December 31
(1)
|
|
|
|
|
|
|
|
|
Highest return for a quarter during
the period of the bar chart above: |
Q1
2013 |
12.32% |
Lowest return for a quarter during
the period of the bar chart above: |
Q4
2018 |
(16.19)% |
(1)
The year-to-date return as of
September 30, 2020
was (25.30)% for Class A
shares.
|
|
|
|
|
|
|
|
|
|
|
|
Average Annual Total Returns For the
periods ended December 31, 2019 |
|
1 Year |
5
Year |
Life
of Fund |
Class A Return Before
Taxes |
18.15% |
7.51% |
10.09% |
Class A Return After Taxes on
Distributions |
17.40% |
5.86% |
8.65% |
Class A Return After Taxes on
Distributions and Sale of Fund Shares |
11.23% |
5.57% |
7.86% |
Class C Return Before
Taxes |
23.06% |
7.91% |
9.94% |
Institutional Class Return Before
Taxes |
25.39% |
9.06% |
11.22% |
Class R-6 Return Before
Taxes |
25.43% |
9.11% |
11.20% |
Russell 2500 Value Index (reflects no deduction for
fees, expenses, or taxes) |
23.56% |
7.18% |
9.99% |
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns
depend on an investor’s tax situation and may differ from those shown. The
after-tax returns shown are not relevant to investors who hold their Fund shares
through tax-deferred arrangements, such as 401(k) plans or individual retirement
accounts. After-tax returns are shown
for Class A shares only and would be different for the other share
classes.
Investment
Advisor and Portfolio Managers
Principal
Global Investors, LLC
•Daniel
R. Coleman (since 2011), Portfolio Manager
•Sarah
E. Radecki (since 2018), Portfolio Manager
•David
W. Simpson (since 2011), Portfolio Manager
Purchase
and Sale of Fund Shares
|
|
|
|
|
|
|
|
|
Share
Class |
Investment
Type |
Purchase
Minimum
Per
Fund |
A
and C |
Initial
Investment |
$1,000(1) |
A
and C |
Initial
Investment for accounts with an Automatic Investment Plan
(AIP) |
$100 |
A
and C |
Subsequent
Investments |
$100(1)(2) |
Institutional
and R-6 |
There
are no minimum initial or subsequent investment requirements for eligible
purchasers. |
N/A |
(1)
Some
exceptions apply; see "Purchase of Fund Shares - Minimum Investments" for more
information.
(2)
For
accounts with an AIP, the subsequent automatic investments must total $1,200
annually if the initial $1,000 minimum has not been met.
You
may purchase or redeem shares on any business day (normally any day when the New
York Stock Exchange is open for regular trading) through your plan,
intermediary, or Financial Professional; by sending a written request to
Principal Funds at P.O. Box 219971, Kansas City, MO 64121-9971 (regular mail) or
430 W. 7th Street, Ste. 219971, Kansas City, MO 64105-1407 (overnight mail);
calling us at 1-800-222-5852; or accessing our website
(www.principalfunds.com).
Class
C shares are subject to a 10-year automatic conversion plan whereby Class C
shares held for ten years after purchase will automatically convert to Class A
shares of the same Fund. See “Purchase of Fund Shares” in the Prospectus for
more information.
Tax
Information
The
Fund’s distributions you receive are generally subject to federal income tax as
ordinary income or capital gain and may also be subject to state and local
taxes, unless you are tax-exempt or your account is tax-deferred in which case
your distributions would be taxed when withdrawn from the tax-deferred
account.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker-dealer or other financial intermediary
(such as a bank, insurance company, investment adviser, etc.), the Fund and its
related companies may pay the intermediary for the sale of Fund shares and
related services. These payments may create a conflict of interest by
influencing the broker-dealer or other intermediary and your salesperson to
recommend the Fund over another investment, or to recommend one share class of
the Fund over another share class. Ask your salesperson or visit your financial
intermediary's website for more information.
SMALL-MIDCAP GROWTH
FUND
Objective: The Fund seeks long-term
growth of capital.
Fees and Expenses of the
Fund
This table describes the fees
and expenses that you may pay if you buy and hold shares of the Fund.
If you purchase Institutional Class shares
through certain programs offered by certain financial intermediaries, you may be
required to pay a commission and/or other forms of compensation to the broker,
or to your Financial Professional or other financial
intermediary.
Shareholder Fees (fees paid directly from your
investment): None
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
|
|
|
|
|
|
|
Share
Class |
|
Inst. |
Management
Fees |
0.70% |
Other
Expenses |
0.97% |
Total
Annual Fund Operating Expenses |
1.67% |
Expense
Reimbursement (1) |
(0.84)% |
Total
Annual Fund Operating Expenses after Expense Reimbursement |
0.83% |
(1) Principal Global
Investors, LLC ("PGI"), the investment advisor, has contractually agreed to
limit the Fund’s expenses by paying, if necessary, expenses normally payable by
the Fund, (excluding interest expense, expenses related to fund investments,
acquired fund fees and expenses, and other extraordinary expenses) to maintain a
total level of operating expenses (expressed as a percent of average net assets
on an annualized basis) not to exceed 0.83% for Institutional Class shares. It
is expected that the expense limit will continue through the period ending
December 30,
2021; however, Principal Funds, Inc. and PGI, the parties to the
agreement, may mutually agree to terminate the expense limit prior to the end of
the period. Subject to applicable expense limits, the Fund may reimburse PGI for
expenses incurred during the current fiscal year.
Example
This Example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other mutual funds.
The Example assumes that you invest
$10,000 in the Fund for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Fund’s operating
expenses remain the same. The calculation of costs takes into account any
applicable contractual fee waivers and/or expense reimbursements for the period
noted in the table above. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
Institutional
Class |
$85 |
$444 |
$828 |
$1,906 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
During
the most recent fiscal year, the Fund's portfolio turnover rate was
134.3% of the average value of its
portfolio.
Principal Investment
Strategies
Under
normal circumstances, the Fund invests at least 80% of its net assets, plus any
borrowings for investment purposes, in equity securities of companies with small
to medium market capitalizations at the time of purchase. For
this Fund, companies with small to medium market capitalizations are those with
market capitalizations within the range of companies in the Russell 2500 Growth
Index (as of November 30, 2020, this range was between approximately $31.5
million and $25.6 billion). The
Fund invests in growth equity securities, which emphasizes buying equity
securities of companies whose potential for growth of capital and earnings is
expected to be above average. To identify such companies, those managing the
Fund’s investments use leading indicators of company-specific business trends
(which can include various leading economic indicators such as unemployment
claims and energy prices) to determine a company’s potential for growth and
earnings to exceed analyst’s current estimates. The Fund actively trades
portfolio securities.
Principal Risks
The value of your investment in the Fund changes with
the value of the Fund's investments. Many factors affect that value, and it is
possible to lose money by investing in the Fund. An investment in the Fund is not a
deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. The
principal risks of investing in the Fund are listed below in alphabetical order
and not in order of significance.
Equity
Securities Risk.
A variety of factors can negatively impact the value of equity securities held
by a fund, including a decline in the issuer’s financial condition, unfavorable
performance of the issuer's sector or industry, or changes in response to
overall market and economic conditions. A fund's principal market segment(s)
(such as market capitalization or style) may underperform other market segments
or the equity markets as a whole.
•Growth
Style Risk.
Growth
investing entails the risk that if growth companies do not increase their
earnings at a rate expected by investors, the market price of their stock may
decline significantly, even if earnings show an absolute increase. Growth
company stocks also typically lack the dividend yield that can lessen price
declines in market downturns.
•Smaller
Companies Risk.
Investments in smaller companies may involve greater risk and price volatility
than investments in larger, more mature companies.
Portfolio
Turnover (Active Trading) Risk. High
portfolio turnover (more than 100%) caused by actively trading portfolio
securities may result in accelerating the realization of taxable gains and
losses, lower fund performance and increased brokerage costs.
Redemption
and Large Transaction Risk. Ownership
of the fund's shares may be concentrated in one or a
few large investors (such as funds of funds, institutional investors,
and asset allocation programs) that may redeem or purchase shares in large
quantities. These transactions may cause the fund to sell securities to meet
redemptions or to invest additional cash at times it would not otherwise do so,
which may result in increased transaction costs, increased expenses, changes to
expense ratios, and adverse effects to fund performance. Such transactions may
also accelerate the realization of taxable income if sales of portfolio
securities result in gains. Moreover, reallocations by large shareholders among
share classes of a fund may result in changes to the expense ratios of affected
classes, which may increase the expenses paid by shareholders of the class that
experienced the redemption.
Performance
No performance information is shown because
the Fund has not yet had a calendar year of performance. The
Fund's performance is benchmarked against the Russell 2500 Growth Index.
Performance
information provides some indication of the risks of investing in the
Fund. Past performance (before and
after taxes) is not necessarily an indication of how the Fund will perform in
the future. You may get updated performance information online
at www.principalfunds.com.
Investment
Advisor and Portfolio Managers
Principal
Global Investors, LLC
•Christopher
T. Corbett (since 2019), Portfolio Manager
•Michael
Iacono (since 2019), Co-Portfolio Manager
•Marc
R. Shapiro (since 2020), Co-Portfolio Manager
Purchase
and Sale of Fund Shares
|
|
|
|
|
|
|
|
|
Share
Class |
Investment
Type |
Purchase
Minimum Per Fund |
Institutional |
There
are no minimum initial or subsequent investment requirements for eligible
purchasers. |
N/A |
You
may purchase or redeem shares on any business day (normally any day when the New
York Stock Exchange is open for regular trading), through your plan,
intermediary, or Financial Professional; by sending a written request to
Principal Funds at P.O. Box 219971, Kansas City, MO 64121-9971 (regular mail) or
430 W. 7th Street, Ste. 219971, Kansas City, MO 64105-1407 (overnight mail);
calling us at 1-800-222-5852; or accessing our website
(www.principalfunds.com).
Tax
Information
The
Fund’s distributions you receive are generally subject to federal income tax as
ordinary income or capital gain and may also be subject to state and local
taxes, unless you are tax-exempt or your account is tax-deferred in which case
your distributions would be taxed when withdrawn from the tax-deferred
account.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker-dealer or other financial intermediary
(such as a bank, insurance company, investment adviser, etc.), the Fund and its
related companies may pay the intermediary for the sale of Fund shares and
related services. These payments may create a conflict of interest by
influencing the broker-dealer or other intermediary and your salesperson to
recommend the Fund over another investment, or to recommend one share class of
the Fund over another share class. Ask your salesperson or visit your financial
intermediary's website for more information.
SPECTRUM PREFERRED AND CAPITAL SECURITIES INCOME
FUND
CONVERSION
NOTICE: On
September 15, 2020, the Fund’s Board of Directors approved the conversion of
Class R-2 shares into Class R-3 shares. Following the close of business on
March 1, 2021, Class R-2 shares will automatically convert into Class R-3 shares
of the same Fund on the basis of the share classes’ relative net asset values on
such date without the imposition of a sales charge or any other charge. The Fund
expects these share class conversions will not constitute taxable sales or
exchanges to shareholders. At such time, delete references to Class R-2
shares from this prospectus.
Objective: The Fund seeks to provide
current income.
Fees and Expenses of the
Fund
This
table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund. You may qualify for sales charge discounts
if you and your family invest, or agree to invest in the future, at least
$100,000 in Class A shares of Principal
Funds, Inc. More
information about these and other discounts is available from your financial
professional and in “Choosing a Share Class and The Costs of Investing”
beginning on page 112 of the Fund’s prospectus, Appendix C to the prospectus
titled "Intermediary-Specific Sales Charge Waivers and Reductions", and
“Multiple Class Structure” beginning on page 4 of the Fund’s Statement of
Additional Information.
If you purchase Institutional Class or
Class R-6 shares through certain programs offered by certain financial
intermediaries, you may be required to pay a commission and/or other forms of
compensation to the broker, or to your Financial Professional or other financial
intermediary.
Shareholder Fees (fees paid directly from your
investment)
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Share
Class |
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A |
C |
J |
Inst. |
R-1 |
R-2 |
R-3 |
R-4 |
R-5 |
R-6 |
Maximum
Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) |
3.75% |
None |
None |
None |
None |
None |
None |
None |
None |
None |
Maximum
Deferred Sales Charge (Load) (as a percentage of the offering price or NAV
at the time Sales Load is paid, whichever is less) |
1.00% |
1.00% |
1.00% |
None |
None |
None |
None |
None |
None |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
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Share
Class |
|
A |
C |
J |
Inst. |
R-1 |
R-2 |
R-3 |
R-4 |
R-5 |
R-6 |
Management
Fees (1) |
0.69% |
0.69% |
0.69% |
0.69% |
0.69% |
0.69% |
0.69% |
0.69% |
0.69% |
0.69% |
Distribution
and/or Service (12b-1) Fees |
0.25% |
1.00% |
0.15% |
None |
0.35% |
0.30% |
0.25% |
0.10% |
None |
None |
Other
Expenses |
0.10% |
0.11% |
0.25% |
0.11% |
0.53% |
0.45% |
0.32% |
0.28% |
0.26% |
0.01% |
Acquired
Fund Fees and Expenses |
0.01% |
0.01% |
0.01% |
0.01% |
0.01% |
0.01% |
0.01% |
0.01% |
0.01% |
0.01% |
Total
Annual Fund Operating Expenses |
1.05% |
1.81% |
1.10% |
0.81% |
1.58% |
1.45% |
1.27% |
1.08% |
0.96% |
0.71% |
Expense
Reimbursement (2) |
None |
None |
None |
—% |
None |
None |
None |
None |
None |
None |
Total
Annual Fund Operating Expenses after Expense Reimbursement |
1.05% |
1.81% |
1.10% |
0.81% |
1.58% |
1.45% |
1.27% |
1.08% |
0.96% |
0.71% |
(1) Fees have been restated to
reflect current fees.
(2) Principal Global
Investors, LLC ("PGI"), the investment advisor, has contractually agreed to
limit the Fund’s expenses by paying, if necessary, expenses normally payable by
the Fund, (excluding interest expense, expenses related to fund investments,
acquired fund fees and expenses, and other extraordinary expenses) to maintain a
total level of operating expenses (expressed as a percent of average net assets
on an annualized basis) not to exceed 0.81% for Institutional Class shares. It
is expected that the expense limit will continue through the period ending
December 30,
2021;
however, Principal Funds, Inc. and PGI, the parties to the agreement, may
mutually agree to terminate the expense limit prior to the end of the period.
Subject to applicable expense limits, the Fund may reimburse PGI for expenses
incurred during the current fiscal year.
Example
This Example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other mutual funds.
The Example assumes that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. The calculation of costs takes into account any applicable
contractual fee waivers and/or expense reimbursements for the period noted in
the table above. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
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1
year |
3
years |
5
years |
10
years |
Class
A |
$478 |
$697 |
$933 |
$1,609 |
Class
C |
284 |
569 |
980 |
2,127 |
Class
J |
212 |
350 |
606 |
1,340 |
Institutional
Class |
83 |
259 |
450 |
1,002 |
Class
R-1 |
161 |
499 |
860 |
1,878 |
Class
R-2 |
148 |
459 |
792 |
1,735 |
Class
R-3 |
129 |
403 |
697 |
1,534 |
Class
R-4 |
110 |
343 |
595 |
1,317 |
Class
R-5 |
98 |
306 |
531 |
1,178 |
Class
R-6 |
73 |
227 |
395 |
883 |
With respect to Classes C and
J shares, you would pay the following expenses if you did not redeem your shares
(all other classes would be the same as in the above
example):
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1
year |
3
years |
5
years |
10
years |
Class
C |
$184 |
$569 |
$980 |
$2,127 |
Class
J |
112 |
350 |
606 |
1,340 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s
performance.
During the most recent fiscal year, the Fund's portfolio turnover rate was
18.1% of the average value of its
portfolio.
Principal Investment
Strategies
Under normal circumstances, the
Fund invests at least 80% of its net assets, plus any borrowing for investment
purposes, in preferred securities and capital securities at the time of
purchase. Preferred securities typically include preferred stock and various
types of junior subordinated debt and trust preferred securities. Preferred
securities may pay fixed rate or adjustable rate distributions and generally
have a payment "preference" over common stock, but are junior to the issuer's
senior debt in a liquidation of the issuer’s assets. Capital securities include
Tier 2 subordinated debt securities issued by U.S. and non-U.S. financial
institutions (including, but not limited to, banks and insurance companies),
contingent convertible securities (“Cocos”), and certain preferred securities,
issued by U.S. and non-U.S. corporations, financial institutions, and other
issuers for purposes of satisfying regulatory capital requirements or obtaining
rating agency credit. Capital securities may pay fixed rate or adjustable rate
distributions and generally have a payment "preference" over common stock, but
are junior to the issuer's senior debt in a liquidation of the issuer’s assets.
Cocos are hybrid debt securities typically issued by non-US banking institutions
that have contractual equity conversion or principal write-down features that
are triggered by regulatory capital thresholds or regulatory actions calling
into question the issuing banking institution’s continued viability as a
going-concern if the conversion trigger were not exercised.
Preferred securities purchased
by the Fund are of companies with senior debt rated at the time of purchase BBB-
or higher by S&P Global Ratings ("S&P Global") or Baa3 or higher by
Moody's Investors Service, Inc. ("Moody's") or, if unrated, of comparable
quality in the opinion of those selecting such investments. If securities are
rated differently by the rating agencies, the highest rating is used. The Fund
also invests up to 55% of its assets in below investment grade preferred
securities and bonds (sometimes called “high yield bonds” or "junk bonds") which
are rated at the time of purchase Ba1 or lower by Moody's and BB+ or lower by
S&P Global (if the bond has been rated by only one of those agencies, that
rating will determine whether the bond is below investment grade; if the bond
has not been rated by either of those agencies, those selecting such investments
will determine whether the bond is of a quality comparable to those rated below
investment grade). The Fund invests in other debt obligations, including (but
not limited to) U.S. Treasury securities and obligations of the U.S. Government,
its agencies and instrumentalities. The Fund invests in foreign securities. The
Fund is not managed to a particular maturity or
duration.
The Fund concentrates its investments
(invests more than 25% of its net assets) in securities in one or more
industries (i.e., banking, insurance and commercial finance) within the
financial services sector.
Principal Risks
The value of your investment in the Fund changes with
the value of the Fund's investments. Many factors affect that value, and it is
possible to lose money by investing in the Fund. An investment in the Fund is not a
deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. The
principal risks of investing in the Fund are listed below in alphabetical order
and not in order of significance.
Capital
Securities Risk.
In addition to the risks associated with other types of preferred securities and
fixed-income securities,
investing
in capital securities includes the risk that the value of securities may decline
in response to changes in legislation and regulations applicable to financial
institutions and financial markets, increased competition, adverse changes in
general or industry-specific economic conditions, or unfavorable interest rates.
Contingent
Convertible Securities Risk.
In addition to the general risks associated with fixed-income securities and
convertible securities, the risks of investing in contingent convertible
securities (“CoCos”) include the risk that a CoCo may be written down, written
off or converted into an equity security when the issuer’s capital ratio falls
below a specified trigger level, or in a regulator’s discretion depending on the
regulator’s judgment about the issuer’s solvency prospects. Due to these
features, CoCos may have substantially greater risk than other securities in
times of financial stress. If the trigger level is breached, the issuer’s
decision to write down, write off or convert a CoCo may result in the fund's
complete loss on an investment in CoCos with no chance of recovery even if the
issuer remains in existence.
Fixed-Income
Securities Risk.
Fixed-income securities are subject to interest rate, credit quality, and
liquidity risks. The market value of fixed-income securities generally declines
when interest rates rise and generally increases when interest rates fall.
Higher interest rates may adversely affect the liquidity of certain fixed-income
securities. Moreover, an issuer of fixed-income securities could default on its
payment obligations due to increased interest rates or for other reasons.
Foreign
Securities Risk.
The risks of foreign securities include loss of value as a result of: political
or economic instability; nationalization, expropriation or confiscatory
taxation; settlement delays; and limited government regulation (including less
stringent reporting, accounting, and disclosure standards than are required of
U.S. companies).
High
Yield Securities Risk.
High yield fixed-income securities (commonly referred to as "junk bonds") are
subject to greater credit quality risk than higher rated fixed-income securities
and should be considered speculative.
Industry
Concentration Risk. A
fund that concentrates investments in a particular industry or group of
industries has greater exposure than other funds to market, economic and other
factors affecting that industry or group of industries.
•Financial
Services. A
fund concentrating in financial services companies may be more susceptible to
adverse economic or regulatory occurrences affecting financial services
companies. Financial companies may be adversely affected in certain market
cycles, including periods of rising interest rates, which may restrict the
availability and increase the cost of capital, and declining economic
conditions, which may cause credit losses due to financial difficulties of
borrowers. Because many types of financial companies are especially vulnerable
to these economic cycles, the Fund’s investments in these companies may lose
significant value during such periods.
Portfolio
Duration Risk. Portfolio
duration is a measure of the expected life of a fixed-income security and its
sensitivity to changes in interest rates. The longer a fund's average portfolio
duration, the more sensitive the fund will be to changes in interest rates,
which means funds with longer average portfolio durations may be more volatile
than those with shorter durations.
Preferred
Securities Risk. Because
preferred securities have a lower priority claim on assets or earnings than
senior bonds and other debt instruments in a company's capital structure, they
are subject to greater credit and liquidation risk than more senior debt
instruments. In addition, preferred securities are subject to other risks, such
as limited or no voting rights, deferring or skipping distributions, interest
rate risk, and redeeming the security prior to any stated maturity
date.
Redemption
and Large Transaction Risk. Ownership
of the fund's shares may be concentrated in one or a
few large investors (such as funds of funds, institutional investors,
and asset allocation programs) that may redeem or purchase shares in large
quantities. These transactions may cause the fund to sell securities to meet
redemptions or to invest additional cash at times it would not otherwise do so,
which may result in increased transaction costs, increased expenses, changes to
expense ratios, and adverse effects to fund performance. Such transactions may
also accelerate the realization of taxable income if sales of portfolio
securities result in gains. Moreover, reallocations by large shareholders among
share classes of a fund may result in changes to the expense ratios of affected
classes, which may increase the expenses paid by shareholders of the class that
experienced the redemption.
Performance
The
following information provides some indication of the risks of investing in the
Fund. Past performance (before and
after taxes) is not necessarily an indication of how the Fund will perform in
the future. You may get updated performance information online
at www.principalfunds.com.
The
bar chart shows the investment returns of the Fund’s Class A shares for each
full calendar year of operations for 10 years (or, if shorter, the life of the
Fund). These annual returns do not reflect
sales charges on Class A shares; if they did, results would be
lower. The table shows for the last one, five, and ten calendar
year periods (or, if shorter, the life of the Fund), how the Fund’s average
annual total returns compare with those of one or more broad measures of market
performance.
For
periods prior to the inception date of Class R-6 shares (January 3, 2017), the
performance shown in the table for Class R-6 is that of the Fund's Institutional
Class shares, adjusted to reflect the fees and expenses of Class R-6. However,
where this adjustment for fees and expenses results in performance for Class R-6
that is higher than the historical performance of the Institutional Class
shares, the historical performance of the Institutional Class shares is used.
These adjustments result in performance for such periods that is no higher than
the historical performance of the Institutional Class shares, which were first
sold May 1,
2002.
Total Returns as of December 31
(1)
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Highest return for a quarter during
the period of the bar chart above: |
Q3
2010 |
10.14% |
Lowest return for a quarter during
the period of the bar chart above: |
Q3
2011 |
(6.10)% |
(1)
The year-to-date return as of
September 30, 2020
was 0.70% for Class A
shares.
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Average Annual Total Returns For the
periods ended December 31, 2019 |
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1 Year |
5 Years |
10
Years |
Class A Return Before
Taxes |
11.78% |
4.90% |
7.18% |
Class A Return After Taxes on
Distributions |
10.24% |
3.30% |
5.23% |
Class A Return After Taxes on
Distributions and Sale of Fund Shares |
7.50% |
3.35% |
5.04% |
Class C Return Before
Taxes |
14.25% |
4.92% |
6.80% |
Class J Return Before
Taxes |
15.06% |
5.70% |
7.49% |
Institutional Class Return Before
Taxes |
16.44% |
6.00% |
7.92% |
Class R-1 Return Before
Taxes |
15.48% |
5.16% |
7.04% |
Class R-2 Return Before
Taxes |
15.67% |
5.30% |
7.18% |
Class R-3 Return Before
Taxes |
15.80% |
5.46% |
7.36% |
Class R-4 Return Before
Taxes |
16.05% |
5.67% |
7.56% |
Class R-5 Return Before
Taxes |
16.23% |
5.80% |
7.70% |
Class R-6 Return Before
Taxes |
16.56% |
6.01% |
7.87% |
ICE BofA Merrill Lynch U.S. All Capital
Securities Index (reflects no deduction for
fees, expenses, or taxes) |
18.39% |
6.48% |
None |
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns
depend on an investor’s tax situation and may differ from those shown. The
after-tax returns shown are not relevant to investors who hold their Fund shares
through tax-deferred arrangements, such as 401(k) plans or individual retirement
accounts. After-tax returns are shown
for Class A shares only and would be different for the other share
classes.
Investment
Advisor
Principal
Global Investors, LLC
Sub-Advisor
and Portfolio Managers
Spectrum
Asset Management, Inc.
•Fernando
(“Fred”) Diaz (since 2010), Portfolio Manager
•Roberto
Giangregorio (since 2010), Portfolio Manager
•L.
Phillip Jacoby, IV (since 2002), Chief Investment Officer and Portfolio
Manager
•Manu
Krishnan (since 2010), Portfolio Manager
•Mark
A. Lieb (since 2009), President and Chief Executive Officer
•Kevin
Nugent (since 2014), Vice President and Portfolio Manager
Purchase
and Sale of Fund Shares
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Share
Class |
Investment
Type |
Purchase
Minimum
Per
Fund |
A,
C, and J |
Initial
Investment |
$1,000(1) |
A,
C, and J |
Initial
Investment for accounts with an Automatic Investment Plan
(AIP) |
$100 |
A,
C, and J |
Subsequent
Investments |
$100(1)(2) |
Institutional,
R-1, R-2, R-3, R-4, R-5 and R-6 |
There
are no minimum initial or subsequent investment requirements for eligible
purchasers. |
N/A |
(1)
Some exceptions apply; see "Purchase of Fund Shares - Minimum Investments" for
more information.
(2)
For accounts with an AIP, the subsequent automatic investments must total $1,200
annually if the initial $1,000 minimum has not been met.
You
may purchase or redeem shares on any business day (normally any day when the New
York Stock Exchange is open for regular trading) through your plan,
intermediary, or Financial Professional; by sending a written request to
Principal Funds at P.O. Box 219971, Kansas City, MO 64121-9971 (regular mail) or
430 W. 7th Street, Ste. 219971, Kansas City, MO 64105-1407 (overnight mail);
calling us at 1-800-222-5852; or accessing our website
(www.principalfunds.com).
For
retirement plan investors, effective as of the close of the New York Stock
Exchange on January 31, 2017, Class R-1 and Class R-2 shares are no longer
available for purchase from new retirement plans except in limited
circumstances. See Purchase of Fund Shares for additional
information.
Class
C shares are subject to a 10-year automatic conversion plan whereby Class C
shares held for ten years after purchase will automatically convert to Class A
shares of the same Fund. See “Purchase of Fund Shares” in the Prospectus for
more information.
Tax
Information
The
Fund’s distributions you receive are generally subject to federal income tax as
ordinary income or capital gain and may also be subject to state and local
taxes, unless you are tax-exempt or your account is tax-deferred in which case
your distributions would be taxed when withdrawn from the tax-deferred
account.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker-dealer or other financial intermediary
(such as a bank, insurance company, investment adviser, etc.), the Fund and its
related companies may pay the intermediary for the sale of Fund shares and
related services. These payments may create a conflict of interest by
influencing the broker-dealer or other intermediary and your salesperson to
recommend the Fund over another investment, or to recommend one share class of
the Fund over another share class. Ask your salesperson or visit your financial
intermediary's website for more information.
ADDITIONAL
INFORMATION ABOUT INVESTMENT STRATEGIES AND RISKS
Each
Fund’s investment objective is described in the summary section for each Fund.
The summary section also describes each Fund’s principal investment strategies,
including the types of securities in which each Fund invests, and the principal
risks of investing in each Fund. The principal investment strategies are not the
only investment strategies available to each Fund, but they are the ones each
Fund primarily uses to achieve its investment objective.
Except
for Fundamental Restrictions described in the Fund's Statement of Additional
Information ("SAI"), the Fund Board may change any Fund's objective or
investment strategies without a shareholder vote if it determines such a change
is in the best interests of the Fund. If there is a material change to a Fund's
investment objective or investment strategies, you should consider whether the
Fund remains an appropriate investment for you. There is no guarantee that each
Fund will meet its objective.
Each
Fund is designed to be a portion of an investor's portfolio. No Fund is intended
to be a complete investment program. Investors should consider the risks of a
Fund before making an investment; it is possible to lose money by investing in a
Fund.
Active
Management
The
performance of a fund that is actively managed (including hybrid funds or
passively-managed funds that use a sampling approach that includes some
actively-managed components) will reflect in part the ability of those managing
the investments of the fund to make investment decisions that are suited to
achieving the fund's investment objective. Actively-managed funds may invest
differently from the benchmark against which the Fund's performance is compared.
When making decisions about whether to buy or sell equity securities,
considerations may include, among other things, a company’s strength in
fundamentals, its potential for earnings growth over time, its ability to
navigate certain macroeconomic environments, the current price of its securities
relative to their perceived worth and relative to others in its industry, and
analysis from computer models. When making decisions about whether to buy or
sell fixed-income investments, considerations may include, among other things,
the strength of certain sectors of the fixed-income market relative to others,
interest rates, a range of economic, political and financial factors, the
balance between supply and demand for certain asset classes, the credit quality
of individual issuers, the fundamental strengths of corporate and municipal
issuers, and other general market conditions.
Models,
which may assist portfolio managers and analysts in formulating their securities
trading and allocation decisions by providing investment and risk management
insights, may also expose a fund to risks. Models may be predictive in
nature, which models depend heavily on the accuracy and reliability of
historical data that is supplied by others and may be incorrect or incorrectly
input. The fund bears the risk that the quantitative models used will not be
successful in identifying trends or in determining the size and direction of
investment positions that will enable the fund to achieve its investment
objective. In addition, “model prices” will often differ substantially from
market prices, especially for instruments with complex characteristics, such as
derivative instruments.
An
active fund's investment performance depends upon the successful allocation of
the fund's assets among asset classes, geographical regions, industry sectors,
and specific issuers and investments. There is no guarantee that these
allocation techniques and decisions will produce the desired results. It is
possible to lose money on an investment in a fund as a result of these
allocation decisions. If a fund's investment strategies do not perform as
expected, the fund could underperform other funds with similar investment
objectives or lose money. Moreover, buying and selling securities to adjust the
fund’s asset allocation may increase portfolio turnover and generate transaction
costs.
Investment
advisors with large assets under management in a Fund, or in other funds that
have the same strategy as a Fund, may have difficulty fully investing such
Fund’s assets according to its investment objective due to potential liquidity
constraints and high transaction costs. Typically, small-cap, mid-cap and
emerging market equity funds are more susceptible to such a risk. A Fund may add
additional investment advisors or close the Fund to new investors to address
such risks.
Passive
Management (Index Funds)
Index
funds use a passive, or indexing, investment approach. Funds that are pure index
funds do not attempt to manage market volatility, use defensive strategies or
reduce the effect of any long-term periods of poor stock or bond performance.
Some index funds attempt to fully replicate their relevant target index by
investing primarily in the securities held by the index in approximately the
same proportion of the weightings in the index. However, because of the
difficulty of executing some relatively small securities trades, other index
funds may use a "sampling" approach and may not be invested in the less heavily
weighted securities held by the index. Some index funds may invest in index
futures and/or exchange-traded funds on a daily basis in an effort to minimize
tracking error relative to the benchmark.
It
is unlikely that an index fund's performance will perfectly correlate with the
performance of the fund's relevant index. An index fund's ability to match the
performance of its index may be affected by many factors, such as fund expenses,
the timing of cash flows into and out of the fund, changes in securities
markets, and changes in the composition of the index.
The
providers of the Funds’ respective underlying indexes do not provide any
warranty or accept any liability for the quality, accuracy or completeness of
any index or its related data. Those managing an index fund’s investments manage
such fund consistently with the underlying index provided by the index provider
and do not provide any warranty or guarantee against the index provider’s or its
agent’s errors. Errors in the quality, accuracy and completeness of the data
used to compile an underlying index may occur and may not be identified and
corrected in a timely manner, or at all. Such errors may negatively or
positively impact the performance of a fund.
Unusual
market conditions may cause an index provider to postpone a scheduled rebalance,
which could cause a fund’s underlying index to vary from its normal or expected
composition. The postponement of a scheduled rebalance, particularly in a time
of market volatility, could mean that constituents that would otherwise be
removed at rebalance due to changes in market capitalizations, issuer credit
ratings, or other reasons may remain, causing the performance and constituents
of the underlying index to vary from those expected under normal conditions.
Apart from scheduled rebalances, an index provider may carry out additional
index rebalances due to unusual market conditions or in order, for example, to
correct an error in the selection of index constituents. When an index is
rebalanced and an index fund in turn rebalances its portfolio, such fund and its
shareholders bear any related transaction costs and market
exposure.
Cash
Management
Funds
may have uninvested cash balances pending investment in other securities,
pending payment of redemptions, or in other circumstances where liquidity is
necessary or desirable. A Fund may hold uninvested cash; invest it in cash
equivalents such as money market funds, including the Principal Funds, Inc.
Government Money Market Fund; lend it to other Funds pursuant to the Funds'
interfund lending facility; and/or invest in other instruments that those
managing the Fund’s assets deem appropriate for cash management purposes.
Generally, these types of investments offer less potential for gains than other
types of securities. To attempt to provide returns similar to its benchmark, a
Fund may invest uninvested cash in stock index futures contracts or
exchange-traded funds (“ETFs”), including Principal Exchange-Traded Funds ETFs.
In selecting such investments, the Advisor may have conflicts of interest due to
economic or other incentives to make or retain an investment in certain
affiliated funds instead of in other investments that may be appropriate for the
Fund.
Liquidity
The
Funds have established a liquidity risk management program as required by the
SEC’s Liquidity Rule. Under the program, PGI assesses, manages, and periodically
reviews each Fund’s liquidity risk, which is the risk that a Fund could not meet
requests to redeem shares issued by the Fund without significant dilution of the
remaining investors’ interests in the Fund. As part of the program, PGI
classifies each investment as a “highly liquid investment,” “moderately liquid
investment,” “less liquid investment” or “illiquid investment.” The liquidity of
a Fund’s portfolio investments is determined based on relevant market, trading
and investment-specific considerations under the program. To the extent that an
investment is deemed to be an illiquid investment or a less liquid investment, a
Fund can expect to be exposed to greater liquidity risk.
Certain
fund holdings may be deemed to be less liquid or illiquid because they cannot be
readily sold without significantly impacting the value of the holdings. A fund
is exposed to liquidity risk when trading volume, lack of a market maker, or
legal restrictions impair its ability to sell particular securities or close
derivative positions at an advantageous price. Funds with principal investment
strategies that involve securities of companies with smaller market
capitalizations, foreign securities, derivatives, high yield bonds and bank
loans or securities with substantial market and/or credit risk tend to have the
greatest exposure to liquidity risk.
Liquidity
risk also refers to the risk of unusually high redemption requests, redemption
requests by certain large shareholders such as institutional investors or asset
allocators, or other unusual market conditions that may make it difficult for a
fund to sell investments within the allowable time period to meet redemptions.
Meeting such redemption requests could require a fund to sell securities at
reduced prices or under unfavorable conditions, which would reduce the value of
the fund.
Market
Volatility and Securities Issuers
The
value of a fund's portfolio securities may decrease in response to overall stock
or bond market movements. Markets tend to move in cycles, with periods of rising
prices and periods of falling prices. Stocks tend to go up and down in value
more than bonds. Moreover, markets (or certain market sectors) may experience
greater volatility in response to the occurrence of natural or man-made
disasters and catastrophes, such as acts of terrorism, pandemics, military
actions, or political instability. If a fund's investments are concentrated in
certain sectors, its performance could be worse than the overall market.
Additionally, the value of a security may decline for reasons directly related
to the issuer, such as management performance, financial leverage, and reduced
demand for the issuer’s goods or services. As a result, the value of an
individual security or particular type of security can be more volatile than the
market as a whole and can perform differently from the value of the market as a
whole.
Recent
events are impacting the securities markets. A respiratory disease caused by a
novel coronavirus designated as COVID-19 was first detected in China in December
2019 and has spread internationally. The transmission of COVID-19 and efforts to
contain its spread have resulted in border closings and other travel
restrictions and disruptions, disruptions to business operations, supply chains
and customer activity, event cancellations and restrictions, service
cancellations and reductions, significant challenges in the healthcare industry,
and quarantines. These impacts have caused significant volatility and declines
in global financial markets, including declines in oil and commodity markets,
which have caused losses for investors. Health crises may exacerbate other
pre-existing political, social, economic, market and financial risks and could
negatively affect the global economy, as well as the economies of individual
countries, the financial performance of individual companies and sectors, and
the markets in general in significant and unforeseen ways. The COVID-19 outbreak
has resulted in certain of those negative consequences. Governmental and
quasi-governmental authorities and regulators throughout the world, such as the
Federal Reserve, have in the past responded to major economic disruptions with a
variety of significant fiscal and monetary policy changes, including but not
limited to, direct capital infusions into companies, new monetary programs, and
dramatically lower interest rates. Certain of those policy changes are being
implemented or considered in response to the COVID-19 outbreak. Such policy
changes may adversely affect the value, volatility and liquidity of dividend and
interest paying securities.
The
COVID-19 outbreak, and future pandemics, could also impair the information
technology and other operational systems upon which a fund’s investment advisor
or sub-advisor rely, and could otherwise disrupt the ability of the fund’s
service providers to perform essential tasks. In certain cases, an exchange or
market may close or issue trading halts on either specific securities or even
the entire market, which may result in a fund being, among other things, unable
to buy or sell certain securities or financial instruments or accurately price
its investments.
The
impact of the COVID-19 pandemic may be short term or may last for an extended
period of time, and in either case could result in a substantial economic
downturn or recession. The resulting market volatility, dramatic changes to
interest rates, and unfavorable economic conditions could result in a fund’s
inability to achieve its investment objectives, cause the postponement of
reconstitution/rebalance dates of passive funds’ underlying indices, adversely
affect the prices and liquidity of the securities and other instruments in which
a fund invests, negatively impact the fund’s performance, and cause losses on
your investment in the fund. You should also review this prospectus and the
statement of additional information to understand each fund’s discretion to
implement temporary defensive measures, as well as the circumstances in which a
fund may satisfy redemption requests in-kind.
Temporary
Defensive Measures
From
time to time, as part of its investment strategy, a Fund may invest without
limit in cash and cash equivalents for temporary defensive purposes in response
to adverse market, economic, or political conditions. For this purpose, cash
equivalents include: bank notes, bank certificates of deposit, bankers'
acceptances, repurchase agreements, commercial paper, and commercial paper
master notes, which are floating rate debt instruments without a fixed maturity.
In addition, a Fund may purchase U.S. government securities, preferred stocks,
and debt securities, whether or not convertible into or carrying rights for
common stock. There is no limit on the extent to which a Fund may take temporary
defensive measures. In taking such measures, a Fund may lose the benefit of
upswings and may limit its ability to meet, or fail to achieve, its investment
objective.
Securities
Lending
To
generate additional income, a Fund may lend its portfolio securities to
broker-dealers and other institutional borrowers to the extent permitted under
the 1940 Act or the rules, regulations or interpretations thereunder. A Fund
that lends its securities will continue to receive amounts equal to the interest
or dividend payments generated by the loaned securities. In addition to
receiving these amounts, the Fund generates income on the loaned securities by
receiving a fee from the borrower, and by earning interest on the collateral
received from the borrower. A negotiated portion of the income is paid to a
securities lending agent (e.g., a bank or trust company) who arranged the loan.
During the term of the loan, the Fund’s investment performance will reflect
changes in the value of the loaned securities.
A
borrower’s obligations under a securities loan is secured continuously by
collateral posted by the borrower and held by the custodian in an amount at
least equal to the market value of the loaned securities. Generally, cash
collateral that a Fund receives from securities lending activities will be
invested in the Principal Funds, Inc. Government Money Market Fund, which is
managed by PGI and for which PGI receives a management fee. The collateral may
also be invested in unaffiliated money market funds.
Securities
lending involves exposure to certain risks, including the risk of losses
resulting from problems in the settlement and accounting process, the risk of a
mismatch between the return on cash collateral reinvestments and the fees each
Fund has agreed to pay a borrower, and credit, legal, counterparty and market
risk. A Fund’s participation in a securities lending transaction may
affect the amount, timing, and character of distributions derived from such
transaction to shareholders. Qualified dividend income does not include
“payments in lieu of dividends,” which the Funds anticipate they will receive
in securities lending transactions.
Strategy
and Risk Table
The
following table lists each Fund and identifies whether the strategies and risks
discussed in this section (listed in alphabetical order) are principal,
non-principal (meaning they are relevant to a Fund but to a lesser degree than
those designated as principal), or not applicable for each Fund. Each fund is
also subject to the risks of any underlying funds in which it
invests.
The
SAI contains additional information about investment strategies and their
related risks.
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INVESTMENT
STRATEGIES
AND
RISKS |
BLUE
CHIP |
BOND
MARKET
INDEX |
CAPITAL
SECURITIES |
DIVERSIFIED
REAL
ASSET |
EDGE
MIDCAP |
Arbitrage
Trading |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Non-Principal |
Not
Applicable |
Bank
Loans (also known as Senior Floating Rate Interests) |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Principal |
Not
Applicable |
Cayman
Subsidiary |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Principal |
Not
Applicable |
Commodity-Related
Investments |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Principal |
Not
Applicable |
Contingent
Convertible Securities |
Not
Applicable |
Not
Applicable |
Principal |
Not
Applicable |
Not
Applicable |
Convertible
Securities |
Non-Principal |
Not
Applicable |
Non-Principal |
Non-Principal |
Non-Principal |
Counterparty
Risk |
Not
Applicable |
Non-Principal |
Not
Applicable |
Principal |
Not
Applicable |
Derivatives |
Non-Principal |
Non-Principal |
Not
Applicable |
Principal |
Not
Applicable |
Emerging
Markets |
Not
Applicable |
Non-Principal |
Not
Applicable |
Non-Principal |
Not
Applicable |
Equity
Securities |
Principal |
Not
Applicable |
Non-Principal |
Principal |
Principal |
–Growth
Style |
Principal |
Not
Applicable |
Non-Principal |
Principal |
Principal |
–Smaller
Companies |
Principal |
Not
Applicable |
Non-Principal |
Principal |
Principal |
–Value
Style |
Non-Principal |
Not
Applicable |
Non-Principal |
Principal |
Principal |
Fixed
Income Securities |
Non-Principal |
Principal |
Principal |
Principal |
Non-Principal |
Foreign
Currency |
Principal |
Non-Principal |
Non-Principal |
Principal |
Non-Principal |
Foreign
Securities |
Principal |
Non-Principal |
Principal |
Principal |
Non-Principal |
Geographic
Concentration (Municipal Obligations) |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Hedging |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Non-Principal |
Not
Applicable |
High
Yield Securities |
Not
Applicable |
Not
Applicable |
Principal |
Principal |
Not
Applicable |
Industry
Concentration |
Not
Applicable |
Principal
(1) |
Principal |
Principal |
Not
Applicable |
Inverse
Floating Rate Investments |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Investment
Company Securities |
Non-Principal |
Non-Principal |
Not
Applicable |
Non-Principal |
Non-Principal |
Leverage |
Non-Principal |
Non-Principal |
Not
Applicable |
Principal |
Not
Applicable |
Master
Limited Partnerships ("MLPs") |
Non-Principal |
Not
Applicable |
Not
Applicable |
Principal |
Non-Principal |
Municipal
Obligations and AMT-Subject Bonds |
Not
Applicable |
Non-Principal |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Portfolio
Duration |
Non-Principal |
Principal |
Principal |
Principal |
Non-Principal |
Portfolio
Turnover (Active Trading) |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Preferred
Securities |
Non-Principal |
Not
Applicable |
Principal |
Non-Principal |
Non-Principal |
Real
Estate Investment Trusts ("REITs") |
Non-Principal |
Non-Principal |
Non-Principal |
Principal |
Principal |
Real
Estate Securities |
Non-Principal |
Principal |
Non-Principal |
Principal |
Principal |
Redemption
and Large Transaction Risk |
Principal |
Principal |
Not
Applicable |
Principal |
Principal |
Securitized
Products |
Not
Applicable |
Principal |
Not
Applicable |
Non-Principal |
Not
Applicable |
Short
Sales |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Non-Principal |
Not
Applicable |
U.S.
Government and U.S. Government Sponsored Securities |
Not
Applicable |
Principal |
Non-Principal |
Principal |
Not
Applicable |
Volatility
Mitigation |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Not
Applicable |
(1)
The
Fund will not concentrate (i.e., invest more than 25% of its assets) its
investments in a particular industry except to the extent the Index is so
concentrated.
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INVESTMENT
STRATEGIES
AND
RISKS |
GLOBAL
MULTI-STRATEGY |
INTERNATIONAL
EQUITY INDEX |
INTERNATIONAL
SMALL COMPANY |
OPPORTUNISTIC
MUNICIPAL |
ORIGIN
EMERGING MARKETS |
Arbitrage
Trading |
Principal |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Bank
Loans (also known as Senior Floating Rate Interests) |
Principal |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Cayman
Subsidiary |
Principal |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Commodity-Related
Investments |
Principal |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Contingent
Convertible Securities |
Non-Principal |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Convertible
Securities |
Principal |
Non-Principal |
Non-Principal |
Not
Applicable |
Not
Applicable |
Counterparty
Risk |
Principal |
Non-Principal |
Not
Applicable |
Principal |
Not
Applicable |
Derivatives |
Principal |
Principal |
Non-Principal |
Principal |
Not
Applicable |
Emerging
Markets |
Principal |
Non-Principal |
Non-Principal |
Not
Applicable |
Principal |
Equity
Securities |
Principal |
Principal |
Principal |
Not
Applicable |
Principal |
–Growth
Style |
Principal |
Non-Principal |
Principal |
Not
Applicable |
Principal |
–Smaller
Companies |
Principal |
Principal |
Principal |
Not
Applicable |
Principal |
–Value
Style |
Principal |
Non-Principal |
Principal |
Not
Applicable |
Principal |
Fixed
Income Securities |
Principal |
Non-Principal |
Non-Principal |
Principal |
Non-Principal |
Foreign
Currency |
Principal |
Principal |
Principal |
Not
Applicable |
Principal |
Foreign
Securities |
Principal |
Principal |
Principal |
Not
Applicable |
Principal |
Geographic
Concentration (Municipal Obligations) |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Non-Principal |
Not
Applicable |
Hedging |
Principal |
Not
Applicable |
Not
Applicable |
Non-Principal |
Not
Applicable |
High
Yield Securities |
Principal |
Not
Applicable |
Not
Applicable |
Principal |
Not
Applicable |
Industry
Concentration |
Not
Applicable |
Principal
(1) |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Inverse
Floating Rate Investments |
Non-Principal |
Not
Applicable |
Not
Applicable |
Principal |
Not
Applicable |
Investment
Company Securities |
Principal |
Principal |
Non-Principal |
Principal |
Not
Applicable |
Leverage |
Principal |
Not
Applicable |
Non-Principal |
Principal |
Not
Applicable |
Master
Limited Partnerships ("MLPs") |
Non-Principal |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Municipal
Obligations and AMT-Subject Bonds |
Non-Principal |
Not
Applicable |
Not
Applicable |
Principal |
Not
Applicable |
Portfolio
Duration |
Principal |
Non-Principal |
Non-Principal |
Principal |
Non-Principal |
Portfolio
Turnover (Active Trading) |
Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Preferred
Securities |
Non-Principal |
Non-Principal |
Non-Principal |
Not
Applicable |
Non-Principal |
Real
Estate Investment Trusts ("REITs") |
Non-Principal |
Non-Principal |
Non-Principal |
Not
Applicable |
Non-Principal |
Real
Estate Securities |
Non-Principal |
Non-Principal |
Non-Principal |
Not
Applicable |
Non-Principal |
Redemption
and Large Transaction Risk |
Principal |
Principal |
Principal |
Principal |
Principal |
Securitized
Products |
Principal |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Short
Sales |
Principal |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Not
Applicable |
U.S.
Government and U.S. Government Sponsored Securities |
Principal |
Not
Applicable |
Not
Applicable |
Principal |
Not
Applicable |
Volatility
Mitigation |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Not
Applicable |
(1)
The
Fund will not concentrate (i.e., invest more than 25% of its assets) its
investments in a particular industry except to the extent the Index is so
concentrated.
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INVESTMENT
STRATEGIES
AND
RISKS |
SMALL-MIDCAP
DIVIDEND INCOME |
SMALL-MIDCAP
GROWTH |
SPECTRUM
PREFERRED AND CAPITAL SECURITIES INCOME |
Arbitrage
Trading |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Bank
Loans (also known as Senior Floating Rate Interests) |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Cayman
Subsidiary |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Commodity-Related
Investments |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Contingent
Convertible Securities |
Not
Applicable |
Not
Applicable |
Principal |
Convertible
Securities |
Non-Principal |
Non-Principal |
Non-Principal |
Counterparty
Risk |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Derivatives |
Not
Applicable |
Not
Applicable |
Non-Principal |
Emerging
Markets |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Equity
Securities |
Principal |
Principal |
Non-Principal |
–Growth
Style |
Principal |
Principal |
Non-Principal |
–Smaller
Companies |
Principal |
Principal |
Non-Principal |
–Value
Style |
Principal |
Non-Principal |
Non-Principal |
Fixed
Income Securities |
Non-Principal |
Non-Principal |
Principal |
Foreign
Currency |
Principal |
Not
Applicable |
Non-Principal |
Foreign
Securities |
Principal |
Non-Principal |
Principal |
Geographic
Concentration (Municipal Obligations) |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Hedging |
Not
Applicable |
Not
Applicable |
Non-Principal |
High
Yield Securities |
Not
Applicable |
Not
Applicable |
Principal |
Industry
Concentration |
Not
Applicable |
Not
Applicable |
Principal |
Inverse
Floating Rate Investments |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Investment
Company Securities |
Non-Principal |
Non-Principal |
Not
Applicable |
Leverage |
Not
Applicable |
Not
Applicable |
Non-Principal |
Master
Limited Partnerships ("MLPs") |
Non-Principal |
Not
Applicable |
Not
Applicable |
Municipal
Obligations and AMT-Subject Bonds |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Portfolio
Duration |
Non-Principal |
Not
Applicable |
Principal |
Portfolio
Turnover (Active Trading) |
Non-Principal |
Principal |
Non-Principal |
Preferred
Securities |
Non-Principal |
Non-Principal |
Principal |
Real
Estate Investment Trusts ("REITs") |
Principal |
Non-Principal |
Non-Principal |
Real
Estate Securities |
Principal |
Non-Principal |
Non-Principal |
Redemption
and Large Transaction Risk |
Principal
|
Principal |
Principal |
Securitized
Products |
Not
Applicable |
Not
Applicable |
Not
Applicable |
Short
Sales |
Not
Applicable |
Not
Applicable |
Not
Applicable |
U.S.
Government and U.S. Government Sponsored Securities |
Not
Applicable |
Not
Applicable |
Non-Principal |
Volatility
Mitigation |
Not
Applicable |
Not
Applicable |
Non-Principal |
Arbitrage
Trading
A
fund employing arbitrage strategies has the risk that anticipated opportunities
do not play out as planned, resulting in potentially reduced returns or losses
to the fund as it unwinds failed trades. For example, with respect to the
convertible arbitrage strategy, an issuer may default or may be unable to make
interest and dividend payments when due; with respect to the merger arbitrage
strategy, the merger deal may terminate before closing, thereby imposing losses
to the fund.
Bank
Loans (also known as Senior Floating Rate Interests)
Bank
loans typically hold the most senior position in the capital structure of a
business entity (the "Borrower"), are secured by specific collateral, and have a
claim on the Borrower's assets and/or stock that is senior to that held by the
Borrower's unsecured subordinated debtholders and stockholders. The proceeds of
bank loans primarily are used to finance leveraged buyouts, recapitalizations,
mergers, acquisitions, stock repurchases, dividends, and, to a lesser extent, to
finance internal growth and for other corporate purposes. Bank loans are
typically structured and administered by a financial institution that acts as
the agent of the lenders participating in the bank loan. Most bank loans that
will be purchased by a fund are rated below-investment-grade (sometimes called
“junk”) or will be comparable if unrated, which means they are more likely to
default than investment-grade loans. A default could lead to non-payment of
income which would result in a reduction of income to the fund, and there can be
no assurance that the liquidation of any collateral would satisfy the Borrower's
obligation in the event of non-payment of scheduled interest or principal
payments, or that such collateral could be readily liquidated. Most bank loans
are not traded on any national securities exchange. Bank loans generally have
less liquidity than investment-grade bonds and there may be less public
information available about them. Bank loan interests may not be considered
“securities,” and purchasers therefore may not be entitled to rely on the
anti-fraud protections of the federal securities laws.
The
primary and secondary market for bank loans may be subject to irregular trading
activity, wide bid/ask spreads and extended trade settlement periods, which may
cause a fund to be unable to realize full value and thus cause a material
decline in a fund's net asset value. Because transactions in bank loans may be
subject to extended settlement periods, a fund may not receive proceeds from the
sale of a bank loan for a period of time after the sale. As a result, sale
proceeds may not be available to make additional investments or to meet a fund’s
redemption obligations for a period of time after the sale of the bank loans,
which could lead to a fund having to sell other investments, borrow to meet
obligations, or borrow to remain fully invested while awaiting
settlement.
Bank
loans pay interest at rates which are periodically reset by reference to a base
lending rate plus a spread. These base lending rates are generally the prime
rate offered by a designated U.S. bank or the London InterBank Offered Rate
(LIBOR) or the prime rate offered by one or more major U.S. banks.
Bank
loans generally are subject to mandatory and/or optional prepayment. Because of
these prepayment conditions and because there may be significant economic
incentives for the borrower to repay, prepayments may occur.
Cayman
Subsidiary
The
Diversified Real Asset Fund and the Global Multi-Strategy Fund may each invest
up to 25% of its total assets in its respective wholly-owned subsidiary
organized under the laws of the Cayman Islands (a “Cayman Subsidiary”). The
Cayman Subsidiaries are not registered as investment companies under the
Investment Company Act of 1940, as amended (the "1940 Act"), and are not subject
to all the investor protections of the 1940 Act. However, a fund investing in a
Cayman Subsidiary wholly owns and controls such Cayman Subsidiary, and the Funds
and Cayman Subsidiaries are managed by Principal Global Investors, LLC ("PGI").
Moreover, the Funds’ Board of Directors have oversight responsibility for the
Funds' investment activities, including investments in a Cayman Subsidiary, and
over a fund’s role as sole shareholder of a Cayman Subsidiary. Each Cayman
Subsidiary is overseen by its own board of directors, which consists of
interested director(s) and may include Fund officer(s). The Diversified Real
Asset Fund and the Global Multi-Strategy Fund are the sole shareholders of their
respective Cayman Subsidiary, and shares of the Cayman Subsidiaries will not be
sold or offered to other investors.
Each
Cayman Subsidiary has entered into a separate management agreement with PGI
whereby PGI provides advisory and accounting agency services to the Cayman
Subsidiary. Further, PGI, on behalf of each Cayman Subsidiary, has entered into
a subadvisory agreement with one or more current sub-advisors of the relevant
Fund.
A
Fund that invests in a Cayman Subsidiary is indirectly exposed to the particular
risks associated with the Cayman Subsidiary’s investments. The Cayman
Subsidiaries invest in commodity-linked derivatives, including commodity-linked
swaps, commodity futures contracts and options on commodities. Each Cayman
Subsidiary may invest in other instruments, including fixed income securities,
cash and cash equivalents and U.S. government securities, either as investments
or to serve as margin or collateral for the Cayman Subsidiary's derivatives
positions. To the extent that a Fund invests in its respective subsidiary, it
will be subject to the particular risks associated with the Cayman Subsidiary’s
investments.
The
principal purpose of investing in a Cayman Subsidiary is to allow a fund to gain
exposure to the commodity markets within the limitations of the federal tax law
requirements applicable to regulated investment companies (“RICs”) under the
Internal Revenue Code (the “Code”). To qualify as a RIC, a fund must meet
certain requirements regarding the source of its income, the diversification of
its assets and the distribution of its income. If a fund fails to qualify as a
RIC, it could be subject to federal income tax on its net income at regular
corporate rates (without reduction for distributions to shareholders). When
distributed, that income would also be taxable to shareholders as an ordinary
dividend to the extent attributable to a fund’s earnings and profits.
Shareholders of that fund would therefore be subject to diminished returns. The
Funds rely on the reasoning set forth in certain private letter rulings issued
to other regulated investment companies from the IRS confirming that income
derived from a Cayman Subsidiary will constitute qualifying income to a fund for
RIC purposes. However, the IRS no longer issues private letter rulings to that
effect, and is reportedly reexamining its position with respect to structures of
this kind. The Funds have not obtained such a private letter ruling.
Moreover,
the Cayman Islands currently does not impose any income, corporate or capital
gains tax, or withholding tax, on the Cayman Subsidiaries. If the laws of the
Cayman Islands were changed and a Cayman Subsidiary was required to pay Cayman
Islands taxes, this may impact a fund’s returns based upon the percentage of
assets allocated to commodities at that time.
Changes
in the laws of the United States and/or the Cayman Islands, particularly with
respect to tax laws, could result in the inability of the Funds and/or the
Cayman Subsidiaries to operate as described in this prospectus and could
negatively affect the Funds and their shareholders.
Commodity-Related
Investments
Commodities
are assets that have tangible properties, such as oil, coal, natural gas,
agricultural products, industrial metals, livestock, and precious metals. The
value of commodities investments will generally be affected by overall market
movements and factors specific to a particular industry or commodity, which may
include weather, embargoes, tariffs, and health, political, international, and
regulatory developments. Economic and other events (whether real or perceived)
can reduce the demand for commodities, which may reduce market prices and cause
the value of fund shares to fall. The frequency and magnitude of such changes
cannot be predicted. Exposure to commodities and commodities markets may subject
a fund to greater volatility than investments in traditional securities. No
active trading market may exist for certain commodities investments, which may
impair the ability of a fund to sell or to realize the full value of such
investments in the event of the need to liquidate such investments. In addition,
adverse market conditions may impair the liquidity of actively traded
commodities investments. Certain types of commodities instruments (such as
commodity swaps) are subject to the risk that the counterparty to the instrument
will not perform or will be unable to perform in accordance with the terms of
the instrument.
Contingent
Convertible Securities ("CoCos")
Contingent
convertible securities (“CoCos”) are hybrid debt securities intended to either
convert into equity or have their principal written down upon the occurrence of
certain “triggers.” The triggers are generally linked to regulatory capital
thresholds or regulatory actions calling into question the issuing banking
institution’s continued viability as a going-concern if the conversion trigger
were not exercised. CoCos’ unique equity conversion or principal write-down
features are tailored to the issuing banking institution and its regulatory
requirements. Some additional risks associated with CoCos include, but are not
limited to, the following:
•The
occurrence of a conversion event is inherently unpredictable and depends on many
factors, some of which will be outside the issuer’s control. Because of the
uncertainty regarding whether a conversion event will occur, it may be difficult
to predict when, if at all, a CoCo will be converted to equity, and a fund may
suffer losses as a result.
•CoCos
may have no stated maturity and fully discretionary coupons. This means coupon
(i.e., interest) payments can be canceled at the banking institution’s
discretion or at the request of the relevant regulatory authority in order to
help the bank absorb losses, without causing a default.
•CoCos
are usually issued in the form of subordinated debt instruments to provide the
appropriate regulatory capital treatment. If an issuer liquidates, dissolves or
winds-up before a conversion to equity has occurred, the rights and claims of
the holders of the CoCos (such as a fund) against the issuer generally rank
junior to the claims of holders of unsubordinated obligations of the issuer. In
addition, if the CoCos are converted into the issuer’s underlying equity
securities after a conversion event (i.e., a “trigger”), each holder will be
further subordinated.
•The
value of CoCos is unpredictable and is influenced by many factors including,
without limitation: the creditworthiness of the issuer and/or fluctuations in
such issuer’s applicable capital ratios; supply and demand for CoCos; general
market conditions and available liquidity; and economic, financial and political
events that affect the issuer, its particular market or the financial markets in
general. Moreover, the performance of CoCos may be correlated with one another
and as a result negative information of one issuer may cause decline in the
value of CoCos of many other issuers.
Due
to these features, CoCos may have substantially greater risk than other
securities in times of financial stress. If the trigger level is breached, the
issuer’s decision to write down, write off or convert a CoCo may result in the
fund's complete loss on an investment in CoCos with no chance of recovery even
if the issuer remains in existence.
Convertible
Securities
Convertible
securities are usually fixed-income securities that a fund has the right to
exchange for equity securities at a specified conversion price. Convertible
securities could also include corporate bonds, notes, or preferred stocks of
U.S. or foreign issuers. Convertible securities allow a fund to realize
additional returns if the market price of the equity securities exceeds the
conversion price. For example, a fund may hold fixed-income securities that are
convertible into shares of common stock at a conversion price of $10 per share.
If the market value of the shares of common stock reached $12, the fund could
realize an additional $2 per share by converting its fixed-income
securities.
Convertible
securities have lower yields than comparable fixed-income securities. In
addition, at the time a convertible security is issued the conversion price
exceeds the market value of the underlying equity securities. Thus, convertible
securities may provide lower returns than non-convertible fixed-income
securities or equity securities depending upon changes in the price of the
underlying equity securities. However, convertible securities permit a fund to
realize some of the potential appreciation of the underlying equity securities
with less risk of losing its initial investment.
Depending
on the features of the convertible security, a fund will treat a convertible
security as a fixed-income security, equity security, or preferred security for
purposes of investment policies and limitations because of the unique
characteristics of convertible securities. Funds that invest in convertible
securities may invest in convertible securities that are below investment grade
(sometimes referred to as "junk"). Many convertible securities are relatively
illiquid.
Counterparty
Risk
Counterparty
risk is the risk that the counterparty to a contract or other obligation will be
unable or unwilling to honor its obligations. If a counterparty fails to meet
its contractual obligations, goes bankrupt, or otherwise experiences a business
interruption, a fund could miss investment opportunities or otherwise hold
investments it would prefer to sell, resulting in losses for the fund. In
addition, a fund may suffer losses if a counterparty fails to comply with
applicable laws or other requirements. Counterparty risk is pronounced during
unusually adverse market conditions and is particularly acute in environments in
which financial services firms are exposed to systemic risks.
Derivatives
Generally,
a derivative is a financial arrangement, the value of which is derived from, or
based on, a traditional security, asset, or market index. A fund may invest in
certain derivative strategies to earn income, manage or adjust the risk profile
of the fund, replace more direct investments, or obtain exposure to certain
markets. A fund may enter into forward commitment agreements, which call for the
fund to purchase or sell a security on a future date at a fixed price. A fund
may also enter into contracts to sell its investments either on demand or at a
specific interval.
The
risks associated with derivative investments include:
•increased
volatility of a fund and/or the failure of the investment to mitigate volatility
as intended;
•the
inability of those managing investments of the fund to predict correctly the
direction of securities prices, interest rates, currency exchange rates, asset
values, and other economic factors;
•losses
caused by unanticipated market movements, which may be substantially greater
than a fund's initial investment and are potentially unlimited;
•the
possibility that there may be no liquid secondary market, which may make it
difficult or impossible to close out a position when desired;
•the
possibility that the counterparty may fail to perform its obligations;
and
•the
inability to close out certain hedged positions to avoid adverse tax
consequences.
There
are many different types of derivatives and many different ways to use them. The
specific derivatives that are principal strategies of each Fund are listed in
its Fund Summary.
•Commodity
Index-Linked Notes are derivative debt instruments issued by U.S. and foreign
banks, brokerage firms, insurance companies and other corporations with
principal and/or coupon payments linked to the performance of commodity indices.
These notes expose a fund to movements in commodity prices. They are also
subject to credit, counterparty, and interest rate risk. Commodity index-linked
notes are often leveraged, increasing the volatility of each note's market value
relative to changes in the underlying commodity index. At the maturity of the
note, a fund may receive more or less principal than it originally invested. A
fund may also receive interest payments on the note that are less than the
stated coupon interest payments.
•Credit
Default Swap Agreements may be entered into by a fund as a "buyer" or "seller"
of credit protection. Credit default swap agreements involve special risks
because they may be difficult to value, are highly susceptible to liquidity and
credit risk, and generally pay a return to the party that has paid the premium
only in the event of an actual default by the issuer of the underlying
obligation (as opposed to a credit downgrade or other indication of financial
difficulty). Credit default swaps can increase credit risk because a fund has
exposure to both the issuer of the referenced obligation and the counterparty to
the credit default swap.
•Foreign
Currency Contracts (such as foreign currency options and foreign currency
forward and swap agreements) may be used by funds to increase exposure to a
foreign currency or to shift exposure to foreign currency fluctuations from one
country to another. A forward currency contract involves a privately negotiated
obligation to purchase or sell a specific currency at a future date at a price
set in the contract. For currency contracts, there is also a risk of government
action through exchange controls that would restrict the ability of a fund to
deliver or receive currency.
•Forwards,
futures contracts and options thereon (including commodities futures); options
(including put or call options); and swap agreements and over-the-counter swap
agreements (e.g., interest rate swaps, total return swaps and credit default
swaps) may be used by funds for hedging purposes in order to try to mitigate or
protect against potential losses due to changing interest rates, securities
prices, asset values, currency exchange rates, and other market conditions;
non-hedging purposes to seek to increase the fund’s income or otherwise enhance
return; and as a low-cost method of gaining exposure to a particular market
without investing directly in those securities or assets. These derivative
investments are subject to special risk considerations, particularly the
imperfect correlation between the change in market value of the instruments held
by a fund and the price of the derivative instrument. If a fund has insufficient
cash, it may have to sell securities from its portfolio to meet daily variation
margin requirements, even when it may be disadvantageous to do so. Options and
Swap Agreements also involve counterparty risk. With respect to options, there
may be difference in trading hours for the options markets and the markets for
the underlying securities (rate movements can take place in the underlying
markets that cannot be reflected in the options markets) and an insufficient
liquid secondary market for particular options.
•Index/structured
securities. Certain derivative securities are described more accurately as
index/structured securities, which are derivative securities whose value or
performance is linked to other equity securities (such as depositary receipts),
currencies, interest rates, indices, or other financial indicators (reference
indices).
Emerging
Markets
The
Funds consider a security to be tied economically to an emerging market (an
“emerging market security”) if the issuer of the security has its principal
place of business or principal office in an emerging market, has its principal
securities trading market in an emerging market, or derives a majority of its
revenue from emerging markets.
Usually,
the term “emerging market” (also called a "developing market") means any market
that is considered to be an emerging market by the international financial
community (including the MSCI Emerging Markets Index or Bloomberg Barclays
Emerging Markets USD Aggregate Bond Index). Emerging markets generally exclude
the U.S., Canada, Japan, Hong Kong, Singapore, Australia, New Zealand, and most
nations located in Western Europe.
Investments
in companies in emerging markets are subject to higher risks than investments in
companies in more developed markets. These risks include:
•increased
social, political, and economic instability;
•a
smaller market for these securities and low or nonexistent trading volume that
results in a lack of liquidity and greater price volatility;
•lack
of publicly available information, including reports of payments of dividends or
interest on outstanding securities;
•foreign
government policies that may restrict opportunities, including restrictions on
investment in issuers or industries deemed sensitive to national
interests;
•relatively
new capital market structure or market-oriented economy;
•the
possibility that recent favorable economic developments may be slowed or
reversed by unanticipated political or social events in these
countries;
•restrictions
that may make it difficult or impossible for a fund to vote proxies, exercise
shareholder rights, pursue legal remedies, and obtain judgments in foreign
courts; and
•possible
losses through the holding of securities in domestic and foreign custodial banks
and depositories.
In
addition, many developing markets have experienced substantial and, in some
periods, extremely high rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have negative
effects on the economies, currencies, interest rates, and securities markets of
those markets.
Repatriation
of investment income, capital, and proceeds of sales by foreign investors may
require governmental registration and/or approval in some developing markets. A
fund could be adversely affected by delays in or a refusal to grant any required
governmental registration or approval for repatriation.
Further,
the economies of developing markets generally are heavily dependent upon
international trade and, accordingly, have been and may continue to be adversely
affected by trade barriers, exchange controls, managed adjustments in relative
currency values and other protectionist measures imposed or negotiated by the
countries with which they trade.
The
U.S. Securities and Exchange Commission, the U.S. Department of Justice, and
other U.S. authorities may be limited in their ability to pursue bad actors,
including instances of fraud in emerging markets. For example, in certain
emerging markets, there are significant legal obstacles to obtaining information
needed for investigations or litigation. Similar limitations apply to the
pursuit of actions again individuals, including officers, who may have engaged
in fraud or wrongdoing. In addition, local authorities often are constrained in
their ability to assist U.S. authorities and overseas investors more generally.
There are also legal or other obstacles to seeking access to funds in a foreign
country.
Equity
Securities
Equity
securities include common stocks, convertible securities, depositary receipts,
rights (an offering of common stock to investors who currently own shares which
entitle them to buy subsequent issues at a discount from the offering price),
and warrants (the right to purchase securities from the issuer at a specified
price, normally higher than the current market price). Common stocks, the most
familiar type, represent an equity (ownership) interest in a corporation. The
value of a company's stock may fall as a result of factors directly relating to
that company, such as decisions made by its management or lower demand for the
company's products or services. A stock's value may also fall because of factors
affecting not just the company, but also companies in the same industry or in a
number of different industries, such as increases in production costs. The value
of a company's stock may also be affected by changes in financial markets that
are relatively unrelated to the company or its industry, such as changes in
interest rates or currency exchange rates. In addition, a company's stock
generally pays dividends only after the company invests in its own business and
makes required payments to holders of its bonds and other debt. For this reason,
the value of a company's stock will usually react more strongly than its bonds
and other debt to actual or perceived changes in the company's financial
condition or prospects.
Some
funds focus their investments on certain market capitalization ranges. Market
capitalization is defined as total current market value of a company's
outstanding equity securities. The market capitalization of companies in a
fund’s portfolios and their related indexes will change over time, and, except
to the extent consistent with its principal investment strategies (for example,
for an index fund that uses a replication strategy), a fund will not
automatically sell a security just because it falls outside of the market
capitalization range of its index(es).
Growth
Style
The
prices of growth stocks may be based largely on expectations of future earnings,
and their prices can decline rapidly and significantly in reaction to negative
news about such factors as earnings, revenues, the economy, political
developments, or other news. Growth stocks may underperform value stocks and
stocks in other broad style categories (and the stock market as a whole) over
any period of time and may shift in and out of favor with investors generally,
sometimes rapidly, depending on changes in market, economic, and other factors.
As a result, a fund that holds substantial investments in growth stocks may
underperform other funds that invest more broadly or favor different investment
styles. Because growth companies typically reinvest their earnings, growth
stocks typically do not pay dividends at levels associated with other types of
stocks, if at all.
Smaller
Companies
Investments
in companies with smaller market capitalizations may involve greater risks and
price volatility (wide, rapid fluctuations) than investments in larger, more
mature companies. Small company stocks may decline in price as large company
stocks rise, or rise in price while larger company stocks decline. The net asset
value of a fund that invests a substantial portion of its assets in small
company stocks may therefore be more volatile than the shares of a fund that
invests solely in larger company stocks. Small companies may be less significant
within their industries and may be at a competitive disadvantage relative to
their larger competitors. Smaller companies may be less mature than larger
companies. At this earlier stage of development, the companies may have limited
product lines, reduced market liquidity for their shares, limited financial
resources, or less depth in management than larger or more established
companies. While smaller companies may be subject to these additional risks,
they may also realize more substantial growth than larger or more established
companies.
Unseasoned
issuers are companies with a record of less than three years continuous
operation, including the operation of predecessors and parents. Many unseasoned
issuers also may be small companies and involve the risks and price volatility
associated with smaller companies. Unseasoned issuers by their nature have only
a limited operating history that can be used for evaluating the company's growth
prospects. As a result, these securities may place a greater emphasis on current
or planned product lines and the reputation and experience of the company's
management and less emphasis on fundamental valuation factors than would be the
case for more mature growth companies.
Value
Style
Value
stocks present the risk that they may decline in price or never reach their
expected full market value because the market fails to recognize the stock's
intrinsic worth. Value stocks may underperform growth stocks and stocks in other
broad style categories (and the stock market as a whole) over any period of time
and may shift in and out of favor with investors generally, sometimes rapidly,
depending on changes in market, economic, and other factors. As a result, a fund
that holds substantial investments in value stocks may underperform other funds
that invest more broadly or favor different investment styles.
Fixed-Income
Securities
Fixed-income
securities include bonds and other debt instruments that are used by issuers to
borrow money from investors (examples include corporate bonds, convertible
securities, mortgage-backed securities, U.S. government securities and
asset-backed securities). The issuer of a fixed-income security generally pays
the investor a fixed, variable, or floating rate of interest. The amount
borrowed must be repaid at maturity. Some debt securities, such as zero coupon
bonds, do not pay current interest, but are sold at a discount from their face
values.
Fixed-income
securities are sensitive to changes in interest rates. In general, fixed-income
security prices rise when interest rates fall and fall when interest rates rise.
An increase in interest rates from a low interest rate environment may lead to
heightened volatility and redemptions alongside reduced liquidity and dealer
market-making capacity in fixed income markets. If interest rates fall, issuers
of callable bonds may call (repay) securities with high interest rates before
their maturity dates; this is known as call risk. In this case, a fund would
likely reinvest the proceeds from these securities at lower interest rates,
resulting in a decline in the fund's income. Very low interest rates, including
rates that fall below zero (where banks charge for depositing money), may
detract from a Fund’s performance and its ability to maintain positive returns
to the extent the Fund is exposed to such interest rates. To the extent a Fund
holds an investment with a negative interest rate to maturity, the Fund would
generate a negative return on that investment. Floating rate securities
generally are less sensitive to interest rate changes but may decline in value
if their interest rates do not rise as much, or as quickly, as interest rates in
general. Conversely, floating rate securities will not generally increase in
value if interest rates decline.
The
United Kingdom’s Financial Conduct Authority, which regulates the London
Inter-bank Offered Rate (“LIBOR”), plans to phase out LIBOR by the end of 2021.
There remains uncertainty regarding LIBOR’s future and the nature of a
replacement rate. LIBOR’s discontinuation and replacement could lead to
short-term and long-term uncertainty, market instability, and adverse impacts to
newly issued and existing financial instruments that reference LIBOR. While some
instruments may contemplate the discontinuation of LIBOR by providing for an
alternative rate-setting methodology, not all instruments may have such
provisions and there is uncertainty regarding the effectiveness of any
alternative methodology. In addition, LIBOR’s discontinuation or replacement may
affect the value, liquidity, or return on certain Fund investments and may
result in costs in connection with closing out positions and entering into new
trades.
Fixed-income
securities are also affected by the credit quality of the issuer.
Investment-grade debt securities are medium and high quality securities. Some
bonds, such as lower grade or "junk" bonds, may have speculative characteristics
and may be particularly sensitive to economic conditions and the financial
condition of the issuers. Credit risk refers to the possibility that the issuer
of the security will not be able to make principal and interest payments when
due.
Additionally,
a Fund's investments in companies with smaller market capitalizations may
involve greater risks, price volatility (wide, rapid fluctuations), and less
liquidity than investments in larger, more mature companies.
Foreign
Currency
Certain
of a fund’s investments will be denominated in foreign currencies or traded in
securities markets in which settlements are made in foreign currencies. Any
income on such investments is generally paid to a fund in foreign currencies. In
addition, funds may engage in foreign currency transactions for both hedging and
investment purposes, as well as to increase exposure to a foreign currency or to
shift exposure to foreign currency fluctuations from one country to
another.
The
value of foreign currencies relative to the U.S. dollar varies continually,
causing changes in the dollar value of a fund’s portfolio investments (even if
the local market price of the investments is unchanged) and changes in the
dollar value of a fund’s income available for distribution to its shareholders.
The effect of changes in the dollar value of a foreign currency on the dollar
value of a fund’s assets and on the net investment income available for
distribution may be favorable or unfavorable. Transactions in non-U.S.
currencies are also subject to many of the risks of investing in foreign
(non-U.S.) securities; for example, changes in foreign economies and political
climates are more likely to affect a fund that has foreign currency exposure
than a fund that invests exclusively in U.S. companies and currency. There also
may be less government supervision of foreign markets, resulting in non-uniform
accounting practices and less publicly available information. Transactions in
foreign currencies, foreign currency denominated debt and certain foreign
currency options, futures contracts and forward contracts (and similar
instruments) may give rise to ordinary income or loss to the extent such income
or loss results from fluctuations in the value of the foreign currency
concerned.
A
fund may incur costs in connection with conversions between various currencies.
In addition, a fund may be required to liquidate portfolio assets, or may incur
increased currency conversion costs, to compensate for a decline in the dollar
value of a foreign currency occurring between the time when a fund declares and
pays a dividend, or between the time when a fund accrues and pays an operating
expense in U.S. dollars. To protect against a change in the foreign currency
exchange rate between the date on which a fund contracts to purchase or sell a
security and the settlement date for the purchase or sale, to gain exposure to
one or more foreign currencies or to “lock in” the equivalent of a dividend or
interest payment in another currency, a fund might purchase or sell a foreign
currency on a spot (i.e.,
cash) basis at the prevailing spot rate.
Currency
hedging involves some of the same general risks and considerations as other
transactions with similar instruments (i.e., derivative instruments) and
hedging. Currency transactions are also subject to additional risks. Because
currency control is of great importance to the issuing governments and
influences economic planning and policy, purchases and sales of currency and
related instruments can be adversely affected by government exchange controls,
limitations or restrictions on repatriation of currency, and manipulations or
exchange restrictions imposed by governments. These forms of governmental
actions can result in losses to a fund if it is unable to deliver or receive
currency or monies in settlement of obligations. They could also cause hedges
the fund has entered into to be rendered useless, resulting in full currency
exposure as well as incurring transaction costs. Settlement of a currency
forward contract for the purchase of most currencies must occur at a bank based
in the issuing nation. The ability to establish and close out positions on
trading options on currency futures contracts is subject to the maintenance of a
liquid market that may not always be available.
Foreign
Securities
The
Funds consider a security to be tied economically to countries outside the U.S.
(a “foreign security”) if the issuer of the security has its principal place of
business or principal office outside the U.S., has its principal securities
trading market outside the U.S., or derives a majority of its revenue
from outside the U.S.
There
may be less publicly available information about foreign companies than U.S.
companies, and information about foreign securities in which the Funds invest
may be less reliable or complete. Foreign companies, including those listed on
U.S. securities exchanges, may not be subject to the same uniform accounting,
auditing, and financial reporting practices as are required of U.S. companies
with respect to such matters as insider trading rules, tender offer regulation,
accounting standards or auditor oversight, stockholder proxy requirements and
the requirements mandating timely and accurate disclosure of information. For
example, the Chinese government has taken positions that prevent the Public
Company Accounting Oversight Board from inspecting the audit work and practices
of accounting firms in mainland China and Hong Kong for compliance with U.S. law
and professional standards. In addition, securities of many foreign companies
are less liquid and more volatile than securities of comparable U.S. companies.
Commissions on foreign securities exchanges may be generally higher than those
on U.S. exchanges.
Foreign
markets also have different clearance and settlement procedures than those in
U.S. markets. In certain markets, there have been times when settlements have
been unable to keep pace with the volume of securities transactions, making it
difficult to conduct these transactions. Delays in settlement could result in
temporary periods when a portion of fund assets is not invested and earning no
return. If a fund is unable to make intended security purchases due to
settlement problems, the fund may miss attractive investment opportunities. In
addition, a fund may incur a loss as a result of a decline in the value of its
portfolio if it is unable to sell a security.
With
respect to certain foreign countries, there is the possibility of
nationalization, expropriation or confiscatory taxation, political or social
instability, or diplomatic developments that could affect a fund's investments
in those countries. In addition, a fund may also suffer losses due to differing
accounting practices and treatments. Investments in foreign securities are
subject to laws of the foreign country that may limit the amount and types of
foreign investments. Changes of governments or of economic or monetary policies,
in the U.S. or abroad, changes in dealings between nations, currency
convertibility or exchange rates could result in investment losses for a
fund.
Foreign
securities are often traded with less frequency and volume, and therefore may
have greater price volatility than is the case with many U.S. securities.
Brokerage commissions, custodial services, and other costs relating to
investment in foreign countries are generally more expensive than in the U.S.
Though the fund intends to acquire the securities of foreign issuers where there
are public trading markets, economic or political turmoil in a country in which
a fund has a significant portion of its assets or deterioration of the
relationship between the U.S. and a foreign country may reduce the liquidity of
a fund's portfolio. The fund may have difficulty meeting a large number of
redemption requests. Furthermore, there may be difficulties in obtaining or
enforcing judgments against foreign issuers.
A
fund may invest in a foreign company by purchasing depositary receipts.
Depositary receipts are certificates of ownership of shares in a foreign-based
issuer held by a bank or other financial institution. They are alternatives to
purchasing the underlying security but are subject to the foreign securities
risks to which they relate.
A
fund may file claims to recover foreign withholding taxes on dividend and
interest income (if any) received from issuers in certain countries and capital
gains on the disposition of stocks or securities where such withholding tax
reclaim is possible. Whether or when a fund will receive a withholding tax
refund is within the control of the tax authorities in such countries. Where a
fund expects to recover withholding taxes, the net asset value of a fund
generally includes accruals for such tax refunds. If the likelihood of recovery
materially decreases, accruals in the fund’s net asset value for such refunds
may be written down partially or in full, which will adversely affect the fund’s
net asset value. Shareholders in the fund at the time an accrual is written down
will bear the impact of the resulting reduction in net asset value regardless of
whether they were shareholders during the accrual period. Conversely, if a fund
receives a tax refund that has not been previously accrued, shareholders in the
fund at the time of the successful recovery will benefit from the resulting
increase in the fund’s net asset value. Shareholders who sold their shares prior
to such time will not benefit from such increase in the fund’s net asset
value.
If
a fund's portfolio invests significantly in a certain geographic region, any
negative development affecting that region will have a greater impact on the
fund than a fund that is not as heavily invested in that region. For example,
with respect to funds that invest significantly in China or the EU:
•Investing
in China involves certain heightened risks and considerations, including, among
others: frequent trading suspensions and government interventions (including by
nationalizing assets); currency exchange rate fluctuations or blockages; limits
on using brokers and on foreign ownership; different financial reporting
standards, as described above; higher dependence on exports and international
trade; political and social instability; infectious disease outbreaks; regional
and global conflicts; increased trade tariffs, embargoes and other trade
limitations; custody and other risks associated with programs used to access
Chinese securities; and uncertainties in tax rules that could result in
unexpected tax liabilities for the Fund. Significant portions of the Chinese
securities markets may become rapidly illiquid, as Chinese issuers have the
ability to suspend the trading of their equity securities. Moreover, actions by
the U.S. government, such as delisting of certain Chinese companies from U.S.
securities exchanges or otherwise restricting their operations in the U.S., may
negatively impact the value of such securities held by the funds.
•Funds
that invest in the United Kingdom face risks related to the United Kingdom's
vote to leave the European Union (the EU), commonly known as Brexit. Brexit has
resulted in significant uncertainties and instability in the financial markets.
Brexit may have significant political and financial consequences in the United
Kingdom, as well as in European markets and the broader global economy.
Geographic
Concentration (Municipal Obligations)
Greater
risks may arise from the geographic concentration (a particular state, such as
California or a particular country or region) of investments, as well as the
current and past financial condition of municipal issuers in the case of a
municipal fund. In addition to factors affecting the state or regional economy,
certain constitutional amendments, legislative measures, executive orders,
administrative regulations, court decisions, and voter initiatives could result
in adverse consequences affecting municipal obligations. See the SAI for a more
detailed description of these risks.
Hedging
Hedging
is a strategy that can be used to attempt to mitigate or protect against
potential losses due to changing interest rates, securities prices, asset
values, currency exchange rates, and other market conditions. The success of a
fund’s hedging strategy will be subject to the ability of those managing the
fund's investments to correctly assess the degree of correlation between the
performance of the instruments used in the hedging strategy and the performance
of the investments in the portfolio being hedged. Since the characteristics of
many securities change as markets change or time passes, the success of a fund’s
hedging strategy will also be subject to the ability of those managing the
fund's investments to continually recalculate, readjust, and execute hedges in
an efficient and timely manner. For a variety of reasons, those managing the
fund's investments may not seek to establish a perfect correlation between such
hedging instruments and the portfolio holdings being hedged. Such imperfect
correlation may prevent a fund from achieving the intended hedge or expose a
fund to risk of loss. In addition, it is not possible to hedge fully or
perfectly against any risk, and hedging entails its own costs.
High
Yield Securities
Below
investment grade securities are fixed income securities that are rated at the
time of purchase Ba1 or lower by Moody's Investors Service, Inc. ("Moody's") and
BB+ or lower by S&P Global Ratings ("S&P Global") (if the security has
been rated by only one of those agencies, that rating will determine if the
security is below investment grade; if the security has not been rated by either
of those agencies, those managing investments of a Fund will determine whether
the security is of a quality comparable to those rated below investment grade).
Below investment grade securities are sometimes referred to as high yield or
"junk bonds" and are considered speculative, particularly with respect to the
issuer's continuing ability to meet principal and interest payments. Such
securities could be in default at time of purchase.
Investing
in high yield securities involves special risks in addition to those associated
with investing in investment grade securities:
•High
yield securities may be less liquid than investment grade
securities.
•The
secondary market on which high yield securities are traded may be less liquid,
which may reduce the price of the security and adversely affect and cause large
fluctuations in the daily price of the Fund's shares.
•Analysis
of the creditworthiness of issuers of high yield securities is more complex. To
the extent a Fund invests in high yield securities, its ability to meet its
objective may be more dependent on such credit analyses.
•High
yield securities may be more susceptible to real or perceived adverse economic
and competitive industry conditions. Although high yield securities prices tend
to be less sensitive to interest rate changes than those of investment grade
securities, they tend to be more sensitive to adverse economic downturns or
individual corporate developments. Adverse publicity and investor perceptions,
whether or not based on fundamental analysis, may decrease the value and
liquidity of high yield securities, especially in a thinly traded
market.
•If
the issuer of high yield securities defaults, a Fund may incur additional
expenses to seek recovery.
•If
an issuer of high yield securities undergoes a corporate restructuring, such
high yield securities may become exchanged for or converted into reorganized
equity of the underlying issuer. Moreover, to the extent that a bond indenture
or loan agreement does not contain sufficiently protective covenants or
otherwise permits the issuer to take certain actions to the Fund's detriment
(such as distributing cash to equity holders, incurring additional indebtedness,
and disposing of assets), the underlying value of the high yield security may
decline.
The
use of credit ratings for evaluating high yield securities also involves certain
risks. For example, credit ratings reflect the safety of principal and interest
payments, not the market value risk of high yield securities. Also, credit
rating agencies may fail to change credit ratings in a timely manner to reflect
subsequent events. If a credit rating agency changes the rating of a portfolio
security held by a Fund, the Fund may retain the security.
Industry
Concentration
A
fund that concentrates its investments (invests more than 25% of its net assets)
in a particular industry (or group of industries) is more exposed to the overall
condition of the particular industry than a fund that invests in a wider variety
of industries. A particular industry could be affected by economic, business,
supply-and-demand, political, or regulatory factors. Companies within the same
industry could react similarly to such factors. As a result, a fund’s
concentration in a particular industry would increase the possibility that the
fund’s performance will be affected by such factors.
Inverse
Floating Rate Investments
Inverse
floating rate investments are variable rate debt instruments that pay interest
at rates that move in the opposite direction of prevailing interest rates.
Inverse floating rate investments tend to underperform the market for fixed rate
bonds in a rising interest rate environment. Inverse floating rate investments
have varying degrees of liquidity. Inverse floating rate investments in which
the funds may invest may include derivative instruments, such as residual
interest bonds or tender option bonds. Such instruments are typically created by
a special purpose trust that holds long-term fixed rate bonds and sells two
classes of beneficial interests: short-term floating rate interests, which are
sold to third party investors, and the inverse floating residual interests,
which are purchased by the funds. The funds generally invest in inverse floating
rate investments that include embedded leverage, thus exposing the funds to
greater risks and increased costs. The market value of a "leveraged" inverse
floating rate investment generally will fluctuate in response to changes in
market rates of interest to a greater extent than the value of an unleveraged
investment. A fund making such an investment will segregate on its books liquid
securities having a value equal to the market value of the bonds underlying the
“leveraged” inverse floating rate investment.
Investment
Company Securities
Securities
of other investment companies, including shares of closed-end investment
companies, unit investment trusts, various exchange-traded funds ("ETFs"), and
other open-end investment companies, represent interests in professionally
managed portfolios that may invest in a variety of instruments. Certain types of
investment companies, such as closed-end investment companies, issue a fixed
number of shares that trade on a stock exchange or over-the-counter at a premium
or a discount to their net asset value. Others are continuously offered at net
asset value, but may also be traded in the secondary market. ETFs are often
structured to perform in a similar fashion to a broad-based securities index.
Investing in ETFs involves generally the same risks as investing directly in the
underlying instruments. Investing in ETFs involves the risk that they will not
perform in exactly the same fashion, or in response to the same factors, as the
index or underlying instruments. Shares of ETFs may trade at prices other than
NAV.
A
fund that invests in another investment company is subject to the risks
associated with direct ownership of the securities in which such investment
company invests. Fund shareholders indirectly bear their proportionate share of
the expenses of each such investment company, including its advisory and
administrative fees. The Fund would also continue to pay its own advisory fees
and other expenses. Consequently, the Fund and its shareholders would, in
effect, absorb two levels of fees with respect to investments in other
investment companies.
A
fund may invest in affiliated underlying funds, and those who manage such fund's
investments and their affiliates may earn different fees from different
underlying funds and may have an incentive to allocate more fund assets to
underlying funds from which they receive higher fees.
Leverage
If
a fund makes investments in futures contracts, forward contracts, swaps and
other derivative instruments, these instruments provide the economic effect of
financial leverage by creating additional investment exposure, as well as the
potential for greater loss. If a fund uses leverage through activities such as
borrowing, entering into short sales, purchasing securities on margin or on a
“when-issued” basis or purchasing derivative instruments in an effort to
increase its returns, the fund has the risk of magnified capital losses that
occur when losses affect an asset base, enlarged by borrowings or the creation
of liabilities, that exceeds the net assets of the fund. The net asset value of
a fund employing leverage will be more volatile and sensitive to market
movements. Leverage may involve the creation of a liability that requires the
fund to pay interest. Leveraging may cause a fund to liquidate portfolio
positions to satisfy its obligations or to meet segregation requirements when it
may not be advantageous to do so. To the extent that a fund is not able to close
out a leveraged position because of market illiquidity, a fund’s liquidity may
be impaired to the extent that it has a substantial portion of liquid assets
segregated or earmarked to cover obligations.
Master
Limited Partnerships ("MLPs")
A
master limited partnership ("MLP") that invests in a particular industry (e.g.,
oil and gas) will be harmed by detrimental economic events within that industry.
For example, the business of certain MLPs is affected by supply and demand for
energy commodities because such MLPs derive revenue and income based upon the
volume of the underlying commodity produced, transported, processed,
distributed, and/or marketed. Many MLPs are also subject to various federal,
state and local environmental laws and health and safety laws as well as laws
and regulations specific to their particular activities.
MLPs
tend to pay relatively higher distributions than other types of companies. The
amount of cash that an MLP can distribute to its partners will depend on the
amount of cash it generates from operations, which will vary from quarter to
quarter depending on factors affecting the market generally and on factors
affecting the particular business lines of the MLP. Available cash will also
depend on the MLP's level of operating costs (including incentive distributions
to the general partner), level of capital expenditures, debt service
requirements, acquisition costs (if any), fluctuations in working capital needs
and other factors.
Certain
benefits derived from investment in MLPs depend largely on the MLPs being
treated as partnerships for federal income tax purposes. As a partnership, an
MLP has no federal income tax liability at the entity level. MLPs taxed as
partnerships file a partnership tax return for U.S. federal, state and local
income tax purposes and communicate the Fund’s allocable share of the MLP’s
income, gains, losses, deductions and expenses via a “Schedule K-1.” Each year,
the Fund will send you an annual tax statement (Form 1099) to assist you in
completing your tax returns. In some circumstances the Fund may need to send you
a corrected Form 1099, which could require you to amend your tax returns. For
example, if the Fund keeps MLP investments until the basis (generally the price
paid for the units, as adjusted downwards with each distribution and allocation
of deductions and losses, and upwards with each allocation of taxable income and
gain) is zero, subsequent distributions will be taxable to the Fund at ordinary
income rates and shareholders may receive a corrected Form 1099.
If,
as a result of a change in current law or a change in an MLP's business, an MLP
was treated as a corporation for federal income tax purposes, the MLP would be
obligated to pay federal income tax on its income at the corporate tax rate. If
an MLP was classified as a corporation for federal income tax purposes, the
amount of cash available for distribution would be reduced and the distributions
received might be taxed entirely as dividend income.
To
the extent a distribution received by a fund from an MLP is treated as a return
of capital, the fund's adjusted tax basis in the interests of the MLP will be
reduced, which may increase the fund's tax liability upon the sale of the
interests in the MLP or upon subsequent distributions in respect of such
interests.
Municipal
Obligations and AMT-Subject Bonds
The
term “municipal obligations” generally is understood to include debt obligations
issued by municipalities to obtain funds for various public purposes. The two
principal classifications of municipal bonds are "general obligation" and
"revenue" bonds. General obligation bonds are secured by the issuer's pledge of
its full faith and credit, with either limited or unlimited taxing power for the
payment of principal and interest. Revenue bonds are not supported by the
issuer's full taxing authority; generally, they are payable only from the
revenues of a particular facility, a class of facilities, or the proceeds of
another specific revenue source.
AMT-subject
bonds are municipal obligations issued to finance certain "private activities,"
such as bonds used to finance airports, housing projects, student loan programs,
and water and sewer projects. Interest on AMT-subject bonds is an item of tax
preference for purposes of the federal individual alternative minimum tax
("AMT"). See "Tax Considerations" for a discussion of the tax consequences of
investing in the fund.
Current
federal income tax laws limit the types and volume of bonds qualifying for the
federal income tax exemption of interest, which may have an effect upon the
ability of the fund to purchase sufficient amounts of tax-exempt
securities.
Portfolio
Duration
Average
duration is a mathematical calculation of the average life of a bond (or for a
bond fund, the average life of the fund's underlying bonds, weighted by the
percentage of the fund's assets that each represents) that serves as a useful
measure of its price risk. Duration is an estimate of how much the value of the
bonds held by a fund will fluctuate in response to a change in interest rates.
For example, if a fund has an average duration of 4 years and interest rates
rise by 1%, the value of the bonds held by the fund will decline by
approximately 4%, and if the interest rates decline by 1%, the value of the
bonds held by the fund will increase by approximately 4%. Longer term bonds and
zero coupon bonds are generally more sensitive to interest rate changes.
Duration, which measures price sensitivity to interest rate changes, is not
necessarily equal to average maturity.
Portfolio
Turnover (Active Trading)
"Portfolio
Turnover" is the term used in the industry for measuring the amount of trading
that occurs in a fund's portfolio during the year. For example, a 100% turnover
rate means that on average every security in the portfolio has been replaced
once during the year. Funds with high turnover rates (more than 100%) are
considered actively-traded and often have higher transaction costs (which are
paid by the fund), may result in higher taxes when fund shares are held in a
taxable account, and may lower the fund's performance. High portfolio turnover
can result in a lower capital gain distribution due to higher transaction costs
added to the basis of the assets or can result in lower ordinary income
distributions to shareholders when the transaction costs cannot be added to the
basis of assets. Both events reduce fund performance.
Please
consider all the factors when you compare the turnover rates of different funds.
You should also be aware that the "total return" line in the Financial
Highlights section reflects portfolio turnover costs.
Preferred
Securities
Preferred
securities include preferred stock and various types of junior subordinated debt
and trust preferred securities. Preferred securities may pay fixed rate or
adjustable rate distributions and generally have a payment "preference" over
common stock, but are junior to the issuer's senior debt in a liquidation of the
issuer’s assets. Preference would mean that a company must pay on its preferred
securities before paying on its common stock, and that any claims of the
preferred security holder would typically be ahead of common stockholders'
claims on assets in a corporate liquidation.
Holders
of preferred securities usually have no right to vote for corporate directors or
on other matters. The market value of preferred securities is sensitive to
changes in interest rates as they are typically fixed income securities; the
fixed-income payments are expected to be the primary source of long-term
investment return. While some preferred securities are issued with a final
maturity date, others are perpetual in nature. In certain instances, a final
maturity date may be extended and/or the final payment of principal may be
deferred at the issuer’s option for a specified time without triggering an event
of default for the issuer. In addition, an issuer of preferred securities may
have the right to redeem the securities before their stated maturity date. For
instance, for certain types of preferred securities, a redemption may be
triggered by a change in federal income tax or securities laws. As with call
provisions, a redemption by the issuer may reduce the return of the security
held by the fund. Preferred securities may be subject to provisions that allow
an issuer, under certain circumstances to skip (indefinitely) or defer (possibly
up to 10 years) distributions. If a fund owns a preferred security that is
deferring its distribution, the fund may be required to report income for tax
purposes while it is not receiving any income.
Preferred
securities are typically issued by corporations, generally in the form of
interest or dividend bearing instruments, or by an affiliated business trust of
a corporation, generally in the form of beneficial interests in subordinated
debentures or similarly structured securities. The preferred securities market
is generally divided into the $25 par “retail” and the $1,000 par
“institutional” segments. The $25 par segment includes securities that are
listed on the New York Stock Exchange (exchange traded), which trade and are
quoted with accrued dividend or interest income, and which are often callable at
par value five years after their original issuance date. The institutional
segment includes $1,000 par value securities that are not exchange-listed (over
the counter), which trade and are quoted on a “clean” price, i.e., without
accrued dividend or interest income, and which often have a minimum of 10 years
of call protection from the date of their original issuance. Preferred
securities can also be issued by real estate investment trusts and involve risks
similar to those associated with investing in real estate investment trust
companies.
Real
Estate Investment Trusts ("REITs")
REITs
involve certain unique risks in addition to the risks associated with investing
in the real estate industry in general (such as possible declines in the value
of real estate, lack of availability of mortgage funds, or extended vacancies of
property). REITs are characterized as: equity REITs, which primarily own
property and generate revenue from rental income; mortgage REITs, which invest
in real estate mortgages; and hybrid REITs, which combine the characteristics of
both equity and mortgage REITs. Equity REITs may be affected by changes in the
value of the underlying property owned by the REITs, while mortgage REITs may be
affected by the quality of any credit extended. REITs are dependent upon
management skills, are not diversified, and are subject to heavy cash flow
dependency, risks of default by borrowers, and self-liquidation. A fund that
invests in a REIT is subject to the REIT’s expenses, including management fees,
and will remain subject to the fund's advisory fees with respect to the assets
so invested. REITs are also subject to the possibilities of failing to qualify
for the special tax treatment accorded REITs under the Code, and failing to
maintain their exemptions from registration under the 1940 Act.
Regular
REIT dividends received by a Fund from a REIT will not qualify for the corporate
dividends-received deduction and generally will not constitute qualified
dividend income for U.S. income tax purposes. Any distribution of income
attributable to regular REIT dividends from a Fund’s investment in a REIT will
not qualify for the deduction that would be available to a non-corporate
shareholder were the shareholder to own such REIT directly.
Investment
in REITs also involves risks similar to those associated with investing in small
market capitalization companies. REITs may have limited financial resources, may
trade less frequently and in a limited volume, and may be subject to more abrupt
or erratic price movements than larger company securities.
Real
Estate Securities
Investing
in securities of companies in the real estate industry subjects a fund to the
special risks associated with the real estate market and the real estate
industry in general. Generally, companies in the real estate industry are
considered to be those that have principal activity involving the development,
ownership, construction, management or sale of real estate; have significant
real estate holdings, such as hospitality companies, healthcare facilities,
supermarkets, mining, lumber and/or paper companies; and/or provide products or
services related to the real estate industry, such as financial institutions
that make and/or service mortgage loans and manufacturers or distributors of
building supplies. Securities of companies in the real estate industry are
sensitive to factors such as loss to casualty or condemnation, changes in real
estate values, property taxes, interest rates, cash flow of underlying real
estate assets, occupancy rates, government regulations affecting zoning, land
use and rents, and the management skill and creditworthiness of the issuer.
Companies in the real estate industry may also be subject to liabilities under
environmental and hazardous waste laws.
Redemption
and Large Transaction Risk
Ownership
of the fund's shares may be concentrated in one or a
few large investors (such as funds of funds, institutional investors,
and asset allocation programs) that may redeem or purchase shares in large
quantities. These transactions may cause the fund to sell securities to meet
redemptions or to invest additional cash at times it would not otherwise do so,
which may result in increased transaction costs, increased expenses, changes to
expense ratios, and adverse effects to fund performance. Such transactions may
also accelerate the realization of taxable income if sales of portfolio
securities result in gains. Moreover, reallocations by large shareholders among
share classes of a fund may result in changes to the expense ratios of affected
classes, which may increase the expenses paid by shareholders of the class that
experienced the redemption.
As
an example, as of August 31, 2020, Principal Funds, Inc. ("PFI") and Principal
Variable Contracts Funds, Inc. ("PVC") funds of funds owned the following
percentages, in the aggregate, of the outstanding shares of the underlying funds
listed below. Principal Global Investors, LLC ("PGI") is the advisor to the PFI
and PVC funds of funds and is committed to minimizing the potential impact of
redemption and large transaction risk on underlying funds to the extent
consistent with pursuing the investment objectives of the funds of funds that it
manages. However, PGI and its affiliates may face conflicts of interest in
fulfilling responsibilities to all such funds.
|
|
|
|
|
|
Fund |
Total
Percentage
of
Outstanding
Shares
Owned |
|
|
Blue
Chip |
32.44% |
Bond
Market Index |
87.99% |
Diversified
Real Asset |
12.35% |
Edge
MidCap |
85.03% |
International
Equity Index |
54.94% |
International
Small Company |
86.74% |
Origin
Emerging Markets |
49.79% |
Spectrum
Preferred and Capital Securities Income |
9.81% |
Securitized
Products
Securitized
products are fixed income instruments that represent interests in underlying
pools of collateral or assets. The value of the securitized product is derived
from the performance, value, and cash flows of the underlying asset(s). The
specific securitized products that are principal strategies of each Fund are
listed in its Fund Summary.
A
fund’s investments in securitized products are subject to risks similar to
traditional fixed income securities, such as credit, interest rate, liquidity,
prepayment, extension, and default risk, as well as additional risks associated
with the nature of the assets and the servicing of those assets. Prepayment risk
may make it difficult to calculate the average life of a fund’s investment in
securitized products. Securitized products are generally issued as pass-through
certificates, which represent the right to receive principal and interest
payments collected on the underlying pool of assets, which are passed through to
the security holder. Therefore, repayment depends on the cash flows generated by
the underlying pool of assets. The securities may be rated as investment-grade
or below-investment-grade.
•Mortgage-backed
securities (“MBS”) represent an interest in a pool of underlying mortgage loans
secured by real property. MBS are sensitive to changes in interest rates, but
may respond to these changes differently from other fixed income securities due
to the possibility of prepayment of the underlying mortgage loans. If interest
rates fall and the underlying loans are prepaid faster than expected, the fund
may have to reinvest the prepaid principal in lower yielding securities, thus
reducing the fund’s income. Conversely, rising interest rates tend to discourage
refinancings and the underlying loans may be prepaid more slowly than expected,
reducing a fund’s potential to reinvest the principal in higher yielding
securities and extending the duration of the underlying loans. In addition, when
market conditions result in an increase in default rates on the underlying loans
and the foreclosure values of the underlying real estate is less than the
outstanding amount due on the underlying loan, collection of the full amount of
accrued interest and principal on these investments may be doubtful. The risk of
such defaults is generally higher in the case of underlying mortgage pools that
include sub-prime mortgages (mortgages granted to borrowers whose credit
histories would not support conventional mortgages).
•Commercial
mortgage-backed securities (“CMBS”) represent an interest in a pool of
underlying commercial mortgage loans secured by real property such as retail,
office, hotel, multi-family, and industrial properties. Certain CMBS are issued
in several classes with different levels of yield and credit protection, and the
CMBS class in which a fund invests usually influences the interest rate, credit,
and prepayment risks.
•Asset-backed
securities (“ABS”) are backed by non-mortgage assets such as company
receivables, truck and auto loans, student loans, leases and credit card
receivables. ABS entail credit risk. They also may present a risk that, in the
event of default, the liquidation value of the underlying assets may be
inadequate to pay any unpaid interest or principal.
Short
Sales
A
fund enters into a short sale by selling a security it has borrowed (typically
from a broker or other institution) with the hope of purchasing the same
security at a later date at a lower price. A fund may also take a short position
in a derivative instrument, such as a future, forward or swap. If the market
price of the security or derivatives increases, the fund will suffer a
(potentially unlimited) loss when it replaces the security or derivative at the
higher price. In certain cases, purchasing a security to cover a short position
can itself cause the price of the security to rise further, thereby exacerbating
the loss. In addition, a fund may not always be able to borrow the security at a
particular time or at an acceptable price. Before a fund replaces a borrowed
security, it is required to designate on its books cash or liquid assets as
collateral to cover the fund’s short position, marking the collateral to market
daily. This obligation limits a fund’s investment flexibility, as well as its
ability to meet redemption requests or other current obligations. A short
position in a derivative instrument involves the risk of a theoretically
unlimited increase in the value of the underlying instrument. Short sales also
involve transaction and other costs that will reduce potential fund gains and
increase potential fund losses.
Certain
funds may also invest the proceeds received from short selling securities, which
creates additional leverage. Using such leverage allows the fund to use the
proceeds to purchase additional securities, thereby increasing its exposure to
assets, such that its total assets may be greater than its capital. Leverage
also magnifies the volatility of changes in the value of the fund’s portfolio.
The effect of the use of leverage by the fund in a market that moves adversely
to its investments could result in substantial losses to the fund, which would
be greater than if the fund were not leveraged. Because a short position loses
value as the security’s price increases, the loss on a short sale is
theoretically unlimited.
The
short sale proceeds utilized by a fund to leverage investments are
collateralized by all or a portion of such fund’s portfolio. Accordingly, a fund
may pledge securities in order to effect short sales, utilize short sale
proceeds or otherwise obtain leverage for investment or other purposes. Should
the securities pledged to brokers to secure the fund’s margin accounts decline
in value, the fund could be subject to a “margin call”, pursuant to which the
fund must either deposit additional funds or securities with the broker or
suffer mandatory liquidation of all or a portion of the pledged securities to
compensate for the decline in value. The banks and dealers that provide leverage
to the fund have discretion to change the fund’s margin requirements at any
time. Changes by counterparties in the foregoing may result in large margin
calls, loss of leverage and forced liquidations of positions at disadvantageous
prices. The utilization of short sale proceeds for leverage will cause the fund
to be subject to higher transaction fees and other costs.
U.S.
Government and U.S. Government-Sponsored Securities
U.S.
Government securities, such as Treasury bills, notes and bonds and
mortgage-backed securities guaranteed by the Government National Mortgage
Association (Ginnie Mae), are supported by the full faith and credit of the
United States; others are supported by the right of the issuer to borrow from
the U.S. Treasury; others are supported by the discretionary authority of the
U.S. Government to purchase the agency's obligations; and still others are
supported only by the credit of the issuing agency, instrumentality, or
enterprise.
Although
U.S. Government-sponsored enterprises such as the Federal Home Loan Mortgage
Corporation (Freddie Mac) and the Federal National Mortgage Association (Fannie
Mae) may be chartered or sponsored by Congress, they are not funded by
Congressional appropriations, and their securities are not issued by the U.S.
Treasury nor supported by the full faith and credit of the U.S.
Government.
There
is no assurance that the U.S. Government would provide financial support to its
agencies and instrumentalities if not required to do so. In addition, certain
governmental entities have been subject to regulatory scrutiny regarding their
accounting policies and practices and other concerns that may result in
legislation, changes in regulatory oversight and/or other consequences that
could adversely affect the credit quality, availability, or investment character
of securities issued by these entities. The value and liquidity of U.S.
Government securities may be affected adversely by changes in the ratings of
those securities.
Volatility
Mitigation
Volatility
mitigation strategies may increase fund transaction costs, which could increase
losses or reduce gains. These strategies may not protect the fund from market
declines and may reduce the fund’s participation in market gains.
PORTFOLIO
HOLDINGS INFORMATION
A
description of the Fund's policies and procedures with respect to disclosure of
the Fund's portfolio securities is available in the Fund's Statement of
Additional Information.
MANAGEMENT
OF THE FUNDS
The
Manager and Advisor
Principal
Global Investors, LLC (“PGI”), an indirect subsidiary of Principal Financial
Group, Inc. ("Principal®"),
serves as the manager and advisor for the Fund. Through the Management Agreement
with the Fund, PGI provides investment advisory services and certain corporate
administrative services for the Fund.
Advisor: Principal
Global Investors, LLC (“PGI”),
711 High Street, Des Moines, IA 50392, is part of a diversified global asset
management organization which utilizes a multi-boutique strategy of specialized
investment groups and affiliates to provide institutional investors and
individuals with diverse investment capabilities, including fixed income,
equities, real estate, currency, asset allocation and stable value. PGI also has
asset management offices of affiliate advisors in non-U.S. locations including
London, Singapore, Tokyo, Hong Kong and Sydney. PGI has been an investment
advisor since 1998.
Funds: In
fulfilling its investment advisory responsibilities, PGI provides day-to-day
discretionary investment services (directly making decisions to purchase or sell
securities) for all or a portion of the following Funds:
•Blue
Chip (services provided by "Aligned Investors", a specialized boutique of
PGI)
•Bond
Market Index
•Diversified
Real Asset (one or more strategies that seek to track the performance of an
index related to a particular sector or asset class)
•Edge
MidCap (services provided by "Edge Asset Management", a specialized boutique of
PGI)
•Global-Multi
Strategy (including a portion of the credit/distressed strategy, which is
managed by Finisterre, a specialized boutique of PGI)
•International
Equity Index
•International
Small Company
•Opportunistic
Municipal
•Small-MidCap
Dividend Income (services provided by "Edge Asset Management", a specialized
boutique of PGI)
•Small-MidCap
Growth (services provided by Columbus Circle, a specialized boutique of
PGI)
Several
of the Funds have multiple Sub-Advisors. A
team within Principal®
Global Asset Allocation, a specialized boutique of PGI and whose members are
identified in each Fund summary and listed below, determines the portion of
those Funds’ assets that PGI and each Sub-Advisor will manage and may reallocate
Fund assets among PGI and the Sub-Advisors from time-to-time.
This team agrees on allocation decisions and shares authority and responsibility
for day-to-day portfolio management, with no limitation on the authority of one
portfolio manager in relation to another.
The
decision to reallocate Fund assets between PGI acting in a discretionary
advisory capacity and the Sub-Advisors may be based on a variety of factors,
including but not limited to: the investment capacity of PGI and each
Sub-Advisor, portfolio diversification, volume of net cash flows, fund
liquidity, investment performance, investment strategies, changes in PGI or each
Sub-Advisor's firm or investment professionals, or changes in the number of
Sub-Advisors.
Ordinarily, reallocations of Fund assets among Sub-Advisors occur as a
Sub-Advisor liquidates assets in the normal course of portfolio management or
with net new cash flows; however, at times existing Fund assets may be
reallocated among PGI and/or the Sub-Advisors.
The
Fund summaries identified the portfolio managers and the Funds they manage.
Additional information about the portfolio managers follows. With respect to the
biographies of PGI portfolio managers, references to Principal®
encompass various entities and groups within the Principal organization, such as
its majority- and wholly-owned subsidiaries, as well as the internal boutiques
referenced above.
As
reflected in the Fund summaries, the day-to-day portfolio management, for some
Funds, is shared by multiple portfolio managers. In each such case, the
portfolio managers operate as a team, sharing authority and responsibility for
research and the day-to-day management of the portfolio. However:
•For
the Blue Chip Fund, Mr. Nolin has ultimate decision making authority. Mr.
Rozycki may make investment decisions in Mr. Nolin’s absence.
•For
the Small-MidCap Growth Fund, Mr. Corbett is the lead Portfolio Manager with
final decision making authority, and Mr. Iacono and Mr. Shapiro are Co-Portfolio
Managers. Mr. Iacono and Mr. Shapiro may make investment decisions in Mr.
Corbett’s absence.
Jessica
S. Bush has
been with Principal®
since 2006. Ms. Bush is responsible for the asset allocation and manager
selection for Principal®
Global Asset Allocation. She earned a bachelor’s degree in Business
Administration from the University of Michigan. She has earned the right to
use the Chartered Financial Analyst designation.
Jeff
Callahan has
been with Principal®
since
2006. He earned a B.A. in Business Administration with an emphasis in Finance
from Wartburg College and an M.B.A. form the University of Iowa. Mr. Callahan
has earned the right to use the Chartered Financial Analyst
designation.
Daniel
R. Coleman
has been with Principal®
since 2001, and has held various investment management roles on the equity team,
including Portfolio Manager and some senior management roles. He earned a
bachelor's degree in Finance from the University of Washington and an M.B.A.
from New York University.
Christopher
T. Corbett has
been with Principal®
since
2006. He earned a B.B.A in Accounting and an M.B.A. in Finance from the
University of Notre Dame. Mr. Corbett has earned the right to use the Chartered
Financial Analyst designation.
Marcus
W. Dummer has
been with Principal®
since 2003. Mr. Dummer is responsible for the asset allocation and manager
selection for Principal®
Global Asset Allocation. He earned a bachelor’s degree in Finance and an M.B.A.
from the University of Utah. He has earned the right to use the Chartered
Alternative Investment Analyst designation.
Kelly
A. Grossman has
been with Principal®
since 1991. Ms. Grossman is responsible for the asset allocation and manager
selection for Principal®
Global Asset Allocation. She earned a bachelor’s degree in Mathematics and
Computer Science from the University of Northern Iowa. Ms. Grossman is a
Fellow of the Society of Actuaries and a member of the American Academy of
Actuaries.
Michael
Iacono has
been with Principal®
since
1997. He earned a B.S. in Accounting from Boston College. Mr. Iacono is a CPA
and has earned the right to use the Chartered Financial Analyst
designation.
Theodore
Jayne
has been with Principal®
since 2015. He earned a bachelor’s degree in Anthropology from Harvard
University. Mr. Jayne has earned the right to use the Chartered Financial
Analyst designation.
Tiffany
N. Lavastida has
been with Principal®
since 1997. She earned a bachelor’s degree in Finance and an M.B.A. from the
University of Iowa. Ms. Lavastida has earned the right to use the Chartered
Financial Analyst designation.
James
Noble
has been with Principal®
since 2010. He earned a bachelor’s degree in Finance and an M.B.A. from Hofstra
University.
K. William
Nolin
has been with Principal®
since 1993. He earned a bachelor’s degree in Finance from the University of Iowa
and an M.B.A. from the Yale School of Management. Mr. Nolin has earned the right
to use the Chartered Financial Analyst designation.
Brian
W. Pattinson
has been with Principal®
since 1994. He earned a bachelor’s degree and an M.B.A. in Finance from the
University of Iowa. Mr. Pattinson has earned the right to use the Chartered
Financial Analyst designation.
Sarah
E. Radecki joined
Principal in 1999. She earned bachelor’s degrees in political science
and economics from Saint Mary’s College of California and a master’s degree in
economics from the University of California at Santa Barbara. She has earned the
right to use the Chartered Financial Analyst designation.
Benjamin
E. Rotenberg has
been with Principal®
since 2014. Mr. Rotenberg is responsible for the asset allocation and manager
selection for Principal®
Global Asset Allocation. He earned a bachelor’s degree in International
Relations and Russian from Pomona College. He has earned the right to use the
Chartered Financial Analyst and the Chartered Alternative Investment Analyst
designations.
Tom
Rozycki
has been with Principal®
since 2001. He earned a bachelor’s degree in Finance from Drake University. Mr.
Rozycki has earned the right to use the Chartered Financial Analyst designation.
Jeffrey
A. Schwarte
has been with Principal®
since 1993. He earned a bachelor’s degree in Accounting from the University of
Northern Iowa. Mr. Schwarte has earned the right to use the Chartered Financial
Analyst designation.
Marc
R. Shapiro has
been with Principal®
since
2004. He earned a B.A. in Finance and Marketing from Emery
University.
Aaron
J. Siebel
has been with Principal®
since 2005. He earned a bachelor’s degree in Finance from the University of
Iowa.
David
W. Simpson
has been with Principal®
since 2003. He earned a bachelor's degree from the University of Illinois and an
M.B.A. in Finance from the University of Wisconsin. Mr. Simpson has earned the
right to use the Chartered Financial Analyst designation.
Darryl
Trunnel has
been with Principal®
since
2008. He earned a bachelor's degree in Agricultural Business from Iowa State
University. Mr. Trunnel has earned the right to use the Chartered Financial
Analyst designation.
James
Welch
has been with Principal®
since 2014. He earned a bachelor's degree in Economics from the Pennsylvania
State University.
The
Sub-Advisors
PGI
has signed contracts with various Sub-Advisors. Under the sub-advisory
agreements, the Sub-Advisor agrees to assume the obligations of PGI to provide
investment advisory services to the portion of the assets of a specific Fund
allocated to it by PGI. For these services, PGI pays the Sub-Advisor a
fee.
PGI
or the Sub-Advisor provides the Fund's Board with a recommended investment
program. The program must be consistent with the Fund's investment objective and
policies. Within the scope of the approved investment program, the Sub-Advisor
advises the Fund on its investment policy and determines which securities are
bought or sold, and in what amounts.
The
Fund summaries identified the sub-advisors, portfolio managers and the funds
they manage. Additional information follows.
Sub-Advisor: BlackRock
Financial Management, Inc. (“BlackRock”),
55 East 52nd Street, New York, New York 10055, is a registered investment
adviser organized in 1994. BlackRock and its affiliates manage investment
company and other portfolio assets.
Sub-Sub-Advisor:
BlackRock
International Limited ("BIL"),
Exchange Place One, 1 Semple Street, Edinburgh EH3 8BL, Scotland, is a
registered investment adviser that was founded in 1995.
Fund: a
portion of Diversified Real Asset (inflation-indexed bonds
strategy)
BlackRock
and BIL, with PGI's consent, have entered into a sub-sub-advisory agreement for
the Diversified Real Asset Fund. Under the agreement, BIL has agreed to carry
out certain investment advisory obligations of BlackRock to manage the
Diversified Real Asset Fund’s assets. BlackRock will allocate to BIL a portion
of the Diversified Real Asset Fund assets it manages.
Sub-Advisor: ClearBridge
RARE Infrastructure (North America) Pty Limited (“ClearBridge”),
Level 13, 35 Clarence Street, Sydney, Australia 2000, is a registered investment
adviser founded in 2009 and specializes solely in global infrastructure.
Fund: a
portion of Diversified Real Asset (infrastructure strategy)
Sub-Advisor: Credit
Suisse Asset Management, LLC (“Credit Suisse”),
Eleven Madison Avenue, New York, NY, 10010, is the New York-based Registered
Investment Adviser of Credit Suisse Asset Management (CSAM). CSAM, which is part
of the International Wealth Management Division of Credit Suisse Group AG, is a
global asset manager with a focus on Alternative Investments and select
Traditional Investments.
Fund: a
portion of Diversified Real Asset (commodity index-linked notes and, indirectly
through a Cayman subsidiary, commodity derivatives)
Sub-Advisor: Delaware
Investments Fund Advisers (“DIFA”),
610 Market Street, Philadelphia, PA 19106, is a series of a registered
investment advisor that is dedicated to the management of equity and fixed
income securities accounts.
Fund: a
portion of Diversified Real Asset (infrastructure strategy)
Sub-Advisor: Gotham
Asset Management, LLC (“Gotham”), 535
Madison Avenue, 30th Floor, New York, NY 10022, is a registered investment
adviser that manages long/short and long-only investment
strategies.
Fund:
a
portion of Global Multi-Strategy (Equity Long/Short Strategy)
Sub-Advisor: Graham
Capital Management, L.P. (“Graham”),
40 Highland Avenue, Rowayton, Connecticut, 06853, founded in 1994, is an
investment management firm that focuses on global macro-oriented
strategies.
Fund(s): a
portion of Global Multi-Strategy. Graham will primarily use the global macro
strategy; however, it may use any of the Fund’s investment strategies, including
investments through the Fund’s Cayman Subsidiary.
Sub-Advisor: KLS
Diversified Asset Management LP (“KLS”), 452
Fifth Avenue, 22nd
Floor, New York, NY 10018,
has
been an SEC-registered investment advisor since 2011.
Fund: a
portion of Global Multi-Strategy (market neutral strategy)
Sub-Advisor: Loomis,
Sayles & Company, L.P. (“Loomis Sayles”),
One Financial Center, Boston, Massachusetts 02111, is an investment advisory
firm that was founded in 1926.
Fund: a
portion of Global Multi-Strategy (credit/distressed strategy)
Sub-Advisor: Los
Angeles Capital Management and Equity Research, Inc. ("Los Angeles
Capital"),
11150 Santa Monica Boulevard, Suite 200, Los Angeles, CA 90025, founded in 2002,
is a registered investment adviser offering risk-controlled, active equity
management services to a broad range of institutional investors.
Fund: a
portion of Global Multi-Strategy. Los Angeles Capital will primarily use the
equity long/short strategy; however, it may use any of the Fund’s investment
strategies.
Sub-Advisor: Mellon
Investments Corporation (“Mellon”),
BNY Mellon Center, One Boston Place, Boston, MA 02108, is a multi-asset
investment adviser providing clients with a wide range of investment
solutions.
Fund(s): a
portion of Diversified Real Asset (a portion of the natural resources strategy)
Sub-Advisor: Nuveen
Asset Management LLC (“Nuveen Asset Management”),
333 West Wacker Drive, Chicago, IL 60606, is an investment adviser registered
with the SEC providing investment management services in a variety of investment
strategies across multiple asset classes.
Fund(s): a
portion of Diversified Real Asset (floating rate debt strategy)
Sub-Advisor: Origin
Asset Management LLP (“Origin”),
One Carey Lane, London, EC2V 8AE, UK manages global equity securities for
institutional clients.
Fund: Origin
Emerging Markets
The
portfolio managers operate as a team, sharing authority and responsibility for
research and the day-to-day management of the portfolio with no limitation on
the authority of one portfolio manager in relation to another.
Chris
Carter has
been with Origin since 2005. Mr. Carter is a graduate of Gonville & Caius
College, University of Cambridge, with an M.A. Honours Degree in Economics and
Philosophy.
Nigel
Dutson has
been with Origin since 2005. Mr. Dutson is a graduate of Surrey University with
a B.Sc. Joint Honours Degree in Mathematics & Economics.
Tarlock
Randhawa has
been with Origin since 2005. Mr. Randhawa is a graduate of Brunel University
with a B.Sc. Joint Honours Degree in Mathematics & Management.
Sub-Advisor: Pictet
Asset Management SA (“Pictet”),
60 Route Des Acacias, Geneva, Switzerland 1211-73, is authorized and regulated
by the FINMA in Switzerland and the SEC in the U.S. and has been an investment
advisor since 2006. Pictet provides asset management services for institutional
investors and investment funds.
Fund: a
portion of Diversified Real Asset (natural resources strategy)
Sub-Advisor: Principal
Real Estate Investors, LLC (“Principal - REI”),
711 High Street, Des Moines, IA 50392, was founded in 2000 and manages
commercial real estate across the spectrum of public and private equity and debt
investments, primarily for institutional investors.
Funds: a
portion of Diversified Real Asset (real estate strategy and commercial mortgage
backed securities strategy)
Sub-Advisor:
Sound Point Capital Management, LP (“Sound Point”),
375
Park Avenue, 33rd Floor, New York, NY 10152, founded in 2009, is a registered
investment advisor that provides investment advice and portfolio management
services.
Fund: a
portion of Global Multi-Strategy. Sound Point will primarily use the
credit/distressed strategy; however, it may use any of the Fund’s investment
strategies.
Sub-Advisor: Spectrum
Asset Management, Inc. (“Spectrum”),
2 High Ridge Park, Stamford, CT 06905, founded in 1987, manages portfolios of
preferred securities for corporate, pension fund, insurance and endowment
clients, open-end and closed-end mutual funds, and separately managed account
programs for high net worth individual investors as well as providing volatility
mitigation solutions for some client portfolios.
Funds: Capital
Securities and Spectrum Preferred and Capital Securities Income
The
day-to-day portfolio management is shared by a team of portfolio managers
(Messrs. Diaz, Giangregorio, Jacoby, Krishnan, and Lieb), under the leadership
of the Chief Investment Officer (who also chairs the Investment Committee) in
conjunction with the Credit and Research Team. This group has the authority and
responsibility for research, credit selection, ongoing portfolio management and
trading. For the Spectrum Preferred and Capital Securities Income Fund, the
volatility mitigation strategies are managed by a team consisting of Mr. Jacoby,
Mr. Krishnan, and Mr. Nugent; however, Mr. Nugent is primarily responsible for
day-to-day portfolio management for the volatility mitigation
strategies.
Fernando
(“Fred”) Diaz
joined Spectrum in 2000.
Roberto
Giangregorio
joined Spectrum in 2003. Mr. Giangregorio earned a B.S. and M.S. in Mechanical
Engineering from S.U.N.Y. at Stony Brook and the University of
Wisconsin-Madison, respectively. He also earned an M.B.A. in Finance from
Cornell University.
L.
Phillip Jacoby, IV
joined Spectrum in 1995. Mr. Jacoby earned a B.S. in Finance from the Boston
University School of Management.
Manu
Krishnan
joined Spectrum in 2004. Mr. Krishnan earned a B.S. in Mechanical Engineering
from the College of Engineering, Osmania University, India, an M.S. in
Mechanical Engineering from the University of Delaware, and an M.B.A. in Finance
from Cornell University. Mr. Krishnan has earned the right to use the Chartered
Financial Analyst designation.
Mark
A. Lieb
founded Spectrum in 1987. Mr. Lieb earned a B.A. in Economics from Central
Connecticut State College and an M.B.A. in Finance from the University of
Hartford.
Kevin
Nugent
joined Spectrum in 2012. Mr. Nugent earned a B.A. from Ohio Wesleyan University.
Sub-Advisor: Wellington
Management Company LLP (“Wellington”) has
its principal offices at 280 Congress Street, Boston, Massachusetts 02210.
Wellington is a professional investment counseling firm that provides investment
services to investment companies, employee benefit plans, endowments,
foundations, and other institutions.
Fund: a
portion of Global Multi-Strategy. Wellington will primarily use the equity
long/short strategy; however, it may use any of the Fund’s investment
strategies.
Sub-Advisor: York
Registered Holdings, L.P. (“York”),
767 Fifth Avenue, 17th Floor, New York, NY 10153, was formed in 2012 as part of
a group of companies established in 1991 that manages capital across various
strategies. York and certain of its affiliates manage capital for hedge funds,
private equity funds, mutual funds, UCITS III-compliant funds and separately
managed accounts for institutional investors.
Fund: a
portion of Global Multi-Strategy. York will primarily use the event-driven
strategy; however, it may use any of the Fund’s investment
strategies.
The
SAI provides additional information about each portfolio manager’s compensation,
other accounts managed by the portfolio manager, and the portfolio manager’s
ownership of securities in the Fund.
Fees
Paid to PGI
Each
Fund, with the exception of the Capital Securities Fund, pays PGI a fee for its
services, which includes the fee PGI pays to Sub-Advisors, as
applicable.
The
Capital Securities Fund will not pay PGI a fee for its services and PGI will not
pay Spectrum a fee for Spectrum's sub-advisory services to the Fund. This
arrangement recognizes that the Wrap Fee Adviser will receive a fee through the
wrap fee program that takes into account the value of any shares of the Fund
held by Eligible Wrap Accounts.
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|
Management
Fee Schedule (as a percentage of the average daily net
assets) |
Fund |
All
Assets |
Capital
Securities |
0.00%
(1) |
(1)
The
table reflects that Principal Global Investors, LLC ("PGI"), the investment
advisor, is absorbing all expenses of the Capital Securities Fund. You should be
aware, however, that the Capital Securities Fund is an integral part of
"wrap-fee" programs, including those sponsored by registered investment advisors
and broker-dealers unaffiliated with the Capital Securities Fund. Participants
in these programs pay a “wrap” fee to the wrap-fee program's sponsor
("Sponsor"). You should read carefully the wrap-fee brochure provided to
you by your Sponsor or your registered investment advisor. The brochure is
required to include information about the fees charged to you by the Sponsor and
the fees the Sponsor pays to your registered investment advisor.
The
fee the Funds paid (as a percentage of the average daily net assets) for the
fiscal year ended August 31, 2020 was:
|
|
|
|
|
|
Blue
Chip Fund |
0.61% |
Bond
Market Index Fund |
0.14% |
Capital
Securities Fund |
0.00% |
Diversified
Real Asset Fund |
0.81% |
Edge
MidCap Fund |
0.71% |
Global
Multi-Strategy Fund |
1.59% |
International
Equity Index Fund |
0.25% |
International
Small Company Fund |
1.04% |
Opportunistic
Municipal Fund |
0.50% |
Origin
Emerging Markets Fund |
1.08% |
Small-MidCap
Dividend Income Fund |
0.77% |
Small-MidCap
Growth Fund |
0.70% |
Spectrum
Preferred and Capital Securities Income Fund |
0.70% |
Availability
of the discussions regarding the basis for the Board of Directors approval of
various management and sub-advisory agreements is as follows:
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|
Semi-Annual
Report to Shareholders for the period ending February 29,
2020 |
Annual
Report to Shareholders for the period ending August 31,
2020 |
Fund |
Management
Agreement |
Sub-Advisory
Agreement |
Management
Agreement |
Sub-Advisory
Agreement |
Diversified
Real Asset |
X |
|
|
X |
Global
Multi-Strategy |
X |
|
|
X |
All
Remaining Funds |
X |
X |
|
|
Manager
of Managers
The
Fund operates as a Manager of Managers. Under an order received from the SEC
(the "current order"), the Fund and PGI may enter into and materially amend
agreements with unaffiliated and wholly-owned affiliated sub-advisors
(affiliated sub-advisors which are at least 95% owned, directly or indirectly,
by PGI or an affiliated person of PGI) without obtaining shareholder approval,
including to:
• hire
one or more sub-advisors;
• change
sub-advisors; and
• reallocate
management fees between PGI and sub-advisors.
Although
there is no present intent to do so, the Funds may, in the future, rely on
current SEC Staff guidance which expands relief under the current order to allow
PGI to enter into and materially amend agreements with majority-owned affiliated
sub-advisors (affiliated sub-advisors which are at least 50% owned, directly or
indirectly, by PGI or an affiliated person of PGI), and, further, to all
sub-advisors regardless of the degree of affiliation with PGI.
In
order to rely on the varying degrees of relief granted by the current order
and/or the SEC Staff guidance, a Fund must receive approval from its
shareholders (or, in the case of a new Fund, the Fund’s sole initial shareholder
before the Fund is available to the other purchasers).
The
shareholders of each Fund have approved such Fund's reliance on the current
order, as supplemented by the SEC Staff guidance, as follows:
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|
Funds |
Unaffiliated
Sub-Advisors |
Wholly-Owned
Affiliated Sub-Advisors |
Majority-Owned
Affiliated Sub-Advisors |
All
Sub-Advisors Regardless of Degree of Affiliation |
Opportunistic
Municipal |
X |
|
|
|
All
Other Funds |
X |
X |
X |
|
PGI
has ultimate responsibility for the investment performance of each Fund that
utilizes a sub-advisor due to its responsibility to oversee sub-advisors and
recommend their hiring, termination, and replacement.
Participating
Affiliate Agreement
In
rendering investment advisory services to a Fund, the advisor and each
sub-advisor may use the resources of one or more of its respective foreign
(non-U.S.) affiliates that are not registered under the Investment Advisers Act
of 1940, as amended, to provide portfolio management, research, and trading
services to the Fund. Under a Participating Affiliate Agreement, and pursuant to
applicable guidance from the staff of the SEC, U.S. registered advisors are
allowed to use investment advisory and trading resources of such unregistered
advisory affiliates subject to the regulatory supervision of the registered
advisor. For example, some Principal Fund Complex assets are managed by
employees of Principal Global Investors (Europe) Limited pursuant to such an
arrangement. Each such affiliate and any of their respective employees who
provide services to the Fund are considered under the Participating Affiliate
Agreement to be “supervised persons” of the advisor or sub-advisor (as
applicable) as that term is defined in the Investment Advisers Act of 1940.
PRICING
OF FUND SHARES
Each
Fund’s shares are bought and sold at the current share price. The share price of
each class of each Fund is calculated each day the New York Stock Exchange
(“NYSE”) is open (share prices are not calculated on the days on which the NYSE
is closed for trading, generally New Year’s Day, Martin Luther King, Jr.
Day, Washington’s Birthday/ Presidents’ Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas). The share price
is determined as of the close of business of the NYSE (normally
3:00 p.m. Central Time). When an order to buy or sell shares is
received, the share price used to fill the order is the next price we calculate
after we receive the order (in proper form) at our transaction processing center
in Kansas City, Missouri. To process your transaction (purchase, redemption, or
exchange) on the day we receive it, we must receive the order (with complete
information):
• on
a day that the NYSE is open and
• before
the close of trading on the NYSE (normally 3:00 p.m. Central
Time).
Orders
received after the close of the NYSE or on days that the NYSE is not open will
be processed on the next day that the NYSE is open for normal trading. The Funds
will not treat an intraday unscheduled disruption in NYSE trading as a closure
of the NYSE and will price its shares as of 3:00 p.m. Central Time, if the
particular disruption directly affects only the NYSE.
For
all classes (except Class S), if we receive an application or purchase request
for a new mutual fund account or subsequent purchase into an existing account
that is accompanied by a check and the application or purchase request does not
contain complete information, we may hold the application (and check) for up to
two business days while we attempt to obtain the necessary information. If we
receive the necessary information within two business days, we will process the
order using the next share price calculated. If we do not receive the
information within two business days, we will return the application and check
to you.
For
all Funds, the share price is calculated by:
• taking
the current market value of the total assets of the Fund
• subtracting
liabilities of the Fund
• dividing
the remainder proportionately into the classes of the Fund
• subtracting
the liability of each class
• dividing
the remainder by the total number of shares outstanding for that
class.
With
respect to any portion of a Fund’s assets invested in other registered
investment companies, that portion of the Fund's NAV is calculated based on the
price (NAV or market, as applicable) of such other registered investment
companies.
Notes:
• If
market quotations are not readily available for a security owned by a Fund, its
fair value is determined using a policy adopted by the Directors. Fair valuation
pricing is subjective and creates the possibility that the fair value determined
for a security may differ materially from the value that could be realized upon
the sale of the security.
• A
Fund's securities may be traded on foreign securities markets that generally
complete trading at various times during the day before the close of the NYSE.
Foreign securities and currencies are converted to U.S. dollars using the
exchange rate in effect at the close of the NYSE. Securities traded outside of
the Western Hemisphere are valued using a fair value policy adopted by the Fund.
These fair valuation procedures are intended to discourage shareholders from
investing in the Fund for the purpose of engaging in market timing or arbitrage
transactions.
• The
trading of foreign securities generally or in a particular country or countries
may not take place on all days the NYSE is open, or may trade on days the NYSE
is closed. Thus, the value of the foreign securities held by the Fund may change
on days when shareholders are unable to purchase or redeem shares.
• Certain
securities issued by companies in emerging markets may have more than one quoted
valuation at any point in time. These may be referred to as local price and
premium price. The premium price is often a negotiated price that may not
consistently represent a price at which a specific transaction can be effected.
The Fund has a policy to value such securities at a price at which the Advisor
expects the securities may be sold.
CONTACT
PRINCIPAL FUNDS, INC.
Contact
information for Principal Funds, Inc. (“Principal Funds”) is as
follows:
Mailing
Addresses:
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Regular
Mail |
Overnight
Mail |
Principal
Funds |
Principal
Funds |
P.O.
Box 219971 |
430
W. 7th Street, Ste. 219971 |
Kansas
City, MO 64121-9971 |
Kansas
City, MO 64105-1407 |
You
may speak with a Client Relations Specialist by calling 1-800-222-5852,
between 7:00 a.m. and 7:00 p.m. Central Time on any day that the NYSE
is open.
To
obtain Automated Clearing House (“ACH”) or wire instructions, please contact a
Client Relations Specialist.
For
additional information about Principal Funds, Inc., go to
www.principalfunds.com.
PURCHASE
OF FUND SHARES
Principal
Funds, Inc. offers funds in multiple share classes: A, C, J, Institutional, R-1,
R-2, R-3, R-4, R-5, R-6, and S. Funds available in multiple share classes
have the same investments, but differing expenses. Classes A, C, J,
Institutional, R-1, R-2, R-3, R-4, R-5, R-6, and S shares are available in this
prospectus.
The
Fund reserves the right to refuse or cancel any purchase orders, including those
by exchange, for any reason. For example, the Fund does not intend to permit
market timing because short-term or other excessive trading into and out of the
Funds may harm performance by disrupting portfolio management strategies and by
increasing expenses. Accordingly, the Fund may reject any purchase orders from
market timers or investors that, in PGI's opinion, may be disruptive to the
Fund. For these purposes, PGI may consider an investor’s trading history in the
Fund or other Funds sponsored by Principal Life and accounts under common
ownership or control.
PGI
may recommend to the Board, and the Board may elect, to close certain funds or
share classes to new investors or to close certain funds or share classes to new
and existing investors.
Principal
Funds will not issue certificates for shares.
No
salesperson, broker-dealer or other person is authorized to give information or
make representations about a Fund other than those contained in this Prospectus.
Information or representations not contained in this prospectus may not be
relied upon as having been provided or made by Principal Funds, a Fund, PGI, any
Sub-Advisor, or Principal Funds Distributor, Inc.
Procedures
for Opening an Account
Classes
A and C Shares
Shares
of the Funds are generally purchased through Financial Professionals. Financial
Professionals may establish shareholder accounts according to their procedures
or they may establish shareholder accounts directly with the Fund by visiting
our website to obtain the appropriate forms.
Your
Financial Professional can help you buy shares of the Funds by mail, through
bank wire, direct deposit, or Automatic Investment Plan (“AIP”). No wires are
accepted on days when the NYSE is closed or when the Federal Reserve is closed
(because the bank that would receive your wire is closed). An investment in the
Fund may be held in various types of accounts, including individual, joint
ownership, trust, and business accounts. The Fund also offers a range of
custodial accounts for those who wish to invest for retirement and/or education
expenses. Prospective shareholders should consult with their Financial
Professional before making decisions about the account and type of investment
that are appropriate for them.
Class
J Shares
Class
J shares are currently available through registered representatives
of:
•
Principal
Securities, Inc. ("PSI") who are also employees of Principal Life distribution
channels used to directly market certain products and services of subsidiaries
of Principal Financial Group, Inc. as well as provide retirement plan services
and education on topics such as investing and retirement. These PSI registered
representatives are with Principal Connection (part of Principal Bank),
and
•Selected
broker-dealers that have entered into a selling agreement to offer Class J
shares.
Class
J shares are also available through an online IRA rollover tool on
www.principal.com.
For
more information about Class J shares of the Funds, please call Principal
Connection at 1-800-247-8000.
Institutional
Class and Classes R-1, R-2, R-3, R-4, R-5, R-6, and S Shares
Shares
of the Funds are generally purchased through Financial Professionals. Class S
shares are available only through certain wrap-fee programs, as discussed below.
There are no sales charges on Institutional Class or Classes R-1, R-2, R-3, R-4,
R-5, R-6, and S shares of the Fund.
Shareholder
accounts in these share classes are generally maintained under an open account
system. Under this system, an account is opened and maintained for each investor
(generally within an omnibus account, plan level account, or institutional
investor). Each investment is confirmed by sending the investor a statement of
account showing the current purchase or sale and the total number of shares
owned. The statement of account is treated by the Fund as evidence of ownership
of Fund shares. Contact your Financial Professional for additional information
on how to buy shares.
Verification
of Identity
To
help the government fight the funding of terrorism and money laundering
activities, Federal law requires financial institutions to obtain, verify, and
record information that identifies each person who opens an account. When you
open an account, we (or your Financial Professional) may ask for your name,
address, date of birth, and other information that will allow us (or your
Financial Professional) to verify your identity. We (or your Financial
Professional) may also ask to see your driver’s license or other identifying
documents.
If
concerns arise with verification of your identity, no transactions, other than
redemptions, will be permitted while we attempt to reconcile the concerns. If we
are unable to verify your identity on a timely basis, we may close your account
or take such other action as we deem appropriate.
Principal
Funds will not establish accounts with foreign addresses. If an existing
shareholder with a U.S. address moves to a foreign location and updates the
address on the shareholder’s account, we are unable to process any purchases or
exchanges on that account. Principal Funds will not establish accounts that are
for the benefit of a business/organization that is illegal under Federal and/or
state law (such as a marijuana clinic) or a person who owns or receives income
from such an entity or whose source of funds is illegal.
Eligible
Purchasers
You
must be an eligible purchaser for a particular share class to buy shares of a
Fund available in that share class. At the sole discretion of the Distributor,
the Fund may broaden or limit the designation of eligible purchasers, permit
certain types of investors to open new accounts, impose further restrictions on
purchases, or reject any purchase orders, all without prior notice. Not all of
the Funds are offered in every state. Please check with your Financial
Professional or our home office for state availability.
Institutional
Class and Classes R-1, R-2, R-3, R-4, R-5, and R-6 Shares
Some
eligible purchasers (as listed below) purchase shares through plans or other
intermediaries; such plans or intermediaries may impose fees in addition to
those charged by the Funds. The services or share classes available to you may
vary depending upon how you wish to purchase shares of the Fund. Each investor's
financial considerations are different. You should speak with your Financial
Professional to help you decide which share class is best for you.
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Eligible
purchasers currently include, but are not limited to: |
Institutional |
R-1 |
R-2 |
R-3 |
R-4 |
R-5 |
R-6 |
retirement
and pension plans to which Principal Life Insurance Company (“Principal
Life”) provides recordkeeping services |
X |
X |
X |
X |
X |
X |
X |
separate
accounts of Principal Life |
X |
X |
X |
X |
X |
X |
X |
Principal
Life or any of its subsidiaries or affiliates |
X |
X |
X |
X |
X |
X |
X |
any
fund distributed by PFD if the fund seeks to achieve its investment
objective by investing primarily in shares of mutual funds |
X |
X |
X |
X |
X |
X |
X |
clients
of Principal Global Investors, LLC |
X |
X |
X |
X |
X |
X |
X |
certain
employer sponsored retirement plans with plan level omnibus
accounts |
X |
X |
X |
X |
X |
X |
X |
certain
pension plans and employee benefit plans |
X |
X |
X |
X |
X |
X |
X |
certain
retirement account investment vehicles administered by foreign or domestic
pension plans |
X |
X |
X |
X |
X |
X |
X |
an
investor who buys shares through an omnibus account with certain
intermediaries, such as a broker-dealer, bank, or other financial
institution, pursuant to a written agreement between the intermediary and
PFD or its affiliate |
X |
X |
X |
X |
X |
X |
X |
certain
retirement plan clients that have an organization, approved by Principal
Life, for purposes of providing plan recordkeeping
services |
X |
X |
X |
X |
X |
X |
X |
investors
investing at least $1,000,000 per fund |
X |
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X |
sponsors,
recordkeepers, or administrators of wrap account, mutual fund asset
allocation, or fee-based programs or participants in those
programs |
X |
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X |
certain
institutional investors that provide recordkeeping for retirement plans or
other employee benefit plans |
X |
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X |
institutional
clients that Principal Life has approved for purposes of providing plan
recordkeeping |
X |
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X |
institutional
investors investing for their own account, including banks, trust
companies, financial intermediaries, corporations, endowments and
foundations |
X |
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X |
collective
trust funds, fund of funds or other pooled investment vehicles, and
entities acting for the account of a public entity |
X |
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X |
certain
clients of a private banking division pursuant to a written agreement
between the bank and PFD or its affiliate |
X |
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X |
the
portfolio manager of any adviser to the fund |
X |
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certain
institutional investors with special arrangements (for example, insurance
companies, employee benefit plans, retirement plans, and Section 529
Plans, among others) |
X |
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X |
retirement
plans and IRAs investing through a retirement marketplace enabled by state
legislation |
X |
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Class
R-1 and Class R-2 Shares
For
retirement plan investors, effective as of the close of the New York Stock
Exchange on January 31, 2017, Class R-1 and Class R-2 shares are no longer
available for purchase from new retirement plans except in limited
circumstances. However,
if a retirement plan currently offers Class R-1 or Class R-2, such plans will be
allowed to continue to invest in these share classes through Funds they
currently offer in their plans or Funds they add to their plans.
Class
S Shares
Eligibility
to invest in the Capital Securities Fund is limited to certain wrap-fee program
accounts. Only wrap-fee program accounts as to which Spectrum and/or Principal
Global Investors, LLC ("PGI") have an agreement with the wrap-fee program’s
sponsor (“Sponsor”) or the wrap account owner to provide investment advisory or
sub-advisory services (either directly or by providing a model investment
portfolio created and maintained by Spectrum and/or PGI to the Sponsor or one or
more Sponsor-designated investment managers) ("Eligible Wrap Accounts") are
eligible to purchase shares of the Fund. References to Wrap Fee Adviser shall
mean Spectrum and/or PGI in their role providing such services to Eligible Wrap
Accounts.
A
client agreement with the Sponsor to open an account in the Sponsor’s wrap-fee
program typically may be obtained by contacting the Sponsor or your financial
advisor. Purchase and sale decisions regarding Fund shares for your wrap account
ordinarily will be made by the Wrap Fee Adviser, the Sponsor or a
Sponsor-designated investment manager, depending on the particular wrap-fee
program in which your wrap account participates. If your wrap-fee account’s use
of the Wrap Fee Adviser’s investment style is terminated by you, the Sponsor or
the Wrap Fee Adviser, your wrap account will cease to be an Eligible Wrap
Account and you will be required to redeem all your shares of the Capital
Securities Fund. Each Eligible Wrap Account, by purchasing shares, agrees to any
such redemption.
Minimum
Investments
Classes
A, C, and J Shares
Principal
Funds has a minimum initial investment amount of $1,000 and a minimum subsequent
investment amount of $100. Initial and subsequent investment minimums apply on a
per-fund basis for each Fund or Portfolio in which a shareholder
invests.
Shareholders
must meet the minimum initial investment amount of $1,000 unless an Automatic
Investment Plan ("AIP") is established. With an AIP, the minimum initial
investment is $100. Accounts or automatic payroll deduction plans established
with an AIP that do not meet the minimum initial investment must maintain
subsequent automatic investments that total at least $1,200
annually.
Minimum
initial and subsequent investments may be waived on accounts set up for: certain
employee benefit plans; retirement plans qualified under Internal Revenue Code
Section 401(a); payroll deduction plans submitting contributions in an
electronic format devised and/or approved by the Fund; and purchases through an
omnibus account with a broker-dealer, investment advisor, or other financial
institution.
Institutional
Class and Classes R-1, R-2, R-3, R-4, R-5, R-6, and S Shares
There
are no minimum initial or subsequent investment requirements for an investor who
otherwise qualifies as an eligible purchaser.
Payment
Classes
A, C, and J Shares
Payments
are to be made via personal or financial institution check (for example, a bank
or cashier’s check), bank wire, direct deposit, or Automatic Investment Plan
("AIP"). No wires are accepted on days when the NYSE is closed or when the
Federal Reserve is closed (because the bank that would receive your wire is
closed). We consider your purchase of Fund shares by check to be your
authorization to make an automated clearing house (“ACH”) debit entry to your
account. We reserve the right to refuse any payment that we feel presents a
fraud or money laundering risk. Examples of the types of payments we will not
accept are cash, starter checks, money orders, travelers’ checks, credit card
checks, and foreign checks.
The
Funds may, in their discretion and under certain limited circumstances, accept
securities as payment for Fund shares at the applicable net asset value
(“‘NAV”). For federal income tax purposes, a purchase of shares with securities
will be treated as a sale or exchange of such securities on which the investor
will generally realize a taxable gain or loss. Each Fund will value securities
used to purchase its shares using the same method the Fund uses to value its
portfolio securities as described in this prospectus.
You
may reinvest your redemption proceeds, dividend payment or capital gain
distribution without an initial sales charge or contingent deferred sales
charge, in the same share class of any other Fund of Principal Funds within 90
days of the date of the redemption. To purchase the shares without a sales
charge (initial or contingent deferred) as described in this section, the
shareholder must notify Principal Funds at the time of reinvestment that the
shareholder is reinvesting proceeds within 90 days of the date of redemption.
The original redemption will be considered a sale for federal (and state) income
tax purposes even if the proceeds are reinvested within 90 days. If a loss is
realized on the sale, the reinvestment may be subject to the “wash sale” rules
resulting in the postponement of the recognition of the loss for tax
purposes.
Your
Financial Professional can help you make a Direct Deposit from your paycheck (if
your employer approves) or from a government allotment. Direct Deposit allows
you to deposit automatically all or part of your paycheck (or government
allotment) to your Principal Funds account(s). You can request a Direct Deposit
Authorization Form to give to your employer or the governmental agency (either
of which may charge a fee for this service). Shares will be purchased on the day
the ACH notification is received by the transfer agent’s bank. On days when the
NYSE is closed, but the bank receiving the ACH notification is open, your
purchase will be priced at the next calculated share price.
Your
Financial Professional can help you establish an Automatic Investment Plan
("AIP"). You may make regular monthly investments with automatic deductions from
your bank or other financial institution account. You select the day of the
month the deduction is to be made (if none is selected, the investment will be
made on the 15th
of the month). If that date is a non-trading day, we will process the deduction
on the next trading day. If the next trading day falls in the next month or
year, we will process the deduction on the day before your selected
day.
Institutional
Class and Classes R-1, R-2, R-3, R-4, R-5, R-6, and S Shares
Payments
are generally to be made through your plan or intermediary. We reserve the right
to refuse any payment that we feel presents a fraud or money laundering risk.
Examples of the types of payments we will not accept are cash, starter checks,
money orders, travelers’ checks, credit card checks, and foreign
checks.
For
Institutional Class shareholders investing through a retirement marketplace
enabled by state legislation, please contact Principal Funds by
calling 1-800-222-5852, between 7:00 a.m. and 7:00 p.m. Central
Time on any day that the NYSE is open.
Automatic
Conversion of Class C Shares
On
September 12, 2018, PFI’s Board of Directors approved a 10-year automatic
conversion plan to exchange Class C shares for Class A shares. Beginning January
22, 2019, Class C shares held for ten years after purchase will automatically
convert to Class A shares of the same Fund. The automatic conversion will
generally occur on the 22nd
day of each month or, if the 22nd
day is not a business day, on the next business day (each, a “Conversion Date”).
If the tenth anniversary of a purchase of Class C shares falls on a Conversion
Date, a shareholder’s Class C shares will be automatically converted on that
date. If the tenth anniversary occurs between Conversion Dates, a shareholder’s
Class C shares will be automatically converted on the next Conversion Date after
such anniversary. Automatic conversions will be on the basis of the NAV per
share, without the imposition of any sales charge (including a CDSC), fee or
other charge. Automatic conversions of Class C shares will constitute tax-free
exchanges for federal income tax purposes.
Class
C shares of a Fund acquired through a reinvestment of dividends and
distributions will convert to Class A shares of the Fund on the Conversion Date
pro rata with the converting Class C shares of that Fund that were not acquired
through reinvestment of dividends and distributions.
Class
C shares held through a financial intermediary in certain omnibus accounts may
be converted by the financial intermediary once it is determined that the Class
C shares have been held for the required period. It is the financial
intermediary’s (and not the Fund’s) responsibility to maintain appropriate
supporting records and to ensure that the shareholder is credited with the
proper holding period, and it is the responsibility of the shareholder or their
financial intermediary to determine that the shareholder is eligible for the
conversion. Additionally,
some intermediaries may have adopted different policies and procedures related
to the conversion of Class C shares, including shorter schedules for conversion.
Please consult with your financial intermediary if you have any
questions.
REDEMPTION
OF FUND SHARES
Under
normal circumstances, you may redeem shares of any class of the Fund at any
time. There is no fee for any redemption. The Fund Board of Directors has
determined that it is not necessary to impose a fee upon the redemption of fund
shares, because the Fund has adopted transfer restrictions as described in
EXCHANGE OF FUND SHARES.
The
shares you redeem will have the NAV per share that is next computed after the
Fund receives and accepts your redemption order in proper and complete form. The
amount you receive will be reduced by any applicable CDSC except as noted below;
see CHOOSING A SHARE CLASS AND THE COSTS OF INVESTING - One-Time Fee -
Contingent Deferred Sales Charge ("CDSC") - CDSC
Waiver.
Your redemption proceeds will generally be sent on the next business day (a day
when the NYSE is open for normal business) following the date on which your
request is received and accepted in proper and complete form. Although you can
redeem your shares at any time, if you purchased shares by check or ACH and
subsequently request a redemption of those shares, your redemption proceeds will
generally be delayed for seven calendar days after the purchase to allow a
sufficient period of time to ensure your recent payment has been cleared by the
relevant bank. To redeem shares purchased by check or ACH within the previous
seven days, the Funds require redemption requests with respect to those shares
to be submitted in writing or by telephone, unless you contact the Fund and make
an alternate arrangement.
Under
unusual circumstances, Principal Funds may suspend redemptions, or postpone
payments for more than seven days, as permitted by federal securities
law.
Under
normal circumstances, the Funds expect to meet redemption requests through
holdings of cash, the sale of investments held in cash equivalents, and/or by
selling liquid index futures or other instruments used for cash management
purposes. In situations in which such holdings are not sufficient to meet
redemption requests, a Fund will typically borrow money through the Fund’s
interfund lending facility or through a bank line-of-credit. Funds may also
choose to sell portfolio assets for the purpose of meeting such requests. Each
Fund further reserves the right to distribute “in kind” securities from the
Fund’s portfolio in lieu (in whole or in part) of cash under certain
circumstances, including under stressed market conditions.
The
agreement for the above-mentioned line of credit is with The Bank of New York
Mellon. The Diversified Real Asset Fund ("DRA") will not be permitted to use the
line of credit because an affiliate of The Bank of New York Mellon serves as a
sub-advisor for DRA. DRA expects to meet requests using the other methods
outlined above.
Classes
A, C, and J Shares
You
will be charged a $10 wire fee if you have the sale proceeds wired to your bank.
It may take additional business days for your financial institution to post this
payment to your account at that financial institution. At your request, the
check will be sent overnight (a $15 overnight fee will be deducted from your
account unless other arrangements are made).
Distributions
from IRA, SEP, SIMPLE, 403(b), and SAR-SEP accounts may be taken
as:
•lump
sum of the entire interest in the account,
•partial
interest in the account, or
•periodic
payments of either a fixed amount or an amount based on certain life expectancy
calculations.
Tax
penalties may apply to distributions before the participant reaches age 59
½.
Selling
shares may create a gain or a loss for federal (and state) income tax purposes.
You should maintain accurate records for use in preparing your income tax
returns.
Generally,
sales proceeds are:
•payable
to all owners on the account (as shown in the account registration)
and
•mailed
to the address on the account (if not changed within the last 15 days) or
sent by wire or ACH to previously authorized U.S. bank account (if not added or
changed within the last 15 days).
For
other payment arrangements, please call Principal Funds. You should also call
Principal Funds for special instructions that may apply to sales from
accounts:
•when
an owner has died;
•for
certain employee benefit plans; or
•owned
by corporations, partnerships, agents, or fiduciaries.
Except
as described above, you may redeem shares of the Funds in any of the following
ways:
By
Mail
To
sell shares by mail, you must:
•Send
a letter or our distribution form which is signed by an owner of the
account,
•Specify
the account number, and
•Specify
the number of shares or the dollar amount to be sold.
If
you send a letter rather than our distribution form, the letter must be in a
form acceptable to the Fund.
By
Telephone or Website, in amounts of $100,000 or less
To
sell shares by telephone:
•The
request may be made by a shareholder or by the shareholder’s Financial
Professional.
•The
combined amount requested from all funds to which the redemption request relates
is $100,000 or less.
•The
address on the account must not have been changed within the last 15 days
and telephone privileges must apply to the account from which the shares are
being sold.
•Wire
or ACH to a previously authorized U.S. bank account that must not have been
added or changed within the last 15 days.
•If
our phone lines are busy or our website is unavailable, you may need to send in
a written sell order.
Telephone
and/or Website redemption privileges are NOT available for all account
types.
Classes
A, C, J, and Institutional Shares - Systematic Withdrawal Plans
You
may set up a systematic withdrawal plan on a monthly, quarterly, semiannual, or
annual basis to sell enough shares to provide a fixed amount of money ($100
minimum amount; the required minimum is waived to the extent necessary to meet
the required minimum distribution as defined by the Internal Revenue
Code).
You
can set up a systematic withdrawal plan by:
•completing
the applicable section of the application,
•sending
us your written instructions,
•completing
a Systematic Withdrawal Plan Request form, or
•calling
us if you have telephone privileges on the account (telephone privileges may not
be available for all types of accounts).
Your
systematic withdrawal plan continues until:
•you
instruct us to stop or
•your
Fund account balance is zero.
When
you set up the withdrawal plan, you select which day you want the sale made (if
none is selected, the sale will be made on the 15th of the month). If the
selected date is not a trading day, the sale will take place on the preceding
trading day (if that day falls in the month or year before your selected date,
the transaction will take place on the next trading day after your selected
date). If telephone privileges apply to the account, you may change the date or
amount by telephoning us. Sales made under your systematic withdrawal plan will
reduce and may eventually exhaust your account. The Fund from which the
systematic withdrawal is made makes no recommendation as to either the number of
shares or the fixed amount that you withdraw.
Institutional
Class and Classes R-1, R-2, R-3, R-4, R-5, and R-6 Shares
You
may redeem shares of the Funds in any of the following ways:
Through
an Employer Sponsored Retirement Plan Administrator or
Record-Keeper
If
you own Fund shares in an eligible retirement or employee benefit plan, you must
sell your shares through the plan’s administrator or record-keeper.
Through
your Financial Professional
If
your Fund shares are held for you in nominee form, you must sell those shares
through your intermediary or dealer.
By
Mail
To
sell shares by mail, you must:
•Send
a letter or our distribution form which is signed by an owner of the account,
•Specify
the account number, and
•Specify
the number of shares or the dollar amount to be sold.
If
you send a letter rather than our distribution form, the letter must be in a
form acceptable to the Fund.
By
Telephone
To
sell shares by telephone:
•Telephone
privileges must apply to the account from which the shares are
sold.
•A
shareholder or the shareholder’s Financial Professional may request to sell
shares by telephone.
•A
maximum amount (listed below) of redemption requests will be permitted per day
per account, as the combined amount from all funds, provided the proceeds are to
be sent to a previously authorized U.S. bank account that must not have been
added or changed within the last 15 days:
◦$10,000,000
for Institutional Class.
◦$500,000
for Classes R-1, R-2, R-3, R-4, R-5, and R-6.
•A
maximum of $500,000 of redemption requests will be permitted per day, as the
combined amount from all funds, provided the proceeds are to be sent by check
through the mail to the address on the account and such address must not have
changed within the last 15 days.
•If
our telephone lines are busy, you may need to send in a written sell
order.
Class
S Shares
The
Eligible Wrap Account may redeem shares of the Fund upon request. If you cease
to be an Eligible Purchaser, you will be required to redeem all your shares of
the Capital Securities Fund. Each Eligible Wrap Account, by purchasing shares,
agrees to any such redemption. An Eligible Wrap Account may redeem shares
through its intermediary.
Distributions
in Kind
Payment
for shares of the Funds tendered for redemption is ordinarily made by check.
However, the Funds may determine that it would be detrimental to the remaining
shareholders of a Fund to make payment of a redemption order wholly or partly in
cash. Under certain circumstances, therefore, each of the Funds may pay the
redemption proceeds in whole or in part by a distribution of “in kind” of
securities from the Fund’s portfolio in lieu of cash. If a Fund pays the
redemption proceeds in kind, the redeeming shareholder might incur brokerage or
other costs in selling the securities for cash. In addition, the securities
received will be subject to market risk until sold. Typically, such in kind
redemptions would be distributed pro rata. Each Fund will value securities used
to pay redemptions in kind using the same method the Fund uses to value its
portfolio securities as described in this prospectus.
EXCHANGE
OF FUND SHARES
An
exchange between Funds is a redemption of shares of one Fund and a concurrent
purchase of shares in another Fund with the redemption proceeds. All exchanges
completed on the same day are considered a single exchange for purposes of the
exchange limitations described below. To prevent excessive exchanges, and under
other circumstances where the Fund Board of Directors or PGI believes it is
in the best interests of the Fund, the Fund reserves the right to revise or
terminate this exchange privilege, limit the amount or further limit the number
of exchanges, reject any exchange or close an account.
Classes
A, C, and J Shares
Your
shares in the Funds (except Money Market) may be exchanged without a sales
charge or CDSC for the same class of any other Principal Funds. However, the
original purchase date of the shares from which an exchange is made is used to
determine if newly acquired shares are subject to a CDSC when they are sold. The
Fund reserves the right to revise or terminate the exchange privilege at any
time.
You
may exchange shares by:
•sending
a written request to Principal Funds,
•using
our website, or
•calling
us, if you have telephone privileges on the account.
Exchanges
from Money Market Fund
Class A
shares of Money Market Fund may be exchanged into:
•Class A
shares of other Funds.
•If
Money Market Fund shares were acquired by direct purchase, a sales charge will
be imposed on the exchange into other Class A shares.
•If
Money Market Fund shares were acquired by (1) exchange from other Funds,
(2) conversion of Class B shares, or (3) reinvestment of
dividends earned on Class A shares that were acquired through exchange, no
sales charge will be imposed on the exchange into other Class A
shares.
•Class C
shares of other Funds - subject to the applicable CDSC.
Automatic
Exchange Election
This
election authorizes an exchange from one Fund of Principal Funds to another Fund
of Principal Funds on a monthly, quarterly, semiannual, or annual basis. You can
set up an automatic exchange by:
•completing
the Automatic Exchange Election section of the application,
•calling
us if telephone privileges apply to the account from which the exchange is to be
made,
•sending
us your written instructions, or
•completing
an Automatic Exchange Election form.
Your
automatic exchange continues until:
•you
instruct us to stop (by calling us if telephone privileges apply to the account
or sending us your written instructions) or
•your
Fund account balance of the account from which shares are redeemed is
zero.
You
may specify the day of the exchange (if none is selected, the exchange will be
made on the 15th of
the month). If the selected day is not a trading day, the sale will take place
on the preceding trading day (if that day falls in the month or year before your
selected date, the transaction will take place on the next trading day after
your selected date). If telephone privileges apply to the account, you may
change the date or amount by telephoning us.
General
•An
exchange by any joint owner is binding on all joint owners.
•If
you do not have an existing account in the Fund to which the exchange is being
made, a new account is established. The new account has the same owner(s),
dividend and capital gain options and dealer of record as the account from which
the shares are being exchanged.
•All
exchanges are subject to the minimum investment and eligibility requirements of
the Fund being acquired.
•You
may acquire shares of a Fund only if its shares are legally offered in your
state of residence.
When
money is exchanged or transferred from one account registration or tax
identification number to another, the account holder is relinquishing his or her
rights to the money. Therefore, exchanges and transfers can only be accepted by
telephone if the exchange (transfer) is between:
•accounts
with identical ownership,
•an
account with a single owner to one with joint ownership if the owner of the
single owner account is also an owner of the account with joint
ownership,
•a
single owner to a Uniform Transfers to Minors Act (“UTMA”) account if the owner
of the single owner account is also the custodian on the UTMA account,
or
•a
single or jointly owned account to an IRA account to fund the yearly IRA
contribution of the owner (or one of the owners in the case of a jointly owned
account).
The
exchange is treated as a sale of shares for federal (and state) income tax
purposes and may result in a capital gain or loss.
Fund
shares used to fund an employee benefit plan may be exchanged only for shares of
other Funds available to the employee benefit plan. Such an exchange must be
made by following the procedures provided in the employee benefit plan and the
written service agreement.
Institutional
Class and Classes R-1, R-2, R-3, R-4, R-5, and R-6 Shares
A
shareholder, which may include a beneficial owner of shares held in nominee name
or a participant in a participant-directed employee benefit plan, may exchange
Fund shares under certain circumstances. In addition to any restrictions an
intermediary (which may include, without limitation, an employee retirement plan
or other employee benefit plan, plan administrator, plan record keeper, or
managed account provider) imposes, Fund shares may be exchanged, without charge,
for shares of the same share class of any other Fund of the Principal Funds,
provided that:
•the
shareholder has not exchanged shares of the Fund within 30 days preceding the
exchange, unless the shareholder is exchanging into the Money Market
Fund,
•the
share class of such other Fund is available through the
intermediary,
•the
share class of such other Fund is available in the shareholder’s state of
residence, and
•with
respect to shares purchased through an intermediary that is willing and able to
impose the 30-day exchange or repurchase restriction described below, the
shareholder has not exchanged shares of the Fund within 30 days preceding the
exchange, unless the shareholder is exchanging into the Money Market
Fund.
With
respect to shares purchased through an intermediary that is willing and able to
impose a 30-day exchange or repurchase restriction, an order to purchase shares
of any Fund, except shares of the Money Market Fund, will be rejected if the
shareholder redeemed shares from that Fund within the preceding 30-day period.
The 30-day exchange or purchase restriction does not apply to exchanges or
purchases made on a scheduled basis such as scheduled periodic portfolio
rebalancing transactions or to transactions by managers of funds of funds in
shares of the underlying Funds.
If
Fund shares are purchased through an intermediary that is unable or unwilling to
impose the 30-day exchange or repurchase restriction described above, Fund
management may waive this restriction based on:
•exchange
and repurchase limitations that the intermediary is able to impose if, in
management’s judgment, such limitations are reasonably likely to prevent
excessive trading in Fund shares; or
•the
implementation of other transaction monitoring management believes is reasonably
likely to identify and prevent excessive trading in Fund shares.
The
Funds’ transfer agent employs transaction monitoring that management believes is
reasonably likely to identify and prevent excessive trading in Fund shares. The
30-day exchange or repurchase restriction described above is not imposed with
respect to shares held directly with the Funds’ transfer agent. However, such
shares may be purchased through an intermediary that imposes such an exchange or
repurchase restriction.
Class
S Shares
Class
S shares of the Capital Securities Fund are not subject to
exchange.
DIVIDENDS
AND DISTRIBUTIONS
Dividends
are based on estimates of income, expenses, and shareholder activity for the
Fund. Actual income, expenses, and shareholder activity may differ from
estimates; consequently, differences, if any, will be included in the
calculation of subsequent dividends. The Funds pay their net investment income
to record date shareholders; this record date is the business day before the
payment date. The payment schedule is as follows:
• The
Opportunistic Municipal Fund declares dividends of its daily net investment
income each day its shares are priced. The Fund pays out its accumulated
declared dividends monthly.
•The
Capital Securities and Spectrum Preferred and Capital Securities Income Funds
pay their net investment income monthly.
• The
Small-MidCap Dividend Income Fund pays its net investment income quarterly in
March, June, September, and December.
• The
Blue Chip, Bond Market Index, Diversified Real Asset, Edge Midcap, Global
Multi-Strategy, International Equity Index, International Small Company, Origin
Emerging Markets, and Small-MidCap Growth Funds pay their net investment income
annually in December.
For
more details on the payment schedule, go to:
www.principalfunds.com/taxcenter.
Net
realized capital gains, if any, are distributed annually in December. Payments
are made to shareholders of record on the business day before the payable date.
Capital gains may be taxable at different rates, depending on the length of time
that the Fund holds its assets.
For
all classes (except Class S), dividend and capital gains distributions will be
reinvested, without a sales charge, in shares of the Fund from which the
distribution is paid; however, you may authorize (on your application or at a
later time) the distribution to be:
•invested
in shares of another of the Principal Funds without a sales charge
(distributions of a Fund may be directed only to one receiving Fund);
or
•paid
in cash, if the amount is $10 or more.
All
income dividend and capital gains distributions, if any, on a Fund's Class S
shares are paid out in cash.
Generally,
for federal income tax purposes, Fund distributions are taxable as ordinary
income, except that any distributions of long-term capital gains will be taxed
as such, regardless of how long Fund shares have been held. Special tax rules
apply to Fund distributions to Individual Retirement Accounts and other
retirement plans. A tax advisor should be consulted to determine the suitability
of the Fund as an investment by such a plan and the tax treatment of
distributions by the Fund. A tax advisor can also provide information on the
potential impact of possible foreign, state, and local taxes. A Fund’s
investments in foreign securities may be subject to foreign withholding taxes.
In that case, the Fund’s yield on those securities would be
decreased.
To
the extent that distributions the Fund pays are derived from a source other than
net income (such as a return of capital), you will receive a notice disclosing
the source of such distributions. Furthermore, such notice will be posted
monthly on our website at www.principalfunds.com/sources-of-distribution. You
may request a copy of all such notices, free of charge, by telephoning
1-800-222-5852. The amounts and sources of distributions included in such
notices are estimates only and you should not rely upon them for purposes of
reporting income taxes. The Fund will send shareholders a Form 1099-DIV for the
calendar year that will tell shareholders how to report these distributions for
federal income tax purposes.
A
Fund’s payment of income dividends and capital gains has the effect of reducing
the share price by the amount of the payment. Distributions from a Fund, whether
received in cash or reinvested in additional shares, may be subject to federal
(and state) income tax. For these reasons, buying shares of a Fund shortly
before it makes a distribution may be disadvantageous to you.
FREQUENT
PURCHASES AND REDEMPTIONS
The
Funds are not designed for, and do not knowingly accommodate, frequent purchases
and redemptions of fund shares. If you intend to trade frequently and/or use
market timing investment strategies, you should not purchase these
Funds.
Frequent
purchases and redemptions pose a risk to the Funds because they
may:
• Disrupt
the management of the Funds by:
◦forcing
the Funds to hold short-term (liquid) assets rather than investing for long-term
growth, which results in lost investment opportunities for the Funds;
and
◦causing
unplanned portfolio turnover;
•Hurt
the portfolio performance of the Funds; and
•Increase
expenses of the Funds due to:
• increased
broker-dealer commissions and
• increased
recordkeeping and related costs.
Certain
Funds may be at greater risk of harm due to frequent purchases and redemptions.
For example, those Funds that invest in foreign securities may appeal to
investors attempting to take advantage of time-zone arbitrage. The Funds have
adopted procedures to “fair value” foreign securities owned by the Funds each
day to discourage these market timing transactions in shares of the
Funds.
For
all Classes (except Class S), the Board has also adopted policies and procedures
with respect to frequent purchases and redemptions of shares of the Funds. The
Funds monitor shareholder trading activity to identify and take action against
abuses. When we do identify abusive trading, we will apply our policies and
procedures in a fair and uniform manner. While our policies and procedures are
designed to identify and protect against abusive trading practices, there can be
no certainty that we will identify and prevent abusive trading in all instances.
If we are not able to identify such excessive trading practices, the Funds and
their shareholders may be harmed. The harm of undetected excessive trading in
shares of the underlying funds in which the funds of funds invest could flow
through to the funds of funds as they would for any fund shareholder. If we, or
a Fund, deem abusive trading practices to be occurring, we will take action that
may include, but is not limited to:
•Rejecting
exchange instructions from the shareholder or other person authorized by the
shareholder to direct exchanges;
•Restricting
submission of exchange requests by, for example, allowing exchange requests to
be submitted by 1st class U.S. mail
only and disallowing requests made by facsimile, overnight courier, telephone or
via the internet;
•Limiting
the number of exchanges during a year; and
•Taking
such other action as directed by the Fund.
The
Funds have reserved the right to accept or reject, without prior written notice,
any exchange requests. In some instances, an exchange may be completed before a
determination of abusive trading. In those instances, we will reverse the
exchange and return the account holdings to the positions held before the
exchange. We will give the shareholder written notice in this
instance.
Institutional
Class and Classes R-1, R-2, R-3, R-4, R-5, and R-6 Shares
In
addition to taking any of the foregoing actions, if we, or a Fund, deem abusive
trading practices to be occurring, we may require a holding period of a minimum
of 30 days before permitting exchanges among the Funds where there is
evidence of at least one round-trip exchange (exchange or redemption of shares
that were purchased within 30 days of the
exchange/redemption).
The
Funds have adopted an exchange frequency restriction for these classes,
described above in “Exchange of Fund Shares” to limit excessive trading in
fund shares.
Class
S Shares
After
considering various factors, including the intended use of the Capital
Securities Fund as an investment vehicle for a specific purpose, the limited
availability of Fund shares to investors, and the anticipated manner in which
purchase and redemption decisions will be made and implemented, the Fund’s Board
has determined that it is not necessary to impose a redemption fee or excessive
trading restrictions to implement the Fund’s policy of not knowingly
accommodating excessive trading in Fund shares.
TAX
CONSIDERATIONS
It
is a policy of the Funds to make distributions of substantially all of their
respective investment income and any net realized capital gains. Shareholders
are responsible for federal income tax (and any other taxes, including state and
local income taxes, if applicable) on dividends and capital gains distributions
whether such dividends or distributions are paid in cash or (except for Class S
shares) are reinvested in additional shares. Special tax rules apply to
distributions from IRAs and other retirement accounts. You should consult a tax
advisor to determine the suitability of the Fund as an investment by such a plan
and the tax treatment of Fund distributions.
Generally,
dividends paid by the Funds from interest, dividends, or net short-term capital
gains will be taxed as ordinary income. Distributions properly designated by the
Fund as deriving from net gains on securities held for more than one year are
taxable as such (generally at a 15% tax rate for individuals and taxable trusts,
some individuals and taxable trusts will be subject to a 20% tax rate),
regardless of how long you have held your shares. Distributions of investment
income properly designated by the Fund as derived from “qualified
dividend income”
will be taxed at the rates applicable to long-term capital gains. Some
high-income individuals and taxable trusts will be subject to a Medicare 3.8%
tax on unearned net investment income.
Because
of tax law requirements, you must provide the Fund with an accurate and
certified taxpayer identification number (for individuals, generally a Social
Security number) to avoid “back-up”
withholding, which is imposed at a rate of 24%. The Fund is required in certain
cases to withhold and remit to the U.S. Treasury 24% of ordinary income
dividends and capital gain dividends, and the proceeds of redemption of shares,
paid to any shareholder who has provided either an incorrect tax identification
number or no number at all, who is subject to backup withholding by the Internal
Revenue Service for failure to report the receipt of interest or dividend income
properly, or who has failed to certify to the Fund that it is not subject to
backup withholding or that it is a corporation or other "exempt
recipient."
A
shareholder recognizes gain or loss on the sale or redemption of shares of the
Fund in an amount equal to the difference between the proceeds of the sales or
redemption and the shareholder's adjusted tax basis in the shares. All or a
portion of any loss so recognized may be disallowed if the shareholder purchases
other shares of the Fund within 30 days before or after the sale or redemption.
In general, any gain or loss arising from (or treated as arising from) the sale
or redemption of shares of the Fund is considered capital gain or loss
(long-term capital gain or loss if the shares were held for longer than one
year). However, any capital loss arising from the sales or redemption of shares
held for six months or less is disallowed to the extent of the amount of
exempt-interest dividends received on such shares and (to the extent not
disallowed) is treated as a long-term capital loss to the extent of the amount
of capital gain dividends received on such shares. Capital losses in any year
are deductible only to the extent of capital gains plus, in the case of a
noncorporate taxpayer, $3,000 of ordinary income under current
rules.
If
a shareholder incurs a sales charge in acquiring shares of the Fund, disposes of
such shares less than 91 days after they are acquired, and subsequently acquires
shares of the Fund or another fund at a reduced sales charge pursuant to a right
to reinvest at such reduced sales charge acquired in connection with the
acquisition of the shares disposed of, then the sales charge on the shares
disposed of (to the extent of the reduction in the sales charge on the shares
subsequently acquired) shall not be taken into account in determining gain or
loss on the shares disposed of but shall be treated as incurred on the
acquisition of the shares subsequently acquired.
Any
gain resulting from the redemption or exchange (except for Class S shares, which
are not subject to exchange), of your shares will generally also be subject to
tax. For shares acquired after January 1, 2012, you will need to select a cost
basis method to be used to calculate your reported gains and losses prior to or
at the time of any redemption or exchange (except for Class S shares, which are
not subject to exchange). If you do not select a method, the Funds’
default method of average cost will be applied to the transactions. The cost
basis method used on your account could significantly affect your taxes due and
should be carefully considered. You should consult your tax advisor for more
information on your own tax situation, including possible foreign, state, and
local taxes.
Investments
by a Fund in certain debt instruments or derivatives may cause the Fund to
recognize taxable income in excess of the cash generated by such instruments. As
a result, the Fund could be required at times to liquidate other investments to
satisfy its distribution requirements under the Internal Revenue Code. The
Fund’s
use of derivatives will also affect the amount, timing, and character of the
Fund’s
distributions.
Under
proposed U.S. Treasury Regulations non-corporate Fund shareholders meeting
certain holding period requirements may be able to deduct up to 20 percent of
qualified REIT dividends passed through and reported to them by the Fund.
The 20 percent deduction applies to qualified REIT dividends distributed during
2018-2025 tax years.
Early
in each calendar year, each Fund will notify you of the amount and tax status of
distributions paid to you for the preceding year.
A
dividend or distribution made shortly after the purchase of shares of a Fund by
a shareholder, although in effect a return of capital to that shareholder, would
be taxable to that shareholder as described above, subject to a holding period
requirement for dividends designated as qualified dividend income.
The
information contained in this prospectus is not a complete description of the
federal, state, local, or foreign tax consequences of investing in the Funds.
You should consult your tax advisor before investing in the Funds.
Funds
Investing in Securities Generating Tax-Exempt Income
Distributions
designated as “exempt-interest
dividends”
by Funds investing in securities generating tax-exempt income are generally not
subject to federal income tax. However, if you receive Social Security or
railroad retirement benefits, you should consult your tax advisor to determine
what effect, if any, an investment in such Funds may have on the federal
taxation of your benefits. Some Funds invest in “AMT-subject
bonds,”
which are municipal obligations issued to finance certain “private
activities,”
such as bonds used to finance airports, housing projects, student loan programs,
and water and sewer projects. Interest on AMT-subject bonds is an item of tax
preference for purposes of the federal individual alternative minimum tax
(“AMT”).
A portion of such Funds' distributions may, therefore, be subject to federal
income taxes or to the federal individual alternative minimum tax. Some Funds
may invest a portion of their assets in securities that generate income that is
not exempt from federal (or state and local) income tax. Income exempt from
federal tax may be subject to state and local income tax. In addition, any
capital gains distributed by such Funds will be taxable as described in this
section. A portion of the dividends paid by such Funds may be exempt from
California State personal income tax, but not from California State franchise
tax or California State corporate income tax. Corporate taxpayers should consult
their tax advisor concerning the California state tax treatment of investments
in such Funds.
CHOOSING
A SHARE CLASS AND THE COSTS OF INVESTING
Before
you invest, you should understand the characteristics of each share class so you
can be sure to choose the class that is right for you. Fund and share class
selections must be made at the time of purchase.
Classes
differ regarding the costs associated with buying, redeeming, and holding
shares. Which class is best for you depends upon:
•the
dollar amount you are investing,
•the
amount of time you plan to hold the investment,
•any
plans to make additional investments in the Principal Funds, and
•eligibility
to purchase the class.
The
following sections describe the fees and expenses you may pay if you invest in a
Fund. You may pay both one-time fees and ongoing fees. Fees and expenses are
important because they lower your earnings. Before investing, you should be sure
you understand the nature of different costs. Your Financial Professional can
help you with this process and can help you choose the share class and Fund or
Funds that are appropriate for you based upon your investment objective, risk
tolerance and other factors. Financial Professionals may receive different
compensation depending upon which class of shares you purchase.
Fees
and Expenses of the Funds
Classes
A, C, and J Shares
These
share classes may include a front-end sales charge and/or contingent deferred
sales charge. There is no sales charge on shares of the Funds purchased with
reinvested dividends or other distributions. You may obtain more information
about sales charge reductions and waivers from your Financial
Professional.
In
some cases, the initial sales charge or contingent deferred sales charge may be
waived or reduced. Appendix C to this prospectus, titled "Intermediary-Specific
Sales Charge Waivers and Reductions", contains information about
intermediary-specific sales charge waivers and reductions that will be available
if you purchase Fund shares through those intermediaries. The prospectus
discusses the initial sales charge or contingent deferred sales charge waivers
or reductions that will be available if you purchase Fund shares directly from
the Fund or through another intermediary not listed on Appendix C.
In
all instances, to receive a waiver or reduction in the initial sales charge or
contingent deferred sales charge, you or your Financial Professional must let
the Fund know at the time you purchase or redeem shares that you qualify for
such a waiver or reduction. It may be necessary for you to provide information
and records, such as account statements, to determine your eligibility. If you
or your Financial Professional do not let the Fund know that you are eligible
for a waiver or reduction, you may not receive a sales charge discount to which
you are otherwise entitled.
Class
C Shares
Class C
shares may not be suitable for large investments. Due to the higher expenses
associated with Class C shares, it may be more advantageous for investors
currently purchasing, intending to purchase, or with existing assets in amounts
that may qualify for a reduced sales charge on Class A shares, including
through Rights of Accumulation and/or Statement of Intent, to purchase
Class A shares. Class C shares have higher annual expenses than
Class A shares because they are subject to higher distribution
fees.
The
Fund seeks to prevent investments in Class C shares by shareholders with at
least $1 million of investments in Principal Funds eligible for inclusion
pursuant to Rights of Accumulation. If you are making an initial purchase of
Principal Funds of $1,000,000 or more and have selected Class C shares, the
purchase will be of Class A shares of the Fund(s) you have selected. If you
are making subsequent purchases into your existing Principal
Funds Class C share accounts and the combined value of the subsequent
investment and your existing Classes A, B, C, and J share accounts
combined for Rights of Accumulation purposes exceeds $1,000,000, the subsequent
investment will be applied to purchase Class A shares of the Fund(s) you
have selected.
Institutional
Class and Classes R-1, R-2, R-3, R-4, R-5, R-6, and S Shares
Fund
shares are sold without a front-end sales charge and do not have a contingent
deferred sales charge. For Institutional Class and Classes R-1, R-2, R-3, R-4,
R-5, and R-6 shares, there is no sales charge on Fund shares purchased with
reinvested dividends or other distributions; for S Class shares, Fund shares are
not purchased with reinvested dividends or other distributions.
However,
if you purchase Institutional Class or Class R-6 shares through certain programs
offered by certain financial intermediaries, you may be required to pay a
commission and/or other forms of compensation to the broker, or to your
Financial Professional or other financial intermediary. Shares of each Fund are
usually available in other share classes that have different fees and
expenses.
One-Time
Fee - Initial Sales Charge
Class
A Shares
The
offering price for Class A shares is the NAV next calculated after receipt
of an investor’s order in proper form by the Fund or its servicing agent, plus
any applicable initial sales charge as shown in the table below. The right-hand
column in the table indicates what portion of the sales charge is paid to
Financial Professionals and their brokerage firms (“dealers”) for selling
Class A shares.
Note:
Because
of rounding in the calculation of the offering price, the actual maximum
front-end sales charge paid by an investor may be higher or lower than the
percentages noted.
For
more information regarding compensation paid to dealers, see “Distribution Plans
and Intermediary Compensation.”
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Fund(s):
Diversified Real Asset, Global Multi-Strategy, Spectrum Preferred and
Capital Securities Income |
|
Amount
of Purchase |
Class
A Sales Charge as % of: |
Dealer
Allowance |
|
|
Offering
Price |
Amount
Invested |
as
% of Offering Price |
|
Less
than $100,000 |
3.75% |
3.90% |
3.00% |
|
$100,000
but less than $250,000 |
2.75% |
2.83% |
2.25% |
|
$250,000
but less than $500,000 |
1.50% |
1.52% |
1.00% |
|
$500,000
or more |
0.00% |
0.00% |
0.00%* |
* |
The
Distributor may pay authorized dealers commissions on purchases of Class A
shares over $500,000 calculated as follows: 1.00% on purchases between
$500,000 and $4,999,999, 0.50% on purchases between $5 million and
$49,999,999, and 0.25% on purchases of $50 million or more. The commission
rate is determined based on the cumulative investments over the life of
the account combined with the investments in existing Classes A, C, and J
shares. |
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Fund(s):
Opportunistic Municipal |
|
Amount
of Purchase |
Class
A Sales Charge as % of: |
Dealer
Allowance |
|
|
Offering
Price |
Amount
Invested |
as
% of Offering Price |
|
Less
than $100,000 |
3.75% |
3.90% |
3.00% |
|
$100,000
but less than $250,000 |
2.75% |
2.83% |
2.25% |
|
$250,000
or more |
0.00% |
0.00% |
0.00%* |
* |
The
Distributor may pay authorized dealers commissions on purchases of Class A
shares over $250,000 calculated as follows: 1.00% on purchases between
$250,000 and $4,999,999, 0.75% on purchases between $5 million and
$9,999,999, 0.50% on purchases between $10 million and 49,999,999, and
0.25% on purchases of $50 million or more. The commission rate is
determined based on the cumulative investments over the life of the
account combined with the investments in existing Classes A, C, and J
shares. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund(s):
Blue Chip, Edge MidCap, International Small Company, Origin Emerging
Markets, Small-MidCap Dividend Income |
|
Amount
of Purchase |
Class
A Sales Charge as % of: |
Dealer
Allowance |
|
|
Offering
Price |
Amount
Invested |
as
% of Offering Price |
|
Less
than $50,000 |
5.50% |
5.82% |
4.75% |
|
$50,000
but less than $100,000 |
4.75% |
4.99% |
4.00% |
|
$100,000
but less than $250,000 |
3.75% |
3.90% |
3.00% |
|
$250,000
but less than $500,000 |
3.00% |
3.09% |
2.50% |
|
$500,000
but less than $1,000,000 |
2.00% |
2.04% |
1.75% |
|
$1,000,000
or more |
0.00% |
0.00% |
0.00%* |
* |
The
Distributor may pay authorized dealers commissions on purchases of Class A
shares over $1 million calculated as follows: 1.00% on purchases between
$1,000,000 and $4,999,999, 0.50% on purchases between $5 million and
$49,999,999, and 0.25% on purchases of $50 million or more. The commission
rate is determined based on the cumulative investments over the life of
the account combined with the investments in existing Classes A, C, and J
shares. |
Initial
Sales Charge Waiver or Reduction
Class
A shares of the Funds may be purchased without a sales charge or at a reduced
sales charge. The availability of certain sales charge waivers and reductions
will depend on whether you purchase your shares directly from the Fund or
through a financial intermediary. Intermediaries may have different policies and
procedures regarding the availability of initial (front-end) sales charge
waivers or reductions. Such
intermediary-specific sales charge variations are described in Appendix C to
this prospectus, titled "Intermediary-Specific Sales Charge Waivers and
Reductions."
If
you purchase Fund shares through an intermediary listed on Appendix C, you will
be eligible to the receive only the intermediary's applicable waivers and
reductions described on Appendix C. If you purchase Fund shares directly from
the Fund or through an intermediary not listed on Appendix C, you will be
eligible to receive only the following initial sales charge waivers and
reductions. In
all instances, it is your responsibility to notify the Fund or your financial
intermediary at the time of purchase of any relationship or other facts
qualifying you for sales charge waivers or reductions.
Initial
Sales Charge Waiver - For Purchases of Fund Shares From the Fund or Through
Intermediaries Not Listed on Appendix C
•No
initial sales charge will apply to purchases of Fund shares if the purchase is
of sufficient size as disclosed in the preceding “Class A Sales Charges”
table.
•You
may reinvest the Funds’ Class A share redemption proceeds without a sales charge
within 90 days of the redemption, if you previously paid a sales charge. Shares
invested directly within the Class A Money Market Fund are not eligible for this
waiver; however, shares in the Money Market Fund that were obtained by exchange
of another Fund that imposed an initial sales charge are eligible.
•A
Fund’s Class A shares may be purchased without an initial sales charge by
the following individuals, groups, and/or entities:
•current
and former Directors of Principal Funds, member companies of
Principal®,
and their active or retired employees, officers, directors, brokers, or agents
(for the life of the account). This also includes their immediate family members
(spouse, domestic partner, children (regardless of age and including in-laws),
and parents, including in-laws) and trusts created by or primarily for the
benefit of these individuals;
•any
employee or registered representative (and their immediate family members and
employees) of an authorized broker-dealer or company that makes available shares
of a Fund;
•clients
investing in Class A shares through a “wrap account” or investment product
offered through broker-dealers, registered investment advisors, and other
financial institutions under which clients may pay a fee to the broker-dealer,
registered investment advisor, or financial institution;
•any
investor who buys Class A shares through an omnibus account held by financial
intermediaries, such as a bank, broker-dealer, or other financial institution,
and that does not accept or charge the initial sales charge;
•financial
intermediaries who offer shares to self-directed investment brokerage accounts;
and
•retirement
plans or benefit plans, or participants in such plans, where the plan’s
investments in the Fund are part of an omnibus account. For clarification, such
plans do not include individual retirement arrangements under IRC Section 408,
such as Simplified Employee Pensions (SEP), SIMPLE IRAs or other
IRAs.
•The
following two bullet points are only applicable to intermediaries that are
affiliated with Principal Financial Group, Inc. A Fund’s Class A shares may be
purchased without an initial sales charge by the following individuals, groups,
and/or entities:
•Premier
Credit Union when the shares are owned directly with Principal Funds;
and
•non-ERISA
clients of Principal Global Investors LLC.
Initial
Sales Charge Reduction - For Purchases of Fund Shares From the Fund or Through
Intermediaries Not Listed on Appendix C
(1)Rights
of Accumulation. The sales charge varies with the size of your purchase.
Purchases made by (i) you, your spouse or domestic partner, your children
(including children of your spouse or domestic partner) age 25 or under, and/or
a trust created by or primarily for the benefit of such persons (together “a
Qualified Purchaser”) will be combined along with the value of existing Classes
A, C, and J shares of Principal Funds owned by such persons, plus (ii) the value
of holdings by you or an immediate family member which includes your spouse,
domestic partner, parent, legal guardian, child, sibling, stepchild, and father-
or mother-in law of Class A, C, and R Units of the Scholar’s Edge 529 Plan, to
determine the applicable sales charge. Class A shares of the Money Market Fund
are not included in the calculation unless they were acquired in exchange from
other Principal Fund shares. If the total amount being invested in the Principal
Funds is near a sales charge breakpoint, you should consider increasing the
amount invested to take advantage of a lower sales charge.
(2)Statement
of Intent (SOI). Qualified Purchasers may obtain reduced sales charges by
signing an SOI. The SOI is a nonbinding obligation on the Qualified Purchaser to
purchase the full amount indicated in the SOI. Purchases made by you, your
spouse or domestic partner, or the children of you, your spouse or domestic
partner up to and including the age of 25 and/or a trust created by or primarily
for the benefit of such persons (together “a Qualified Purchaser”) will be
combined along with the value of existing Classes A, C, and J shares of
Principal Funds owned by such persons. Purchases of Class A shares of Money
Market Fund are not included. The sales charge is based on the total amount to
be invested in a 13-month period. If the intended investment is not made (or
shares are sold during the 13-month period), sufficient shares will be sold to
pay the additional sales charge due. If a shareholder who signs an SOI dies
within the 13-month period, no additional front-end sales charge will be
required and the SOI will be considered met. An SOI is not available for 401(a)
plan purchases.
(3)The
maximum sales charge that applies to purchases of Class A shares by
qualified plans administered by Expertplan, Inc. that were previously converted
from B share plans is the sales charge that applies to purchases of at least
$250,000 but less than $500,000 as described in the sales charge tables; the
regular sales charge applies to purchases of $500,000 or more in such accounts
and to all purchases of the Diversified Real Asset Fund, Global Multi-Strategy
Fund, and Spectrum Preferred and Capital Securities Income Fund
shares.
(4)The
maximum sales charge for all purchases made in an account that is included in a
SIMPLE IRA, SEP, SAR-SEP, non-qualified deferred compensation, or payroll
deduction plan established before March 1, 2002 with Principal Management
Corporation as the Funds’ transfer agent, is the sales charge that applies to
purchases of at least $100,000 but less than $250,000 as described in the sales
charge tables; the regular sales charge applies to purchases of $250,000 or more
in such accounts and to all purchases of the Diversified Real Asset Fund, Global
Multi-Strategy Fund, and Spectrum Preferred and Capital Securities Income Fund
shares. The reduced sales charge applies to purchases made by or on behalf of
participants to such plans who became participants on or before July 28,
2007.
Class
C Shares
Purchases
of Class C shares are not subject to a front-end sales load. The offering price
for Class C shares is the NAV next calculated after receipt of an
investor’s order in proper form by the Fund or its servicing agent, with no
initial sales charge. The Distributor currently pays authorized dealers
commissions of up to 1.00% of the amount invested in Class C
shares.
Institutional
Class and Classes J, R-1, R-2, R-3, R-4, R-5, R-6, and S Shares
Purchases
of these classes of shares are not subject to a front-end sales load. The
offering price for such shares is the NAV next calculated after receipt of an
investor’s order in proper form by the Fund or its servicing agent, with no
initial sales charge.
One-Time
Fee - Contingent Deferred Sales Charge (“CDSC”)
If
you sell (redeem) shares and the CDSC is imposed, it will reduce the amount of
sales proceeds.
The
CDSC is based on the lesser of the market value at the time of redemption or the
initial purchase price of the shares sold. The CDSC does not apply to shares
purchased with reinvested dividends or other distributions. The CDSC is not
charged on exchanges. However, the original purchase date of the shares from
which an exchange is made determines if the newly acquired shares are subject to
the CDSC when they are sold.
If
you sell some but not all of the shares in your account, the shares not subject
to a CDSC will be sold first. Other shares will be sold in the order purchased
(first in, first out). The CDSC does not apply to shares redeemed according to a
systematic withdrawal plan limited to no more than 1.00% per month (measured
cumulatively for non-monthly plans) of the value of the Fund account at the
time, and beginning on the date, the systematic withdrawal plan is
established.
Class
A Shares
Class
A shares purchased in amounts that are of sufficient size to qualify for a 0.00%
sales charge, as disclosed in the “Class A Sales Charges” table, are generally
subject to a CDSC of 1.00% if the shares are redeemed during the first 18 months
after purchase (12 months after purchase for Opportunistic Municipal Fund),
unless the dealer, at its discretion, has waived the commission. The Distributor
may pay authorized dealers commissions up to 1.00% of the price of such
purchases.
There
is no CDSC on Class A shares of the Money Market Fund that are directly
purchased by the shareholder. However, for Class A Money Market Fund shares that
are obtained through an exchange of shares from another Fund, the CDSC
originally applicable to the purchase of such Fund’s shares will continue to
apply.
The
CDSC generally will not be imposed on redemptions of shares purchased through an
omnibus account with certain financial intermediaries, such as a bank or other
financial institution, where no sales charge payments were advanced for
purchases made through these entities.
Class
C Shares
Each
initial and subsequent purchase of Class C shares is subject to a CDSC of 1.00%
for a period of 12 months from the date of purchase. Shares will be redeemed
first from shares purchased through reinvested dividends and capital gain
distributions, which are not subject to the CDSC, and then in order of purchase.
Within 90 days after the sale of Class C shares, you may reinvest any amount of
the sale proceeds in Class C shares and those shares purchased will not be
subject to the 12-month CDSC.
Class
J Shares
If
you sell your Class J shares within 18 months of purchase, a CDSC may be imposed
on the shares sold. The CDSC, if any, is determined by multiplying by 1.00% the
lesser of the market value at the time of redemption or the initial purchase
price of the shares sold. Within 90 days after the sale of Class J shares, you
may reinvest the amount of the sale proceeds into any Principal Funds Class J
shares Fund; shares purchased by redemption proceeds are not subject to the
eighteen-month CDSC.
Institutional
Class and Classes R-1, R-2, R-3, R-4, R-5, R-6, and S Shares
These
share classes are not subject to a CDSC.
CDSC
Waiver
The
CDSC may be waived on Classes A, C, and J shares of the Funds; waivers vary
depending on how shares are purchased. Certain waivers and reductions apply when
shares are purchased directly from the Fund; others apply when shares are
purchased through an intermediary. Intermediaries may have different policies
and procedures regarding the availability of waivers or reductions of the CDSC.
Such
intermediary-specific sales charge variations are described in Appendix C to
this prospectus, titled "Intermediary-Specific Sales Charge Waivers and
Reductions."
If
you purchase Fund shares through an intermediary listed on Appendix C, you will
be eligible to the receive only the intermediary's applicable waivers and
reductions described on Appendix C. If you purchase Fund shares directly from
the Fund or through an intermediary not listed on Appendix C, you will be
eligible to receive only the following CDSC waivers and reductions. In
all instances, it is your responsibility to notify the Fund or your financial
intermediary at the time of redemption of any facts qualifying you for sales
charge waivers or reductions.
CDSC
Waiver - For Purchases of Fund Shares From the Fund or Through Intermediaries
Not Listed on Appendix C
For
Classes A, C, and J shares, the CDSC is waived on shares:
•redeemed
within 90 days after an account is re-registered due to a shareholder's
death;
•redeemed
to pay surrender fees;
•redeemed
to pay retirement plan fees;
•redeemed
involuntarily from accounts with small balances;
•redeemed
due to the shareholder's disability (as defined by the Internal Revenue Code)
provided the shares were purchased before the disability;
•redeemed
from retirement plans to satisfy minimum distribution rules under the Internal
Revenue Code;
•redeemed
from a retirement plan to assure the plan complies with the Internal Revenue
Code;
•redeemed
from retirement plans qualified under Section 401(a) of the Internal Revenue
Code due to the plan participant's death, disability, retirement, or separation
from service after attaining age 55;
•redeemed
from retirement plans to satisfy excess contribution rules under the Internal
Revenue Code; or
•redeemed
using a systematic withdrawal plan (up to 1% per month (measured cumulatively
with respect to non-monthly plans) of the value of the fund account at the time,
and beginning on the date, the systematic withdrawal plan begins). (The free
withdrawal privilege not used in a calendar year is not added to the free
withdrawal privileges for any following year.)
For
Class J shares, the CDSC also is waived on shares:
•redeemed
that were purchased pursuant to the Small Amount Force Out program (SAFO);
or
•of
the Money Market Fund redeemed within 30 days of the initial purchase if the
redemption proceeds are transferred to another Principal IRA, defined as either
a fixed or variable annuity issued by Principal Life Insurance Company to fund
an IRA, a Principal Bank IRA product, or a WRAP account IRA sponsored by
Principal Securities, Inc.
Ongoing
Fees
The
ongoing fees are the operating expenses of a Fund, which are described in the
“Annual Fund Operating Expenses” table included in the Summary for each Fund.
These expenses reduce the value of each share you own. Because they are ongoing,
they increase the cost of investing in the Funds.
With
the exception of Class S of the Capital Securities Fund, each Fund pays ongoing
fees to PGI and others who provide services to the Fund. These fees
include:
• Management
Fee (all Classes except Class S) — Through the Management Agreement with the
Fund, PGI has agreed to provide investment advisory services and corporate
administrative services to the Fund.
• Distribution
Fee (Classes A, C, J, R-1, R-2, R-3, and R-4) — Each Fund has adopted a
distribution plan under Rule 12b-1 of the Investment Company Act of 1940
for the foregoing classes. Under the plan, these classes of each Fund pay a
distribution fee based on the average daily NAV of the Fund. These fees pay
distribution and other expenses for the sale of Fund shares and for services
provided to shareholders. Because they are ongoing fees, over time, these fees
may exceed other types of sales charges.
• Other
Expenses — (all Classes except Class S) - A portion of expenses that are
allocated to all classes of the Fund. Other expenses include interest expense,
expenses related to fund investments, and index licensing fees. Additional
examples of other expenses include:
• Transfer
Agent Fee (all Classes except Class S) - Principal Shareholder Services,
Inc. (“PSS”) has entered into a Transfer Agency Agreement with the Fund under
which PSS provides transfer agent services to these classes. For Class J shares,
these services are currently provided at a rate that includes a profit; for
Classes A, C, and Institutional Class shares, these services are currently
provided at cost. The Fund does not pay for these services for Classes R-1, R-2,
R-3, R-4, R-5, and R-6 shares.
•Certain
Operating Expenses (Institutional Class and Classes A, C, J, and
R-6) - expenses of registering and qualifying shares for sale, the
cost of producing and distributing reports and prospectuses to shareholders of
these classes, the cost of shareholder meetings held solely for shareholders of
these classes, and other operating expenses of the Fund.
• Service
Fee (Classes R-1, R-2, R-3, R-4, and R-5) - PGI has entered into a
Service Agreement with the Fund under which PGI is required to provide certain
personal services to shareholders (plan sponsors) and beneficial owners (plan
members), such as responding to plan sponsor and plan member
inquiries.
•Administrative
Services Fee (Classes R-1, R-2, R-3, R-4, and R-5) - PGI has entered into
an Administrative Services Agreement with Principal Funds under which PGI is
required to provide shareholder and administrative services for retirement plans
and other beneficial owners of Fund shares.
• Acquired
Fund Fees and Expenses (all Classes except Class S) - fees and expenses charged
by other investment companies in which a Fund invests a portion of its
assets.
Class
S Shares
The
Capital Securities Fund does not pay any direct advisory, administrative, or
other fees. PGI, the investment advisor, has contractually agreed to absorb all
expenses of the Capital Securities Fund. PGI also pays or absorbs expenses
attributable to Class S shares by paying expenses normally payable by the
Capital Securities Fund, excluding interest expense.
DISTRIBUTION
PLANS AND INTERMEDIARY COMPENSATION
Distribution
and/or Service (12b-1) Fees
Principal
Funds Distributor, Inc. ("PFD" or the "Distributor") is the distributor for the
shares of Principal Funds, Inc. PFD is an affiliate of Principal Life Insurance
Company and with it is a subsidiary of Principal Financial Group, Inc. and
member of Principal®.
Principal
Funds has adopted a distribution plan pursuant to Rule 12b-1 under the
Investment Company Act for each of the Classes A, C, J, R-1, R-2, R-3, and R-4
shares of Principal Funds. Under the 12b-1 plans, except as noted below, each
Fund makes payments from its assets attributable to the particular share class
to the Fund’s Distributor for distribution-related expenses and for providing
services to shareholders of that share class. Payments under the 12b-1 Plans are
made by the Funds to the Distributor pursuant to the 12b-1 Plans regardless of
the expenses incurred by the Distributor. When the Distributor receives Rule
12b-1 fees, it may pay some or all of them to intermediaries whose customers are
shareholders of the Funds for sales support services and for providing services
to shareholders of that share class. Intermediaries may include, among others,
broker-dealers, registered investment advisors, banks, trust companies, pension
plan consultants, retirement plan administrators, and insurance companies. These
intermediaries include Principal Securities, Inc., a broker-dealer affiliated
with PGI. Because Rule 12b-1 fees are paid out of Fund assets and are ongoing
fees, over time they will increase the cost of your investment in the Funds and
may cost you more than other types of sales charges.
The
maximum annual Rule 12b-1 fee for distribution related expenses and/or for
providing services to shareholders under each 12b-1 plan (as a percentage of
average daily net assets) is:
|
|
|
|
|
|
Share
Class |
Maximum
Annualized Rate
12b-1
Fee |
A |
0.25% |
C |
1.00% |
J |
0.15% |
R-1 |
0.35% |
R-2 |
0.30% |
R-3 |
0.25% |
R-4 |
0.10% |
The
Distributor generally uses Rule 12b-1 fees to finance any activity that is
primarily intended to result in the sale of shares and for providing services to
shareholders of the share class, and the activities vary depending on the share
class. In addition to shareholder services, examples of such sales or
distribution related expenses include, but are not limited to:
•Compensation
to salespeople and selected dealers, including ongoing commission
payments.
•Printing
of prospectuses and statements of additional information and reports for other
than existing shareholders, and preparing and conducting sales
seminars.
Examples
of services to shareholders include furnishing information as to the status of
shareholder accounts, responding to telephone and written inquiries of
shareholders, and assisting shareholders with tax information.
Payments
under the 12b-1 plans will not automatically terminate for funds that are closed
to new investors or to additional purchases by existing shareholders. The Fund
Board will determine whether to terminate, modify, or leave unchanged the 12b-1
plans when the Board directs the implementation of the closure of a
Fund.
Classes
A and C Shares
Generally,
to receive 12b-1 fees from the Distributor, dealers or other intermediaries must
be the dealer of record for shares with average daily net assets of at least
$100,000. Generally, Class A shares must be held for three months before these
fees are paid. In the case of Class C shares, generally these fees are not paid
until such shares have been held for twelve months.
Class
J Shares
Effective
January 1, 2021, the Distributor has voluntarily agreed to limit the
Distribution Fees attributable to Class J, reducing the Fund’s Distribution Fees
for Class J Shares by 0.020%.* This voluntary waiver may be revised or
terminated at any time without notice to shareholders.
*For
the period from December 31, 2016 to December 31, 2020, the voluntary waiver was
0.030%.
Commissions,
Finder’s Fees, and Ongoing Payments
See
"Choosing a Share Class and The Costs of Investing" for more
details.
Class
A Shares
All
or a portion of the initial sales charge that you pay may be paid by the
Distributor to intermediaries selling Class A shares. The Distributor may pay
these intermediaries a commission of up to 1.00% on purchases of $1,000,000 or
more (or $500,000 or more depending on the Fund purchased), excluding purchases
by qualified retirement plans in omnibus accounts which are not subject to
initial sales charges.
In
lieu of commissions, the Distributor may pay intermediaries a finder’s fee on
initial investment by qualified retirement plans in omnibus accounts which are
not subject to initial sales charges, provided the selling intermediary notifies
the Distributor within 90 days of the initial investment that the transaction is
eligible for the payment of a finder’s fee. The finder’s fee on such initial
investments may be up to 1.00% on initial investments between $500,000 and
$4,999,999, 0.50% on initial investments between $5 million and $49,999,999,
0.25% on initial investments of $50 million or more. Initial investments include
transfers, rollovers and other lump sum purchases, excluding ongoing systematic
investments, made within 90 days of the initial funding of the account. The
intermediary shall, upon request by the Distributor provided within 90 days of
the triggering event, refund the finder’s fee to the Distributor to the extent
shares are redeemed within 12 months of the initial investment or trading
restrictions are placed on the account in accordance with the Funds' frequent
trading policy.
Classes
A, J, R-1, R-2, R-3, and R-4 Shares
Additionally,
the Distributor generally makes ongoing 12b-1 fee payments to your intermediary
at a rate that varies by class, as noted above under “Distribution and/or
Service (12b-1) Fees.”
Class
C Shares
The
Distributor will pay, at the time of your purchase, a commission to your
intermediary equal to 1.00% of your investment. Additionally, the Distributor
generally makes ongoing 12b-1 fee payments to your intermediary as noted above
under “Distribution and/or Service (12b-1) Fees.”
Additional
Payments to Intermediaries
Shares
of the Funds are sold primarily through intermediaries, such as brokers,
dealers, investment advisors, banks, trust companies, pension plan consultants,
retirement plan administrators, and insurance companies.
Classes
A, C, and J Shares
In
addition to payments pursuant to 12b-1 plans, sales charges, commissions and
finder’s fees, including
compensation
for referrals, PGI or its affiliates enter into agreements with some
intermediaries pursuant to which the intermediaries receive payments for
providing services relating to Fund shares. Examples of such services are
administrative, networking, recordkeeping, sub-transfer agency and shareholder
services. In some situations, the Fund will reimburse PGI or its affiliates for
making such payments; in others, the Fund may make such additional payments
directly to intermediaries.
PGI
or its affiliates also pay, without reimbursement from the Fund, compensation
from their own resources to certain intermediaries that support the distribution
of shares of the Fund or provide services to Fund shareholders.
Such
additional payments vary, but generally do not exceed: (a) 0.25% of the current
year's sales of Fund shares by that intermediary and/or (b) 0.25% of average net
asset value of Fund shares held by clients of such intermediary.
The
Distributor and its affiliates pay a bonus or other consideration or incentive
to certain intermediaries if an employee covered under an employer sponsored
benefit program purchases a product from an affiliate of Distributor with the
assistance of a registered representative of an affiliate of Distributor, if the
intermediary sold the funding vehicle the employer sponsored benefit program
utilizes or if the intermediary subsequently became the broker of record with
regard to the employer sponsored benefit program.
Institutional
Class and Classes R-1, R-2, R-3, R-4, R-5, and R-6 Shares
In
addition to payments pursuant to applicable 12b-1 plans, PGI or its affiliates
enter into agreements with some intermediaries pursuant to which the
intermediaries receive payments for providing services relating to Fund shares.
Examples of such services are administrative, networking, recordkeeping,
sub-transfer agency and/or shareholder services. For Classes R-1, R-2, R-3, R-4,
and R-5 shares, such compensation is generally paid out of the Service Fees and
Administrative Service Fees that are disclosed in this prospectus as Other
Expenses. For Institutional Class shares, in some situations the Fund will
reimburse PGI or its affiliates for making such payments; in others, the Fund
may make such payments directly to the intermediaries.
PGI
or its affiliates also pay, without reimbursement from the Fund, compensation
from their own resources to certain intermediaries that support the distribution
of shares of the Fund or provide services to Fund shareholders.
For
Institutional Class shares, such payments vary, but generally do not exceed: (a)
0.10% of the current year’s sales of Fund shares by that intermediary or (b)
0.10% of the average net asset value of Fund shares held by clients of such
intermediary.
Principal
Life Insurance Company is one such intermediary that provides services relating
to Fund shares held in employee benefit plans, and it is typically paid all of
the Service Fees and Administrative Service Fees pertaining to such plans, and
it also is paid other compensation described in this section as payable to
intermediaries.
The
Distributor and its affiliates do not pay compensation to intermediaries (other
than to affiliates of the Distributor) for distribution services or other
services to Fund shareholders for Class R-6 shares. For more information, see
the Statement of Additional Information (SAI).
Institutional
Class and Classes A, C, J, R-1, R-2, R-3, R-4, R-5, and R-6 Shares
The
intermediary may pay to its Financial Professionals some or all of the amounts
the Distributor and its affiliates pay to the intermediary.
The
amounts paid to intermediaries vary by share class and by Fund.
In
some cases, the Distributor and its affiliates will provide payments or
reimbursements in connection with the costs of conferences, educational
seminars, training and marketing efforts related to the Funds. Such activities
may be sponsored by intermediaries or the Distributor. The costs associated with
such activities may include travel, lodging, entertainment, and meals. In some
cases, the Distributor will also provide payment or reimbursement for expenses
associated with transactions ("ticket") charges and general marketing
expenses.
For
more information, see the Statement of Additional Information
(SAI).
The
payments described in this prospectus may create a conflict of interest by
influencing your Financial
Professional
or your intermediary to recommend the Fund over another investment, or to
recommend one share class of the Fund over another share class. Ask your
Financial Professional or visit your intermediary's website for more information
about the total amounts paid to them by PGI and its affiliates, and by sponsors
of other investment companies your Financial Professional may recommend to
you.
Your
intermediary may charge you additional fees other than those disclosed in this
prospectus. Ask your Financial Professional about any fees and commissions they
charge.
FUND ACCOUNT
INFORMATION
Statements
You
will receive quarterly statements for the Funds you own, or if you purchase
through a third party intermediary, on a periodic basis established by such
intermediary. Such statements provide the number and value of shares you own,
transactions during the period, dividends declared or paid, and other
information. The year-end statement includes information for all transactions
that took place during the year. Please review your statement as soon as you
receive it. Keep your statements, as you may need them for tax reporting
purposes.
Generally,
each time you buy, sell, or exchange shares in Principal Funds, you will receive
a confirmation shortly thereafter. It summarizes all the key information - what
you bought or sold, the amount of the transaction, and other important
information.
Certain
purchases and sales are only included on your quarterly statement. These include
accounts:
•when
the only activity during the quarter are:
◦purchases
of shares from reinvested dividends and/or capital gains,
◦purchases
under an Automatic Investment Plan,
◦sales
under a Systematic Withdrawal Plan, or
◦purchases
or sales under an Automatic Exchange Election;
◦conversion
of Class C shares into Class A shares
•used
to fund certain individual retirement or individual pension plans;
or
•established
under a payroll deduction plan.
If
you need information about your account(s) at other times, you may call us or
access your account on the internet.
Orders
Placed by Intermediaries
Principal
Funds may have an agreement with your intermediary, such as a broker-dealer,
third party administrator, or trust company, that permits the intermediary to
receive orders on behalf of the Fund until 3 p.m. Central Time. The agreement
may include authorization for your intermediary to designate other
intermediaries (“sub-designees”) to receive orders on behalf of the Fund on the
same terms that apply to the intermediary. In such cases, if your intermediary
or a sub-designee receives your order in correct form by 3 p.m. Central Time,
transmits it to the Fund, and pays for it in accordance with the agreement, the
Fund will price the order at the next net asset value per share it computes
after your intermediary or sub-designee received your order.
The
time at which the Fund prices orders and the time until which the Fund or your
intermediary or sub-designee will accept orders may change in the case of an
emergency or if the NYSE closes at a time other than 3 p.m. Central
Time.
Transactions
through Financial Institutions/Professionals
Financial
institutions and dealers may charge their customers a processing or service fee
in connection with the purchase or redemption of Fund shares. The amount and
applicability of such a fee is determined and disclosed to its customers by each
individual financial institution or dealer. Processing or service fees typically
are fixed, nominal dollar amounts and are in addition to the sales and other
charges described in this prospectus and the SAI.
Your
financial institution or dealer will provide you with specific information about
any processing or service fees you will be charged.
Telephone
and Internet Instructions
The
Funds reserve the right to refuse telephone and/or internet instructions. You
are liable for a loss resulting from a fraudulent telephone or internet
instruction that we reasonably believe is genuine. We use reasonable procedures
to assure instructions are genuine. If the procedures are not followed, we may
be liable for loss due to unauthorized or fraudulent transactions. The
procedures include: recording all telephone instructions, requiring the use of a
password (Personal Identification Number) for internet instructions, requesting
personal identification information, and sending written confirmation to the
shareholder’s address of record.
If
you elect telephone privileges, instructions regarding your account(s) may be
given to us via the telephone or internet. Your instructions:
•may
be given by calling us;
•may
be given via our website for certain transactions (for security purposes you
need a user name and password to use any of the internet services, including
viewing your account information online. If you don’t have a user name or
password, you may obtain one at our website); or
•may
be given to your Financial Professional (a person employed by or affiliated with
broker/dealer firms) who will in turn contact us with your
instructions.
Instructions
received from one owner are binding on all owners. In the case of an account
owned by a corporation or trust, instructions received from an authorized person
are binding on the corporation/trust unless we have a written notification
requiring that more than one authorized person execute written
instructions.
Signature
Guarantees
For
all classes (except Class S), certain transactions require that your signature
be guaranteed. A signature guarantee may help protect your account against
fraud. If required, the signature(s) must be guaranteed by a commercial bank,
trust company, credit union, savings and loan, national securities exchange
member, or brokerage firm that participates in a Medallion program recognized by
the Securities Transfer Association. A signature guaranteed by a notary public
or savings bank is not acceptable. We reserve the right to require a signature
guarantee on any transaction.
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Signature
guarantees are required in any of the following
circumstances: |
A |
C |
J |
Inst. |
R-1 |
R-2 |
R-3 |
R-4 |
R-5 |
R-6 |
if
you sell more than $100,000 (in the aggregate) from the
Funds |
X |
X |
X |
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if
you sell more than $500,000 (in the aggregate) from the
Funds |
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X |
X |
X |
X |
X |
X |
X |
if
you sell more than $10,000,000 if you have the proceeds sent
electronically to a previously authorized U.S. bank
account |
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X |
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if
a sales proceeds check is payable to a party other than the account
shareholder(s) |
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X |
X |
X |
X |
X |
X |
X |
if
a sales proceeds check is payable to a party other than the account
shareholder(s) or Principal Life, Principal Bank, a retirement plan
trustee or custodian that has agreed in writing to accept a transfer of
assets from the Fund or Principal Securities, Inc. payable through
Pershing |
X |
X |
X |
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to
change ownership of an account |
X |
X |
X |
X |
X |
X |
X |
X |
X |
X |
to
add telephone transaction services and/or wire or ACH redemption
privileges to an existing account if there is not a common owner between
the bank account and mutual fund account |
X |
X |
X |
X |
X |
X |
X |
X |
X |
X |
to
change bank account information designated under an existing telephone
withdrawal plan if there is not a common owner between the bank account
and mutual fund account |
X |
X |
X |
X |
X |
X |
X |
X |
X |
X |
to
wire or ACH to a shareholder’s U.S. bank account not previously authorized
or when the request does not include a voided check or deposit slip
indicating a common owner between the bank account and mutual fund
account |
X |
X |
X |
X |
X |
X |
X |
X |
X |
X |
to
exchange or transfer among accounts with different
ownership |
X |
X |
X |
X |
X |
X |
X |
X |
X |
X |
to
have a sales proceeds check mailed to an address other than the address on
the account or to the address on the account if it has been changed within
the preceding 15 days |
X |
X |
X |
X |
X |
X |
X |
X |
X |
X |
Reservation
of Rights
Principal
Funds reserves the right to amend or terminate the special plans described in
this prospectus. Shareholders will be notified of any such action to the extent
required by law.
Such
plans include, for example, automatic investment, systematic withdrawal, waiver
of Fund minimums for certain accounts and waiver or reduction of the sales
charge or contingent deferred sales charge for certain purchasers.
Classes
A, C, and J Shares - Minimum Account Balance
Each
Fund has a minimum required account balance of $1000. The Fund reserves the
right to redeem all shares in your account if the value of your account falls
below $1000. The Fund will mail the redemption proceeds to you. An involuntary
redemption of a small account will not be triggered by market conditions alone.
The Fund will notify you before involuntarily redeeming your account. You will
have 30 days to make an additional investment of an amount that brings your
account up to the required minimum. The Funds reserve the right to increase the
required minimum.
Householding
To
avoid sending duplicate copies of materials to households, mailings for accounts
held by members of your household may be combined so that only one copy of each
prospectus, annual and semiannual reports will be mailed. In addition, your
account information may be included with other householded accounts on the same
quarterly and annual statements. The consolidation of these mailings, called
householding, benefits Principal Funds and our shareholders through reduced
printing and mailing expenses. If you prefer to receive multiple copies of these
materials, you may write or call Principal Funds. Householding will be stopped
within thirty (30) days after we receive your request.
Multiple
Translations
This
prospectus may be translated into other languages. In the event of any
inconsistencies or ambiguity as to the meaning of any word or phrase in a
translation, the English text will prevail.
Financial
Statements
Shareholders
will receive annual financial statements for the Funds, audited by the Funds’
independent registered public accounting firm. Shareholders will also receive a
semiannual financial statement that is unaudited.
APPENDIX
A – DESCRIPTION OF BOND RATINGS
Moody's
Investors Service, Inc. Rating Definitions:
Long-Term
Obligation Ratings
Ratings
assigned on Moody's global long-term obligation rating scales are
forward-looking opinions of the relative credit risk of financial obligations
issued by non-financial corporates, financial institutions, structured finance
vehicles, project finance vehicles, and public sector entities. Long-term
ratings are assigned to issuers or obligations with an original maturity of one
year or more and reflect both on the likelihood of a default or impairment on
contractual financial obligations and the expected financial loss suffered in
the event of default or impairment.1
1
For
certain structured finance, preferred stock and hybrid securities in which
payment default events are either not defined or do not match investor’s
expectations for timely payment,
the ratings reflect the likelihood of impairment and the expected financial loss
in the event of impairment.
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Aaa: |
Obligations
rated Aaa are judged to be of the highest quality, subject to the lowest
level of credit risk. |
Aa: |
Obligations
rated Aa are judged to be of high quality and are subject to very low
credit risk. |
A: |
Obligations
rated A are considered upper-medium grade and are subject to low credit
risk. |
Baa: |
Obligations
rated Baa are subject to moderate credit risk. They are considered
medium-grade and as such may possess certain speculative
characteristics. |
Ba: |
Obligations
rated Ba are judged to be speculative and are subject to substantial
credit risk. |
B: |
Obligations
rated B are considered speculative and are subject to high credit
risk. |
Caa: |
Obligations
rated Caa are judged to be speculative of poor standing and are subject to
very high credit risk. |
Ca: |
Obligations
rated Ca are highly speculative and are likely in, or very near, default,
with some prospect of recovery of principal and
interest. |
C: |
Obligations
rated C are the lowest rated class of bonds and are typically in default,
with little prospect for recovery of principal or
interest. |
NOTE: Moody's
appends
numerical modifiers, 1, 2, and 3 to each generic rating classification from Aa
through Caa. The modifier 1 indicates that the obligation ranks in the higher
end of its generic rating category, the modifier 2 indicates a mid-range
ranking, and the modifier 3 indicates a ranking in the lower end of that generic
rating category. Additionally, a “(hyb)” indicator is appended to all ratings of
hybrid securities issued by banks, issuers, financial companies, and securities
firms.*
*
By their terms, hybrid securities allow for the omission of scheduled dividends,
interest, or principal payments, which can potentially result in impairment if
such an omission occurs. Hybrid securities may also be subject to contractually
allowable write-downs of principal that could result in impairment.
Together the hybrid indicator, the long-term obligation rating assigned to a
hybrid security is an expression of the relative credit risk associated with
that security.
SHORT-TERM
NOTES: Short-term ratings are assigned to obligations with an original maturity
of thirteen months or less and reflect both on the likelihood of a default or
impairment on contractual financial obligations and the expected financial loss
suffered in the event of default. Moody's employs the following three
designations, all judged to be investment grade, to indicate the relative
repayment ability of rated issuers:
Issuers
rated Prime-1 (or related supporting institutions) have a superior ability to
repay short-term debt obligations.
Issuers
rated Prime-2 (or related supporting institutions) have a strong ability to
repay short-term debt obligations.
Issuers
rated Prime-3 (or related supporting institutions) have an acceptable ability to
repay short-term obligations.
Issuers
rated Not Prime do not fall within any of the Prime rating
categories.
US
MUNICIPAL SHORT-TERM DEBT: The Municipal Investment Grade (MIG) scale is used to
rate US municipal bonds of up to five years maturity. MIG ratings are divided
into three levels - MIG 1 through MIG 3 - while speculative grade short-term
obligations are designated SG.
MIG
1 denotes superior credit quality, afforded excellent protection from highly
reliable liquidity support, or demonstrated broad-based access to the market for
refinancing.
MIG
2 denotes strong credit quality with ample margins of protection, although not
as large as in the preceding group.
MIG
3 notes are of acceptable credit quality. Liquidity and cash-flow protection may
be narrow and market access for refinancing is likely to be less
well-established.
SG
denotes speculative-grade credit quality and may lack sufficient margins of
protection.
Description
of S&P Global Ratings' Credit Rating Definitions:
S&P
Global's credit rating, both long-term and short-term, is a forward-looking
opinion of the creditworthiness of an obligor with respect to a specific
obligation. This assessment takes into consideration the creditworthiness of
guarantors, insurers, or other forms of credit enhancement on the
obligation.
The
credit rating is not a recommendation to purchase, sell or hold a security,
inasmuch as it does not comment as to market price or suitability for a
particular investor.
The
ratings are statements of opinion as of the date they are expressed furnished by
the issuer or obtained by S&P Global Ratings from other sources S&P
Global Ratings considers reliable. S&P Global Ratings does not perform an
audit in connection with any rating and may, on occasion, rely on unaudited
financial information. The ratings may be changed, suspended, or withdrawn as a
result of changes in, or unavailability of, such information, or for other
circumstances.
The
ratings are based, in varying degrees, on the following
considerations:
•Likelihood
of payment - capacity and willingness of the obligor to meet its financial
commitment on an obligation in accordance with the terms of the
obligation;
•Nature
of and provisions of the financial obligation;
•Protection
afforded by, and relative position of, the financial obligation in the event of
bankruptcy, reorganization, or other arrangement under the laws of bankruptcy
and other laws affecting creditor's rights.
LONG-TERM
CREDIT RATINGS:
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AAA: |
Obligations
rated ‘AAA’ have the highest rating assigned by S&P Global Ratings.
The obligor’s capacity to meet its financial commitment on the obligation
is extremely strong. |
AA: |
Obligations
rated ‘AA’ differ from the highest-rated issues only in small degree. The
obligor’s capacity to meet its financial commitment on the obligation is
very strong. |
A:
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Obligations
rated ‘A’ have a strong capacity to meet financial commitment on the
obligation although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
obligations in higher-rated categories. |
BBB: |
Obligations
rated ‘BBB’ exhibit adequate protection parameters; however, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to meet financial commitment on the
obligation. |
BB,
B, CCC, CC and C: |
Obligations
rated ‘BB’, ‘B’, ‘CCC’, ‘CC’, and ‘C’ are regarded, on balance, as having
significant speculative characteristics. ‘BB’ indicates the lowest degree
of speculation and ‘C’ the highest degree of speculation. While such
obligations will likely have some quality and protective characteristics,
these may be outweighed by large uncertainties or major risk exposures to
adverse conditions. |
BB: |
Obligations
rated ‘BB’ are less vulnerable to nonpayment than other speculative
issues. However it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
the obligor’s inadequate capacity to meet its financial commitment on the
obligation. |
B: |
Obligations
rated ‘B’ are more vulnerable to nonpayment than ‘BB’ but the obligor
currently has the capacity to meet its financial commitment on the
obligation. Adverse business, financial, or economic conditions will
likely impair this capacity. |
CCC: |
Obligations
rated ‘CCC’ are currently vulnerable to nonpayment and is dependent upon
favorable business, financial, and economic conditions for the obligor to
meet its financial commitment on the obligation. If adverse business,
financial, or economic conditions occur, the obligor is not likely to have
the capacity to meet its financial commitment on the
obligation. |
CC: |
Obligations
rated ‘CC’ are currently highly vulnerable to nonpayment. The ‘CC’ rating
is used when a default has not yet occurred but S&P Global Ratings
expects default to be a virtual certainty, regardless of anticipated time
to default. |
C:
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The
rating ‘C’ is highly vulnerable to nonpayment, the obligation is expected
to have lower relative seniority or lower ultimate recovery compared to
higher rated obligations. |
D:
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Obligations
rated ‘D’ are in default, or in breach of an imputed promise. For
non-hybrid capital instruments, the ‘D’ rating category is used when
payments on an obligation are not made on the date due, unless S&P
Global Ratings believes that such payments will be made within five
business days in the absence of a stated grace period or within the
earlier of the stated grace period or 30 calendar days. The rating will
also be used upon filing for bankruptcy petition or the taking of similar
action and where default is a virtual certainty. If an obligation is
subject to a distressed exchange offer the rating is lowered to
‘D’. |
Plus
(+) or Minus (-): The ratings from ‘AA’ to ‘CCC’ may be modified by the addition
of a plus or minus sign to show relative standing within the major rating
categories.
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NR: |
Indicates
that no rating has been requested, that there is insufficient information
on which to base a rating or that S&P Global Ratings does not rate a
particular type of obligation as a matter of
policy. |
SHORT-TERM
CREDIT RATINGS: Ratings are graded into four categories, ranging from ‘A-1’ for
the highest quality obligations to ‘D’ for the lowest.
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A-1:
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This
is the highest category. The obligor’s capacity to meet its financial
commitment on the obligation is strong. Within this category, certain
obligations are designated with a plus sign (+). This indicates that the
obligor’s capacity to meet its financial commitment on these obligations
is extremely strong. |
A-2:
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Issues
carrying this designation are somewhat more susceptible to the adverse
effects of the changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor’s capacity
to meet its financial commitment on the obligation is
satisfactory. |
A-3:
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Issues
carrying this designation exhibit adequate capacity to meet their
financial obligations. However, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity of the
obligor to meet it financial commitment on the
obligation. |
B:
|
Issues
rated ‘B’ are regarded as vulnerable and have significant speculative
characteristics. The obligor has capacity to meet financial commitments;
however, it faces major ongoing uncertainties which could lead to
obligor’s inadequate capacity to meet its financial
obligations. |
C:
|
This
rating is assigned to short-term debt obligations that are currently
vulnerable to nonpayment and is dependent upon favorable business,
financial, and economic conditions to meet its financial commitment on the
obligation. |
D:
|
This
rating indicates that the issue is either in default or in breach of an
imputed promise. For non-hybrid capital instruments, the ‘D’ rating
category is used when payments on an obligation are not made on the date
due, unless S&P Global Ratings believes that such payments will be
made within five business days in the absence of a stated grace period or
within the earlier of the stated grace period or 30 calendar days. The
rating will also be used upon filing for bankruptcy petition or the taking
of similar action and where default is a virtual certainty. If an
obligation is subject to a distressed exchange offer the rating is lowered
to ‘D’. |
MUNICIPAL
SHORT-TERM NOTE RATINGS: S&P Global Ratings rates U.S. municipal notes with
a maturity of less than three years as follows:
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SP-1:
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A
strong capacity to pay principal and interest. Issues that possess a very
strong capacity to pay debt service is given a "+"
designation. |
SP-2:
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A
satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the terms of
the notes. |
SP-3:
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A
speculative capacity to pay principal and
interest. |
APPENDIX
B – ADDITIONAL FUND-SPECIFIC INFORMATION
International
Equity Index Fund
THIS
FUND IS NOT SPONSORED, ENDORSED, SOLD OR PROMOTED BY MSCI INC. (“MSCI”),
ANY OF ITS AFFILIATES, ANY OF ITS INFORMATION PROVIDERS OR ANY OTHER THIRD PARTY
INVOLVED IN, OR RELATED TO, COMPILING, COMPUTING OR CREATING ANY MSCI INDEX
(COLLECTIVELY, THE “MSCI
PARTIES”).
THE MSCI INDEXES ARE THE EXCLUSIVE PROPERTY OF MSCI. MSCI AND THE MSCI
INDEX NAMES ARE SERVICE MARK(S) OF MSCI OR ITS AFFILIATES AND HAVE BEEN LICENSED
FOR USE FOR CERTAIN PURPOSES BY PGI. NONE OF THE MSCI PARTIES MAKES ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, TO THE ISSUER OR OWNERS OF THIS
FUND OR ANY OTHER PERSON OR ENTITY REGARDING THE ADVISABILITY OF INVESTING IN
FUNDS GENERALLY OR IN THIS FUND PARTICULARLY OR THE ABILITY OF ANY MSCI INDEX TO
TRACK CORRESPONDING STOCK MARKET PERFORMANCE. MSCI OR ITS AFFILIATES ARE
THE LICENSORS OF CERTAIN TRADEMARKS, SERVICE MARKS AND TRADE NAMES AND OF THE
MSCI INDEXES WHICH ARE DETERMINED, COMPOSED AND CALCULATED BY MSCI WITHOUT
REGARD TO THIS FUND OR THE ISSUER OR OWNERS OF THIS FUND OR ANY OTHER PERSON OR
ENTITY. NONE OF THE MSCI PARTIES HAS ANY OBLIGATION TO TAKE THE NEEDS OF
THE ISSUER OR OWNERS OF THIS FUND OR ANY OTHER PERSON OR ENTITY INTO
CONSIDERATION IN DETERMINING, COMPOSING OR CALCULATING THE MSCI INDEXES.
NONE OF THE MSCI PARTIES IS RESPONSIBLE FOR OR HAS PARTICIPATED IN THE
DETERMINATION OF THE TIMING OF, PRICES AT, OR QUANTITIES OF THIS FUND TO BE
ISSUED OR IN THE DETERMINATION OR CALCULATION OF THE EQUATION BY OR THE
CONSIDERATION INTO WHICH THIS FUND IS REDEEMABLE. FURTHER, NONE OF THE
MSCI PARTIES HAS ANY OBLIGATION OR LIABILITY TO THE ISSUER OR OWNERS OF THIS
FUND OR ANY OTHER PERSON OR ENTITY IN CONNECTION WITH THE ADMINISTRATION,
MARKETING OR OFFERING OF THIS FUND.
ALTHOUGH
MSCI SHALL OBTAIN INFORMATION FOR INCLUSION IN OR FOR USE IN THE CALCULATION OF
THE MSCI INDEXES FROM SOURCES THAT MSCI CONSIDERS RELIABLE, NONE OF THE MSCI
PARTIES WARRANTS OR GUARANTEES THE ORIGINALITY, ACCURACY AND/OR THE COMPLETENESS
OF ANY MSCI INDEX OR ANY DATA INCLUDED THEREIN. NONE OF THE MSCI PARTIES
MAKES ANY WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE
ISSUER OF THE FUND, OWNERS OF THE FUND, OR ANY OTHER PERSON OR ENTITY, FROM THE
USE OF ANY MSCI INDEX OR ANY DATA INCLUDED THEREIN. NONE OF THE MSCI
PARTIES SHALL HAVE ANY LIABILITY FOR ANY ERRORS, OMISSIONS OR INTERRUPTIONS OF
OR IN CONNECTION WITH ANY MSCI INDEX OR ANY DATA INCLUDED THEREIN. FURTHER, NONE
OF THE MSCI PARTIES MAKES ANY EXPRESS OR IMPLIED WARRANTIES OF ANY KIND, AND THE
MSCI PARTIES HEREBY EXPRESSLY DISCLAIM ALL WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO EACH MSCI INDEX AND ANY DATA
INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL
ANY OF THE MSCI PARTIES HAVE ANY LIABILITY FOR ANY DIRECT, INDIRECT, SPECIAL,
PUNITIVE, CONSEQUENTIAL OR ANY OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF
NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
No
purchaser, seller or holder of this security, product or fund, or any other
person or entity, should use or refer to any MSCI trade name, trademark or
service mark to sponsor, endorse, market or promote this security without first
contacting MSCI to determine whether MSCI’s permission is required. Under
no circumstances may any person or entity claim any affiliation with MSCI
without the prior written permission of MSCI.
Diversified
Real Asset Fund
Delaware
Investments Fund Advisers ("DIFA"), a series of Macquarie Investment Management
Business Trust, 610 Market Street, Philadelphia, Pennsylvania, 19106, serves as
sub-advisor for a portion of the assets of Diversified Real Asset Fund. DIFA is
a subsidiary of Macquarie Management Holdings, Inc. ("MMHI"). MMHI is a wholly
owned subsidiary of Macquarie Group Ltd. ("MGL"). MGL, a Sydney,
Australia-headquartered global provider of banking, financial, advisory,
investment and funds management services operates in more than 70 locations in
more than 28 countries. Macquarie Investment Management is the marketing name
for certain companies comprising the asset management division of MGL, including
DIFA. Other than Macquarie Bank Limited ("MBL") none of the entities referred to
in this document are authorized deposit-taking institutions for the purposes of
the Banking Act 1959 (Commonwealth of Australia). The obligations of these
entities do not represent deposits or other liabilities of MBL. MBL does not
guarantee or otherwise provide assurance in respect of the obligations of these
entities, unless noted otherwise. Investments in the Fund are subject to
investment risk, including possible delays in repayment and loss of income and
capital invested. No Macquarie Group company guarantees or will guarantee the
performance of the Fund, the repayment of capital from the fund or any
particular rate of return.
Global
Multi-Strategy Fund
Due
to the timing of the HFRI family of indices finalizing their index performance,
HFRI may revise historical performance data up to four months following the
calendar year end. The index performance shown was calculated using current,
available data at the time of filing, but is subject to change outside of the
control of the Fund and its affiliates.
APPENDIX
C – INTERMEDIARY-SPECIFIC SALES CHARGE WAIVERS AND REDUCTIONS
Certain
intermediaries have different policies and procedures regarding the availability
of sales charge waivers and reductions, which are discussed below. In all
instances, it is the purchaser’s responsibility to notify the Fund or the
purchaser’s financial intermediary at the time of purchase of any relationship
or other facts qualifying the purchaser for sales charge waivers or reductions.
In order to receive a waiver or reduction offered by one intermediary or the
Fund, the purchaser must purchase Fund shares from the Fund or intermediary
offering the waiver or reduction. Please see the section of the prospectus
entitled “CHOOSING A SHARE CLASS AND THE COSTS OF INVESTING” for more
information on sales charges and waivers available for different
classes.
Currently,
the following intermediaries have implemented a schedule of sales charge waivers
and reductions described below:
Ameriprise
Financial
Automatic
Exchange of Class C Shares Held Through Ameriprise Financial
Class
C shares held in an Ameriprise Financial account will automatically exchange to
Class A shares in the month of the 10-year anniversary of the purchase date. To
the extent that the prospectus elsewhere provides for an automatic exchange with
respect to such shares following a shorter holding period, that automatic
exchange will apply following such shorter period.
Class
A Shares Front-End/Initial Sales Charge Waivers on Class A Shares Available at
Ameriprise Financial
The
following information applies to Class A purchases if you have an account with
or otherwise purchase fund shares through Ameriprise Financial.
Shareholders
purchasing Fund shares through an Ameriprise Financial brokerage account are
eligible for the following front-end sales change waivers (also referred to as
initial sales charge waivers), which may differ from those disclosed elsewhere
in this Fund's prospectus or SAI:
•Employer-sponsored
retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b)
plans, profit sharing and money purchase pension plans and defined benefit
plans). For purposes of this provision, employer-sponsored retirement plans do
not include SEP IRAs, Simple IRAs or SAR-SEPs.
•Shares
purchased through reinvestment of capital gains distributions and dividend
reinvestment when purchasing shares of the same Fund (but not any other fund
within the same fund family).
•Shares
exchanged from Class C shares of the same fund in the month of or following the
7-year anniversary of the purchase date. To the extent that this prospectus
elsewhere provides for a waiver with respect to exchanges of Class C shares or
conversion of Class C shares following a shorter holding period, that waiver
will apply.
•Employees
and registered representatives of Ameriprise Financial or its affiliates and
their immediate family members.
•Shares
purchased by or through qualified accounts (including IRAs, Coverdell Education
Savings Accounts, 401(k)s, 403(b) TSCAs subject to ERISA and defined benefit
plans) that are held by a covered family member, defined as an Ameriprise
financial advisor and/or the advisor’s spouse, advisor’s lineal ascendant
(mother, father, grandmother, grandfather, great grandmother, great
grandfather), advisor’s lineal descendant (son, step-son, daughter,
step-daughter, grandson, granddaughter, great grandson, great granddaughter,
including through adoption) or any spouse of a covered family member who is a
lineal descendant.
•Shares
purchased from the proceeds of redemptions within the same fund family, provided
(1) the repurchase occurs within 90 days following the redemption, (2) the
redemption and purchase occur in the same account, and (3) redeemed shares were
subject to a front-end or deferred sales load (i.e., Rights of
Reinstatement).
Edward
D. Jones & Co.
Effective
on or after May 1, 2020, if you purchase fund shares on the Edward Jones
commission and fee-based platforms, you are eligible only for the following
sales charge discounts (also referred to as "breakpoints") and waivers, which
can differ from breakpoints and waivers described elsewhere in the mutual fund
prospectus or SAI or through another broker-dealer. In all instances, it is your
responsibility to inform Edward Jones at the time of purchase of any
relationship, holdings of Principal Funds, Inc. or other facts qualifying the
purchaser for breakpoints or waivers. Edward Jones can ask for documentation of
such circumstance.
Rights
of Accumulation (ROA) at Edward Jones
•The
applicable sales charge on a purchase of Class A shares is determined by taking
into account all share classes (except any money market funds and retirement
plan share classes) of Principal Funds, Inc. held by the shareholder or in an
account grouped by Edward Jones with other accounts for the purpose of providing
certain pricing considerations ("pricing groups") . This includes all share
classes held on the Edward Jones platform and/or held on another platform.
•ROA
is determined by calculating the higher of cost or market value (current shares
x NAV).
Letter
of Intent (LOI) at Edward Jones
•Through
an LOI, shareholders can receive the sales charge and breakpoint discounts for
purchases shareholders intend to make over a 13-month period from the date
Edward Jones receives the LOI. The LOI combines the current market value of any
existing qualifying holdings and account types with the value that the
shareholder intends to buy over a 13-month period to calculate the front-end
sales charge and any breakpoint discounts. Each purchase the shareholder makes
during that 13-month period will receive the sales charge and breakpoint
discount that applies to the total amount. Purchases made before the LOI is
received by Edward Jones are not covered under the LOI and will not reduce the
sales charge previously paid. Sales charges will be adjusted if the LOI is not
met.
Sales
Charge Waivers at Edward Jones
Sales
charges are waived for the following shareholders and in the following
situations:
•Associates
of Edward Jones and its affiliates and their family members who are in the same
pricing group (as determined by Edward Jones under its policies and procedures)
as the associate. This waiver will continue for the remainder of the associate's
life if the associate retires from Edward Jones in good-standing.
•Shares
purchased in an Edward Jones fee-based program.
•Shares
purchased through reinvestment of capital gains distributions and dividend
reinvestment.
•Shares
purchased from the proceeds of redeemed shares of the same fund family so long
as the following conditions are met: 1) the proceeds are from the sale of shares
within 60 days of the purchase, and 2) the sale and purchase are made in the
same share class and the same account or the purchase is made in an individual
retirement account with proceeds from liquidations in a non‑retirement
account.
•Shares
exchanged into class A shares from another share class so long as the exchange
is into the same fund and was initiated at the discretion of Edward Jones.
Edward Jones is responsible for any remaining CDSC due to the fund company, if
applicable. Any future purchases are subject to the applicable sales charge as
disclosed in the prospectus.
•Exchanges
from class C shares to class A shares of the same fund, generally, in the 84th
month following the anniversary of the purchase date or earlier at the
discretion of Edward Jones.
Contingent
Deferred Sales Charge (CDSC) Waivers at Edward Jones
If
the shareholder purchases shares that are subject to a CDSC and those shares are
redeemed before the CDSC is expired, the shareholder is responsible to pay the
CDSC, except in the following conditions:
•Death
or disability of the shareholder.
•Systematic
withdrawals with up to 10% per year of the account value.
•Return
of excess contributions from an Individual Retirement Account
(IRA).
•Shares
sold as part of a required minimum distribution for IRA and retirement accounts
if the redemption is taken in or after the year the shareholder reaches their
qualified age based on applicable IRS regulations.
•Shares
sold to pay Edward Jones fees or costs in such cases where the transaction is
initiated by Edward Jones.
•Shares
exchanged in an Edward Jones fee-based program.
•Shares
acquired through NAV reinstatement.
Other
Important Information Related to Edward Jones
Minimum
Purchase Amounts (Per Fund & Account)
•$250
initial purchase minimum
•$50
subsequent purchase minimum
Minimum
Balances
Edward
Jones has the right to redeem at its discretion fund holdings with a balance of
$250 or less. The following are examples of accounts that are not included in
this policy:
•A
fee-based account held on an Edward Jones platform
•A
529 account held on an Edward Jones platform
•An
account with an active systematic investment plan or letter of intent
(LOI)
Changing
Share Classes
•At
any time it deems necessary, Edward Jones has the authority to change a share
class to Class A shares of the same fund at NAV.
Janney
Montgomery Scott
Effective
May 1, 2020, if you purchase fund shares through a Janney Montgomery Scott LLC
(“Janney”) brokerage account, you will be eligible for the following load
waivers (front-end sales charge waivers and contingent deferred sales charge
("CDSC"), or back-end sales charge, waivers) and discounts, which may differ
from those disclosed elsewhere in this fund’s Prospectus or SAI.
Front-end
Sales Charge* Waivers on Class A Shares Available at Janney
•Shares
purchased through reinvestment of capital gains distributions and dividend
reinvestment when purchasing
shares of the same fund (but not any other fund within the fund
family).
•Shares
purchased by employees and registered representatives of Janney or its
affiliates and their family members as designated by Janney.
•Shares
purchased from the proceeds of redemptions within the same fund family, provided
(1) the repurchase occurs within ninety (90) days following the redemption, (2)
the redemption and purchase occur in the same account, and (3) redeemed shares
were subject to a front-end or deferred sales load (i.e., right of
reinstatement).
•Employer-sponsored
retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b)
plans, profit sharing and money purchase pension plans and defined benefit
plans). For purposes of this provision, employer-sponsored retirement plans do
not include SEP IRAs, Simple IRAs, SAR‑SEPs or Keogh plans.
•Shares
acquired through a right of reinstatement.
•Class
C shares that are no longer subject to a contingent deferred sales charge and
are converted to Class A shares of the same fund pursuant to Janney’s policies
and procedures.
CDSC
Waivers on Class A and C Shares Available at Janney
•Shares
sold
upon the death or disability of the shareholder.
•Shares
sold as part of a systematic withdrawal plan as described in the fund’s
Prospectus.
•Shares
sold in connection with a return of excess contributions from an IRA
account.
•Shares
sold as part of a required minimum distribution for IRA and retirement accounts
if the redemption is taken in or after the year the shareholder reaches their
qualified age based on applicable IRS regulations.
•Shares
sold
to pay Janney fees but only if the transaction is initiated by
Janney.
•Shares
acquired through a right of reinstatement.
•Shares
exchanged into the same share class of a different fund.
Front-end
Sales Charge* Discounts Available at Janney: Breakpoints, Rights of
Accumulation, and/or Letters of Intent
•Breakpoints
as described in the fund’s Prospectus.
•Rights
of accumulation (“ROA”), which entitle shareholders to breakpoint discounts,
will be automatically calculated based on the aggregated holding of fund family
assets held by accounts within the purchaser’s household at Janney. Eligible
fund family assets not held at Janney may be included in the ROA calculation
only if the shareholder notifies his or her financial advisor about such
assets.
•Letters
of intent ("LOI") which allow for breakpoint discounts based on anticipated
purchases within a fund family, over a 13-month time period. Eligible fund
family assets not held at Janney Montgomery Scott may be included in the
calculation of letters of intent only if the shareholder notifies his or her
financial advisor about such assets.
*Also
referred to as an "initial sales charge."
Merrill
Lynch
Shareholders
purchasing Fund shares through a Merrill Lynch platform or account will be
eligible only for the following load waivers (front-end sales charge waivers and
contingent deferred, or back-end, sales charge waivers) and discounts, which may
differ from those disclosed elsewhere in this Fund’s prospectus or
SAI.
Front-end
Sales Load Waivers on Class A Shares Available at Merrill Lynch
•Employer-sponsored
retirement, deferred compensation and employee benefit plans (including health
savings accounts) and trusts used to fund those plans, provided that the shares
are not held in a commission-based brokerage account and shares are held for the
benefit of the plan.
•Shares
purchased by a 529 Plan (does not include 529 Plan units or 529-specific share
classes or equivalents).
•Shares
purchased through a Merrill Lynch affiliated investment advisory
program.
•Shares
exchanged due to the holdings moving from a Merrill Lynch affiliated investment
advisory program to a Merrill Lynch brokerage (non-advisory) account pursuant to
Merrill Lynch’s policies relating to sales load discounts and
waivers.
•Shares
purchased by third party investment advisors on behalf of their advisory clients
through Merrill Lynch’s platform.
•Shares
of funds purchased through the Merrill Edge Self-Directed platform.
•Shares
purchased through reinvestment of capital gains distributions and dividend
reinvestment when purchasing shares of the same fund (but not any other fund
within the fund family).
•Shares
exchanged from Class C (i.e. level-load) shares of the same fund pursuant to
Merrill Lynch’s policies relating to sales load discounts and
waivers.
•Employees
and registered representatives of Merrill Lynch
or
its affiliates and their family members.
•Directors
or Trustees of the Fund, and employees of the Fund’s investment adviser or any
of its affiliates, as described in this prospectus.
•Eligible
shares purchased from the proceeds of redemptions within the same fund family,
provided (1) the repurchase occurs within 90 days following the redemption, (2)
the redemption and purchase occur in the same account, and (3) redeemed shares
were subject to a front-end or deferred sales load (known as Rights of
Reinstatement). Automated transactions (i.e. systematic purchases and
withdrawals) and purchases made after shares are automatically sold to pay
Merrill Lynch’s account maintenance fees are not eligible for
reinstatement.
CDSC
Waivers on Class A, B and C Shares Available at Merrill Lynch
•Death
or disability of the shareholder.
•Shares
sold as part of a systematic withdrawal plan as described in the Fund’s
prospectus.
•Return
of excess contributions from an IRA Account.
•Shares
sold as part of a required minimum distribution for IRA and retirement accounts
pursuant to the Internal Revenue Code.
•Shares
sold to pay Merrill Lynch fees but only if the transaction is initiated by
Merrill Lynch.
•Shares
acquired through a right of reinstatement.
•Shares
held in retirement brokerage accounts, that are exchanged for a lower cost share
class due to transfer to certain fee based accounts or platforms (applicable to
A and C shares only).
•Shares
received through an exchange due to the holdings moving from a Merrill Lynch
affiliated investment advisory program to a Merrill Lynch brokerage
(non-advisory) account pursuant to Merrill Lynch’s policies relating to sales
load discounts and waivers.
Front-end
load Discounts Available at Merrill Lynch: Breakpoints, Rights of Accumulation
& Letters of Intent
•Breakpoints
as described in this prospectus.
•Rights
of Accumulation (ROA) which entitle shareholders to breakpoint discounts as
described in the Fund’s prospectus will be automatically calculated based on the
aggregated holding of fund family assets held by accounts (including 529 program
holdings, where applicable) within the purchaser’s household at Merrill Lynch.
Eligible fund family assets not held at Merrill Lynch may be included in the ROA
calculation only if the shareholder notifies his or her financial advisor about
such assets.
•Letters
of Intent (LOI) which allow for breakpoint discounts based on anticipated
purchases within a fund family, through Merrill Lynch, over a 13-month period of
time.
Morgan
Stanley Wealth Management
Initial
Sales Charge Waivers on Class A Shares Available at Morgan Stanley Wealth
Management
Effective
July 1, 2018, if you purchase Class A Fund shares through a Morgan Stanley
Wealth Management transactional brokerage account you will be eligible only for
the following initial sales charge waivers, which differ from those disclosed
elsewhere in this prospectus or the SAI.
•Employer-sponsored
retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b)
plans, profit sharing and money purchase pension plans and defined benefit
plans). For purposes of this provision, employer-sponsored retirement plans do
not include SEP IRAs, Simple IRAs, SAR-SEPs or Keogh plans.
•Morgan
Stanley employee and employee-related accounts according to Morgan Stanley’s
account linking rules.
•Shares
purchased through reinvestment of dividends and capital gains distributions when
purchasing shares of the same fund.
•Shares
purchased through a Morgan Stanley self-directed brokerage account.
•Class
C (i.e., level-load) shares that are no longer subject to a contingent deferred
sales charge and are converted to Class A shares of the same fund pursuant to
Morgan Stanley Wealth Management’s share class conversion program.
•Shares
purchased from the proceeds of redemptions within the same fund family, provided
(i) the repurchase occurs within 90 days following the redemption, (ii) the
redemption and purchase occur in the same account, and (iii) redeemed shares
were subject to a front-end or deferred sales charge.
Oppenheimer
& Co. Inc.
Effective
June 12, 2020, shareholders purchasing Fund shares through an Oppenheimer &
Co. Inc. (“OPCO”) platform or account are eligible only for the following load
waivers (front-end sales charge waivers and contingent deferred, or back-end,
sales charge waivers) and discounts, which may differ from those disclosed
elsewhere in this Fund’s prospectus or SAI.
Front-end
Sales Load Waivers on Class A Shares Available at OPCO
•Employer-sponsored
retirement, deferred compensation and employee benefit plans (including health
savings accounts) and trusts used to fund those plans, provided that the shares
are not held in a commission-based brokerage account and shares are held for the
benefit of the plan.
•Shares
purchased by or through a 529 Plan.
•Shares
purchased through a OPCO affiliated investment advisory program.
•Shares
purchased through reinvestment of capital gains distributions and dividend
reinvestment when purchasing shares of the same fund (but not any other fund
within the fund family).
•Shares
purchased from the proceeds of redemptions within the same fund family, provided
(1) the repurchase occurs within 90 days following the redemption, (2) the
redemption and purchase occur in the same account, and (3) redeemed shares were
subject to a front-end or deferred sales load (known as Rights of Restatement).
•A
shareholder in the Fund’s Class C shares will have their shares converted at net
asset value to Class A shares (or the appropriate share class) of the Fund if
the shares are no longer subject to a CDSC and the conversion is in line with
the policies and procedures of OPCO.
•Employees
and registered representatives of OPCO or its affiliates and their family
members.
•Directors
or Trustees of the Fund, and employees of the Fund’s investment adviser or any
of its affiliates, as described in this prospectus.
CDSC
Waivers on A, B and C Shares Available at OPCO
•Death
or disability of the shareholder.
•Shares
sold as part of a systematic withdrawal plan as described in the Fund’s
prospectus.
•Return
of excess contributions from an IRA Account.
•Shares
sold as part of a required minimum distribution for IRA and retirement accounts
due to the shareholder reaching the qualified age based on applicable IRS
regulations as described in the prospectus.
•Shares
sold to pay OPCO fees but only if the transaction is initiated by
OPCO.
•Shares
acquired through a right of reinstatement.
Front-end
Load Discounts Available at OPCO: Breakpoints, Rights of Accumulation &
Letters of Intent
•Breakpoints
as described in this prospectus.
•Rights
of Accumulation (ROA) which entitle shareholders to breakpoint discounts will be
automatically calculated based on the aggregated holding of fund family assets
held by accounts within the purchaser’s household at OPCO. Eligible fund family
assets not held at OPCO may be included in the ROA calculation only if the
shareholder notifies his or her financial advisor about such
assets.
Raymond
James
Effective
March 1, 2019, shareholders purchasing fund shares through a Raymond James &
Associates, Inc., Raymond James Financial Services, Inc. or each entity’s
affiliates (“Raymond James”) platform or account, or through an introducing
broker-dealer or independent registered investment adviser for which Raymond
James provides trade execution, clearance, and/or custody services, will be
eligible only for the following load waivers (front-end sales charge waivers and
contingent deferred, or back-end, sales charge waivers) and discounts, which may
differ from those disclosed elsewhere in this fund’s prospectus or
SAI.
Front-end
Sales Load Waivers on Class A Shares Available at Raymond James
•Shares
purchased in an investment advisory program.
•Shares
purchased within the same fund family through a systematic reinvestment of
capital gains and dividend distributions.
•Employees
and registered representatives of Raymond James or its affiliates and their
family members as designated by Raymond James.
•Shares
purchased from the proceeds of redemptions within the same fund family, provided
(1) the repurchase occurs within 90 days following the redemption, (2) the
redemption and purchase occur in the same account, and (3) redeemed shares were
subject to a front-end or deferred sales load (known as Rights of
Reinstatement).
•A
shareholder in the Fund’s Class C shares will have their shares converted at net
asset value to Class A shares (or the appropriate share class) of the Fund if
the shares are no longer subject to a CDSC and the conversion is in line with
the policies and procedures of Raymond James.
CDSC
Waivers on Classes A and C Shares Available at Raymond James
•Death
or disability of the shareholder.
•Shares
sold as part of a systematic withdrawal plan as described in the fund’s
prospectus.
•Return
of excess contributions from an IRA Account.
•Shares
sold as part of a required minimum distribution for IRA and retirement accounts
due to the shareholder reaching their qualified age based on applicable IRS
regulations as described in the fund’s prospectus.
•Shares
sold to pay Raymond James fees but only if the transaction is initiated by
Raymond James.
•Shares
acquired through a right of reinstatement.
Front-end
Load Discounts Available at Raymond James: Breakpoints, Rights of Accumulation,
and/or Letters of Intent
•Breakpoints
as described in this prospectus.
•Rights
of accumulation which entitle shareholders to breakpoint discounts will be
automatically calculated based on the aggregated holding of fund family assets
held by accounts within the purchaser’s household at Raymond James. Eligible
fund family assets not held at Raymond James may be included in the calculation
of rights of accumulation only if the shareholder notifies his or her financial
advisor about such assets.
•Letters
of intent which allow for breakpoint discounts based on anticipated purchases
within a fund family, over a 13-month time period. Eligible fund family assets
not held at Raymond James may be included in the calculation of letters of
intent only if the shareholder notifies his or her financial advisor about such
assets.
Robert
W. Baird & Co. Incorporated
Effective
June 15, 2020, shareholders purchasing fund shares through a Robert W. Baird
& Co. Incorporated (“Baird”) platform or account will only be eligible for
the following sales charge waivers (front-end sales charge waivers and CDSC
waivers) and discounts, which may differ from those disclosed elsewhere in this
prospectus or the SAI
Front-end
Sales Charge Waivers on Investors A-shares Available at Baird
•Shares
purchased through reinvestment of capital gains distributions and dividend
reinvestment when purchasing share of the same fund.
•Share
purchase by employees and registers representatives of Baird or its affiliate
and their family members as designated by Baird.
•Shares
purchase from the proceeds of redemptions from another Principal Funds, Inc.
Fund, provided (1) the repurchase occurs within 90 days following the
redemption, (2) the redemption and purchase occur in the same accounts, and (3)
redeemed shares were subject to a front-end or deferred sales charge (known as
rights of reinstatement).
•A
shareholder in the Funds Investor C Shares will have their share converted at
net asset value to Investor A shares of the fund if the shares are no longer
subject to CDSC and the conversion is in line with the policies and procedures
of Baird.
•Employer-sponsored
retirement plans or charitable accounts in a transactional brokerage account at
Baird, including 401(k) plans, 457 plans, employer-sponsored 403(b) plans,
profit sharing and money purchase pension plans and defined benefit plans. For
purposes of this provision, employer-sponsored retirement plans do not include
SEP IRAs, Simple IRAs or SAR-SEPs.
CDSC
Waivers on Investor A and C shares Available at Baird
•Shares
sold due to death or disability of the shareholder.
•Shares
sold as part of a systematic withdrawal plan as described in the Fund’s
Prospectus.
•Shares
bought due to returns of excess contributions from an IRA Account.
•Shares
sold as part of a required minimum distribution for IRA and retirement accounts
due to the shareholder reaching the qualified age based on applicable IRS
regulations as described in the fund’s prospectus.
•Shares
sold to pay Baird fees but only if the transaction is initiated by
Baird.
•Shares
acquired through a right of reinstatement.
Front-end
Sales Charge Discounts Available at Baird: Breakpoints and/or Rights of
Accumulations
•Breakpoints
as described in this prospectus.
•Rights
of accumulations which entitles shareholders to breakpoint discounts will be
automatically calculated based on the aggregated holding of Principal Funds,
Inc.’s assets held by accounts within the purchaser’s household at Baird.
Eligible Principal Funds, Inc.’s assets not held at Baird may be included in the
rights of accumulations calculation only if the shareholder notifies his or her
financial advisor about such assets.
•Letters
of Intent (LOI) allow for breakpoint discounts based on anticipated purchases of
Principal Funds, Inc.’s funds through Baird, over a 13-month period of
time.
Stifel,
Nicolaus & Company, Incorporated
Effective
July 1, 2020, shareholders purchasing Fund shares through a Stifel, Nicolaus
& Company, Incorporated (“Stifel”) platform or account or who own shares for
which Stifel or an affiliate is the broker‑dealer of record are eligible for the
following additional sales charge waiver.
Front-end
Sales Load Waivers on Class A Shares Available at Stifel
•Class
C shares that have been held for more than seven (7) years will be converted to
Class A shares of the same Fund pursuant to Stifel’s policies and
procedures.
•All
other sales charge waivers and reductions described elsewhere in the Fund’
Prospectus or SAI still apply.
US
Bancorp Investments, Inc. (“USBI”)
Effective
February 2021, Shareholders who purchase fund shares through a USBI platform or
account or who own shares for which USBI or an affiliate is the broker-dealer of
record, where the shares are held in an omnibus account at the fund, and who are
invested in Class C shares will have their shares converted at NAV to Class A
shares (or the appropriate share class) of the fund if the shares are no longer
subject to a CDSC and the conversion is in line with the policies and procedures
of USBI.
(updated
December 2020)
APPENDIX
D – FINANCIAL HIGHLIGHTS
The
following financial highlights tables are intended to help you understand the
Fund’s financial performance for the periods shown. Certain information reflects
returns for a single Fund share. The total returns in each table represent the
rate that an investor would have earned or lost each period on an investment in
the Fund (assuming reinvestment of all distributions). This information has been
derived from the financial statements audited by Ernst & Young LLP,
Independent Registered Public Accounting Firm, whose report, along with each
Fund’s financial statements, is included in Principal Funds, Inc. Annual
Report to Shareholders
for the fiscal year ended August 31, 2020, which is available upon request, and
incorporated by reference into the SAI.
To
request a free copy of the latest annual or semiannual report for the Fund, you
may telephone 1-800-222-5852.
FINANCIAL
HIGHLIGHTS
PRINCIPAL
FUNDS, INC.
Selected
data for a share of Capital Stock outstanding throughout each year ended August
31 (except as noted):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Asset Value, Beginning of Period |
Net
Investment Income (Loss) (a) |
Net
Realized and Unrealized Gain (Loss) on Investments |
Total
From Investment Operations |
Dividends
from Net Investment Income |
Distributions
from Realized Gains |
Total
Dividends and Distributions |
Net
Asset Value, End of Period |
BLUE
CHIP FUND |
|
|
|
|
|
|
|
|
Class
A shares |
|
|
|
|
|
|
|
|
2020 |
$25.56 |
|
($0.07) |
|
$9.54 |
|
$9.47 |
|
($0.02) |
|
($1.16) |
|
($1.18) |
|
$33.85 |
|
2019 |
24.49 |
|
(0.01) |
|
2.67 |
|
2.66 |
|
— |
|
(1.59) |
|
(1.59) |
|
25.56 |
|
2018 |
19.91 |
|
(0.07) |
|
5.24 |
|
5.17 |
|
— |
|
(0.59) |
|
(0.59) |
|
24.49 |
|
2017 |
16.85 |
|
0.07 |
|
3.08 |
|
3.15 |
|
— |
|
(0.09) |
|
(0.09) |
|
19.91 |
|
2016 |
15.52 |
|
(0.04) |
|
1.69 |
|
1.65 |
|
(0.01) |
|
(0.31) |
|
(0.32) |
|
16.85 |
|
Class
C shares |
|
|
|
|
|
|
|
|
2020 |
24.39 |
|
(0.26) |
|
9.03 |
|
8.77 |
|
— |
|
(1.15) |
|
(1.15) |
|
32.01 |
|
2019 |
23.62 |
|
(0.18) |
|
2.54 |
|
2.36 |
|
— |
|
(1.59) |
|
(1.59) |
|
24.39 |
|
2018 |
19.37 |
|
(0.23) |
|
5.07 |
|
4.84 |
|
— |
|
(0.59) |
|
(0.59) |
|
23.62 |
|
2017 |
16.52 |
|
(0.07) |
|
3.01 |
|
2.94 |
|
— |
|
(0.09) |
|
(0.09) |
|
19.37 |
|
2016 |
15.33 |
|
(0.16) |
|
1.66 |
|
1.50 |
|
— |
|
(0.31) |
|
(0.31) |
|
16.52 |
|
DIVERSIFIED
REAL ASSET FUND |
|
|
|
|
|
|
|
|
Class
A shares |
|
|
|
|
|
|
|
|
2020 |
11.23 |
|
0.17 |
|
(0.06) |
|
0.11 |
|
(0.21) |
|
— |
|
(0.21) |
|
11.13 |
|
2019 |
11.70 |
|
0.26 |
|
(0.42) |
|
(0.16) |
|
(0.31) |
|
— |
|
(0.31) |
|
11.23 |
|
2018 |
11.53 |
|
0.24 |
|
0.15 |
|
0.39 |
|
(0.22) |
|
— |
|
(0.22) |
|
11.70 |
|
2017 |
11.07 |
|
0.17 |
|
0.55 |
|
0.72 |
|
(0.26) |
|
— |
|
(0.26) |
|
11.53 |
|
2016 |
11.22 |
|
0.17 |
|
(0.27) |
|
(0.10) |
|
(0.05) |
|
— |
|
(0.05) |
|
11.07 |
|
Class
C shares |
|
|
|
|
|
|
|
|
2020 |
11.00 |
|
0.08 |
|
(0.06) |
|
0.02 |
|
(0.12) |
|
— |
|
(0.12) |
|
10.90 |
|
2019 |
11.45 |
|
0.17 |
|
(0.40) |
|
(0.23) |
|
(0.22) |
|
— |
|
(0.22) |
|
11.00 |
|
2018 |
11.29 |
|
0.14 |
|
0.15 |
|
0.29 |
|
(0.13) |
|
— |
|
(0.13) |
|
11.45 |
|
2017 |
10.80 |
|
0.10 |
|
0.53 |
|
0.63 |
|
(0.14) |
|
— |
|
(0.14) |
|
11.29 |
|
2016 |
10.98 |
|
0.09 |
|
(0.27) |
|
(0.18) |
|
— |
|
— |
|
— |
|
10.80 |
|
FINANCIAL
HIGHLIGHTS (Continued)
PRINCIPAL
FUNDS, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Return(b) |
Net
Assets, End of Period (in thousands) |
Ratio
of Expenses to Average Net Assets |
Ratio
of Net Investment Income to Average Net Assets |
Portfolio
Turnover Rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38.51 |
% |
|
$646,386 |
|
0.93 |
% |
(c) |
(0.25 |
%) |
30.0 |
% |
12.75 |
|
|
302,904 |
|
1.00 |
|
(c) |
(0.06) |
|
15.9 |
|
26.45 |
|
|
164,310 |
|
1.09 |
|
(c) |
(0.30) |
|
34.0 |
|
18.81 |
|
|
71,738 |
|
1.15 |
|
(c) |
0.41 |
|
27.1 |
|
10.77 |
|
|
36,575 |
|
1.28 |
|
(c) |
(0.26) |
|
36.4 |
|
|
|
|
|
|
|
|
37.43 |
|
|
322,210 |
|
1.66 |
|
(c) |
(0.99) |
|
30.0 |
|
11.91 |
|
|
156,734 |
|
1.73 |
|
(c) |
(0.80) |
|
15.9 |
|
25.47 |
|
|
91,660 |
|
1.84 |
|
(c) |
(1.05) |
|
34.0 |
|
17.91 |
|
|
40,344 |
|
1.94 |
|
(c) |
(0.41) |
|
27.1 |
|
9.93 |
|
|
21,705 |
|
2.08 |
|
(c) |
(1.06) |
|
36.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.89 |
|
|
43,485 |
|
1.19 |
|
(c) |
1.57 |
|
85.4 |
|
(1.11) |
|
|
54,880 |
|
1.22 |
|
(c) |
2.35 |
|
71.5 |
|
3.36 |
|
|
107,180 |
|
1.22 |
|
(c) |
2.05 |
|
84.1 |
|
6.63 |
|
|
118,212 |
|
1.25 |
|
(c) |
1.58 |
|
65.1 |
|
(0.85) |
|
|
210,864 |
|
1.25 |
|
(c) |
1.59 |
|
77.6 |
|
|
|
|
|
|
|
|
0.16 |
|
|
11,010 |
|
1.96 |
|
(c) |
0.75 |
|
85.4 |
|
(1.86) |
|
|
16,037 |
|
1.97 |
|
(c) |
1.51 |
|
71.5 |
|
2.61 |
|
|
23,105 |
|
1.97 |
|
(c) |
1.24 |
|
84.1 |
|
5.83 |
|
(d) |
24,940 |
|
2.00 |
|
(c) |
0.88 |
|
65.1 |
|
(1.55) |
|
(d) |
31,350 |
|
2.00 |
|
(c) |
0.86 |
|
77.6 |
|
(a)Calculated
based on average shares outstanding during the period.
(b)Total
return is calculated without the front-end sales charge or contingent deferred
sales charge, if applicable.
(c)Reflects
Manager's contractual expense limit.
(d)Total
return is calculated using the traded net asset value which may differ from the
reported net asset value. The traded net asset value is the net asset value
which a shareholder would have paid or received from a subscription or
redemption.
FINANCIAL
HIGHLIGHTS
PRINCIPAL
FUNDS, INC.
Selected
data for a share of Capital Stock outstanding throughout each year ended August
31 (except as noted):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Asset Value, Beginning of Period |
Net
Investment Income (Loss) (a) |
Net
Realized and Unrealized Gain (Loss) on Investments |
Total
From Investment Operations |
Dividends
from Net Investment Income |
Distributions
from Realized Gains |
Tax
Return of Capital Distribution |
Total
Dividends and Distributions |
Net
Asset Value, End of Period |
EDGE
MIDCAP FUND |
|
|
|
|
|
|
|
|
|
Class
A shares |
|
|
|
|
|
|
|
|
|
2020 |
$14.39 |
|
$0.06 |
|
$0.92 |
|
$0.98 |
|
($0.11) |
|
($0.50) |
|
$— |
|
($0.61) |
|
$14.76 |
|
2019(e) |
11.98 |
|
0.06 |
|
2.35 |
|
2.41 |
|
— |
|
— |
|
— |
|
— |
|
14.39 |
|
GLOBAL
MULTI-STRATEGY FUND |
|
|
|
|
|
|
|
|
Class
A shares |
|
|
|
|
|
|
|
|
|
2020 |
10.64 |
|
0.18 |
|
0.13 |
|
0.31 |
|
— |
|
— |
|
— |
|
— |
|
10.95 |
|
2019 |
11.09 |
|
0.18 |
|
(0.02) |
|
0.16 |
|
(0.11) |
|
(0.47) |
|
(0.03) |
|
(0.61) |
|
10.64 |
|
2018 |
11.28 |
|
0.11 |
|
(0.01) |
|
0.10 |
|
(0.05) |
|
(0.24) |
|
— |
|
(0.29) |
|
11.09 |
|
2017 |
10.77 |
|
0.08 |
|
0.43 |
|
0.51 |
|
— |
|
— |
|
— |
|
— |
|
11.28 |
|
2016 |
10.91 |
|
0.01 |
|
0.14 |
|
0.15 |
|
(0.06) |
|
(0.23) |
|
— |
|
(0.29) |
|
10.77 |
|
Class
C shares |
|
|
|
|
|
|
|
|
|
2020 |
10.31 |
|
0.10 |
|
0.13 |
|
0.23 |
|
— |
|
— |
|
— |
|
— |
|
10.54 |
|
2019 |
10.75 |
|
0.10 |
|
(0.01) |
|
0.09 |
|
(0.03) |
|
(0.47) |
|
(0.03) |
|
(0.53) |
|
10.31 |
|
2018 |
10.97 |
|
0.03 |
|
(0.01) |
|
0.02 |
|
— |
|
(0.24) |
|
— |
|
(0.24) |
|
10.75 |
|
2017 |
10.56 |
|
(0.01) |
|
0.42 |
|
0.41 |
|
— |
|
— |
|
— |
|
— |
|
10.97 |
|
2016 |
10.73 |
|
(0.07) |
|
0.13 |
|
0.06 |
|
— |
|
(0.23) |
|
— |
|
(0.23) |
|
10.56 |
|
FINANCIAL
HIGHLIGHTS (Continued)
PRINCIPAL
FUNDS, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Return(b) |
Net
Assets, End of Period (in thousands) |
Ratio
of Expenses to Average Net Assets |
Ratio
of Expenses to Average Net Assets (Excluding Dividends and Interest
Expense on Short Sales, Short Sale Fees and Reverse Repurchase Agreement
Expense) |
Ratio
of Net Investment Income to Average Net Assets |
Portfolio
Turnover Rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.54 |
% |
(c) |
$12,547 |
|
1.10 |
% |
(d) |
N/A |
|
0.46 |
% |
|
27.9 |
% |
|
20.20 |
|
(c),(f) |
5,587 |
|
1.10 |
|
(d),(g) |
N/A |
|
0.59 |
|
(g) |
19.8 |
|
(g) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.01 |
|
(c) |
27,072 |
|
3.68 |
% |
(d),(h) |
2.11 |
% |
(d),(h),(i) |
1.68 |
|
|
439.7 |
|
|
1.82 |
|
|
41,100 |
|
3.37 |
|
(d),(h) |
2.02 |
|
(d),(h),(i) |
1.72 |
|
|
387.8 |
|
|
0.90 |
|
|
63,860 |
|
2.48 |
|
(d) |
1.95 |
|
(d),(i) |
1.02 |
|
|
378.0 |
|
|
4.74 |
|
|
112,799 |
|
2.50 |
|
(d) |
1.92 |
|
(d),(i) |
0.72 |
|
|
317.6 |
|
|
1.41 |
|
|
145,370 |
|
2.41 |
|
(d) |
1.94 |
|
(d),(i) |
0.11 |
|
|
233.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2.23 |
|
|
16,605 |
|
4.33 |
|
(d),(h) |
2.76 |
|
(d),(h),(i) |
0.99 |
|
|
439.7 |
|
|
1.10 |
|
|
26,585 |
|
4.11 |
|
(d),(h) |
2.76 |
|
(d),(h),(i) |
0.99 |
|
|
387.8 |
|
|
0.16 |
|
|
41,343 |
|
3.26 |
|
(d) |
2.73 |
|
(d),(i) |
0.24 |
|
|
378.0 |
|
|
3.88 |
|
|
48,130 |
|
3.31 |
|
(d) |
2.73 |
|
(d),(i) |
(0.08) |
|
|
317.6 |
|
|
0.61 |
|
|
56,557 |
|
3.22 |
|
(d) |
2.75 |
|
(d),(i) |
(0.68) |
|
|
233.9 |
|
|
(a)Calculated
based on average shares outstanding during the period.
(b)Total
return is calculated without the front-end sales charge or contingent deferred
sales charge, if applicable.
(c)Total
return is calculated using the traded net asset value which may differ from the
reported net asset value. The traded net asset value is the net asset value
which a shareholder would have paid or received from a subscription or
redemption.
(d)Reflects
Manager's contractual expense limit.
(e)Period
from December 31, 2018, date operations commenced, through August 31,
2019.
(f)Total
return amounts have not been annualized.
(g)Computed
on an annualized basis.
(h)Includes
0.01% of expenses associated with fund investments. The expense is not subject
to the Manager's contractual expense limit.
(i)Excludes
dividends and interest expense on short sales and short sale fees and reverse
repurchase agreement expense. See "Operating Policies" in notes to financial
statements.
FINANCIAL
HIGHLIGHTS
PRINCIPAL
FUNDS, INC.
Selected
data for a share of Capital Stock outstanding throughout each year ended August
31 (except as noted):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Asset Value, Beginning of Period |
Net
Investment Income (Loss) (a) |
Net
Realized and Unrealized Gain (Loss) on Investments |
Total
From Investment Operations |
Dividends
from Net Investment Income |
Distributions
from Realized Gains |
Total
Dividends and Distributions |
Net
Asset Value, End of Period |
INTERNATIONAL SMALL COMPANY FUND |
|
|
|
|
|
|
|
Class A shares |
|
|
|
|
|
|
|
|
2020 |
$10.41 |
|
$0.04 |
|
$0.41 |
|
$0.45 |
|
($0.28) |
|
$— |
|
($0.28) |
|
$10.58 |
|
2019 |
12.29 |
|
0.08 |
|
(1.14) |
|
(1.06) |
|
(0.09) |
|
(0.73) |
|
(0.82) |
|
10.41 |
|
2018 |
12.09 |
|
0.08 |
|
0.68 |
|
0.76 |
|
(0.19) |
|
(0.37) |
|
(0.56) |
|
12.29 |
|
2017 |
9.80 |
|
0.06 |
|
2.24 |
|
2.30 |
|
(0.01) |
|
— |
|
(0.01) |
|
12.09 |
|
2016 |
9.59 |
|
0.06 |
|
0.27 |
|
0.33 |
|
(0.12) |
|
— |
|
(0.12) |
|
9.80 |
|
OPPORTUNISTIC MUNICIPAL FUND |
|
|
|
|
|
|
|
Class A shares |
|
|
|
|
|
|
|
|
2020 |
11.26 |
|
0.36 |
|
(0.30) |
|
0.06 |
|
(0.36) |
|
— |
|
(0.36) |
|
10.96 |
|
2019 |
10.60 |
|
0.43 |
|
0.64 |
|
1.07 |
|
(0.41) |
|
— |
|
(0.41) |
|
11.26 |
|
2018 |
10.65 |
|
0.42 |
|
(0.07) |
|
0.35 |
|
(0.40) |
|
— |
|
(0.40) |
|
10.60 |
|
2017 |
11.03 |
|
0.40 |
|
(0.40) |
|
— |
|
(0.38) |
|
— |
|
(0.38) |
|
10.65 |
|
2016 |
10.20 |
|
0.38 |
|
0.82 |
|
1.20 |
|
(0.37) |
|
— |
|
(0.37) |
|
11.03 |
|
FINANCIAL
HIGHLIGHTS (Continued)
PRINCIPAL
FUNDS, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Return(b) |
Net
Assets, End of Period (in thousands) |
Ratio
of Expenses to Average Net Assets |
Ratio
of Expenses to Average Net Assets (Excluding Interest Expense and
Fees) |
Ratio
of Net Investment Income to Average Net Assets |
Portfolio
Turnover Rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.11 |
% |
$4,784 |
|
1.60 |
% |
(c) |
N/A |
|
0.39 |
% |
44.1 |
% |
(7.70) |
|
4,739 |
|
1.60 |
|
(c) |
N/A |
|
0.80 |
|
46.8 |
|
6.26 |
|
5,204 |
|
1.60 |
|
(c) |
N/A |
|
0.61 |
|
45.9 |
|
23.48 |
|
2,699 |
|
1.60 |
|
(c) |
N/A |
|
0.54 |
|
58.8 |
|
3.47 |
|
2,026 |
|
1.60 |
|
(c) |
N/A |
|
0.61 |
|
49.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.62 |
|
50,459 |
|
0.91 |
% |
(c) |
0.84 |
% |
(c),(d) |
3.35 |
|
76.6 |
|
10.36 |
|
53,756 |
|
0.98 |
|
(c) |
0.86 |
|
(c),(d) |
4.01 |
|
66.1 |
|
3.37 |
|
46,667 |
|
1.00 |
|
(c) |
0.90 |
|
(c),(d) |
3.94 |
|
76.0 |
|
0.13 |
|
40,758 |
|
0.95 |
|
(c) |
0.89 |
|
(c),(d) |
3.83 |
|
67.9 |
|
11.94 |
|
49,208 |
|
0.95 |
|
(c) |
0.90 |
|
(c),(d) |
3.52 |
|
53.5 |
|
(a)Calculated
based on average shares outstanding during the period.
(b)Total
return is calculated without the front-end sales charge or contingent deferred
sales charge, if applicable.
(c)Reflects
Manager's contractual expense limit.
(d)Excludes
interest expense and fees paid through inverse floater agreements. See
"Operating Policies" in notes to financial statements.
FINANCIAL
HIGHLIGHTS
PRINCIPAL
FUNDS, INC.
Selected
data for a share of Capital Stock outstanding throughout each year ended August
31 (except as noted):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Asset Value, Beginning of Period |
Net
Investment Income (Loss) (a) |
Net
Realized and Unrealized Gain (Loss) on Investments |
Total
From Investment Operations |
Dividends
from Net Investment Income |
Distributions
from Realized Gains |
Total
Dividends and Distributions |
Net
Asset Value, End of Period |
ORIGIN EMERGING MARKETS FUND |
|
|
|
|
|
|
|
Class A shares |
|
|
|
|
|
|
|
|
2020 |
$10.63 |
|
$0.11 |
|
$1.77 |
|
$1.88 |
|
($0.15) |
|
$— |
|
($0.15) |
|
$12.36 |
|
2019 |
11.28 |
|
0.11 |
|
(0.68) |
|
(0.57) |
|
(0.08) |
|
— |
|
(0.08) |
|
10.63 |
|
2018 |
11.74 |
|
0.12 |
|
(0.52) |
|
(0.40) |
|
(0.06) |
|
— |
|
(0.06) |
|
11.28 |
|
2017 |
9.07 |
|
0.18 |
|
2.52 |
|
2.70 |
|
(0.03) |
|
— |
|
(0.03) |
|
11.74 |
|
2016 |
8.55 |
|
0.04 |
|
0.56 |
|
0.60 |
|
(0.08) |
|
— |
|
(0.08) |
|
9.07 |
|
SMALL-MIDCAP DIVIDEND INCOME FUND |
|
|
|
|
|
|
|
Class A shares |
|
|
|
|
|
|
|
|
2020 |
13.96 |
|
0.16 |
|
(1.88) |
|
(1.72) |
|
(0.23) |
|
(0.10) |
|
(0.33) |
|
11.91 |
|
2019 |
17.84 |
|
0.28 |
|
(1.92) |
|
(1.64) |
|
(0.35) |
|
(1.89) |
|
(2.24) |
|
13.96 |
|
2018 |
16.57 |
|
0.34 |
|
1.92 |
|
2.26 |
|
(0.21) |
|
(0.78) |
|
(0.99) |
|
17.84 |
|
2017 |
14.95 |
|
0.35 |
|
1.60 |
|
1.95 |
|
(0.33) |
|
— |
|
(0.33) |
|
16.57 |
|
2016 |
12.73 |
|
0.34 |
|
2.44 |
|
2.78 |
|
(0.30) |
|
(0.26) |
|
(0.56) |
|
14.95 |
|
Class C shares |
|
|
|
|
|
|
|
|
2020 |
13.82 |
|
0.06 |
|
(1.86) |
|
(1.80) |
|
(0.14) |
|
(0.10) |
|
(0.24) |
|
11.78 |
|
2019 |
17.68 |
|
0.17 |
|
(1.90) |
|
(1.73) |
|
(0.24) |
|
(1.89) |
|
(2.13) |
|
13.82 |
|
2018 |
16.43 |
|
0.21 |
|
1.90 |
|
2.11 |
|
(0.08) |
|
(0.78) |
|
(0.86) |
|
17.68 |
|
2017 |
14.84 |
|
0.23 |
|
1.60 |
|
1.83 |
|
(0.24) |
|
— |
|
(0.24) |
|
16.43 |
|
2016 |
12.65 |
|
0.24 |
|
2.41 |
|
2.65 |
|
(0.20) |
|
(0.26) |
|
(0.46) |
|
14.84 |
|
FINANCIAL
HIGHLIGHTS (Continued)
PRINCIPAL
FUNDS, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Return(b) |
Net
Assets, End of Period (in thousands) |
Ratio
of Expenses to Average Net Assets |
Ratio
of Net Investment Income to Average Net Assets |
Portfolio
Turnover Rate |
|
|
|
|
|
|
|
|
|
|
|
|
17.73 |
% |
$4,003 |
|
1.60 |
% |
(c) |
0.96 |
% |
72.9 |
% |
(4.94) |
|
2,455 |
|
1.66 |
|
(c) |
1.08 |
|
59.4 |
|
(3.49) |
|
4,384 |
|
1.75 |
|
(c) |
0.97 |
|
52.3 |
|
29.91 |
|
3,003 |
|
1.75 |
|
(c) |
1.83 |
|
66.3 |
|
7.03 |
|
401 |
|
1.75 |
|
(c) |
0.47 |
|
69.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(12.55) |
|
103,382 |
|
1.12 |
|
(c) |
1.20 |
|
28.9 |
|
(7.83) |
|
147,402 |
|
1.13 |
|
(c) |
1.91 |
|
21.9 |
|
13.93 |
|
214,620 |
|
1.13 |
|
(c) |
1.98 |
|
31.5 |
|
13.17 |
|
232,872 |
|
1.17 |
|
|
2.15 |
|
25.5 |
|
22.61 |
|
207,431 |
|
1.17 |
|
|
2.56 |
|
25.8 |
|
|
|
|
|
|
|
(13.25) |
|
71,660 |
|
1.87 |
|
(c) |
0.45 |
|
28.9 |
|
(8.50) |
|
118,135 |
|
1.88 |
|
(c) |
1.16 |
|
21.9 |
|
13.08 |
|
170,893 |
|
1.88 |
|
(c) |
1.23 |
|
31.5 |
|
12.37 |
|
178,599 |
|
1.92 |
|
(c) |
1.41 |
|
25.5 |
|
21.57 |
|
165,335 |
|
1.94 |
|
(c) |
1.79 |
|
25.8 |
|
(a)Calculated
based on average shares outstanding during the period.
(b)Total
return is calculated without the front-end sales charge or contingent deferred
sales charge, if applicable.
(c)Reflects
Manager's contractual expense limit.
FINANCIAL
HIGHLIGHTS
PRINCIPAL
FUNDS, INC.
Selected
data for a share of Capital Stock outstanding throughout each year ended August
31 (except as noted):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Asset Value, Beginning of Period |
Net
Investment Income (Loss) (a) |
Net
Realized and Unrealized Gain (Loss) on Investments |
Total
From Investment Operations |
Dividends
from Net Investment Income |
Distributions
from Realized Gains |
Total
Dividends and Distributions |
Net
Asset Value, End of Period |
SPECTRUM PREFERRED AND CAPITAL SECURITIES INCOME FUND |
|
|
|
|
|
Class A shares |
|
|
|
|
|
|
|
|
2020 |
$10.30 |
|
$0.42 |
|
$0.05 |
|
$0.47 |
|
($0.45) |
|
$— |
|
($0.45) |
|
$10.32 |
|
2019 |
10.06 |
|
0.49 |
|
0.26 |
|
0.75 |
|
(0.51) |
|
— |
|
(0.51) |
|
10.30 |
|
2018 |
10.53 |
|
0.50 |
|
(0.46) |
|
0.04 |
|
(0.49) |
|
(0.02) |
|
(0.51) |
|
10.06 |
|
2017 |
10.36 |
|
0.49 |
|
0.24 |
|
0.73 |
|
(0.47) |
|
(0.09) |
|
(0.56) |
|
10.53 |
|
2016 |
10.24 |
|
0.49 |
|
0.19 |
|
0.68 |
|
(0.47) |
|
(0.09) |
|
(0.56) |
|
10.36 |
|
Class C shares |
|
|
|
|
|
|
|
|
2020 |
10.29 |
|
0.35 |
|
0.04 |
|
0.39 |
|
(0.37) |
|
— |
|
(0.37) |
|
10.31 |
|
2019 |
10.05 |
|
0.42 |
|
0.25 |
|
0.67 |
|
(0.43) |
|
— |
|
(0.43) |
|
10.29 |
|
2018 |
10.52 |
|
0.42 |
|
(0.46) |
|
(0.04) |
|
(0.41) |
|
(0.02) |
|
(0.43) |
|
10.05 |
|
2017 |
10.35 |
|
0.42 |
|
0.23 |
|
0.65 |
|
(0.39) |
|
(0.09) |
|
(0.48) |
|
10.52 |
|
2016 |
10.23 |
|
0.42 |
|
0.19 |
|
0.61 |
|
(0.40) |
|
(0.09) |
|
(0.49) |
|
10.35 |
|
FINANCIAL
HIGHLIGHTS (Continued)
PRINCIPAL
FUNDS, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Return(b) |
Net
Assets, End of Period (in thousands) |
Ratio
of Expenses to Average Net Assets |
Ratio
of Net Investment Income to Average Net Assets |
Portfolio
Turnover Rate |
|
|
|
|
|
|
|
|
|
|
4.77 |
% |
$844,525 |
|
1.05 |
% |
4.18 |
% |
18.1 |
% |
7.80 |
|
732,421 |
|
1.06 |
|
4.96 |
|
19.8 |
|
0.32 |
|
655,225 |
|
1.06 |
|
4.83 |
|
12.3 |
|
7.31 |
|
732,471 |
|
1.06 |
|
4.81 |
|
16.1 |
|
6.89 |
|
883,381 |
|
1.07 |
|
4.83 |
|
13.9 |
|
|
|
|
|
|
|
|
|
|
|
3.95 |
|
365,817 |
|
1.81 |
|
3.44 |
|
18.1 |
|
6.97 |
|
469,674 |
|
1.81 |
|
4.21 |
|
19.8 |
|
(0.44) |
|
631,599 |
|
1.81 |
|
4.08 |
|
12.3 |
|
6.53 |
|
751,561 |
|
1.81 |
|
4.07 |
|
16.1 |
|
6.11 |
|
859,055 |
|
1.81 |
|
4.09 |
|
13.9 |
|
(a)Calculated
based on average shares outstanding during the period.
(b)Total
return is calculated without the front-end sales charge or contingent deferred
sales charge, if applicable.
FINANCIAL
HIGHLIGHTS
PRINCIPAL
FUNDS, INC.
Selected
data for a share of Capital Stock outstanding throughout each year ended August
31 (except as noted):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Asset Value, Beginning of Period |
Net
Investment Income (Loss) (a) |
Net
Realized and Unrealized Gain (Loss) on Investments |
Total
From Investment Operations |
Dividends
from Net Investment Income |
Distributions
from Realized Gains |
Total
Dividends and Distributions |
Net
Asset Value, End of Period |
BLUE CHIP FUND |
|
|
|
|
|
|
|
|
Class J shares |
|
|
|
|
|
|
|
|
2020 |
$25.86 |
|
($0.04) |
|
$9.64 |
|
$9.60 |
|
($0.01) |
|
($1.16) |
|
($1.17) |
|
$34.29 |
|
2019 |
24.74 |
|
(0.02) |
|
2.73 |
|
2.71 |
|
— |
|
(1.59) |
|
(1.59) |
|
25.86 |
|
2018(e) |
20.16 |
|
(0.05) |
|
5.22 |
|
5.17 |
|
— |
|
(0.59) |
|
(0.59) |
|
24.74 |
|
Institutional shares |
|
|
|
|
|
|
|
|
2020 |
26.00 |
|
(0.01) |
|
9.72 |
|
9.71 |
|
(0.05) |
|
(1.19) |
|
(1.24) |
|
34.47 |
|
2019 |
24.81 |
|
0.09 |
|
2.69 |
|
2.78 |
|
— |
|
(1.59) |
|
(1.59) |
|
26.00 |
|
2018 |
20.10 |
|
0.01 |
|
5.29 |
|
5.30 |
|
— |
|
(0.59) |
|
(0.59) |
|
24.81 |
|
2017 |
17.00 |
|
0.10 |
|
3.17 |
|
3.27 |
|
(0.08) |
|
(0.09) |
|
(0.17) |
|
20.10 |
|
2016 |
15.63 |
|
0.05 |
|
1.70 |
|
1.75 |
|
(0.07) |
|
(0.31) |
|
(0.38) |
|
17.00 |
|
R-3 shares |
|
|
|
|
|
|
|
|
2020 |
25.59 |
|
(0.12) |
|
9.53 |
|
9.41 |
|
— |
|
(1.15) |
|
(1.15) |
|
33.85 |
|
2019 |
24.55 |
|
(0.07) |
|
2.70 |
|
2.63 |
|
— |
|
(1.59) |
|
(1.59) |
|
25.59 |
|
2018 |
20.00 |
|
(0.10) |
|
5.24 |
|
5.14 |
|
— |
|
(0.59) |
|
(0.59) |
|
24.55 |
|
2017 |
16.96 |
|
0.21 |
|
2.95 |
|
3.16 |
|
(0.03) |
|
(0.09) |
|
(0.12) |
|
20.00 |
|
2016(i) |
15.64 |
|
(0.01) |
|
1.33 |
|
1.32 |
|
— |
|
— |
|
— |
|
16.96 |
|
R-4 shares |
|
|
|
|
|
|
|
|
2020 |
25.76 |
|
(0.06) |
|
9.58 |
|
9.52 |
|
(0.03) |
|
(1.17) |
|
(1.20) |
|
34.08 |
|
2019 |
24.66 |
|
(0.01) |
|
2.70 |
|
2.69 |
|
— |
|
(1.59) |
|
(1.59) |
|
25.76 |
|
2018 |
20.05 |
|
(0.06) |
|
5.26 |
|
5.20 |
|
— |
|
(0.59) |
|
(0.59) |
|
24.66 |
|
2017 |
16.98 |
|
0.09 |
|
3.11 |
|
3.20 |
|
(0.04) |
|
(0.09) |
|
(0.13) |
|
20.05 |
|
2016(i) |
15.64 |
|
— |
|
1.34 |
|
1.34 |
|
— |
|
— |
|
— |
|
16.98 |
|
R-5 shares |
|
|
|
|
|
|
|
|
2020 |
25.86 |
|
(0.04) |
|
9.66 |
|
9.62 |
|
(0.03) |
|
(1.16) |
|
(1.19) |
|
34.29 |
|
2019 |
24.72 |
|
0.02 |
|
2.71 |
|
2.73 |
|
— |
|
(1.59) |
|
(1.59) |
|
25.86 |
|
2018 |
20.07 |
|
(0.03) |
|
5.27 |
|
5.24 |
|
— |
|
(0.59) |
|
(0.59) |
|
24.72 |
|
2017 |
16.99 |
|
0.18 |
|
3.04 |
|
3.22 |
|
(0.05) |
|
(0.09) |
|
(0.14) |
|
20.07 |
|
2016(i) |
15.64 |
|
0.01 |
|
1.34 |
|
1.35 |
|
— |
|
— |
|
— |
|
16.99 |
|
R-6 shares |
|
|
|
|
|
|
|
|
2020 |
26.04 |
|
0.04 |
|
9.72 |
|
9.76 |
|
(0.07) |
|
(1.19) |
|
(1.26) |
|
34.54 |
|
2019 |
24.82 |
|
0.07 |
|
2.74 |
|
2.81 |
|
— |
|
(1.59) |
|
(1.59) |
|
26.04 |
|
2018 |
20.10 |
|
0.03 |
|
5.28 |
|
5.31 |
|
— |
|
(0.59) |
|
(0.59) |
|
24.82 |
|
2017(j) |
17.03 |
|
0.23 |
|
2.84 |
|
3.07 |
|
— |
|
— |
|
— |
|
20.10 |
|
FINANCIAL
HIGHLIGHTS (Continued)
PRINCIPAL
FUNDS, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Return |
|
Net
Assets, End of Period (in thousands) |
Ratio
of Expenses to Average Net Assets |
Ratio
of Expenses to Average Net Assets |
Ratio
of Net Investment Income to Average Net Assets |
|
Portfolio
Turnover Rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38.58 |
% |
(b) |
$153,325 |
|
0.82 |
% |
(c) |
0.91 |
% |
(d) |
(0.14) |
% |
|
30.0 |
% |
|
12.82 |
|
(b) |
80,050 |
|
0.96 |
|
(c) |
1.08 |
|
(d) |
(0.06) |
|
|
15.9 |
|
|
26.12 |
|
(b),(f) |
59,232 |
|
1.01 |
|
(c),(g) |
1.04 |
% |
(d),(g) |
(0.21) |
|
(g) |
34.0 |
|
(g) |
|
|
|
|
|
|
|
|
|
|
|
38.88 |
|
|
2,638,389 |
|
0.66 |
|
(h) |
— |
|
|
(0.02) |
|
|
30.0 |
|
|
13.09 |
|
|
725,718 |
|
0.67 |
|
(h) |
— |
|
|
0.39 |
|
|
15.9 |
|
|
26.88 |
|
|
175,887 |
|
0.75 |
|
(h) |
— |
|
|
0.03 |
|
|
34.0 |
|
|
19.42 |
|
|
63,268 |
|
0.69 |
|
(h) |
— |
|
|
0.57 |
|
|
27.1 |
|
|
11.39 |
|
|
1,257,265 |
|
0.69 |
|
(h) |
— |
|
|
0.33 |
|
|
36.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
38.20 |
|
|
8,764 |
|
1.12 |
|
(h) |
— |
|
|
(0.43) |
|
|
30.0 |
|
|
12.58 |
|
|
5,913 |
|
1.15 |
|
(h) |
— |
|
|
(0.32) |
|
|
15.9 |
|
|
26.18 |
|
|
8,402 |
|
1.24 |
|
|
— |
|
|
(0.45) |
|
|
34.0 |
|
|
18.77 |
|
|
337 |
|
1.25 |
|
|
— |
|
|
1.08 |
|
|
27.1 |
|
|
8.44 |
|
(f) |
11 |
|
1.26 |
|
(g) |
— |
|
|
(0.13) |
|
(g) |
36.4 |
|
(g) |
|
|
|
|
|
|
|
|
|
|
|
38.45 |
|
|
5,230 |
|
0.93 |
|
(h) |
— |
|
|
(0.23) |
|
|
30.0 |
|
|
12.78 |
|
|
3,989 |
|
0.96 |
|
(h) |
— |
|
|
(0.05) |
|
|
15.9 |
|
|
26.42 |
|
|
1,300 |
|
1.05 |
|
|
— |
|
|
(0.27) |
|
|
34.0 |
|
|
19.02 |
|
|
27 |
|
1.06 |
|
|
— |
|
|
0.51 |
|
|
27.1 |
|
|
8.57 |
|
(f) |
11 |
|
1.07 |
|
(g) |
— |
|
|
0.05 |
|
(g) |
36.4 |
|
(g) |
|
|
|
|
|
|
|
|
|
|
|
38.66 |
|
|
12,060 |
|
0.81 |
|
(h) |
— |
|
|
(0.15) |
|
|
30.0 |
|
|
12.92 |
|
|
6,380 |
|
0.84 |
|
(h) |
— |
|
|
0.07 |
|
|
15.9 |
|
|
26.59 |
|
|
5,279 |
|
0.93 |
|
|
— |
|
|
(0.15) |
|
|
34.0 |
|
|
19.11 |
|
|
83 |
|
0.94 |
|
|
— |
|
|
0.95 |
|
|
27.1 |
|
|
8.63 |
|
(f) |
11 |
|
0.95 |
|
(g) |
— |
|
|
0.19 |
|
(g) |
36.4 |
|
(g) |
|
|
|
|
|
|
|
|
|
|
|
39.01 |
|
|
4,051,190 |
|
0.55 |
|
(h) |
— |
|
|
0.15 |
|
|
30.0 |
|
|
13.22 |
|
|
3,052,936 |
|
0.58 |
|
(h) |
— |
|
|
0.29 |
|
|
15.9 |
|
|
26.93 |
|
|
2,709,836 |
|
0.67 |
|
(h) |
— |
|
|
0.12 |
|
|
34.0 |
|
|
18.03 |
|
(f) |
1,582,450 |
|
0.68 |
|
(g),(h) |
— |
|
|
1.74 |
|
(g) |
27.1 |
|
(g) |
(a)Calculated
based on average shares outstanding during the period.
(b)Total
return is calculated without the contingent deferred sales charge.
(c)Reflects
Manager's contractual expense limit and/or Distributor's voluntary distribution
fee limit.
(d)Excludes
expense reimbursement from Manager and/or Distributor.
(e)Period
from September 11, 2017, date operations commenced, through August 31,
2018.
(f)Total
return amounts have not been annualized.
(g)Computed
on an annualized basis.
(h)Reflects
Manager's contractual expense limit.
(i)Period
from March 29, 2016, date operations commenced, through August 31,
2016.
(j)Period
from January 3, 2017, date operations commenced, through August 31,
2017.
FINANCIAL
HIGHLIGHTS
PRINCIPAL
FUNDS, INC.
Selected
data for a share of Capital Stock outstanding throughout each year ended August
31 (except as noted):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Asset Value, Beginning of Period |
Net
Investment Income (Loss) (a) |
Net
Realized and Unrealized Gain (Loss) on Investments |
Total
From Investment Operations |
Dividends
from Net Investment Income |
Distributions
from Realized Gains |
Total
Dividends and Distributions |
Net
Asset Value, End of Period |
BOND MARKET INDEX FUND |
|
|
|
|
|
|
|
|
Class J shares |
|
|
|
|
|
|
|
|
2020 |
$11.36 |
|
$0.21 |
|
$0.43 |
|
$0.64 |
|
($0.21) |
|
$— |
|
($0.21) |
|
$11.79 |
|
2019 |
10.60 |
|
0.23 |
|
0.74 |
|
0.97 |
|
(0.21) |
|
— |
|
(0.21) |
|
11.36 |
|
2018 |
11.01 |
|
0.20 |
|
(0.39) |
|
(0.19) |
|
(0.22) |
|
— |
|
(0.22) |
|
10.60 |
|
2017 |
11.17 |
|
0.17 |
|
(0.20) |
|
(0.03) |
|
(0.13) |
|
— |
|
(0.13) |
|
11.01 |
|
2016 |
10.82 |
|
0.13 |
|
0.40 |
|
0.53 |
|
(0.17) |
|
(0.01) |
|
(0.18) |
|
11.17 |
|
Institutional shares |
|
|
|
|
|
|
|
|
2020 |
11.59 |
|
0.26 |
|
0.45 |
|
0.71 |
|
(0.27) |
|
— |
|
(0.27) |
|
12.03 |
|
2019 |
10.81 |
|
0.29 |
|
0.76 |
|
1.05 |
|
(0.27) |
|
— |
|
(0.27) |
|
11.59 |
|
2018 |
11.21 |
|
0.25 |
|
(0.39) |
|
(0.14) |
|
(0.26) |
|
— |
|
(0.26) |
|
10.81 |
|
2017 |
11.39 |
|
0.21 |
|
(0.20) |
|
0.01 |
|
(0.19) |
|
— |
|
(0.19) |
|
11.21 |
|
2016 |
11.02 |
|
0.20 |
|
0.39 |
|
0.59 |
|
(0.21) |
|
(0.01) |
|
(0.22) |
|
11.39 |
|
R-1 shares |
|
|
|
|
|
|
|
|
2020 |
11.36 |
|
0.16 |
|
0.43 |
|
0.59 |
|
(0.13) |
|
— |
|
(0.13) |
|
11.82 |
|
2019 |
10.58 |
|
0.19 |
|
0.75 |
|
0.94 |
|
(0.16) |
|
— |
|
(0.16) |
|
11.36 |
|
2018 |
10.97 |
|
0.15 |
|
(0.38) |
|
(0.23) |
|
(0.16) |
|
— |
|
(0.16) |
|
10.58 |
|
2017 |
11.16 |
|
0.12 |
|
(0.20) |
|
(0.08) |
|
(0.11) |
|
— |
|
(0.11) |
|
10.97 |
|
2016 |
10.80 |
|
0.10 |
|
0.39 |
|
0.49 |
|
(0.12) |
|
(0.01) |
|
(0.13) |
|
11.16 |
|
R-2 shares |
|
|
|
|
|
|
|
|
2020 |
11.37 |
|
0.17 |
|
0.44 |
|
0.61 |
|
(0.20) |
|
— |
|
(0.20) |
|
11.78 |
|
2019 |
10.61 |
|
0.20 |
|
0.76 |
|
0.96 |
|
(0.20) |
|
— |
|
(0.20) |
|
11.37 |
|
2018 |
11.00 |
|
0.17 |
|
(0.39) |
|
(0.22) |
|
(0.17) |
|
— |
|
(0.17) |
|
10.61 |
|
2017 |
11.18 |
|
0.13 |
|
(0.20) |
|
(0.07) |
|
(0.11) |
|
— |
|
(0.11) |
|
11.00 |
|
2016 |
10.80 |
|
0.11 |
|
0.39 |
|
0.50 |
|
(0.11) |
|
(0.01) |
|
(0.12) |
|
11.18 |
|
R-3 shares |
|
|
|
|
|
|
|
|
2020 |
11.35 |
|
0.19 |
|
0.44 |
|
0.63 |
|
(0.20) |
|
— |
|
(0.20) |
|
11.78 |
|
2019 |
10.57 |
|
0.22 |
|
0.76 |
|
0.98 |
|
(0.20) |
|
— |
|
(0.20) |
|
11.35 |
|
2018 |
10.97 |
|
0.19 |
|
(0.39) |
|
(0.20) |
|
(0.20) |
|
— |
|
(0.20) |
|
10.57 |
|
2017 |
11.16 |
|
0.15 |
|
(0.20) |
|
(0.05) |
|
(0.14) |
|
— |
|
(0.14) |
|
10.97 |
|
2016 |
10.79 |
|
0.13 |
|
0.40 |
|
0.53 |
|
(0.15) |
|
(0.01) |
|
(0.16) |
|
11.16 |
|
R-4 shares |
|
|
|
|
|
|
|
|
2020 |
11.39 |
|
0.22 |
|
0.43 |
|
0.65 |
|
(0.16) |
|
— |
|
(0.16) |
|
11.88 |
|
2019 |
10.60 |
|
0.24 |
|
0.78 |
|
1.02 |
|
(0.23) |
|
— |
|
(0.23) |
|
11.39 |
|
2018 |
11.00 |
|
0.21 |
|
(0.39) |
|
(0.18) |
|
(0.22) |
|
— |
|
(0.22) |
|
10.60 |
|
2017 |
11.18 |
|
0.17 |
|
(0.20) |
|
(0.03) |
|
(0.15) |
|
— |
|
(0.15) |
|
11.00 |
|
2016 |
10.84 |
|
0.15 |
|
0.39 |
|
0.54 |
|
(0.19) |
|
(0.01) |
|
(0.20) |
|
11.18 |
|
R-5 shares |
|
|
|
|
|
|
|
|
2020 |
11.42 |
|
0.23 |
|
0.44 |
|
0.67 |
|
(0.24) |
|
— |
|
(0.24) |
|
11.85 |
|
2019 |
10.65 |
|
0.26 |
|
0.75 |
|
1.01 |
|
(0.24) |
|
— |
|
(0.24) |
|
11.42 |
|
2018 |
11.05 |
|
0.22 |
|
(0.39) |
|
(0.17) |
|
(0.23) |
|
— |
|
(0.23) |
|
10.65 |
|
2017 |
11.23 |
|
0.18 |
|
(0.19) |
|
(0.01) |
|
(0.17) |
|
— |
|
(0.17) |
|
11.05 |
|
2016 |
10.85 |
|
0.16 |
|
0.41 |
|
0.57 |
|
(0.18) |
|
(0.01) |
|
(0.19) |
|
11.23 |
|
FINANCIAL
HIGHLIGHTS (Continued)
PRINCIPAL
FUNDS, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Return |
Net
Assets, End of Period (in thousands) |
Ratio
of Expenses to Average Net Assets |
Ratio
of Gross Expenses to Average Net Assets |
Ratio
of Net Investment Income to Average Net Assets |
Portfolio
Turnover Rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.75 |
% |
(b) |
$44,200 |
|
0.57 |
% |
(c) |
0.62 |
% |
(d) |
1.79 |
% |
94.1 |
% |
9.38 |
|
(b) |
29,025 |
|
0.71 |
|
(c) |
0.91 |
|
(d) |
2.10 |
|
107.7 |
|
(1.79) |
|
(b) |
27,466 |
|
0.62 |
|
(c) |
0.75 |
|
(d) |
1.86 |
|
102.7 |
|
(0.20) |
|
(b) |
30,315 |
|
0.64 |
|
(c) |
0.70 |
|
(d) |
1.53 |
|
117.8 |
|
4.98 |
|
(b) |
33,765 |
|
0.76 |
|
(c) |
0.83 |
|
(d) |
1.23 |
|
151.8 |
|
|
|
|
|
|
|
|
|
|
6.29 |
|
|
2,290,008 |
|
0.14 |
|
(e) |
— |
|
|
2.25 |
|
94.1 |
|
9.92 |
|
|
2,056,135 |
|
0.16 |
|
(e) |
— |
|
|
2.65 |
|
107.7 |
|
(1.29) |
|
|
1,472,817 |
|
0.16 |
|
(e) |
— |
|
|
2.32 |
|
102.7 |
|
0.19 |
|
|
1,795,872 |
|
0.23 |
|
(e) |
— |
|
|
1.94 |
|
117.8 |
|
5.52 |
|
|
1,648,408 |
|
0.23 |
|
(e) |
— |
|
|
1.75 |
|
151.8 |
|
|
|
|
|
|
|
|
|
|
5.27 |
|
|
1,412 |
|
1.02 |
|
(e) |
— |
|
|
1.36 |
|
94.1 |
|
8.99 |
|
|
1,169 |
|
1.04 |
|
(e) |
— |
|
|
1.78 |
|
107.7 |
|
(2.10) |
|
|
1,391 |
|
1.04 |
|
(e) |
— |
|
|
1.44 |
|
102.7 |
|
(0.70) |
|
|
2,158 |
|
1.11 |
|
(e) |
— |
|
|
1.07 |
|
117.8 |
|
4.60 |
|
|
1,913 |
|
1.11 |
|
(e) |
— |
|
|
0.88 |
|
151.8 |
|
|
|
|
|
|
|
|
|
|
5.46 |
|
|
7,324 |
|
0.89 |
|
(e) |
— |
|
|
1.46 |
|
94.1 |
|
9.18 |
|
|
3,546 |
|
0.91 |
|
(e) |
— |
|
|
1.91 |
|
107.7 |
|
(2.03) |
|
|
2,151 |
|
0.91 |
|
(e) |
— |
|
|
1.58 |
|
102.7 |
|
(0.59) |
|
|
2,936 |
|
0.98 |
|
(e) |
— |
|
|
1.19 |
|
117.8 |
|
4.76 |
|
|
2,940 |
|
0.98 |
|
(e) |
— |
|
|
1.01 |
|
151.8 |
|
|
|
|
|
|
|
|
|
|
5.66 |
|
|
13,196 |
|
0.71 |
|
(e) |
— |
|
|
1.67 |
|
94.1 |
|
9.41 |
|
|
11,337 |
|
0.73 |
|
(e) |
— |
|
|
2.09 |
|
107.7 |
|
(1.87) |
|
|
13,934 |
|
0.73 |
|
(e) |
— |
|
|
1.75 |
|
102.7 |
|
(0.42) |
|
|
17,123 |
|
0.80 |
|
(e) |
— |
|
|
1.38 |
|
117.8 |
|
5.00 |
|
|
16,998 |
|
0.80 |
|
(e) |
— |
|
|
1.19 |
|
151.8 |
|
|
|
|
|
|
|
|
|
|
5.84 |
|
|
6,523 |
|
0.52 |
|
(e) |
— |
|
|
1.87 |
|
94.1 |
|
9.82 |
|
|
5,521 |
|
0.54 |
|
(e) |
— |
|
|
2.29 |
|
107.7 |
|
(1.67) |
|
|
44,422 |
|
0.54 |
|
(e) |
— |
|
|
1.95 |
|
102.7 |
|
(0.18) |
|
|
42,411 |
|
0.61 |
|
(e) |
— |
|
|
1.57 |
|
117.8 |
|
5.10 |
|
|
36,951 |
|
0.61 |
|
(e) |
— |
|
|
1.38 |
|
151.8 |
|
|
|
|
|
|
|
|
|
|
6.01 |
|
|
18,279 |
|
0.40 |
|
(e) |
— |
|
|
1.98 |
|
94.1 |
|
9.67 |
|
|
16,552 |
|
0.42 |
|
(e) |
— |
|
|
2.40 |
|
107.7 |
|
(1.56) |
|
|
18,775 |
|
0.42 |
|
(e) |
— |
|
|
2.05 |
|
102.7 |
|
(0.06) |
|
|
26,153 |
|
0.49 |
|
(e) |
— |
|
|
1.67 |
|
117.8 |
|
5.24 |
|
(f) |
31,929 |
|
0.49 |
|
(e) |
— |
|
|
1.50 |
|
151.8 |
|
(a)Calculated
based on average shares outstanding during the period.
(b)Total
return is calculated without the contingent deferred sales charge.
(c)Reflects
Manager's contractual expense limit and/or Distributor's voluntary distribution
fee limit.
(d)Excludes
expense reimbursement from Manager and/or Distributor.
(e)Reflects
Manager's contractual expense limit.
(f)Total
return is calculated using the traded net asset value which may differ from the
reported net asset value. The traded net asset value is the net asset value
which a shareholder would have paid or received from a subscription or
redemption.
FINANCIAL
HIGHLIGHTS
PRINCIPAL
FUNDS, INC.
Selected
data for a share of Capital Stock outstanding throughout each year ended August
31 (except as noted):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Asset Value, Beginning of Period |
Net
Investment Income (Loss) (a) |
Net
Realized and Unrealized Gain (Loss) on Investments |
Total
From Investment Operations |
Dividends
from Net Investment Income |
Distributions
from Realized Gains |
Total
Dividends and Distributions |
Net
Asset Value, End of Period |
DIVERSIFIED
REAL ASSET FUND |
|
|
|
|
|
|
|
|
Institutional
shares |
|
|
|
|
|
|
|
|
2020 |
$11.25 |
|
$0.21 |
|
($0.04) |
|
$0.17 |
|
($0.28) |
|
$— |
|
($0.28) |
|
$11.14 |
|
2019 |
11.74 |
|
0.31 |
|
(0.44) |
|
(0.13) |
|
(0.36) |
|
— |
|
(0.36) |
|
11.25 |
|
2018 |
11.57 |
|
0.29 |
|
0.14 |
|
0.43 |
|
(0.26) |
|
— |
|
(0.26) |
|
11.74 |
|
2017 |
11.08 |
|
0.23 |
|
0.54 |
|
0.77 |
|
(0.28) |
|
— |
|
(0.28) |
|
11.57 |
|
2016 |
11.25 |
|
0.22 |
|
(0.29) |
|
(0.07) |
|
(0.10) |
|
— |
|
(0.10) |
|
11.08 |
|
R-3
shares |
|
|
|
|
|
|
|
|
2020 |
11.20 |
|
0.15 |
|
(0.05) |
|
0.10 |
|
(0.23) |
|
— |
|
(0.23) |
|
11.07 |
|
2019 |
11.69 |
|
0.25 |
|
(0.43) |
|
(0.18) |
|
(0.31) |
|
— |
|
(0.31) |
|
11.20 |
|
2018 |
11.53 |
|
0.23 |
|
0.13 |
|
0.36 |
|
(0.20) |
|
— |
|
(0.20) |
|
11.69 |
|
2017 |
11.06 |
|
0.19 |
|
0.52 |
|
0.71 |
|
(0.24) |
|
— |
|
(0.24) |
|
11.53 |
|
2016(c) |
10.45 |
|
0.10 |
|
0.51 |
|
0.61 |
|
— |
|
— |
|
— |
|
11.06 |
|
R-4
shares |
|
|
|
|
|
|
|
|
2020 |
11.23 |
|
0.18 |
|
(0.06) |
|
0.12 |
|
(0.24) |
|
— |
|
(0.24) |
|
11.11 |
|
2019 |
11.72 |
|
0.26 |
|
(0.42) |
|
(0.16) |
|
(0.33) |
|
— |
|
(0.33) |
|
11.23 |
|
2018 |
11.54 |
|
0.25 |
|
0.15 |
|
0.40 |
|
(0.22) |
|
— |
|
(0.22) |
|
11.72 |
|
2017 |
11.07 |
|
0.20 |
|
0.53 |
|
0.73 |
|
(0.26) |
|
— |
|
(0.26) |
|
11.54 |
|
2016(c) |
10.45 |
|
0.10 |
|
0.52 |
|
0.62 |
|
— |
|
— |
|
— |
|
11.07 |
|
R-5
shares |
|
|
|
|
|
|
|
|
2020 |
11.23 |
|
0.19 |
|
(0.06) |
|
0.13 |
|
(0.26) |
|
— |
|
(0.26) |
|
11.10 |
|
2019 |
11.73 |
|
0.30 |
|
(0.44) |
|
(0.14) |
|
(0.36) |
|
— |
|
(0.36) |
|
11.23 |
|
2018 |
11.56 |
|
0.27 |
|
0.14 |
|
0.41 |
|
(0.24) |
|
— |
|
(0.24) |
|
11.73 |
|
2017 |
11.08 |
|
0.21 |
|
0.54 |
|
0.75 |
|
(0.27) |
|
— |
|
(0.27) |
|
11.56 |
|
2016(c) |
10.45 |
|
0.11 |
|
0.52 |
|
0.63 |
|
— |
|
— |
|
— |
|
11.08 |
|
R-6
shares |
|
|
|
|
|
|
|
|
2020 |
11.26 |
|
0.22 |
|
(0.06) |
|
0.16 |
|
(0.28) |
|
— |
|
(0.28) |
|
11.14 |
|
2019 |
11.74 |
|
0.32 |
|
(0.43) |
|
(0.11) |
|
(0.37) |
|
— |
|
(0.37) |
|
11.26 |
|
2018 |
11.57 |
|
0.29 |
|
0.14 |
|
0.43 |
|
(0.26) |
|
— |
|
(0.26) |
|
11.74 |
|
2017 |
11.08 |
|
0.27 |
|
0.50 |
|
0.77 |
|
(0.28) |
|
— |
|
(0.28) |
|
11.57 |
|
2016 |
11.25 |
|
0.26 |
|
(0.32) |
|
(0.06) |
|
(0.11) |
|
— |
|
(0.11) |
|
11.08 |
|
EDGE
MIDCAP FUND |
|
|
|
|
|
|
|
|
Institutional
shares |
|
|
|
|
|
|
|
|
2020 |
14.42 |
|
0.11 |
|
0.92 |
|
1.03 |
|
(0.12) |
|
(0.50) |
|
(0.62) |
|
14.83 |
|
2019 |
14.99 |
|
0.11 |
|
0.09 |
|
0.20 |
|
(0.15) |
|
(0.62) |
|
(0.77) |
|
14.42 |
|
2018 |
12.60 |
|
0.16 |
|
2.42 |
|
2.58 |
|
— |
|
(0.19) |
|
(0.19) |
|
14.99 |
|
2017 |
12.24 |
|
0.12 |
|
0.78 |
|
0.90 |
|
(0.10) |
|
(0.44) |
|
(0.54) |
|
12.60 |
|
2016(g) |
10.00 |
|
0.11 |
|
2.17 |
|
2.28 |
|
(0.03) |
|
(0.01) |
|
(0.04) |
|
12.24 |
|
R-6
shares |
|
|
|
|
|
|
|
|
2020 |
14.46 |
|
0.13 |
|
0.92 |
|
1.05 |
|
(0.13) |
|
(0.50) |
|
(0.63) |
|
14.88 |
|
2019 |
15.03 |
|
0.13 |
|
0.09 |
|
0.22 |
|
(0.17) |
|
(0.62) |
|
(0.79) |
|
14.46 |
|
2018 |
12.68 |
|
0.16 |
|
2.44 |
|
2.60 |
|
(0.06) |
|
(0.19) |
|
(0.25) |
|
15.03 |
|
2017(h) |
12.12 |
|
0.09 |
|
0.47 |
|
0.56 |
|
— |
|
— |
|
— |
|
12.68 |
|
FINANCIAL
HIGHLIGHTS (Continued)
PRINCIPAL
FUNDS, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Return |
Net
Assets, End of Period (in thousands) |
Ratio
of Expenses to Average Net Assets |
Ratio
of Net Investment Income to Average Net Assets |
Portfolio
Turnover Rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.36 |
% |
|
$1,960,593 |
|
0.84 |
% |
(b) |
1.95 |
% |
|
85.4 |
% |
|
(0.83) |
|
|
2,388,382 |
|
0.85 |
|
(b) |
2.74 |
|
|
71.5 |
|
|
3.72 |
|
|
2,518,033 |
|
0.85 |
|
(b) |
2.45 |
|
|
84.1 |
|
|
7.16 |
|
|
2,591,713 |
|
0.88 |
|
(b) |
2.08 |
|
|
65.1 |
|
|
(0.53) |
|
|
3,294,419 |
|
0.87 |
|
(b) |
2.02 |
|
|
77.6 |
|
|
|
|
|
|
|
|
|
|
|
0.78 |
|
|
138 |
|
1.36 |
|
(b) |
1.39 |
|
|
85.4 |
|
|
(1.27) |
|
|
113 |
|
1.36 |
|
(b) |
2.22 |
|
|
71.5 |
|
|
3.15 |
|
|
81 |
|
1.35 |
|
(b) |
1.99 |
|
|
84.1 |
|
|
6.60 |
|
|
17 |
|
1.38 |
|
|
1.71 |
|
|
65.1 |
|
|
5.84 |
|
(d) |
11 |
|
1.39 |
|
(e) |
2.08 |
|
(e) |
77.6 |
|
(e) |
|
|
|
|
|
|
|
|
|
0.95 |
|
|
12 |
|
1.17 |
|
(b) |
1.61 |
|
|
85.4 |
|
|
(1.13) |
|
|
12 |
|
1.17 |
|
(b) |
2.36 |
|
|
71.5 |
|
|
3.41 |
|
(f) |
15 |
|
1.16 |
|
(b) |
2.17 |
|
|
84.1 |
|
|
6.82 |
|
(f) |
11 |
|
1.19 |
|
|
1.76 |
|
|
65.1 |
|
|
5.93 |
|
(d) |
11 |
|
1.20 |
|
(e) |
2.25 |
|
(e) |
77.6 |
|
(e) |
|
|
|
|
|
|
|
|
|
1.01 |
|
|
32 |
|
1.05 |
|
(b) |
1.71 |
|
|
85.4 |
|
|
(0.92) |
|
|
74 |
|
1.05 |
|
(b) |
2.71 |
|
|
71.5 |
|
|
3.53 |
|
|
12 |
|
1.04 |
|
(b) |
2.35 |
|
|
84.1 |
|
|
6.93 |
|
|
11 |
|
1.07 |
|
|
1.90 |
|
|
65.1 |
|
|
6.03 |
|
(d) |
11 |
|
1.08 |
|
(e) |
2.39 |
|
(e) |
77.6 |
|
(e) |
|
|
|
|
|
|
|
|
|
1.32 |
|
|
1,162,658 |
|
0.79 |
|
(b) |
1.99 |
|
|
85.4 |
|
|
(0.68) |
|
|
1,330,773 |
|
0.79 |
|
(b) |
2.82 |
|
|
71.5 |
|
|
3.78 |
|
|
1,523,846 |
|
0.79 |
|
(b) |
2.50 |
|
|
84.1 |
|
|
7.17 |
|
|
1,568,988 |
|
0.83 |
|
(b) |
2.42 |
|
|
65.1 |
|
|
(0.50) |
|
|
29,601 |
|
0.88 |
|
(b) |
2.43 |
|
|
77.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.97 |
|
|
82,198 |
|
0.77 |
|
(b) |
0.79 |
|
|
27.9 |
|
|
2.47 |
|
|
34,358 |
|
0.82 |
|
(b) |
0.81 |
|
|
19.8 |
|
|
20.58 |
|
|
14,470 |
|
0.90 |
|
(b) |
1.17 |
|
|
17.4 |
|
|
7.51 |
|
|
1,289 |
|
0.78 |
|
(b) |
1.00 |
|
|
11.9 |
|
|
22.89 |
|
(d) |
292,615 |
|
0.79 |
|
(b),(e) |
1.04 |
|
(e) |
22.4 |
|
(e) |
|
|
|
|
|
|
|
|
|
7.11 |
|
|
758,215 |
|
0.66 |
|
(b) |
0.90 |
|
|
27.9 |
|
|
2.56 |
|
|
653,991 |
|
0.71 |
|
(b) |
0.90 |
|
|
19.8 |
|
|
20.69 |
|
|
657,980 |
|
0.76 |
|
(b) |
1.15 |
|
|
17.4 |
|
|
4.62 |
|
(d) |
286,832 |
|
0.77 |
|
(b),(e) |
1.06 |
|
(e) |
11.9 |
|
(e) |
(a)Calculated
based on average shares outstanding during the period.
(b)Reflects
Manager's contractual expense limit.
(c)Period
from March 29, 2016, date operations commenced, through August 31,
2016.
(d)Total
return amounts have not been annualized.
(e)Computed
on an annualized basis.
(f)Total
return is calculated using the traded net asset value which may differ from the
reported net asset value. The traded net asset value is the net asset value
which a shareholder would have paid or received from a subscription or
redemption.
(g)Period
from September 28, 2015, date operations commenced, through August 31,
2016.
(h)Period
from January 3, 2017, date operations commenced, through August 31,
2017.
FINANCIAL
HIGHLIGHTS
PRINCIPAL
FUNDS, INC.
Selected
data for a share of Capital Stock outstanding throughout each year ended August
31 (except as noted):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Asset Value, Beginning of Period |
Net
Investment Income (Loss) (a) |
Net
Realized and Unrealized Gain (Loss) on Investments |
Total
From Investment Operations |
Dividends
from Net Investment Income |
Distributions
from Realized Gains |
Tax
Return of Capital Distribution |
Total
Dividends and Distributions |
Net
Asset Value, End of Period |
GLOBAL
MULTI-STRATEGY FUND |
|
|
|
|
|
|
|
|
Institutional
shares |
|
|
|
|
|
|
|
|
|
2020 |
$10.76 |
|
$0.21 |
|
$0.15 |
|
$0.36 |
|
$— |
|
$— |
|
$— |
|
$— |
|
$11.12 |
|
2019 |
11.21 |
|
0.23 |
|
(0.02) |
|
0.21 |
|
(0.16) |
|
(0.47) |
|
(0.03) |
|
(0.66) |
|
10.76 |
|
2018 |
11.39 |
|
0.15 |
|
— |
|
0.15 |
|
(0.09) |
|
(0.24) |
|
— |
|
(0.33) |
|
11.21 |
|
2017 |
10.86 |
|
0.11 |
|
0.44 |
|
0.55 |
|
(0.02) |
|
— |
|
— |
|
(0.02) |
|
11.39 |
|
2016 |
10.99 |
|
0.05 |
|
0.14 |
|
0.19 |
|
(0.09) |
|
(0.23) |
|
— |
|
(0.32) |
|
10.86 |
|
R-6
shares |
|
|
|
|
|
|
|
|
|
2020 |
10.75 |
|
0.29 |
|
0.08 |
|
0.37 |
|
— |
|
— |
|
— |
|
— |
|
11.12 |
|
2019 |
11.21 |
|
0.23 |
|
(0.02) |
|
0.21 |
|
(0.17) |
|
(0.47) |
|
(0.03) |
|
(0.67) |
|
10.75 |
|
2018 |
11.39 |
|
0.16 |
|
(0.01) |
|
0.15 |
|
(0.09) |
|
(0.24) |
|
— |
|
(0.33) |
|
11.21 |
|
2017(f) |
11.28 |
|
0.04 |
|
0.07 |
|
0.11 |
|
— |
|
— |
|
— |
|
— |
|
11.39 |
|
FINANCIAL
HIGHLIGHTS (Continued)
PRINCIPAL
FUNDS, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Return |
Net
Assets, End of Period (in thousands) |
Ratio
of Expenses to Average Net Assets |
Ratio
of Expenses to Average Net Assets (Excluding Dividends and Interest
Expense on Short Sales, Short Sale Fees and Reverse Repurchase Agreement
Expense) |
Ratio
of Net Investment Income to Average Net Assets |
Portfolio
Turnover Rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.44 |
% |
(b) |
$591,298 |
|
3.21 |
% |
(c),(d) |
1.64 |
% |
(c),(d),(e) |
1.98 |
% |
|
439.7 |
% |
|
2.24 |
|
|
453,013 |
|
2.99 |
|
(c),(d) |
1.64 |
|
(c),(d),(e) |
2.11 |
|
|
387.8 |
|
|
1.29 |
|
|
749,738 |
|
2.16 |
|
(c) |
1.63 |
|
(c),(e) |
1.35 |
|
|
378.0 |
|
|
5.04 |
|
|
1,156,731 |
|
2.18 |
|
(c) |
1.60 |
|
(c),(e) |
1.03 |
|
|
317.6 |
|
|
1.80 |
|
|
2,265,206 |
|
2.08 |
|
(c) |
1.61 |
|
(c),(e) |
0.46 |
|
|
233.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
3.44 |
|
|
166,448 |
|
3.15 |
|
(c),(d) |
1.58 |
|
(c),(d),(e) |
2.74 |
|
|
439.7 |
|
|
2.28 |
|
|
818,258 |
|
2.91 |
|
(c),(d) |
1.56 |
|
(c),(d),(e) |
2.19 |
|
|
387.8 |
|
|
1.25 |
|
(b) |
1,780,595 |
|
2.08 |
|
(c) |
1.55 |
|
(c),(e) |
1.43 |
|
|
378.0 |
|
|
1.06 |
|
(b),(g) |
1,532,177 |
|
2.10 |
|
(c),(h) |
1.54 |
|
(c),(e),(h) |
1.51 |
|
(h) |
317.6 |
|
(h) |
(a)Calculated
based on average shares outstanding during the period.
(b)Total
return is calculated using the traded net asset value which may differ from the
reported net asset value. The traded net asset value is the net asset value
which a shareholder would have paid or received from a subscription or
redemption.
(c)Reflects
Manager's contractual expense limit.
(d)Includes
0.01% of expenses associated with fund investments. The expense is not subject
to the Manager's contractual expense limit.
(e)Excludes
dividends and interest expense on short sales and short sale fees. See
"Operating Policies" in notes to financial statements.
(f)Period
from June 12, 2017, date operations commenced, through August 31,
2017.
(g)Total
return amounts have not been annualized.
(h)Computed
on an annualized basis.
FINANCIAL
HIGHLIGHTS
PRINCIPAL
FUNDS, INC.
Selected
data for a share of Capital Stock outstanding throughout each year ended August
31 (except as noted):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Asset Value, Beginning of Period |
Net
Investment Income (Loss) (a) |
Net
Realized and Unrealized Gain (Loss) on Investments |
Total
From Investment Operations |
Dividends
from Net Investment Income |
Distributions
from Realized Gains |
Total
Dividends and Distributions |
Net
Asset Value, End of Period |
INTERNATIONAL
EQUITY INDEX FUND |
|
|
|
|
|
|
|
Institutional
shares |
|
|
|
|
|
|
|
|
2020 |
$9.83 |
|
$0.21 |
|
$0.37 |
|
$0.58 |
|
($0.32) |
|
($0.03) |
|
($0.35) |
|
$10.06 |
|
2019 |
10.57 |
|
0.30 |
|
(0.69) |
|
(0.39) |
|
(0.26) |
|
(0.09) |
|
(0.35) |
|
9.83 |
|
2018 |
10.55 |
|
0.28 |
|
0.12 |
|
0.40 |
|
(0.30) |
|
(0.08) |
|
(0.38) |
|
10.57 |
|
2017 |
9.24 |
|
0.27 |
|
1.29 |
|
1.56 |
|
(0.25) |
|
— |
|
(0.25) |
|
10.55 |
|
2016 |
9.58 |
|
0.26 |
|
(0.26) |
|
— |
|
(0.23) |
|
(0.11) |
|
(0.34) |
|
9.24 |
|
R-1
shares |
|
|
|
|
|
|
|
|
2020 |
9.50 |
|
0.12 |
|
0.35 |
|
0.47 |
|
(0.21) |
|
(0.03) |
|
(0.24) |
|
9.73 |
|
2019 |
10.20 |
|
0.20 |
|
(0.65) |
|
(0.45) |
|
(0.16) |
|
(0.09) |
|
(0.25) |
|
9.50 |
|
2018 |
10.20 |
|
0.18 |
|
0.11 |
|
0.29 |
|
(0.21) |
|
(0.08) |
|
(0.29) |
|
10.20 |
|
2017 |
8.93 |
|
0.18 |
|
1.26 |
|
1.44 |
|
(0.17) |
|
— |
|
(0.17) |
|
10.20 |
|
2016 |
9.28 |
|
0.17 |
|
(0.25) |
|
(0.08) |
|
(0.16) |
|
(0.11) |
|
(0.27) |
|
8.93 |
|
R-2
shares |
|
|
|
|
|
|
|
|
2020 |
9.79 |
|
0.15 |
|
0.35 |
|
0.50 |
|
(0.21) |
|
(0.03) |
|
(0.24) |
|
10.05 |
|
2019 |
10.51 |
|
0.22 |
|
(0.68) |
|
(0.46) |
|
(0.17) |
|
(0.09) |
|
(0.26) |
|
9.79 |
|
2018 |
10.49 |
|
0.21 |
|
0.11 |
|
0.32 |
|
(0.22) |
|
(0.08) |
|
(0.30) |
|
10.51 |
|
2017 |
9.18 |
|
0.19 |
|
1.30 |
|
1.49 |
|
(0.18) |
|
— |
|
(0.18) |
|
10.49 |
|
2016 |
9.52 |
|
0.19 |
|
(0.26) |
|
(0.07) |
|
(0.16) |
|
(0.11) |
|
(0.27) |
|
9.18 |
|
R-3
shares |
|
|
|
|
|
|
|
|
2020 |
9.64 |
|
0.16 |
|
0.35 |
|
0.51 |
|
(0.27) |
|
(0.03) |
|
(0.30) |
|
9.85 |
|
2019 |
10.35 |
|
0.23 |
|
(0.65) |
|
(0.42) |
|
(0.20) |
|
(0.09) |
|
(0.29) |
|
9.64 |
|
2018 |
10.35 |
|
0.22 |
|
0.10 |
|
0.32 |
|
(0.24) |
|
(0.08) |
|
(0.32) |
|
10.35 |
|
2017 |
9.07 |
|
0.20 |
|
1.28 |
|
1.48 |
|
(0.20) |
|
— |
|
(0.20) |
|
10.35 |
|
2016 |
9.40 |
|
0.20 |
|
(0.25) |
|
(0.05) |
|
(0.17) |
|
(0.11) |
|
(0.28) |
|
9.07 |
|
R-4
shares |
|
|
|
|
|
|
|
|
2020 |
9.75 |
|
0.18 |
|
0.36 |
|
0.54 |
|
(0.29) |
|
(0.03) |
|
(0.32) |
|
9.97 |
|
2019 |
10.48 |
|
0.25 |
|
(0.67) |
|
(0.42) |
|
(0.22) |
|
(0.09) |
|
(0.31) |
|
9.75 |
|
2018 |
10.46 |
|
0.24 |
|
0.12 |
|
0.36 |
|
(0.26) |
|
(0.08) |
|
(0.34) |
|
10.48 |
|
2017 |
9.17 |
|
0.20 |
|
1.31 |
|
1.51 |
|
(0.22) |
|
— |
|
(0.22) |
|
10.46 |
|
2016 |
9.50 |
|
0.21 |
|
(0.24) |
|
(0.03) |
|
(0.19) |
|
(0.11) |
|
(0.30) |
|
9.17 |
|
R-5
shares |
|
|
|
|
|
|
|
|
2020 |
9.78 |
|
0.19 |
|
0.36 |
|
0.55 |
|
(0.30) |
|
(0.03) |
|
(0.33) |
|
10.00 |
|
2019 |
10.50 |
|
0.27 |
|
(0.67) |
|
(0.40) |
|
(0.23) |
|
(0.09) |
|
(0.32) |
|
9.78 |
|
2018 |
10.49 |
|
0.24 |
|
0.12 |
|
0.36 |
|
(0.27) |
|
(0.08) |
|
(0.35) |
|
10.50 |
|
2017 |
9.18 |
|
0.23 |
|
1.31 |
|
1.54 |
|
(0.23) |
|
— |
|
(0.23) |
|
10.49 |
|
2016 |
9.52 |
|
0.22 |
|
(0.25) |
|
(0.03) |
|
(0.20) |
|
(0.11) |
|
(0.31) |
|
9.18 |
|
R-6
shares |
|
|
|
|
|
|
|
|
2020 |
9.83 |
|
0.22 |
|
0.36 |
|
0.58 |
|
(0.32) |
|
(0.03) |
|
(0.35) |
|
10.06 |
|
2019 |
10.57 |
|
0.30 |
|
(0.69) |
|
(0.39) |
|
(0.26) |
|
(0.09) |
|
(0.35) |
|
9.83 |
|
2018 |
10.54 |
|
0.29 |
|
0.12 |
|
0.41 |
|
(0.30) |
|
(0.08) |
|
(0.38) |
|
10.57 |
|
2017(d) |
9.01 |
|
0.14 |
|
1.39 |
|
1.53 |
|
— |
|
— |
|
— |
|
10.54 |
|
FINANCIAL
HIGHLIGHTS (Continued)
PRINCIPAL
FUNDS, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Return |
Net
Assets, End of Period (in thousands) |
Ratio
of Expenses to Average Net Assets |
Ratio
of Net Investment Income to Average Net Assets |
Portfolio
Turnover Rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.77 |
% |
|
$35,803 |
|
0.31 |
% |
(b) |
2.11 |
% |
|
31.1 |
% |
|
(3.33) |
|
|
50,221 |
|
0.31 |
|
(b) |
3.09 |
|
|
23.4 |
|
|
3.69 |
|
|
46,042 |
|
0.34 |
|
(b) |
2.54 |
|
|
27.2 |
|
|
17.42 |
|
|
67,784 |
|
0.32 |
|
(b) |
2.83 |
|
|
24.7 |
|
|
(0.02) |
|
|
831,719 |
|
0.34 |
|
(b) |
2.83 |
|
|
31.3 |
|
|
|
|
|
|
|
|
|
|
|
4.86 |
|
|
491 |
|
1.19 |
|
|
1.31 |
|
|
31.1 |
|
|
(4.19) |
|
|
588 |
|
1.20 |
|
|
2.09 |
|
|
23.4 |
|
|
2.78 |
|
|
722 |
|
1.19 |
|
|
1.71 |
|
|
27.2 |
|
|
16.43 |
|
|
1,000 |
|
1.19 |
|
|
1.93 |
|
|
24.7 |
|
|
(0.90) |
|
|
586 |
|
1.21 |
|
|
1.93 |
|
|
31.3 |
|
|
|
|
|
|
|
|
|
|
|
5.02 |
|
|
548 |
|
1.06 |
|
|
1.50 |
|
|
31.1 |
|
|
(4.09) |
|
|
745 |
|
1.07 |
|
|
2.28 |
|
|
23.4 |
|
|
2.90 |
|
(c) |
907 |
|
1.06 |
|
|
1.94 |
|
|
27.2 |
|
|
16.66 |
|
(c) |
874 |
|
1.06 |
|
|
1.96 |
|
|
24.7 |
|
|
(0.75) |
|
|
903 |
|
1.08 |
|
|
2.12 |
|
|
31.3 |
|
|
|
|
|
|
|
|
|
|
|
5.11 |
|
|
15,706 |
|
0.88 |
|
|
1.65 |
|
|
31.1 |
|
|
(3.82) |
|
|
16,499 |
|
0.89 |
|
|
2.41 |
|
|
23.4 |
|
|
3.03 |
|
|
17,816 |
|
0.88 |
|
|
2.04 |
|
|
27.2 |
|
|
16.77 |
|
|
18,585 |
|
0.88 |
|
|
2.14 |
|
|
24.7 |
|
|
(0.49) |
|
|
15,789 |
|
0.90 |
|
|
2.26 |
|
|
31.3 |
|
|
|
|
|
|
|
|
|
|
|
5.34 |
|
|
9,023 |
|
0.69 |
|
|
1.84 |
|
|
31.1 |
|
|
(3.72) |
|
|
7,466 |
|
0.70 |
|
|
2.51 |
|
|
23.4 |
|
|
3.37 |
|
|
11,977 |
|
0.69 |
|
|
2.22 |
|
|
27.2 |
|
|
16.93 |
|
|
13,372 |
|
0.69 |
|
|
2.14 |
|
|
24.7 |
|
|
(0.30) |
|
|
11,997 |
|
0.71 |
|
|
2.32 |
|
|
31.3 |
|
|
|
|
|
|
|
|
|
|
|
5.45 |
|
|
16,208 |
|
0.57 |
|
|
1.95 |
|
|
31.1 |
|
|
(3.50) |
|
|
16,948 |
|
0.58 |
|
|
2.80 |
|
|
23.4 |
|
|
3.38 |
|
|
18,479 |
|
0.57 |
|
|
2.26 |
|
|
27.2 |
|
|
17.23 |
|
|
29,429 |
|
0.57 |
|
|
2.35 |
|
|
24.7 |
|
|
(0.30) |
|
|
29,179 |
|
0.59 |
|
|
2.49 |
|
|
31.3 |
|
|
|
|
|
|
|
|
|
|
|
5.66 |
|
(c) |
1,020,094 |
|
0.29 |
|
(b) |
2.25 |
|
|
31.1 |
|
|
(3.23) |
|
(c) |
1,003,550 |
|
0.28 |
|
(b) |
3.04 |
|
|
23.4 |
|
|
3.80 |
|
|
997,061 |
|
0.27 |
|
(b) |
2.67 |
|
|
27.2 |
|
|
16.98 |
|
(e) |
924,600 |
|
0.27 |
|
(b),(f) |
2.02 |
|
(f) |
24.7 |
|
(f) |
(a)Calculated
based on average shares outstanding during the period.
(b)Reflects
Manager's contractual expense limit.
(c)Total
return is calculated using the traded net asset value which may differ from the
reported net asset value. The traded net asset value is the net asset value
which a shareholder would have paid or received from a subscription or
redemption.
(d)Period
from January 3, 2017, date operations commenced, through August 31,
2017.
(e)Total
return amounts have not been annualized.
(f)Computed
on an annualized basis.
FINANCIAL
HIGHLIGHTS
PRINCIPAL
FUNDS, INC.
Selected
data for a share of Capital Stock outstanding throughout each year ended August
31 (except as noted):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Asset Value, Beginning of Period |
Net
Investment Income (Loss) (a) |
Net
Realized and Unrealized Gain (Loss) on Investments |
Total
From Investment Operations |
Dividends
from Net Investment Income |
Distributions
from Realized Gains |
Total
Dividends and Distributions |
Net
Asset Value, End of Period |
INTERNATIONAL
SMALL COMPANY FUND |
|
|
|
|
|
|
|
Institutional
shares |
|
|
|
|
|
|
|
|
2020 |
$10.46 |
|
$0.09 |
|
$0.40 |
|
$0.49 |
|
($0.32) |
|
$— |
|
($0.32) |
|
$10.63 |
|
2019 |
12.36 |
|
0.14 |
|
(1.17) |
|
(1.03) |
|
(0.14) |
|
(0.73) |
|
(0.87) |
|
10.46 |
|
2018 |
12.17 |
|
0.15 |
|
0.67 |
|
0.82 |
|
(0.26) |
|
(0.37) |
|
(0.63) |
|
12.36 |
|
2017 |
9.87 |
|
0.18 |
|
2.15 |
|
2.33 |
|
(0.03) |
|
— |
|
(0.03) |
|
12.17 |
|
2016 |
9.61 |
|
0.08 |
|
0.30 |
|
0.38 |
|
(0.12) |
|
— |
|
(0.12) |
|
9.87 |
|
R-6
shares |
|
|
|
|
|
|
|
|
2020 |
10.52 |
|
0.09 |
|
0.42 |
|
0.51 |
|
(0.33) |
|
— |
|
(0.33) |
|
10.70 |
|
2019 |
12.42 |
|
0.14 |
|
(1.16) |
|
(1.02) |
|
(0.15) |
|
(0.73) |
|
(0.88) |
|
10.52 |
|
2018 |
12.21 |
|
0.13 |
|
0.71 |
|
0.84 |
|
(0.26) |
|
(0.37) |
|
(0.63) |
|
12.42 |
|
2017(c) |
9.83 |
|
0.02 |
|
2.36 |
|
2.38 |
|
— |
|
— |
|
— |
|
12.21 |
|
OPPORTUNISTIC
MUNICIPAL FUND |
|
|
|
|
|
|
|
Institutional
shares |
|
|
|
|
|
|
|
|
2020 |
11.26 |
|
0.40 |
|
(0.30) |
|
0.10 |
|
(0.39) |
|
— |
|
(0.39) |
|
10.97 |
|
2019 |
10.61 |
|
0.46 |
|
0.63 |
|
1.09 |
|
(0.44) |
|
— |
|
(0.44) |
|
11.26 |
|
2018 |
10.66 |
|
0.45 |
|
(0.07) |
|
0.38 |
|
(0.43) |
|
— |
|
(0.43) |
|
10.61 |
|
2017 |
11.03 |
|
0.43 |
|
(0.39) |
|
0.04 |
|
(0.41) |
|
— |
|
(0.41) |
|
10.66 |
|
2016 |
10.20 |
|
0.39 |
|
0.84 |
|
1.23 |
|
(0.40) |
|
— |
|
(0.40) |
|
11.03 |
|
ORIGIN
EMERGING MARKETS FUND |
|
|
|
|
|
|
|
Institutional
shares |
|
|
|
|
|
|
|
|
2020 |
10.47 |
|
0.16 |
|
1.74 |
|
1.90 |
|
(0.20) |
|
— |
|
(0.20) |
|
12.17 |
|
2019 |
11.16 |
|
0.18 |
|
(0.71) |
|
(0.53) |
|
(0.16) |
|
— |
|
(0.16) |
|
10.47 |
|
2018 |
11.61 |
|
0.07 |
|
(0.41) |
|
(0.34) |
|
(0.11) |
|
— |
|
(0.11) |
|
11.16 |
|
2017 |
8.97 |
|
0.05 |
|
2.66 |
|
2.71 |
|
(0.07) |
|
— |
|
(0.07) |
|
11.61 |
|
2016 |
8.42 |
|
0.07 |
|
0.56 |
|
0.63 |
|
(0.08) |
|
— |
|
(0.08) |
|
8.97 |
|
R-6
shares |
|
|
|
|
|
|
|
|
2020 |
10.48 |
|
0.16 |
|
1.75 |
|
1.91 |
|
(0.21) |
|
— |
|
(0.21) |
|
12.18 |
|
2019 |
11.16 |
|
0.25 |
|
(0.76) |
|
(0.51) |
|
(0.17) |
|
— |
|
(0.17) |
|
10.48 |
|
2018 |
11.61 |
|
0.15 |
|
(0.49) |
|
(0.34) |
|
(0.11) |
|
— |
|
(0.11) |
|
11.16 |
|
2017 |
8.97 |
|
0.50 |
|
2.21 |
|
2.71 |
|
(0.07) |
|
— |
|
(0.07) |
|
11.61 |
|
2016 |
8.42 |
|
0.07 |
|
0.56 |
|
0.63 |
|
(0.08) |
|
— |
|
(0.08) |
|
8.97 |
|
FINANCIAL
HIGHLIGHTS (Continued)
PRINCIPAL
FUNDS, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Return |
Net
Assets, End of Period (in thousands) |
Ratio
of Expenses to Average Net Assets |
Ratio
of Expenses to Average Net Assets (Excluding Interest Expense
Fees) |
Ratio
of Gross Expenses to Average Net Assets |
Ratio
of Net Investment Income to Average Net Assets |
Portfolio
Turnover Rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.49 |
% |
|
$72,515 |
|
1.20 |
% |
(b) |
N/A |
|
— |
% |
|
0.88 |
% |
|
44.1 |
% |
|
(7.31) |
|
|
34,866 |
|
1.20 |
|
(b) |
N/A |
|
— |
|
|
1.36 |
|
|
46.8 |
|
|
6.63 |
|
|
18,212 |
|
1.20 |
|
(b) |
N/A |
|
— |
|
|
1.19 |
|
|
45.9 |
|
|
23.66 |
|
|
1,991 |
|
1.08 |
|
(b) |
N/A |
|
— |
|
|
1.72 |
|
|
58.8 |
|
|
3.99 |
|
|
168,786 |
|
1.20 |
|
(b) |
N/A |
|
— |
|
|
0.82 |
|
|
49.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.67 |
|
|
966,964 |
|
1.08 |
|
(b) |
N/A |
|
— |
|
|
0.91 |
|
|
44.1 |
|
|
(7.20) |
|
|
855,932 |
|
1.07 |
|
(b) |
N/A |
|
— |
|
|
1.36 |
|
|
46.8 |
|
|
6.79 |
|
|
976,593 |
|
1.06 |
|
(b) |
N/A |
|
— |
|
|
1.06 |
|
|
45.9 |
|
|
24.21 |
|
(d) |
1,002,985 |
|
1.06 |
|
(b),(e) |
N/A |
|
— |
|
|
0.24 |
|
(e) |
58.8 |
|
(e) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.99 |
|
|
82,465 |
|
0.63 |
% |
(b) |
0.56 |
% |
(b),(f) |
— |
|
|
3.64 |
|
|
76.6 |
|
|
10.55 |
|
|
82,132 |
|
0.70 |
|
(b) |
0.58 |
|
(b),(f) |
— |
|
|
4.27 |
|
|
66.1 |
|
|
3.66 |
|
|
55,466 |
|
0.72 |
|
(b) |
0.62 |
|
(b),(f) |
— |
|
|
4.21 |
|
|
76.0 |
|
|
0.48 |
|
|
61,797 |
|
0.69 |
|
(b) |
0.63 |
|
(b),(f) |
— |
|
|
4.10 |
|
|
67.9 |
|
|
12.23 |
|
|
3,606 |
|
0.70 |
|
(b) |
0.65 |
|
(b),(f) |
— |
|
|
3.57 |
|
|
53.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18.21 |
|
|
26,478 |
|
1.20 |
|
(b) |
N/A |
|
— |
|
|
1.44 |
|
|
72.9 |
|
|
(4.55) |
|
|
11,710 |
|
1.22 |
|
(b) |
N/A |
|
— |
|
|
1.78 |
|
|
59.4 |
|
|
(2.98) |
|
|
12,032 |
|
1.25 |
|
(b) |
N/A |
|
— |
|
|
0.58 |
|
|
52.3 |
|
|
30.58 |
|
|
35,584 |
|
1.24 |
|
(b) |
N/A |
|
— |
|
|
0.51 |
|
|
66.3 |
|
|
7.50 |
|
|
778,143 |
|
1.24 |
|
(b) |
N/A |
|
1.24 |
|
(g) |
0.86 |
|
|
69.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18.30 |
|
|
1,827,389 |
|
1.07 |
|
(b) |
N/A |
|
— |
|
|
1.43 |
|
|
72.9 |
|
|
(4.42) |
|
|
1,082,059 |
|
1.12 |
|
(b) |
N/A |
|
— |
|
|
2.40 |
|
|
59.4 |
|
|
(2.97) |
|
|
622,846 |
|
1.21 |
|
(b) |
N/A |
|
— |
|
|
1.21 |
|
|
52.3 |
|
|
30.54 |
|
|
662,808 |
|
1.21 |
|
(b) |
N/A |
|
— |
|
|
4.54 |
|
|
66.3 |
|
|
7.50 |
|
|
90 |
|
1.26 |
|
(b) |
N/A |
|
— |
|
|
0.87 |
|
|
69.0 |
|
|
(a)Calculated
based on average shares outstanding during the period.
(b)Reflects
Manager's contractual expense limit.
(c)Period
from January 3, 2017, date operations commenced, through August 31,
2017.
(d)Total
return amounts have not been annualized.
(e)Computed
on an annualized basis.
(f)Excludes
interest expense and fees paid through inverse floater agreements. See
"Operating Policies" in notes to financial statements.
(g)Excludes
expense reimbursement from Manager and/or Distributor.
FINANCIAL
HIGHLIGHTS
PRINCIPAL
FUNDS, INC.
Selected
data for a share of Capital Stock outstanding throughout each year ended August
31 (except as noted):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Asset Value, Beginning of Period |
Net
Investment Income (Loss) (a) |
Net
Realized and Unrealized Gain (Loss) on Investments |
Total
From Investment Operations |
Dividends
from Net Investment Income |
Distributions
from Realized Gains |
Total
Dividends and Distributions |
Net
Asset Value, End of Period |
SMALL-MIDCAP
DIVIDEND INCOME FUND |
|
|
|
|
|
|
|
Institutional
shares |
|
|
|
|
|
|
|
|
2020 |
$14.04 |
|
$0.19 |
|
($1.89) |
|
($1.70) |
|
($0.27) |
|
($0.10) |
|
($0.37) |
|
$11.97 |
|
2019 |
17.92 |
|
0.32 |
|
(1.91) |
|
(1.59) |
|
(0.40) |
|
(1.89) |
|
(2.29) |
|
14.04 |
|
2018 |
16.65 |
|
0.39 |
|
1.92 |
|
2.31 |
|
(0.26) |
|
(0.78) |
|
(1.04) |
|
17.92 |
|
2017 |
15.01 |
|
0.41 |
|
1.61 |
|
2.02 |
|
(0.38) |
|
— |
|
(0.38) |
|
16.65 |
|
2016 |
12.79 |
|
0.39 |
|
2.43 |
|
2.82 |
|
(0.34) |
|
(0.26) |
|
(0.60) |
|
15.01 |
|
R-6
shares |
|
|
|
|
|
|
|
|
2020 |
14.10 |
|
0.20 |
|
(1.89) |
|
(1.69) |
|
(0.28) |
|
(0.10) |
|
(0.38) |
|
12.03 |
|
2019 |
17.98 |
|
0.33 |
|
(1.93) |
|
(1.60) |
|
(0.39) |
|
(1.89) |
|
(2.28) |
|
14.10 |
|
2018 |
16.66 |
|
0.40 |
|
1.94 |
|
2.34 |
|
(0.24) |
|
(0.78) |
|
(1.02) |
|
17.98 |
|
2017(c) |
16.17 |
|
0.33 |
|
0.22 |
|
0.55 |
|
(0.06) |
|
— |
|
(0.06) |
|
16.66 |
|
SMALL-MIDCAP
GROWTH FUND |
|
|
|
|
|
|
|
Institutional
shares |
|
|
|
|
|
|
|
|
2020 |
10.26 |
|
(0.06) |
|
4.13 |
|
4.07 |
|
— |
|
— |
|
— |
|
14.33 |
|
2019(g) |
10.00 |
|
(0.01) |
|
0.27 |
|
0.26 |
|
— |
|
— |
|
— |
|
10.26 |
|
FINANCIAL
HIGHLIGHTS (Continued)
PRINCIPAL
FUNDS, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Return |
Net
Assets, End of Period (in thousands) |
Ratio
of Expenses to Average Net Assets |
Ratio
of Net Investment Income to Average Net Assets |
Portfolio
Turnover Rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12.36) |
% |
|
$1,408,105 |
|
0.85 |
% |
(b) |
1.47 |
% |
|
28.9 |
% |
|
(7.54) |
|
|
1,892,406 |
|
0.86 |
|
(b) |
2.19 |
|
|
21.9 |
|
|
14.20 |
|
|
2,453,527 |
|
0.86 |
|
(b) |
2.25 |
|
|
31.5 |
|
|
13.56 |
|
|
2,179,792 |
|
0.86 |
|
(b) |
2.51 |
|
|
25.5 |
|
|
22.94 |
|
|
1,142,465 |
|
0.82 |
|
(b) |
2.90 |
|
|
25.8 |
|
|
|
|
|
|
|
|
|
|
|
(12.24) |
|
|
9,135 |
|
0.79 |
|
(b) |
1.52 |
|
|
28.9 |
|
|
(7.54) |
|
|
8,589 |
|
0.79 |
|
(b) |
2.27 |
|
|
21.9 |
|
|
14.39 |
|
|
7,737 |
|
0.78 |
|
(b) |
2.28 |
|
|
31.5 |
|
|
3.43 |
|
(d) |
610,070 |
|
0.77 |
|
(b),(e) |
2.96 |
|
(e) |
25.5 |
|
(e) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39.77 |
|
(f) |
7,626 |
|
0.83 |
|
(b) |
(0.59) |
|
|
134.3 |
|
|
2.60 |
|
(d) |
5,131 |
|
0.83 |
|
(b),(e) |
(0.48) |
|
(e) |
175.8 |
|
(e) |
(a)Calculated
based on average shares outstanding during the period.
(b)Reflects
Manager's contractual expense limit.
(c)Period
from January 3, 2017, date operations commenced, through August 31,
2017.
(d)Total
return amounts have not been annualized.
(e)Computed
on an annualized basis.
(f)Total
return is calculated using the traded net asset value which may differ from the
reported net asset value. The traded net asset value is the net asset value
which a shareholder would have paid or received from a subscription or
redemption.
(g)Period
from June 12, 2019, date operations commenced, through August 31,
2019.
FINANCIAL
HIGHLIGHTS
PRINCIPAL
FUNDS, INC.
Selected
data for a share of Capital Stock outstanding throughout each year ended August
31 (except as noted):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Asset Value, Beginning of Period |
Net
Investment Income (Loss) (a) |
Net
Realized and Unrealized Gain (Loss) on Investments |
Total
From Investment Operations |
Dividends
from Net Investment Income |
Distributions
from Realized Gains |
Total
Dividends and Distributions |
Net
Asset Value, End of Period |
SPECTRUM
PREFERRED AND CAPITAL SECURITIES INCOME FUND |
|
|
|
|
Class J shares |
|
|
|
|
|
|
|
|
2020 |
$10.01 |
|
$0.41 |
|
$0.04 |
|
$0.45 |
|
($0.45) |
|
$— |
|
($0.45) |
|
$10.01 |
|
2019 |
9.79 |
|
0.47 |
|
0.26 |
|
0.73 |
|
(0.51) |
|
— |
|
(0.51) |
|
10.01 |
|
2018 |
10.26 |
|
0.49 |
|
(0.45) |
|
0.04 |
|
(0.49) |
|
(0.02) |
|
(0.51) |
|
9.79 |
|
2017 |
10.11 |
|
0.49 |
|
0.22 |
|
0.71 |
|
(0.47) |
|
(0.09) |
|
(0.56) |
|
10.26 |
|
2016 |
10.01 |
|
0.48 |
|
0.18 |
|
0.66 |
|
(0.47) |
|
(0.09) |
|
(0.56) |
|
10.11 |
|
Institutional shares |
|
|
|
|
|
|
|
|
2020 |
10.23 |
|
0.45 |
|
0.04 |
|
0.49 |
|
(0.48) |
|
— |
|
(0.48) |
|
10.24 |
|
2019 |
9.99 |
|
0.52 |
|
0.26 |
|
0.78 |
|
(0.54) |
|
— |
|
(0.54) |
|
10.23 |
|
2018 |
10.46 |
|
0.52 |
|
(0.46) |
|
0.06 |
|
(0.51) |
|
(0.02) |
|
(0.53) |
|
9.99 |
|
2017 |
10.30 |
|
0.52 |
|
0.23 |
|
0.75 |
|
(0.50) |
|
(0.09) |
|
(0.59) |
|
10.46 |
|
2016 |
10.18 |
|
0.52 |
|
0.19 |
|
0.71 |
|
(0.50) |
|
(0.09) |
|
(0.59) |
|
10.30 |
|
R-1 shares |
|
|
|
|
|
|
|
|
2020 |
10.17 |
|
0.36 |
|
0.06 |
|
0.42 |
|
(0.40) |
|
— |
|
(0.40) |
|
10.19 |
|
2019 |
9.94 |
|
0.44 |
|
0.25 |
|
0.69 |
|
(0.46) |
|
— |
|
(0.46) |
|
10.17 |
|
2018 |
10.41 |
|
0.44 |
|
(0.46) |
|
(0.02) |
|
(0.43) |
|
(0.02) |
|
(0.45) |
|
9.94 |
|
2017 |
10.25 |
|
0.44 |
|
0.22 |
|
0.66 |
|
(0.41) |
|
(0.09) |
|
(0.50) |
|
10.41 |
|
2016 |
10.14 |
|
0.43 |
|
0.19 |
|
0.62 |
|
(0.42) |
|
(0.09) |
|
(0.51) |
|
10.25 |
|
R-2 shares |
|
|
|
|
|
|
|
|
2020 |
10.11 |
|
0.38 |
|
0.03 |
|
0.41 |
|
(0.41) |
|
— |
|
(0.41) |
|
10.11 |
|
2019 |
9.88 |
|
0.45 |
|
0.25 |
|
0.70 |
|
(0.47) |
|
— |
|
(0.47) |
|
10.11 |
|
2018 |
10.35 |
|
0.45 |
|
(0.45) |
|
— |
|
(0.45) |
|
(0.02) |
|
(0.47) |
|
9.88 |
|
2017 |
10.20 |
|
0.45 |
|
0.22 |
|
0.67 |
|
(0.43) |
|
(0.09) |
|
(0.52) |
|
10.35 |
|
2016 |
10.09 |
|
0.45 |
|
0.18 |
|
0.63 |
|
(0.43) |
|
(0.09) |
|
(0.52) |
|
10.20 |
|
R-3 shares |
|
|
|
|
|
|
|
|
2020 |
10.15 |
|
0.40 |
|
0.04 |
|
0.44 |
|
(0.43) |
|
— |
|
(0.43) |
|
10.16 |
|
2019 |
9.92 |
|
0.47 |
|
0.25 |
|
0.72 |
|
(0.49) |
|
— |
|
(0.49) |
|
10.15 |
|
2018 |
10.39 |
|
0.47 |
|
(0.46) |
|
0.01 |
|
(0.46) |
|
(0.02) |
|
(0.48) |
|
9.92 |
|
2017 |
10.23 |
|
0.47 |
|
0.22 |
|
0.69 |
|
(0.44) |
|
(0.09) |
|
(0.53) |
|
10.39 |
|
2016 |
10.12 |
|
0.47 |
|
0.18 |
|
0.65 |
|
(0.45) |
|
(0.09) |
|
(0.54) |
|
10.23 |
|
R-4 shares |
|
|
|
|
|
|
|
|
2020 |
10.13 |
|
0.42 |
|
0.04 |
|
0.46 |
|
(0.45) |
|
— |
|
(0.45) |
|
10.14 |
|
2019 |
9.90 |
|
0.48 |
|
0.26 |
|
0.74 |
|
(0.51) |
|
— |
|
(0.51) |
|
10.13 |
|
2018 |
10.37 |
|
0.49 |
|
(0.46) |
|
0.03 |
|
(0.48) |
|
(0.02) |
|
(0.50) |
|
9.90 |
|
2017 |
10.21 |
|
0.48 |
|
0.23 |
|
0.71 |
|
(0.46) |
|
(0.09) |
|
(0.55) |
|
10.37 |
|
2016 |
10.10 |
|
0.49 |
|
0.18 |
|
0.67 |
|
(0.47) |
|
(0.09) |
|
(0.56) |
|
10.21 |
|
R-5 shares |
|
|
|
|
|
|
|
|
2020 |
10.18 |
|
0.43 |
|
0.04 |
|
0.47 |
|
(0.46) |
|
— |
|
(0.46) |
|
10.19 |
|
2019 |
9.95 |
|
0.50 |
|
0.25 |
|
0.75 |
|
(0.52) |
|
— |
|
(0.52) |
|
10.18 |
|
2018 |
10.42 |
|
0.50 |
|
(0.45) |
|
0.05 |
|
(0.50) |
|
(0.02) |
|
(0.52) |
|
9.95 |
|
2017 |
10.26 |
|
0.50 |
|
0.23 |
|
0.73 |
|
(0.48) |
|
(0.09) |
|
(0.57) |
|
10.42 |
|
2016 |
10.15 |
|
0.50 |
|
0.18 |
|
0.68 |
|
(0.48) |
|
(0.09) |
|
(0.57) |
|
10.26 |
|
R-6 shares |
|
|
|
|
|
|
|
|
2020 |
10.23 |
|
0.46 |
|
0.04 |
|
0.50 |
|
(0.49) |
|
— |
|
(0.49) |
|
10.24 |
|
2019 |
9.99 |
|
0.53 |
|
0.25 |
|
0.78 |
|
(0.54) |
|
— |
|
(0.54) |
|
10.23 |
|
2018 |
10.46 |
|
0.53 |
|
(0.46) |
|
0.07 |
|
(0.52) |
|
(0.02) |
|
(0.54) |
|
9.99 |
|
2017(g) |
9.91 |
|
0.35 |
|
0.53 |
|
0.88 |
|
(0.33) |
|
— |
|
(0.33) |
|
10.46 |
|
FINANCIAL
HIGHLIGHTS (Continued)
PRINCIPAL
FUNDS, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Return |
Net
Assets, End of Period (in thousands) |
Ratio
of Expenses to Average Net Assets |
Ratio
of Gross Expenses to Average Net Assets |
Ratio
of Net Investment Income to Average Net Assets |
Portfolio
Turnover Rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.67 |
% |
(b) |
$42,554 |
|
1.07 |
% |
(c) |
1.10 |
% |
(d) |
4.17 |
% |
|
18.1 |
% |
|
7.75 |
|
(b) |
45,660 |
|
1.13 |
|
(c) |
1.16 |
|
(d) |
4.89 |
|
|
19.8 |
|
|
0.38 |
|
(b) |
45,458 |
|
1.02 |
|
(c) |
1.05 |
|
(d) |
4.87 |
|
|
12.3 |
|
|
7.37 |
|
(b) |
51,417 |
|
1.00 |
|
(c) |
1.03 |
|
(d) |
4.88 |
|
|
16.1 |
|
|
6.87 |
|
(b) |
50,135 |
|
1.06 |
|
(c) |
1.10 |
|
(d) |
4.84 |
|
|
13.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
4.96 |
|
|
4,746,270 |
|
0.81 |
|
(e) |
— |
|
4.42 |
|
|
18.1 |
|
|
8.12 |
|
|
3,591,388 |
|
0.81 |
|
(e) |
— |
|
5.21 |
|
|
19.8 |
|
|
0.59 |
|
|
3,306,108 |
|
0.80 |
|
(e) |
— |
|
5.09 |
|
|
12.3 |
|
|
7.58 |
|
|
3,817,309 |
|
0.77 |
|
(e) |
— |
|
5.11 |
|
|
16.1 |
|
|
7.26 |
|
|
2,444,823 |
|
0.76 |
|
|
— |
|
5.14 |
|
|
13.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
4.24 |
|
|
613 |
|
1.58 |
|
|
— |
|
3.62 |
|
|
18.1 |
|
|
7.23 |
|
|
1,024 |
|
1.58 |
|
|
— |
|
4.44 |
|
|
19.8 |
|
|
(0.20) |
|
|
987 |
|
1.58 |
|
|
— |
|
4.29 |
|
|
12.3 |
|
|
6.75 |
|
|
1,315 |
|
1.58 |
|
|
— |
|
4.31 |
|
|
16.1 |
|
|
6.32 |
|
|
1,572 |
|
1.58 |
|
|
— |
|
4.32 |
|
|
13.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
4.24 |
|
|
1,565 |
|
1.45 |
|
|
— |
|
3.79 |
|
|
18.1 |
|
|
7.42 |
|
|
1,514 |
|
1.45 |
|
|
— |
|
4.58 |
|
|
19.8 |
|
|
(0.06) |
|
|
1,788 |
|
1.45 |
|
|
— |
|
4.45 |
|
|
12.3 |
|
|
6.84 |
|
|
1,760 |
|
1.45 |
|
|
— |
|
4.44 |
|
|
16.1 |
|
|
6.49 |
|
|
1,234 |
|
1.45 |
|
|
— |
|
4.45 |
|
|
13.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
4.49 |
|
|
1,328 |
|
1.27 |
|
|
— |
|
3.98 |
|
|
18.1 |
|
|
7.58 |
|
|
2,101 |
|
1.27 |
|
|
— |
|
4.77 |
|
|
19.8 |
|
|
0.11 |
|
|
2,319 |
|
1.27 |
|
|
— |
|
4.62 |
|
|
12.3 |
|
|
7.09 |
|
|
2,676 |
|
1.27 |
|
|
— |
|
4.62 |
|
|
16.1 |
|
|
6.66 |
|
|
3,311 |
|
1.27 |
|
|
— |
|
4.63 |
|
|
13.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
4.71 |
|
|
1,031 |
|
1.08 |
|
|
— |
|
4.16 |
|
|
18.1 |
|
|
7.80 |
|
|
1,397 |
|
1.08 |
|
|
— |
|
4.93 |
|
|
19.8 |
|
|
0.31 |
|
|
1,284 |
|
1.08 |
|
|
— |
|
4.82 |
|
|
12.3 |
|
|
7.30 |
|
|
1,304 |
|
1.08 |
|
|
— |
|
4.78 |
|
|
16.1 |
|
|
6.86 |
|
|
1,395 |
|
1.08 |
|
|
— |
|
4.89 |
|
|
13.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
4.82 |
|
|
3,526 |
|
0.96 |
|
|
— |
|
4.29 |
|
|
18.1 |
|
|
7.89 |
|
|
3,200 |
|
0.96 |
|
|
— |
|
5.05 |
|
|
19.8 |
|
|
0.43 |
|
|
3,023 |
|
0.96 |
|
|
— |
|
4.92 |
|
|
12.3 |
|
|
7.40 |
|
|
3,506 |
|
0.96 |
|
|
— |
|
4.92 |
|
|
16.1 |
|
|
7.07 |
|
(f) |
4,216 |
|
0.96 |
|
|
— |
|
4.93 |
|
|
13.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5.17 |
|
(f) |
1,518,101 |
|
0.71 |
|
(e) |
— |
|
4.52 |
|
|
18.1 |
|
|
8.12 |
|
(f) |
910,863 |
|
0.71 |
|
(e) |
— |
|
5.32 |
|
|
19.8 |
|
|
0.69 |
|
|
1,010,227 |
|
0.71 |
|
(e) |
— |
|
5.21 |
|
|
12.3 |
|
|
8.98 |
|
(h) |
520,462 |
|
0.71 |
|
(e),(i) |
— |
|
5.08 |
|
(i) |
16.1 |
|
(i) |
(a)Calculated
based on average shares outstanding during the period.
(b)Total
return is calculated without the contingent deferred sales charge.
(c)Reflects
Manager's contractual expense limit and/or Distributor's voluntary distribution
fee limit.
(d)Excludes
expense reimbursement from Manager and/or Distributor.
(e)Reflects
Manager's contractual expense limit.
(f)Total
return is calculated using the traded net asset value which may differ from the
reported net asset value. The traded net asset value is the net asset value
which a shareholder would have paid or received from a subscription or
redemption.
(g)Period
from January 3, 2017, date operations commenced, through August 31,
2017.
(h)Total
return amounts have not been annualized.
(i)Computed
on an annualized basis.
FINANCIAL
HIGHLIGHTS
PRINCIPAL
FUNDS, INC.
Selected
data for a share of Capital Stock outstanding throughout each year ended August
31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Asset Value, Beginning of Period |
Net
Investment Income (Loss)(a) |
Net
Realized and Unrealized Gain (Loss) on Investments |
Total
From Investment Operations |
Dividends
from Net Investment Income |
Total
Dividends and Distributions |
Net
Asset Value End of Period |
CAPITAL
SECURITIES FUND |
|
|
|
|
|
|
|
Class
S shares |
|
|
|
|
|
|
|
2020 |
$10.17 |
|
$0.50 |
|
$0.23 |
|
$0.73 |
|
($0.54) |
|
($0.54) |
|
$10.36 |
|
2019 |
9.95 |
|
0.58 |
|
0.21 |
|
0.79 |
|
(0.57) |
|
(0.57) |
|
10.17 |
|
2018 |
10.40 |
|
0.58 |
|
(0.49) |
|
0.09 |
|
(0.54) |
|
(0.54) |
|
9.95 |
|
2017 |
9.98 |
|
0.57 |
|
0.36 |
|
0.93 |
|
(0.51) |
|
(0.51) |
|
10.40 |
|
2016 |
9.87 |
|
0.57 |
|
0.07 |
|
0.64 |
|
(0.53) |
|
(0.53) |
|
9.98 |
|
FINANCIAL
HIGHLIGHTS (Continued)
PRINCIPAL
FUNDS, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Return |
Net
Assets, End of Period (in thousands) |
Ratio
of Expenses to Average Net Assets |
Ratio
of Net Investment Income to Average Net Assets |
Portfolio
Turnover Rate |
|
|
|
|
|
|
|
|
|
|
|
|
7.42 |
% |
$846,849 |
0.00 |
% |
(b) |
4.95 |
% |
14.0 |
% |
8.39 |
|
648,432 |
0.00 |
|
(b) |
5.89 |
|
14.7 |
|
0.87 |
|
544,446 |
0.00 |
|
(b) |
5.67 |
|
9.1 |
|
9.62 |
|
457,089 |
0.00 |
|
(b) |
5.67 |
|
8.4 |
|
6.77 |
|
298,208 |
0.00 |
|
(b) |
5.89 |
|
8.8 |
|
(a)Calculated
based on average shares outstanding during the period.
(b)Reflects
Manager's contractual expense limit.
Additional
information about the Fund is available in the Statement of Additional
Information dated December 31, 2020, which is incorporated by reference into
this prospectus. Additional
information about the Funds’ investments is available in the Fund’s annual and
semiannual reports to shareholders. In the Fund’s annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected the Funds’ performance during the last fiscal year. The Statement of
Additional Information and the Fund’s annual and semiannual reports can be
obtained free of charge by writing Principal Funds, P.O. Box 219971, Kansas
City, MO 64121-9971. In addition, the Fund makes its Statement of Additional
Information and annual and semiannual reports available, free of charge, on our
website www.principalfunds.com/prospectuses. To request this and other
information about the Fund and to make shareholder inquiries, telephone
1-800-222-5852.
Reports
and other information about the Fund are available on the EDGAR Database on the
Commission’s internet site at www.sec.gov. Copies of this information may be
obtained, upon payment of a duplicating fee, by electronic request at the
following e-mail address: [email protected].
PFI
has entered into a management agreement with Principal Global Investors, LLC
(“PGI”). PFI and/or PGI, on behalf of the Funds, enter into contractual
arrangements with various parties, including, among others, the Funds’
sub-advisors, distributor, transfer agent and custodian, who provide services to
the Funds. These arrangements are between PFI and/or PGI and the applicable
service provider. Shareholders are not parties to, or intended to be third-party
beneficiaries of, any of these arrangements. Such arrangements are not intended
to create in any individual shareholder or group of shareholders any right,
including the right to enforce such arrangements against the service providers
or to seek any remedy thereunder against PGI or any other service provider,
either directly or on behalf of PFI or any Fund.
This
prospectus provides information that you should consider in determining whether
to purchase shares of a Fund. This prospectus, the Statement of Additional
Information, or the contracts that are exhibits to PFI’s registration statement
are not intended to give rise to any agreement or contract between PFI and/or
any Fund and any investor, or give rise to any contract or other rights in any
individual shareholder, group of shareholders or other person other than any
rights conferred explicitly by federal or state securities laws that may not be
waived.
The
U.S. government does not insure or guarantee an investment in any of the
Funds.
Shares
of the Funds are not deposits or obligations of, or guaranteed or endorsed by,
Principal Bank or any other financial institution, nor are shares of the Funds
federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board, or any other agency.
Principal
Funds, Inc. SEC File 811-07572