PFI 1031 Annual Update 030123

PRINCIPAL FUNDS, INC.

(“PFI” or the “Registrant”)

Statement of Additional Information

Dated March 1, 2023

This Statement of Additional Information (“SAI”) is not a prospectus. It contains information in addition to the information in the Registrant’s Prospectus. The Prospectus, which may be amended from time to time, contains the basic information you should know before investing in a Fund. You should read this SAI together with the Prospectus dated March 1, 2023.

Incorporation by Reference: The audited financial statements, schedules of investments, and auditor’s report included in the Registrant’s Annual Report to Shareholders, for the fiscal year ended October 31, 2022, are hereby incorporated by reference into and are legally a part of this SAI.

For a free copy of the current Prospectus, Semi-Annual Report, or Annual Report, call 1-800-222-5852 or write:

Principal Funds
P.O. Box 219971
Kansas City, MO 64121-9971

The Prospectus may be viewed at www.PrincipalAM.com/Prospectuses.

The proposed merger of the Principal LifeTime 2010 Fund into the Principal LifeTime Strategic Income Fund is expected to occur on or about May 12, 2023 (the “Merger Date”). The Fund’s officers, however, have the discretion to change this date. On the Merger Date, delete all references to the Principal LifeTime 2010 Fund from this SAI.

The ticker symbols for series and share classes begin on the next page.

	Ticker Symbols by Share Class
Fund/Portfolio	A	C	J	Inst.	R-1	R-3	R-4	R-5	R-6
California Municipal	SRCMX	SRCCX		PCMFX
Core Fixed Income	CMPIX	CNMCX	PIOJX	PIOIX	PIOMX	PIOOX	PIOPX	PIOQX	PICNX
Core Plus Bond	PRBDX		PBMJX	PMSIX	PBOMX	PBMMX	PBMSX	PBMPX
Diversified Income	PGBAX	PGDCX		PGDIX					PGBLX
Diversified International	PRWLX		PIIJX	PIIIX	PDVIX	PINRX	PINLX	PINPX	PDIFX
Equity Income	PQIAX	PEUCX	PEIJX	PEIIX	PIEMX	PEIOX	PEIPX	PEIQX
Finisterre Emerging Markets Total Return Bond				PFUMX
Global Emerging Markets	PRIAX		PIEJX	PIEIX	PIXEX	PEAPX	PESSX	PEPSX	PIIMX
Global Real Estate Securities	POSAX			POSIX		PGRKX	PGRVX	PGRUX	PGRSX
Government & High Quality Bond	CMPGX		PMRJX	PMRIX	PMGRX	PRCMX	PMRDX	PMREX
Government Money Market				PGVXX					PGWXX
High Income				PYHIX
High Yield	CPHYX	CCHIX		PHYTX					PHYFX
Inflation Protection			PIPJX	PIPIX	PISPX	PIFPX	PIFSX	PBPPX
International I				PINIX	PPISX	PRPPX	PUPPX	PTPPX	PIIDX
LargeCap Growth I	PLGAX		PLGJX	PLGIX	PCRSX	PPUMX	PPUSX	PPUPX	PLCGX
LargeCap S&P 500 Index	PLSAX	PLICX	PSPJX	PLFIX	PLPIX	PLFMX	PLFSX	PLFPX
LargeCap Value III			PLVJX	PLVIX	PESAX	PPSFX	PPSSX	PPSRX
MidCap	PEMGX	PMBCX	PMBJX	PCBIX	PMSBX	PMBMX	PMBSX	PMBPX	PMAQX
MidCap Growth			PMGJX	PGWIX	PMSGX	PFPPX	PIPPX	PHPPX
MidCap Growth III			PPQJX	PPIMX	PHASX	PPQMX	PPQSX	PPQPX
MidCap S&P 400 Index			PMFJX	MPSIX	PMSSX	PMFMX	PMFSX	PMFPX	PMAPX
MidCap Value I	PCMVX		PVEJX	PVMIX	PLASX	PMPRX	PABWX	PABVX	PCMSX
Money Market	PCSXX		PMJXX
Overseas				PINZX		PINTX	PINUX
Principal Capital Appreciation	CMNWX	CMNCX		PWCIX	PCAMX	PCAOX	PCAPX	PCAQX
Principal LifeTime Strategic Income	PALTX		PLSJX	PLSIX	PLAIX	PLSMX	PLSSX	PLSPX
Principal LifeTime 2010	PENAX		PTAJX	PTTIX	PVASX	PTAMX	PTASX	PTAPX
Principal LifeTime 2015				LTINX	LTSGX	LTAPX	LTSLX	LTPFX
Principal LifeTime 2020	PTBAX		PLFJX	PLWIX	PWASX	PTBMX	PTBSX	PTBPX
Principal LifeTime 2025				LTSTX	LTSNX	LTVPX	LTEEX	LTPDX
Principal LifeTime 2030	PTCAX		PLTJX	PMTIX	PXASX	PTCMX	PTCSX	PTCPX
Principal LifeTime 2035				LTIUX	LTANX	LTAOX	LTSEX	LTPEX
Principal LifeTime 2040	PTDAX		PTDJX	PTDIX	PYASX	PTDMX	PTDSX	PTDPX
Principal LifeTime 2045				LTRIX	LTRGX	LTRVX	LTRLX	LTRDX
Principal LifeTime 2050	PPEAX		PFLJX	PPLIX	PZASX	PTERX	PTESX	PTEFX
Principal LifeTime 2055				LTFIX	LTFGX	LTFDX	LTFLX	LTFPX
Principal LifeTime 2060			PLTAX	PLTZX	PLTRX	PLTCX	PLTMX	PLTOX
Principal LifeTime 2065				PLJIX	PLJAX	PLJCX	PLJDX	PLJEX
Principal LifeTime 2070			PLTLX	PLTGX	PLTSX	PLTDX	PLTBX	PLTFX
Principal LifeTime Hybrid Income			PHJFX	PHTFX					PLTYX
Principal LifeTime Hybrid 2015			PHJMX	PHTMX					PLRRX
Principal LifeTime Hybrid 2020			PHJTX	PHTTX					PLTTX
Principal LifeTime Hybrid 2025			PHJQX	PHTQX					PLFTX
Principal LifeTime Hybrid 2030			PHJNX	PHTNX					PLZTX
Principal LifeTime Hybrid 2035			PHJJX	PHTJX					PLRTX
Principal LifeTime Hybrid 2040			PHJEX	PLTQX					PLMTX
Principal LifeTime Hybrid 2045			PHJYX	PHTYX					PLNTX
Principal LifeTime Hybrid 2050			PHJUX	PHTUX					PLJTX
Principal LifeTime Hybrid 2055			PHJBX	PLTNX					PLHTX
Principal LifeTime Hybrid 2060			PHJGX	PLTHX					PLKTX
Principal LifeTime Hybrid 2065			PHJDX	PLHHX					PLHRX
Principal LifeTime Hybrid 2070			PLKJX	PLKSX					PLKRX
Real Estate Securities	PRRAX	PRCEX	PREJX	PIREX	PRAEX	PRERX	PRETX	PREPX	PFRSX
SAM Balanced	SABPX	SCBPX	PSAJX	PSBIX	PSBGX	PBAPX	PSBLX	PSBFX

HISTORY OF THE FUNDS

Principal Funds, Inc. (“PFI” or the “Registrant”) was organized as Principal Special Markets Fund, Inc. on January 28, 1993, as a Maryland corporation. The Registrant changed its name to Principal Investors Fund, Inc. effective September 14, 2000 and to Principal Funds, Inc. effective June 13, 2008.

On January 12, 2007, the Registrant acquired WM Trust I, WM Trust II, and WM Strategic Asset Management Portfolios, LLC.

Classes offered by each series of the Registrant (each, a “Fund” and, together, the “Funds”) are shown in the following table.

	Share Class
Fund/Portfolio	A	C	J	Inst.	R-1	R-3	R-4	R-5	R-6
California Municipal	X	X		X
Core Fixed Income	X	X	X	X	X	X	X	X	X
Core Plus Bond	X		X	X	X	X	X	X
Diversified Income	X	X		X					X
Diversified International	X		X	X	X	X	X	X	X
Equity Income	X	X	X	X	X	X	X	X
Finisterre Emerging Markets Total Return Bond				X
Global Emerging Markets	X		X	X	X	X	X	X	X
Global Real Estate Securities	X			X		X	X	X	X
Government & High Quality Bond	X		X	X	X	X	X	X
Government Money Market				X					X
High Income				X
High Yield	X	X		X					X
Inflation Protection			X	X	X	X	X	X
International I				X	X	X	X	X	X
LargeCap Growth I	X		X	X	X	X	X	X	X
LargeCap S&P 500 Index	X	X	X	X	X	X	X	X
LargeCap Value III			X	X	X	X	X	X
MidCap	X	X	X	X	X	X	X	X	X
MidCap Growth			X	X	X	X	X	X
MidCap Growth III			X	X	X	X	X	X
MidCap S&P 400 Index			X	X	X	X	X	X	X
MidCap Value I	X		X	X	X	X	X	X	X
Money Market	X		X
Overseas				X	X	X	X
Principal Capital Appreciation	X	X		X	X	X	X	X
Principal LifeTime Strategic Income	X		X	X	X	X	X	X
Principal LifeTime 2010	X		X	X	X	X	X	X
Principal LifeTime 2015				X	X	X	X	X
Principal LifeTime 2020	X		X	X	X	X	X	X
Principal LifeTime 2025				X	X	X	X	X
Principal LifeTime 2030	X		X	X	X	X	X	X
Principal LifeTime 2035				X	X	X	X	X
Principal LifeTime 2040	X		X	X	X	X	X	X
Principal LifeTime 2045				X	X	X	X	X
Principal LifeTime 2050	X		X	X	X	X	X	X
Principal LifeTime 2055				X	X	X	X	X
Principal LifeTime 2060			X	X	X	X	X	X
Principal LifeTime 2065				X	X	X	X	X
Principal LifeTime 2070			X	X	X	X	X	X
Principal LifeTime Hybrid Income			X	X					X
Principal LifeTime Hybrid 2015			X	X					X
Principal LifeTime Hybrid 2020			X	X					X
Principal LifeTime Hybrid 2025			X	X					X
Principal LifeTime Hybrid 2030			X	X					X
Principal LifeTime Hybrid 2035			X	X					X

	Share Class
Fund/Portfolio	A	C	J	Inst.	R-1	R-3	R-4	R-5	R-6
Principal LifeTime Hybrid 2040			X	X					X
Principal LifeTime Hybrid 2045			X	X					X
Principal LifeTime Hybrid 2050			X	X					X
Principal LifeTime Hybrid 2055			X	X					X
Principal LifeTime Hybrid 2060			X	X					X
Principal LifeTime Hybrid 2065			X	X					X
Principal LifeTime Hybrid 2070			X	X					X
Real Estate Securities	X	X	X	X	X	X	X	X	X
SAM Balanced	X	X	X	X	X	X	X	X
SAM Conservative Balanced	X	X	X	X	X	X	X	X
SAM Conservative Growth	X	X	X	X	X	X	X	X
SAM Flexible Income	X	X	X	X	X	X	X	X
SAM Strategic Growth	X	X	X	X	X	X	X	X
Short-Term Income	X	X	X	X	X	X	X	X
SmallCap	X	X	X	X	X	X	X	X	X
SmallCap Growth I			X	X	X	X	X	X	X
SmallCap S&P 600 Index			X	X	X	X	X	X	X
SmallCap Value II			X	X	X	X	X	X	X
Tax-Exempt Bond	X	X		X

Each class has different expenses. Because of these different expenses, the investment performance of the classes will vary. For more information, including your eligibility to purchase certain classes of shares, call Principal Funds at 1-800-222-5852.

Principal Global Investors, LLC (“PGI” or the “Manager”) may recommend to the Board of Directors (the “Board”), and the Board may elect, to close certain Funds to new investors or close certain Funds to new and existing investors. PGI may make such a recommendation when a Fund approaches a size where additional investments in the Fund have the potential to adversely impact Fund performance and make it increasingly difficult to keep the Fund fully invested in a manner consistent with its investment objective. PGI may also recommend to the Board, and the Board may elect, to close certain share classes to new or new and existing investors.

MULTIPLE CLASS STRUCTURE

The Board has adopted a multiple class plan (the “Multiple Class Plan”) pursuant to U.S. Securities and Exchange Commission (“SEC”) Rule 18f-3. The share classes each Fund offers are identified in the chart included under the heading “History of the Funds.” The share classes offered under the Multiple Class Plan include: Classes A, C, J, Institutional, R-1, R-3, R-4, R-5, and R-6.

Class A shares are generally sold with a sales charge that is a variable percentage based on the amount of the purchase, as described in the Prospectus. Certain redemptions of Class A shares within 12 months of purchase may be subject to a contingent deferred sales charge (“CDSC”), as described in the Prospectus.

Class C shares are not subject to a sales charge at the time of purchase but are subject to a 1% CDSC on shares redeemed within 12 months of purchase, as described in the Prospectus.

Class J shares are sold without any front-end sales charge. A CDSC of 1% is imposed if Class J shares are redeemed within 18 months of purchase, as described in the Prospectus.

Sales charge waivers and reductions may be available depending on whether shares are purchased directly from the Fund or through a financial intermediary, as described in the Prospectus and Appendix B to the Prospectus, titled “Intermediary-Specific Sales Charge Waivers and Reductions.”

For Classes A, C, and J shares purchased from the Fund or through an intermediary not identified on Appendix B to the Prospectus, 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 prior to 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 purchased from the Fund or through an intermediary not identified on Appendix B to the Prospectus, 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. (PSI).

Institutional Class and Classes R-1, R-3, R-4, R-5, and R-6 shares are available without any front-end sales charge or CDSC. Classes R-1, R-3, R-4, and R-5 shares are available through employer-sponsored retirement plans. Such plans may impose fees in addition to those charged by the Funds. Classes R-1, R-3, R-4, and R-5 shares are subject to asset-based charges (described below). Class R-6 shares are generally available through the defined contribution investment only channel.

PGI receives a fee for providing investment advisory and certain corporate administrative services under the terms of the Management Agreement between the Registrant and PGI. In addition to the management fee, the Funds’ Classes R-1, R-3, R-4, and R-5 shares pay PGI a service fee and an administrative services fee under the terms of a Service Agreement between the Registrant and PGI and an Administrative Services Agreement between the Registrant and PGI, respectively.

Service Agreement (Classes R-1, R-3, R-4, and R-5 Shares)

The Service Agreement provides for PGI to provide certain personal services to shareholders (plan sponsors) and beneficial owners (plan members) of those classes. These personal services include:

•

responding to plan sponsor and plan member inquiries;

•

providing information regarding plan sponsor and plan member investments; and

•

providing other similar personal services or services related to the maintenance of shareholder accounts as contemplated by National Association of Securities Dealers (NASD) Rule 2830 (or any successor thereto).

As compensation for these services, Principal Funds will pay PGI service fees equal to 0.25% of the average daily net assets attributable to each of the R-1, R-3, R-4, and R-5 Classes. The service fees are calculated and accrued daily and paid monthly to PGI (or at such other intervals as Principal Funds and PGI may agree).

Administrative Services Agreement (Classes R-1, R-3, R-4, and R-5 Shares)

The Administrative Services Agreement provides for PGI to provide services to beneficial owners of Fund shares. Such services include:

•

receiving, aggregating, and processing purchase, exchange, and redemption requests from plan shareholders;

•

providing plan shareholders with a service that invests the assets of their accounts in shares pursuant to pre-authorized instructions submitted by plan members;

•

processing dividend payments from the Funds on behalf of plan shareholders and changing shareholder account designations;

•

acting as shareholder of record and nominee for plans;

•

maintaining account records for shareholders and/or other beneficial owners;

•

providing notification to plan shareholders of transactions affecting their accounts;

•

forwarding prospectuses, financial reports, tax information, and other communications from the Fund to beneficial owners;

•

distributing, receiving, tabulating, and transmitting proxy ballots of plan shareholders; and

•

other similar administrative services.

As compensation for these services, Principal Funds will pay PGI service fees equal to 0.28% of the average daily net assets attributable to the R-1 Class, 0.07% of the average daily net assets of the R-3 Class, 0.03% of the average daily net assets of the R-4 Class, and 0.01% of the average daily net assets of the R-5 Class. The service fees are calculated and accrued daily and paid monthly to PGI (or at such other intervals as Principal Funds and PGI may agree).

PGI will generally, at its discretion, appoint (and may at any time remove) other parties, including companies affiliated with PGI, as its agent to carry out the provisions of the Service Agreement and/or the Administrative Services Agreement. However, the appointment of an agent shall not relieve PGI of any of its responsibilities or liabilities under those agreements. Any fees paid to agents under these agreements shall be the sole responsibility of PGI.

Rule 12b-1 Fees / Distribution Plans and Agreements

The Distributor for the Funds is Principal Funds Distributor, Inc. (“PFD” or the “Distributor”). The address for PFD is as follows: 711 High Street, Des Moines, IA 50392.

In addition to the management and service fees, certain of the Funds’ share classes are subject to a Rule 12b-1 Distribution Plan and Agreement (each, a “Plan” and, together, the “Plans”). The Board and initial shareholders of Classes A, C, J, R-1, R-3, and R-4 shares have approved and entered into a Plan. In adopting the Plans, the Board (including a majority of board members who are not interested persons of the Funds (as defined in the Investment Company Act of 1940, as amended) determined that there was a reasonable likelihood that the Plans would benefit the Funds and the shareholders of the affected classes. Among the possible benefits of the Plans include the potential for building and retaining Fund assets, as well as the ability to offer an incentive for registered representatives to provide ongoing servicing to shareholders.

The Plans provide that each Fund makes payments to the Fund’s Distributor from assets of each share class that has a Plan to compensate the Distributor and other selling dealers, various banks, broker-dealers, and other financial intermediaries, for providing certain services to the Fund. Such services may include, but are not limited to:

•

formulation and implementation of marketing and promotional activities;

•

preparation, printing, and distribution of sales literature;

•

preparation, printing, and distribution of prospectuses and the Fund reports to other-than-existing shareholders;

•

obtaining such information with respect to marketing and promotional activities as the Distributor deems advisable;

•

making payments to dealers and others engaged in the sale of shares or who engage in shareholder support services; and

•

providing training, marketing, and support with respect to the sale of shares.

Each Fund pays the Distributor a fee after the end of each month at an annual rate as a percentage of the daily net asset value of the assets attributable to each share class as follows:

Share Class	Maximum Annualized Rule 12b-1 Fee
A(1)(2)	0.25%(3)
C(2)	1.00%
J(2)	0.15%
R-1	0.35%
R-3	0.25%
R-4	0.10%

(1)

Class A shares of the Money Market Fund are not subject to Rule 12b-1 fees.

(2)

The Distributor also receives the proceeds of any CDSC imposed.

(3)

The maximum annualized Rule 12b-1 fee for Class A shares of the Government & High Quality Bond, LargeCap S&P 500 Index, and Short-Term Income Funds is 0.15%.

Effective December 31, 2015, the Distributor has contractually agreed to limit the distribution fees attributable to Class J normally payable by the Money Market Fund. This waiver is in place through February 29, 2024 and will reduce the Money Market Fund’s distribution fees by 0.15%. It is expected that the fee waiver will continue to the period disclosed; however, PFI and the Distributor, the parties to the agreement, may agree to terminate the fee waiver prior to the end of the period.

Effective January 1, 2021, the Distributor has voluntarily agreed to limit the distribution fees attributable to Class J, reducing the Funds’ 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%.

The Distributor may remit on a continuous basis all of these sums to its investment representatives and other financial intermediaries as a trail fee in recognition of their services and assistance.

Currently, the Distributor makes payments to dealers on accounts for which such dealer is designated dealer of record. Payments are based on the average net asset value of the accounts invested in Classes A, C, J, R-1, R-3, or R-4 shares.

Under the Plans, the Funds have no legal obligation to pay any amount that exceeds the compensation limit. The Funds do not pay, directly or indirectly, interest, carrying charges, or other financing costs in association with these Plans. All fees paid under a Fund’s Plan are paid to the Distributor, which is entitled to retain such fees paid by the Fund without regard to the expenses that it incurs.

For the fiscal year ended October 31, 2022, each Fund made the following 12b-1 payments to PFD, and PFD, from these 12b-1 payments, made the following payments to financial intermediaries that distribute and/or service the Fund’s shares. The “Retained by PFD” column reflects the difference between the amount paid by the Fund to PFD and the amount of that 12b-1 fee paid by PFD to financial intermediaries. That difference/remainder is then used by PFD to pay for other 12b-1-eligible expenses. For the fiscal year ended October 31, 2022, the 12b-1-eligible expenses for each Fund were greater than the amount of the Fund’s 12b-1 payments to PFD.

Fund/Portfolio	Paid by Fund to PFD (amounts in thousands)	Paid by PFD to Financial Intermediaries (amounts in thousands)	Retained by PFD (amounts in thousands)
California Municipal	$ 1,327	$ 1,281	$ 46
Core Fixed Income	1,071	1,071	—
Core Plus Bond	452	445	7
Diversified Income	7,001	7,001	—
Diversified International	890	875	15
Equity Income	4,610	4,404	206
Finisterre Emerging Markets Total Return Bond	5	5	—
Global Emerging Markets	362	354	8
Global Real Estate Securities	365	352	13
Government & High Quality Bond	535	528	7
Government Money Market	—	—	—
High Income	—	—	—
High Yield	1,719	1,689	30

Fund/Portfolio	Paid by Fund to PFD (amounts in thousands)	Paid by PFD to Financial Intermediaries (amounts in thousands)	Retained by PFD (amounts in thousands)
Inflation Protection	$ 55	$ 51	$ 4
International I	12	12	—
LargeCap Growth I	2,011	1,934	77
LargeCap S&P 500 Index	3,338	3,166	172
LargeCap Value III	159	155	4
MidCap	6,172	6,172	—
MidCap Growth	209	206	3
MidCap Growth III	85	83	2
MidCap S&P 400 Index	456	423	33
MidCap Value I	443	432	11
Money Market	752	—	752
Overseas	2	2	—
Principal Capital Appreciation	3,203	3,143	60
Principal LifeTime 2010	404	395	9
Principal LifeTime 2015	78	75	3
Principal LifeTime 2020	1,761	1,735	26
Principal LifeTime 2025	358	339	19
Principal LifeTime 2030	2,676	2,630	46
Principal LifeTime 2035	307	297	10
Principal LifeTime 2040	1,893	1,867	26
Principal LifeTime 2045	230	227	3
Principal LifeTime 2050	926	912	14
Principal LifeTime 2055	132	130	2
Principal LifeTime 2060	90	89	1
Principal LifeTime 2065	13	12	1
Principal LifeTime 2070(1)	—	—	—
Principal LifeTime Hybrid 2015	116	116	—
Principal LifeTime Hybrid 2020	302	302	—
Principal LifeTime Hybrid 2025	367	367	—
Principal LifeTime Hybrid 2030	294	294	—
Principal LifeTime Hybrid 2035	230	230	—
Principal LifeTime Hybrid 2040	195	195	—
Principal LifeTime Hybrid 2045	119	119	—
Principal LifeTime Hybrid 2050	96	96	—
Principal LifeTime Hybrid 2055	43	43	—
Principal LifeTime Hybrid 2060	19	19	—
Principal LifeTime Hybrid 2065	8	8	—
Principal LifeTime Hybrid 2070(2)	—	—	—
Principal LifeTime Hybrid Income	59	59	—
Principal LifeTime Strategic Income	180	173	7
Real Estate Securities	1,597	1,495	102
SAM Balanced	9,837	9,683	154
SAM Conservative Balanced	3,717	3,637	80
SAM Conservative Growth	6,977	6,844	133
SAM Flexible Income	6,551	6,330	221
SAM Strategic Growth	4,568	4,461	107
Short-Term Income	1,142	1,057	85
SmallCap	1,341	1,262	79

Fund/Portfolio	Paid by Fund to PFD (amounts in thousands)	Paid by PFD to Financial Intermediaries (amounts in thousands)	Retained by PFD (amounts in thousands)
SmallCap Growth I	$ 172	$ 164	$ 8
SmallCap S&P 600 Index	566	535	31
SmallCap Value II	53	51	2
Tax-Exempt Bond	1,225	1,170	55

(1)

The Principal LifeTime 2070 Fund is new since October 31, 2022.

(2)

The Principal LifeTime Hybrid 2070 Fund is new since October 31, 2022.

Principal Underwriter

PFD acts as the principal underwriter in the continuous public offering of the Funds’ shares. The table below shows the aggregate dollar amount of underwriting commissions and the amount retained by PFD for the last three fiscal years ended October 31:

Underwriting Fees for Periods Ended October 31 (amounts in thousands)
	2022		2021		2020
Fund/Portfolio	Total Underwriting Commissions	Amount Retained by PFD	Total Underwriting Commissions	Amount Retained by PFD	Total Underwriting Commissions	Amount Retained by PFD
California Municipal	$ 77	$ 59	$ 94	$ 31	$ 286	$ 194
Core Fixed Income	87	28	249	77	240	78
Core Plus Bond	48	14	72	21	107	29
Diversified Income	267(1)	73	411	114	738	218
Diversified International	161	33	214	37	159	29
Equity Income	682	133	895	159	939	196
Finisterre Emerging Markets Total Return Bond	3	1	17(2)	5	11	2
Global Emerging Markets	76(3)	15	117	23	74	13
Global Real Estate Securities	100	18	62	11	102	20
Government & High Quality Bond	71	23	103	32	183	36
High Income	—	—	1	—	9	2
High Yield	139	39	169	44	222	65
Inflation Protection	5	5	3	1	13	3
International I	—	—	3	1	40	6
LargeCap Growth I	273	59	409	80	346	63
LargeCap S&P 500 Index	516	139	557	141	620	150
LargeCap Value III	2	2	—	—	1	1
MidCap	574	106	838	152	665	114
MidCap Growth	6	6	8	8	4	4
MidCap Growth III	—	—	1	1	1	1
MidCap S&P 400 Index	4	4	6	6	10	10
MidCap Value I	130	25	132	22	89	15
Money Market	175	175	103	103	76	76
Principal Capital Appreciation	376	66	456	74	459	76
Principal Lifetime Strategic Income	33	18	27	6	20	5
Principal LifeTime 2010	10	5	16	6	29	8
Principal LifeTime 2020	104	50	140	60	137	47
Principal LifeTime 2030	335	84	387	82	378	76
Principal LifeTime 2040	342	74	368	81	358	79
Principal LifeTime 2050	506	90	462	79	404	73
Principal LifeTime 2060	4	4	6	6	2	2
Principal LifeTime Hybrid Income	22	22	4	4	6	6
Principal LifeTime Hybrid 2015	45	45	7	7	9	9
Principal LifeTime Hybrid 2020	103	103	57	57	26	26
Principal LifeTime Hybrid 2025	157	157	76	76	34	34
Principal LifeTime Hybrid 2030	92	92	46	46	23	23
Principal LifeTime Hybrid 2035	85	85	43	43	36	36
Principal LifeTime Hybrid 2040	77	77	37	37	31	31

Underwriting Fees for Periods Ended October 31 (amounts in thousands)
	2022		2021		2020
Fund/Portfolio	Total Underwriting Commissions	Amount Retained by PFD	Total Underwriting Commissions	Amount Retained by PFD	Total Underwriting Commissions	Amount Retained by PFD
Principal LifeTime Hybrid 2045	$ 57	$ 57	$ 20	$ 20	$ 21	$ 21
Principal LifeTime Hybrid 2050	51	51	23	23	12	12
Principal LifeTime Hybrid 2055	28	28	9	9	4	4
Principal LifeTime Hybrid 2060	11	11	3	3	4	4
Principal LifeTime Hybrid 2065	3	3	1	1	—	—
Real Estate Securities	280	55	243	46	367	70
SAM Balanced	2,044	542	2,277	444	2,067	417
SAM Conservative Balanced	844	311	1,098	260	927	227
SAM Conservative Growth	1,791	396	1,858	379	1,704	322
SAM Flexible Income	918	399	1,172	375	1,176	361
SAM Strategic Growth	1,447	283	1,465	262	1,519	291
Short-Term Income	469	137	553	159	450	136
SmallCap	247	56	380	61	210	36
SmallCap Growth I	2	2	10	10	4	4
SmallCap S&P 600 Index	4	4	4	4	3	3
SmallCap Value II	1	1	6	2	18	3
Tax-Exempt Bond	155	85	164	56	177	72

(1)

Effective March 1, 2022, Global Diversified Income Fund changed its name to Diversified Income Fund.

(2)

Effective February 1, 2021, Finisterre Unconstrained Emerging Markets Bond Fund changed its name to Finisterre Emerging Markets Total Return Bond Fund.

(3)

Effective January 1, 2022, International Emerging Markets Fund changed its name to Global Emerging Markets Fund.

PFD does not charge fees on redemptions or repurchases of Fund shares. The amounts in the table above for Total Underwriting Commissions include any applicable contingent deferred sales charges and front-end sales charges.

Transfer Agency Agreement (Classes A, C, J, Institutional, R-1, R-3, R-4, R-5, and R-6)

The Transfer Agency Agreement provides for Principal Shareholder Services, Inc. (“PSS”) (711 High Street, Des Moines, IA 50392) an affiliate of PGI, to act as transfer and shareholder servicing agent for the Classes A, C, J, Institutional, R-1, R-3, R-4, R-5, and R-6.

•

For Classes A and C, and Institutional Class shares, the Registrant pays PSS a fee for the services provided pursuant to the Transfer Agency Agreement in an amount equal to the costs incurred by PSS for providing such services.

•

For Class J shares, the Registrant pays PSS a fee for the services provided pursuant to the Transfer Agency Agreement in an amount that includes profit.

The Registrant pays PSS for the following services for Classes A, C, and J, and Institutional Class shares:

•

issuance, transfer, conversion, cancellation, and registry of ownership of Fund shares, and maintenance of open account system;

•

preparation and distribution of dividend and capital gain payments to shareholders;

•

delivery, redemption, and repurchase of shares, and remittances to shareholders;

•

the tabulation of proxy ballots and the preparation and distribution to shareholders of notices, proxy statements and proxies, reports, confirmation of transactions, prospectuses, and tax information;

•

communication with shareholders concerning the above items; and

•

use of its best efforts to qualify the capital stock of the Funds for sale in states and jurisdictions as directed by the Funds.

The Registrant does not pay for these services for Classes R-1, R-3, R-4, R-5, and R-6 shares. PSS will pay operating expenses attributable to Classes R-1, R-3, R-4, and R-5 shares related to (a) the cost of meetings of shareholders and (b) the costs of initial and ongoing qualification of the capital stock of the Funds for sale in states and jurisdictions.

DESCRIPTION OF THE FUNDS’ INVESTMENTS AND RISKS

The Registrant is a registered, open-end management investment company, commonly called a mutual fund. The Registrant consists of multiple investment portfolios, which are referred to as “Funds.” Each Fund has its own investment objective, strategies, and portfolio management team. As described below, each Fund has adopted a fundamental policy regarding diversification, as that term is used in the Investment Company Act of 1940, as amended (the “1940 Act”), and as interpreted, modified, or otherwise permitted by regulatory authority having jurisdiction, from time to time.

Fund Policies

The investment objective, principal investment strategies, and principal risks of each Fund are described in the Prospectus. This SAI contains supplemental information about those strategies and risks and the types of securities that those managing the investments of each Fund can select. Additional information is also provided about other strategies that each Fund may use to try to achieve its objective.

The composition of each Fund and the techniques and strategies that those managing a Fund’s investments may use in selecting securities will vary over time. A Fund is not required to use all of the investment techniques and strategies available to it in seeking its goals.

Unless otherwise indicated, with the exception of the percentage limitations on borrowing, the restrictions apply at the time transactions are entered into. Accordingly, any later increase or decrease beyond the specified limitation, resulting from market fluctuations or in a rating by a rating service, does not require elimination of any security from a Fund’s portfolio.

The investment objective of each Fund and, except as described below as “fundamental restrictions,” the investment strategies described in this SAI and the Prospectus are not fundamental and may be changed by the Board without shareholder approval.

With the exception of the diversification test required by the Internal Revenue Code, the Funds will not consider collateral held in connection with securities lending activities when applying any of the following fundamental restrictions or any other investment restriction set forth in the Prospectus or SAI.

Fundamental Restrictions

Except as specifically noted, each Fund has adopted the following fundamental restrictions. Each fundamental restriction is a matter of fundamental policy and may not be changed without a vote of a majority of the outstanding voting securities of the affected Fund, except as permitted by the 1940 Act or other governing Statute and the Rules thereunder, the SEC, or other regulatory agency with authority over the Funds. The 1940 Act provides that “a vote of a majority of the outstanding voting securities” of a Fund means the affirmative vote of the lesser of (1) more than 50% of the outstanding Fund shares or (2) 67% or more of the Fund shares present at a meeting if more than 50% of the outstanding Fund shares are represented at the meeting in person or by proxy. Each share has one vote, with fractional shares voting proportionately. Shares of all classes of a Fund will vote together as a single class, except when otherwise required by law or as determined by the Board.

Each Fund:

may not issue senior securities, except as permitted under the 1940 Act, as amended, and as interpreted, modified or otherwise permitted by regulatory authority having jurisdiction, from time to time.

has adopted a commodities policy, as follows:

(a)

The California Municipal Fund may not purchase or sell commodities, except as permitted under the 1940 Act, as amended, and as interpreted, modified or otherwise permitted by regulatory authority having jurisdiction, from time to time.

(b)

The remaining Funds may not purchase or sell commodities, except as permitted by applicable law, regulation or regulatory authority having jurisdiction.

may not purchase or sell real estate, which term does not include securities of companies that deal in real estate or mortgages or investments secured by real estate or interests therein, except that each Fund reserves freedom of action to hold and to sell real estate acquired as a result of the Fund’s ownership of securities.

may not borrow money, except as permitted under the 1940 Act, as amended, and as interpreted, modified or otherwise permitted by regulatory authority having jurisdiction, from time to time.

may not make loans, except as permitted under the 1940 Act, as amended, and as interpreted, modified or otherwise permitted by regulatory authority having jurisdiction, from time to time.

has adopted a policy regarding diversification, as follows:

(a)

The LargeCap Growth I and Real Estate Securities Funds have elected to be non-diversified.

(b)

All other Funds have elected to be treated as a “diversified” investment company, as that term is used in the 1940 Act, as amended, and as interpreted, modified or otherwise permitted by regulatory authority having jurisdiction, from time to time.

has adopted a concentration policy, as follows:

(a)

The Global Real Estate Securities and Real Estate Securities Funds will concentrate their investments in a particular industry or group of industries as described in the Prospectus.

(b)

The LargeCap S&P 500 Index, MidCap S&P 400 Index, and SmallCap S&P 600 Index Funds will not concentrate their investments in a particular industry or group of industries, except to the extent that their related Index is also so concentrated.

(c)

The remaining Funds may not concentrate, as that term is used in the 1940 Act, as amended, and as interpreted, modified or otherwise permitted by regulatory authority having jurisdiction, from time to time, its investments in a particular industry or group of industries.

may not act as an underwriter of securities, except to the extent that the Fund may be deemed to be an underwriter in connection with the sale of securities held in its portfolio.

Non-Fundamental Restrictions

Except as specifically noted, each Fund has also adopted the following non-fundamental restrictions. Non-fundamental restrictions are not fundamental policies and may be changed without shareholder approval. It is contrary to each Fund’s present policy to:

Invest more than 15% of its net assets in illiquid securities and in repurchase agreements maturing in more than seven days, except to the extent permitted by applicable law or regulatory authority having jurisdiction, from time to time; however:

(a)

The Government Money Market and Money Market Funds may each not invest more than 5% of its net assets in illiquid securities and in repurchase agreements maturing in more than seven days, except to the extent permitted by applicable law or regulatory authority having jurisdiction, from time to time.

(b)

International Fund I, the Principal LifeTime Funds, Principal LifeTime Hybrid Funds, and the Strategic Asset Management (SAM) Portfolios have not adopted this non-fundamental restriction.

Pledge, mortgage, or hypothecate its assets, except to secure permitted borrowings.

(a)

With respect to the Principal LifeTime Funds, Principal LifeTime Hybrid Funds, and Strategic Asset Management (SAM) Portfolios, the deposit of underlying securities and other assets in escrow and other collateral arrangements in connection with transactions that involve any future payment obligation, as permitted under the 1940 Act, as amended, and as interpreted, modified or otherwise permitted by any regulatory authority having jurisdiction, from time to time, by the underlying funds are not deemed to be pledges, mortgages, hypothecations, or other encumbrances.

(b)

For all Funds, the deposit of underlying securities and other assets in escrow and other collateral arrangements in connection with transactions that involve any future payment obligation, as permitted under the 1940 Act, as amended, and as interpreted, modified or otherwise permitted by any regulatory authority having jurisdiction, from time to time, are not deemed to be pledges, mortgages, hypothecations, or other encumbrances.

(c)

International Fund I has not adopted this non-fundamental restriction.

Invest in companies for the purpose of exercising control or management.

(a)

International Fund I has not adopted this non-fundamental restriction.

Invest more than 25% of its assets in foreign securities; however:

(a)

The High Yield Fund may not invest more than 35% of its assets in foreign securities;

(b)

The Diversified Income, Diversified International, Finisterre Emerging Markets Total Return Bond, Global Emerging Markets, Global Real Estate Securities, Money Market, and Overseas Funds each may invest up to 100% of its assets in foreign securities;

(c)

The LargeCap S&P 500 Index, MidCap S&P 400 Index, and SmallCap S&P 600 Index Funds each may invest in foreign securities to the extent that the relevant index is so invested;

(d)

The California Municipal, Government & High Quality Bond, Government Money Market, and Tax-Exempt Bond Funds may not invest in foreign securities; and

(e)

International Fund I, the Principal LifeTime Funds, Principal LifeTime Hybrid Funds, and the Strategic Asset Management (SAM) Portfolios have not adopted this non-fundamental restriction.

Invest more than 5% of its total assets in real estate limited partnership interests.

(a)

The Diversified Income, Global Real Estate Securities, International I, and Real Estate Securities Funds and the Principal LifeTime Funds, Principal LifeTime Hybrid Funds, and the Strategic Asset Management (SAM) Portfolios have not adopted this non-fundamental restriction.

Acquire securities of other investment companies in reliance on Section 12(d)(1)(F) or (G) of the 1940 Act, invest more than 10% of its total assets in securities of other investment companies, invest more than 5% of its total assets in the securities of any one investment company, or acquire more than 3% of the outstanding voting securities of any one investment company, except in connection with a merger, consolidation, or plan of reorganization and except as permitted by the 1940 Act, SEC Rules adopted under the 1940 Act, or exemptions granted by the SEC. The Fund may purchase securities of closed-end investment companies in the open market where no underwriter or dealer’s commission or profit, other than a customary broker’s commission, is involved.

(a)

The Principal LifeTime Funds, Principal LifeTime Hybrid Funds, and the Strategic Asset Management (SAM) Portfolios have not adopted this non-fundamental restriction.

International Fund I has adopted additional non-fundamental restrictions as noted below. The Fund:

may not purchase securities on margin, except that the Fund may obtain such short-term credits as are necessary for the clearance of transactions, and provided that margin payments in connection with futures contracts and options on futures contracts shall not constitute purchasing securities on margin.

may not purchase any security if, as a result, more than 15% of its net assets would be invested in securities that are deemed to be illiquid because they are subject to legal or contractual restrictions on resale or because they cannot be sold or disposed of in the ordinary course of business at approximately the prices at which they are valued.

Non-Fundamental Policy - Rule 35d-1 under the 1940 Act - Investment Company Names

Except as specifically noted, each Fund has also adopted a non-fundamental policy, pursuant to SEC Rule 35d-1, which requires it, under normal circumstances, to invest at least 80% of its net assets, plus any borrowings for investment purposes, in the type of investments, industry, or geographic region (as described in the Prospectus) as suggested by the name of the Fund.

This policy applies at the time of purchase. A Fund will provide 60 days’ notice to shareholders prior to implementing a change in this policy for the Fund. For purposes of this non-fundamental policy, each Fund tests market capitalization ranges monthly.

For purposes of testing this requirement with respect to:

•

Forward foreign currency contracts and other investments that have economic characteristics similar to foreign currency: the value of such contracts and investments may include the Fund’s investments in cash and/or cash equivalents to the extent such cash and/or cash equivalents are maintained with respect to the Fund’s exposure under its forward foreign currency contracts and similar investments.

•

Derivatives instruments: each Fund will typically count the mark-to-market value of such derivatives. However, a Fund may use a derivative contract’s notional value when it determines that notional value is an appropriate measure of the Fund’s exposure to investments. For example, with respect to single-name equity swaps that are “fully paid” (equity swaps in which cash and/or cash equivalents are posted as collateral for the purpose of covering the full notional value of the swap), each Fund will count the value of such cash and/or cash equivalents.

•

Investments in underlying funds (including ETFs): each Fund will count all investments in an underlying fund toward the requirement as long as 80% of the value of such underlying fund’s holdings focus on the particular type of investment suggested by the Fund name.

The California Municipal, Diversified Income, Diversified International, High Income, Inflation Protection, International I, Principal Capital Appreciation, Short-Term Income, and Tax-Exempt Bond Funds, Principal LifeTime Funds, Principal LifeTime Hybrid Funds, and Strategic Asset Management (SAM) Portfolios have not adopted this non-fundamental policy.

The Tax-Exempt Bond Fund has also adopted a fundamental policy that requires it, under normal circumstances, to invest at least 80% of its net assets in investments, the income from which is exempt from federal income tax or so that at least 80% of the income the Fund distributes will be exempt from federal income tax.

The California Municipal Fund has adopted a fundamental policy that requires it, under normal circumstances, to invest at least 80% of its net assets in investments, the income from which is exempt from federal income tax and California state personal income tax or so that at least 80% of the income the Fund distributes will be exempt from federal income tax and California state personal income tax. The Fund also has adopted a non-fundamental policy that requires it, under normal circumstances, to invest at least 80% of its net assets in municipal obligations.

Investment Strategies and Risks Related to Borrowing and Senior Securities, Commodity-Related Investments, Industry Concentration, and Loans

Borrowing and Senior Securities

Under the 1940 Act, a fund that borrows money is required to maintain continuous asset coverage (that is, total assets including borrowings, less liabilities exclusive of borrowings) of 300% of the amount borrowed, with an exception for borrowings not in excess of 5% of the fund’s total assets made for temporary or emergency purposes. If a fund invests the proceeds of borrowing, borrowing will tend to exaggerate the effect on net asset value of any increase or decrease in the market value of a fund’s portfolio. If a fund invests the proceeds of borrowing, money borrowed will be subject to interest costs that may or may not be recovered by earnings on the securities purchased. A fund also may be required to maintain minimum average balances in connection with a borrowing or to pay a commitment or other fee to maintain a line of credit; either of these requirements would increase the cost of borrowing over the stated interest rate.

Commodity-Related Investments

All Funds Except the Finisterre Emerging Markets Total Return Bond Fund

Under the 1940 Act, a fund’s registration statement must recite the fund’s policy with regard to investing in commodities. Each Fund may invest in commodities to the extent permitted by applicable law and under its fundamental and non-fundamental policies and restrictions. Pursuant to a claim for exclusion filed with the Commodity Futures Trading Commission (“CFTC”) on behalf of each of the Funds under Rule 4.5, PGI is not deemed to be a “commodity pool operator” under the Commodity Exchange Act (“CEA”) as it specifically relates to PGI’s operations with respect to the Funds, and the Funds, therefore, are not considered regulated commodity pools and are not subject to registration or regulation under the CEA. The CFTC amended Rule 4.5 exclusions for certain otherwise regulated persons from the definition of the term “commodity pool operator.” Rule 4.5 provides that an investment company does not meet the definition of “commodity pool operator” if its use of futures contracts, options on futures contracts, and swaps is sufficiently limited that the fund can fall within one of two exclusions set out in Rule 4.5. Each Fund intends to limit its use of futures contracts, options on futures contracts, and swaps to the degree necessary to fall within one of the two exclusions. If a Fund is unable to do so, it may incur expenses that are necessary to comply with the CEA and rules the CFTC has adopted under it.

Finisterre Emerging Markets Total Return Bond Fund

Based on its current investment strategies, the Finisterre Emerging Markets Total Return Bond Fund is deemed to be a “commodity pool” under the CEA, and PGI is considered a “commodity pool operator” with respect to the Fund. PGI is, therefore, subject to dual regulation by the SEC and the CFTC. The CFTC or the SEC could alter the regulatory requirements governing the use of commodity futures (which include futures on broad-based securities indexes, interest rate futures, and currency futures) or options on commodity futures or swaps transactions by investment companies, including this Fund.

Industry Concentration

“Concentration” means a fund invests more than 25% of its net assets in a particular industry or group of industries. To monitor compliance with the policy regarding industry concentration, the Funds may use the industry classifications provided by Bloomberg, L.P., the Morgan Stanley Capital International (MSCI)/Standard & Poor’s Global Industry Classification Standard (GICS), the Directory of Companies Filing Annual Reports with the SEC, or any other reasonable industry classification system.

•

Each Fund interprets its policy with respect to concentration in a particular industry to apply only to direct investments in the securities of issuers in a particular industry. To the extent a Fund invests its assets in underlying investment companies, 25% or more of such Fund’s total assets may be indirectly exposed to a particular industry or group of related industries through its investments in one or more underlying investment companies.

•

For purposes of this restriction, government securities (such as treasury securities or mortgage-backed securities that are issued or guaranteed by the U.S. government, its agencies, or instrumentalities) are not subject to the Funds’ industry concentration restrictions.

•

Each Fund views its investments in tax-exempt municipal securities as not representing interests in any particular industry or group of industries. For information about municipal securities, see the Municipal Obligations section.

Loans

A Fund may not make loans to other persons, except as permitted by (i) the 1940 Act and the Rules and Regulations thereunder, or other successor law governing the regulation of registered investment companies, or interpretations or modifications thereof by the SEC, SEC Staff, or other authority of competent jurisdiction, or (ii) pursuant to exemptive or other relief or permission from the SEC, SEC Staff, or other authority of competent jurisdiction. Generally, this means the Funds are typically permitted to make loans but must take into account potential issues such as liquidity, valuation, and avoidance of impermissible transactions. Examples of permissible loans include (a) the lending of its portfolio securities, (b) the purchase of debt securities, loan participations, and/or engaging in direct corporate loans in accordance with the Fund’s investment objective and policies, (c) the entry into a repurchase agreement (to the extent such entry is deemed to be a loan), and (d) loans to affiliated investment companies to the extent permitted by the 1940 Act or any exemptions therefrom that may be granted by the SEC.

Other Investment Strategies and Risks

Commodity Index-Linked Notes

A commodity index-linked note is a type of structured note that is a derivative instrument. Over the long term, the returns on a fund’s investments in commodity index-linked notes are expected to exhibit low or negative correlation with stocks and bonds, which means the prices of commodity-linked notes may move in a different direction than investments in traditional equity and debt securities. As an example, during periods of rising inflation, debt securities have historically tended to decrease in value and the prices of certain commodities, such as oil and metals, have historically tended to increase. The reverse may be true during “bull markets,” when the value of traditional securities such as stocks and bonds is increasing. Under such economic conditions, a fund’s investments in commodity index-linked notes may be expected not to perform as well as investments in traditional securities. There can be no assurance, however, that derivative instruments will perform in that manner in the future and, at certain times in the past, the price movements of commodity-linked investments have been parallel to debt and equity securities. If commodities prices move in tandem with the prices of financial assets, they may not provide overall portfolio diversification benefits.

Convertible Securities

A convertible security is a bond, debenture, note, preferred stock, or other security that entitles the holder to acquire common stock or other equity securities of the same or a different issuer. A convertible security generally entitles the holder to receive interest paid or accrued until the convertible security matures or is redeemed, converted or exchanged. Before conversion, convertible securities have characteristics similar to non-convertible debt or preferred securities, as applicable. Convertible securities rank senior to common stock in a corporation’s capital structure and, therefore, generally entail less

	Ticker Symbols by Share Class
Fund/Portfolio	A	C	J	Inst.	R-1	R-3	R-4	R-5	R-6
SAM Conservative Balanced	SAIPX	SCIPX	PCBJX	PCCIX	PCSSX	PCBPX	PCBLX	PCBFX
SAM Conservative Growth	SAGPX	SCGPX	PCGJX	PCWIX	PCGGX	PCGPX	PCWSX	PCWPX
SAM Flexible Income	SAUPX	SCUPX	PFIJX	PIFIX	PFIGX	PFIPX	PFILX	PFIFX
SAM Strategic Growth	SACAX	SWHCX	PSWJX	PSWIX	PSGGX	PSGPX	PSGLX	PSGFX
Short-Term Income	SRHQX	STCCX	PSJIX	PSHIX	PSIMX	PSIOX	PSIPX	PSIQX
SmallCap	PLLAX	PSMCX	PSBJX	PSLIX	PSABX	PSBMX	PSBSX	PSBPX	PSMLX
SmallCap Growth I			PSIJX	PGRTX	PNASX	PPNMX	PPNSX	PPNPX	PCSMX
SmallCap S&P 600 Index			PSSJX	PSSIX	PSAPX	PSSMX	PSSSX	PSSPX	PSPIX
SmallCap Value II			PSMJX	PPVIX	PCPTX	PJARX	PSTWX	PLARX	PSMVX
Tax-Exempt Bond	PTEAX	PTBCX		PITEX

HISTORY OF THE FUNDS	3
MULTIPLE CLASS STRUCTURE	4
DESCRIPTION OF THE FUNDS’ INVESTMENTS AND RISKS	11
LEADERSHIP STRUCTURE AND BOARD	44
INVESTMENT ADVISORY AND OTHER SERVICES	53
INTERMEDIARY COMPENSATION	64
BROKERAGE ALLOCATION AND OTHER PRACTICES	66
Purchase and Redemption Of Shares	72
Government Money Market and Money Market Funds Material Events	75
Pricing Of Fund Shares	75
Tax Considerations	77
Portfolio Holdings Disclosure	78
Proxy Voting Policies and Procedures	79
Financial Statements	80
Independent Registered Public Accounting Firm	80
General Information	80
Control Persons and Principal Holders Of Securities	81
Portfolio Manager Disclosure	150
APPENDIX A—DESCRIPTION OF BOND RATINGS	A-1
Appendix B—Price Make Up Sheet	B-1
Appendix C—Proxy Voting Policies	C-1