FACTS WHAT DOES PRINCIPAL FUNDS DO WITH YOUR PERSONAL INFORMATION?
 
  Financial companies choose how they share your personal information. Federal law gives
Why? consumers the right to limit some but not all sharing. Federal law also requires us to tell you
  how we collect, share, and protect your personal information. Please read this notice carefully
  to understand what we do.    
 
  The types of personal information we collect and share depend on the product or service you
  have with us. This information can include:    
  Social Security number and income    
What? Assets and transaction history    
  Account transactions and account balances    
  When you are no longer our customer, we continue to share your information as described in
  this notice    
 
  All financial companies need to share customers’ personal information to run their everyday
How? business. In the section below, we list the reasons financial companies can share their
  customers’ personal information; the reasons Principal Funds chooses to share; and whether
  you can limit this sharing.    
 
REASONS WE CAN SHARE YOUR PERSONAL DOES PRINCIPAL CAN YOU LIMIT THIS
INFORMATION     FUNDS SHARE? SHARING?
For our everyday business purposes—such as to    
process your transactions, maintain your account(s),    
      Yes No
respond to court orders and legal investigations, or report    
to credit bureaus      
 
For our marketing purposes—to offer our products and    
      Yes No
services to you        
 
For joint marketing with other financial companies No We don’t share
 
For our affiliates’ everyday business purposes    
      Yes No
information about your transactions and experiences    
 
For our affiliates’ everyday business purposes    
      No We don’t share
information about your creditworthiness    
 
For nonaffiliates to market to you No We don’t share
 
 
Questions? Call 1-800-222-5852 or go to www.principalfunds.com/customer-support/contact-us

 

EE11865PFI-03


 

Page 2

Who we are

Who is providing this notice?

Principal Funds includes Principal Funds, Inc., Principal Funds Distributor, Inc., and Principal Diversified Select Real Asset Fund.

What we do

How does Principal Funds protect my personal information?

How does Principal Funds collect my personal information?

To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include computer safeguards and secured files and buildings.

We collect your personal information, for example, when you • Open an account or seek advice about your investments

•Direct us to buy securities or make deposits, or withdrawals from your account • Give us your contact information or show your government issued ID We also collect your personal information from others, such as affiliates, or other companies.

 

Why can’t I limit all sharing?

Federal law gives you the right to limit only

•sharing for affiliates’ everyday business purposes—information about your creditworthiness • affiliates from using your information to market to you • sharing for nonaffiliates to market to you State laws and individual companies may give you additional rights to limit sharing.

Definitions

Affiliates

Companies related by common ownership or control. They can be financial and nonfinancial companies.

  Our affiliates include companies of Principal Financial Group®
 

Nonaffiliates

Companies not related by common ownership or control. They can be financial and nonfinancial companies.

  Principal Funds does not share with nonaffiliates so they can market to you.
 

Joint marketing

A formal agreement between nonaffiliated financial companies that together market financial products or services to you.

  Principal Funds does not jointly market.
Other important information    

 

This Privacy Notice governs information that you provide to Principal (or that we otherwise receive) when you apply for or receive a product or service used primarily for personal, family or household purposes. We may collect additional information depending on the nature of your relationship with Principal or if you interact with us through our website or other digital technologies. Details about how we protect and use this additional information, including information about your privacy rights under California law such as the California Consumer Privacy Act, are available online at www.principal.com/privacy-policies.

If you do not have access to www.principal.com/privacy-policies, please contact us at 1-800-986-3343 to have a copy mailed to you.

EE11865PFI-03 | 01/2020


 

Table of Contents

Financial Statements 1  
Notes to Financial Statements 25  
Schedules of Investments 41  
Financial Highlights (Includes performance information) 146  
Shareholder Expense Example 160  
Supplemental Information 162

 

Not FDIC or NCUA insured

May lose value Not a deposit No bank or credit union guarantee Not insured by any Federal government agency


 

  Statements of Assets and Liabilities              
  Principal Exchange-Traded Funds              
  December 31, 2021 (unaudited)              
 
                    Principal  
              Principal     International  
      Principal     Healthcare     Adaptive  
      Active High     Innovators     Multi-Factor  
      Yield ETF (a)     ETF (b)     ETF  
Investment in securities — at cost   $ 248,600,520   $ 111,319,498   $ 130,863,262  
Investment in affiliated funds — at cost     $ 847,958   $ 4,668,883   $  
Foreign currency — at cost     $   $   $ 21,548  
Assets                      
Investment in securities — at value   $ 248,815,820 (c) $ 90,022,419 (c) $ 131,852,862  
Investment in affiliated funds — at value       847,958     4,668,883      
Foreign currency — at value               21,710  
Cash       29,780          
Receivables:                      
Dividends       13,384     5     126,155  
Interest       3,592,514          
Securities lending income       230     4,093      
Investment securities sold       906,632     853,357     6  
  Total Assets   254,206,318     95,548,757     132,000,733  
 
Liabilities                      
Accrued management and investment advisory fees       85,657     37,038     28,372  
Accrued income distribution       1,064,065     861,124     675,974  
Payables:                      
Investment securities purchased       7,494,454          
Collateral obligation on securities loaned — at value       847,958     4,668,883      
  Total Liabilities     9,492,134     5,567,045     704,346  
Net Assets Applicable to Outstanding Shares   $ 244,714,184   $ 89,981,712   $ 131,296,387  
 
Net Assets Consist of:                      
Capital shares and additional paid-in-capital   $ 234,804,680   $ 105,824,344   $ 131,309,161  
Total distributable earnings (accumulated loss)       9,909,504     (15,842,632 )   (12,774 )
  Total Net Assets $ 244,714,184   $ 89,981,712   $ 131,296,387  
 
Net Asset Value Per Share:                      
Net assets   $ 244,714,184   $ 89,981,712   $ 131,296,387  
Shares issued and outstanding     11,800,000 (d)   1,900,001     5,200,001  
Net asset value per share     $ 20.74 (d) $ 47.36   $ 25.25  

 

(a)      Effective September 1, 2021, Principal Active Income ETF changed its name to Principal Active High Yield ETF.
(b)      Effective October 29, 2021, Principal Healthcare Innovators Index ETF changed its name to Principal Healthcare Innovators ETF.
(c)      Includes fair market value of securities loaned, see 'Securities Lending' in Notes to Financial Statements.
(d)      Reflects a 2 to 1 stock split effective after the close of trading on August 30, 2021; see Notes to Financial Statements.

See accompanying notes.

1


 

Statements of Assets and Liabilities            
Principal Exchange-Traded Funds            
December 31, 2021 (unaudited)            
 
    Principal            
    Investment            
    Grade     Principal      
    Corporate     Millennials     Principal
    Active ETF     ETF (a)     Quality ETF
Investment in securities — at cost $ 485,151,400   $ 112,781,750   $ 91,299,366
Investment in affiliated funds — at cost $ 1,601,613   $ 2,317,867   $
Assets                
Investment in securities — at value $ 486,475,333 (b) $ 104,092,879 (b) $ 96,797,640
Investment in affiliated funds — at value   1,601,613     2,317,867    
Deposits with counterparty   643,400        
Receivables:                
Dividends   86     35,506     45,926
Interest   4,025,795        
Securities lending income   232     737    
Fund shares sold       5,802,687    
Investment securities sold       1,989,896     173,123
Variation margin on financial derivative instruments   29,475        
Total Assets   492,775,934     114,239,572     97,016,689
 
Liabilities                
Accrued management and investment advisory fees   84,278     39,453     13,065
Accrued income distribution   1,283,773     2,542,964     274,755
Payables:                
Investment securities purchased       5,309,117    
Collateral obligation on securities loaned — at value   1,601,613     2,317,867    
Total Liabilities   2,969,664     10,209,401     287,820
Net Assets Applicable to Outstanding Shares $ 489,806,270   $ 104,030,171   $ 96,728,869
 
Net Assets Consist of:                
Capital shares and additional paid-in-capital $ 490,448,044   $ 110,505,395   $ 85,320,836
Total distributable earnings (accumulated loss)   (641,774 )   (6,475,224 )   11,408,033
Total Net Assets $ 489,806,270   $ 104,030,171   $ 96,728,869
 
Net Asset Value Per Share:                
Net assets $ 489,806,270   $ 104,030,171   $ 96,728,869
Shares issued and outstanding   18,650,001     1,800,001     1,600,001
Net asset value per share $ 26.26   $ 57.79   $ 60.46

 

(a)      Effective October 29, 2021, Principal Millennials Index ETF changed its name to Principal Millennials ETF.
(b)      Includes fair market value of securities loaned, see 'Securities Lending' in Notes to Financial Statements.

See accompanying notes.

2


 

Statements of Assets and Liabilities            
Principal Exchange-Traded Funds            
December 31, 2021 (unaudited)            
 
          Principal      
    Principal     Spectrum      
    Spectrum     Tax-   Principal  
    Preferred     Advantaged   Ultra-Short  
    Securities     Dividend   Active  
    Active ETF     Active ETF   Income ETF  
Investment in securities — at cost $ 442,439,793   $ 22,849,322 $ 8,596,100  
Investment in affiliated funds — at cost $ 7,334,728   $ $ 4,170  
Assets                
Investment in securities — at value $ 449,262,550 (a) $ 23,944,824 $ 8,568,142 (a)
Investment in affiliated funds — at value   7,334,728       4,170  
Deposits with counterparty       14,955    
Receivables:                
Dividends   234     17,623   4  
Interest   3,985,004     199,338   19,776  
Securities lending income   3,429       1  
Total Assets   460,585,945     24,176,740   8,592,093  
 
Liabilities                
Accrued management and investment advisory fees   218,119     13,050   1,398  
Accrued income distribution   1,418,868     99,452   8,000  
Payables:                
Investment securities purchased   235,948        
Collateral obligation on securities loaned — at value   7,334,728       4,170  
Total Liabilities   9,207,663     112,502   13,568  
Net Assets Applicable to Outstanding Shares $ 451,378,282   $ 24,064,238 $ 8,578,525  
 
Net Assets Consist of:                
Capital shares and additional paid-in-capital $ 451,078,429   $ 23,199,193 $ 8,800,419  
Total distributable earnings (accumulated loss)   299,853     865,045   (221,894 )
Total Net Assets $ 451,378,282   $ 24,064,238 $ 8,578,525  
 
Net Asset Value Per Share:                
Net assets $ 451,378,282   $ 24,064,238 $ 8,578,525  
Shares issued and outstanding   22,350,005     1,150,001   350,001  
Net asset value per share $ 20.20   $ 20.93 $ 24.51  
 
(a) Includes fair market value of securities loaned, see 'Securities Lending' in Notes to Financial Statements.        

 

See accompanying notes.

3


 

  Statements of Assets and Liabilities        
  Principal Exchange-Traded Funds        
  December 31, 2021 (unaudited)        
 
      Principal U.S.       Principal U.S.
    Large-Cap     Small-Cap
      Adaptive   Principal U.S.   Adaptive
      Multi-Factor Mega-Cap   Multi-Factor
        ETF   ETF   ETF
Investment in securities — at cost   $ 123,771,997 $ 1,495,299,872 $ 6,216,933
Assets                
Investment in securities — at value   $ 131,911,411 $ 1,866,341,022 $ 6,660,494
Receivables:                
Dividends       82,840   1,294,478   7,466
Fund shares sold       2,901,273    
Investment securities sold       180,760   6,634,807   44,249
Expense reimbursement from Advisor         51,313  
  Total Assets   135,076,284   1,874,321,620   6,712,209
 
Liabilities                
Accrued management and investment advisory fees       18,080   256,564   1,124
Accrued income distribution       421,620   8,364,176   50,000
Payables:                
Investment securities purchased       2,895,939    
  Total Liabilities     3,335,639   8,620,740   51,124
Net Assets Applicable to Outstanding Shares   $ 131,740,645 $ 1,865,700,880 $ 6,661,085
 
Net Assets Consist of:                
Capital shares and additional paid-in-capital   $ 119,455,849 $ 1,307,382,814 $ 6,262,759
Total distributable earnings (accumulated loss)     12,284,796   558,318,066   398,326
  Total Net Assets $ 131,740,645 $ 1,865,700,880 $ 6,661,085
 
Net Asset Value Per Share:                
Net assets   $ 131,740,645 $ 1,865,700,880 $ 6,661,085
Shares issued and outstanding       4,550,001   42,100,001   250,001
Net asset value per share     $ 28.95 $ 44.32 $ 26.64

 

See accompanying notes.

4


 

Statements of Assets and Liabilities      
Principal Exchange-Traded Funds      
December 31, 2021 (unaudited)      
 
    Principal U.S.      
  Small-Cap      
    Multi-Factor     Principal
                       ETF     Value ETF
Investment in securities — at cost $ 1,183,213,260   $ 79,917,211
Investment in affiliated funds — at cost $ 10,127,850   $
Assets            
Investment in securities — at value $ 1,238,741,207 (a) $ 82,092,053
Investment in affiliated funds — at value   10,127,850    
Receivables:            
Dividends     1,190,513     139,963
Securities lending income     8,170     11
Investment securities sold     5,544,861     527,986
Total Assets   1,255,612,601     82,760,013
 
Liabilities            
Accrued management and investment advisory fees     447,280     9,749
Accrued income distribution     7,734,239     609,773
Collateral obligation on securities loaned — at value   10,127,850    
Total Liabilities   18,309,369     619,522
Net Assets Applicable to Outstanding Shares $ 1,237,303,232   $ 82,140,491
 
Net Assets Consist of:            
Capital shares and additional paid-in-capital $ 1,081,277,085   $ 78,128,944
Total distributable earnings (accumulated loss)   156,026,147     4,011,547
Total Net Assets $ 1,237,303,232   $ 82,140,491
 
Net Asset Value Per Share:            
Net assets $ 1,237,303,232   $ 82,140,491
Shares issued and outstanding   26,100,001     1,850,001
Net asset value per share   $ 47.41   $ 44.40
 
(a) Includes fair market value of securities loaned, see 'Securities Lending' in Notes to Financial Statements.  

 

See accompanying notes.

5


 

Statements of Operations              
Principal Exchange-Traded Funds              
Six Months Ended December 31, 2021 (unaudited)              
 
          Principal     Principal  
    Principal     Healthcare     International  
    Active High     Innovators     Adaptive Multi-  
    Yield ETF (a)     ETF (b)     Factor ETF  
Net Investment Income (Loss)                  
Income:                  
Dividend $ 180,941   $ 31,578   $ 1,210,226  
Withholding tax   (719 )       (115,551 )
Interest   4,993,710          
Securities lending — net   2,880     31,254      
Total Income   5,176,812     62,832     1,094,675  
 
Expenses:                  
Management and investment advisory fees   509,111     293,536     110,792  
Total Expenses   509,111     293,536     110,792  
Net Investment Income (Loss)   4,667,701     (230,704 )   983,883  
 
Net Realized and Unrealized Gain (Loss) on Investments and Foreign Currency:                
Net realized gain (loss) from:                  
Investment transactions   6,572,508     (1,709,600 )   (1,569,884 )
In-kind redemptions   18,690,957     11,483,281     677,163  
Foreign currency transactions   (478 )       (7,290 )
Change in unrealized appreciation (depreciation) of:                  
Investments   (25,072,094 )   (42,533,785 )   2,015,194  
Foreign currency transactions   247         1,150  
Net Realized and Unrealized Gain (Loss) on Investments and Foreign Currency   191,140     (32,760,104 )   1,116,333  
Net Increase (Decrease) in Net Assets Resulting from Operations $ 4,858,841   $ (32,990,808 ) $ 2,100,216  

 

(a)      Effective September 1, 2021, Principal Active Income ETF changed its name to Principal Active High Yield ETF.
(b)      Effective October 29, 2021, Principal Healthcare Innovators Index ETF changed its name to Principal Healthcare Innovators ETF.

See accompanying notes.

6


 

Statements of Operations            
Principal Exchange-Traded Funds            
Six Months Ended December 31, 2021 (unaudited)            
 
    Principal            
    Investment            
    Grade     Principal      
    Corporate     Millennials     Principal
    Active ETF     ETF (a)     Quality ETF
Net Investment Income (Loss)                
Income:                
Dividend $ 708   $ 3,124,642   $ 534,516
Withholding tax       (408,015 )  
Interest   6,250,277        
Securities lending — net   5,175     154,186    
Total Income   6,256,160     2,870,813     534,516
 
Expenses:                
Management and investment advisory fees   472,802     238,823     67,314
Total Expenses   472,802     238,823     67,314
Net Investment Income (Loss)   5,783,358     2,631,990     467,202
 
Net Realized and Unrealized Gain (Loss) on Investments, Foreign Currency and Futures:            
Net realized gain (loss) from:                
Investment transactions   1,724,414     41,750     3,344
In-kind redemptions       5,105,168     7,449,209
Foreign currency transactions       (3,472 )  
Futures contracts   453,652        
Change in unrealized appreciation (depreciation) of:                
Investments   (6,996,446 )   (19,962,462 )   3,123,274
Futures contracts   (21,855 )      
Foreign currency transactions       (445 )  
Net Realized and Unrealized Gain (Loss) on Investments, Foreign Currency and                
Futures   (4,840,235 )   (14,819,461 )   10,575,827
Net Increase (Decrease) in Net Assets Resulting from Operations $ 943,123   $ (12,187,471 ) $ 11,043,029
 
(a) Effective October 29, 2021, Principal Millennials Index ETF changed its name to Principal Millennials ETF.      

 

See accompanying notes.

7


 

Statements of Operations              
Principal Exchange-Traded Funds              
Six Months Ended December 31, 2021 (unaudited)              
 
          Principal        
    Principal     Spectrum        
    Spectrum     Tax-     Principal  
    Preferred     Advantaged     Ultra-Short  
    Securities     Dividend     Active  
    Active ETF     Active ETF     Income ETF  
Net Investment Income (Loss)                  
Income:                  
Dividend $ 1,148   $ 74,559   $ 31  
Interest   7,426,831     461,865     24,451  
Securities lending — net   19,472         90  
Total Income   7,447,451     536,424     24,572  
 
Expenses:                  
Management and investment advisory fees   1,141,908     71,861     7,912  
Total Expenses   1,141,908     71,861     7,912  
Net Investment Income (Loss)   6,305,543     464,563     16,660  
 
Net Realized and Unrealized Gain (Loss) on Investments and Futures:                  
Net realized gain (loss) from:                  
Investment transactions   551,714     28,679     322  
Futures contracts       (11,778 )    
Written options         13,924        
Change in unrealized appreciation (depreciation) of:                  
Investments   (6,769,145 )   (469,569 )   (39,375 )
Net Realized and Unrealized Gain (Loss) on Investments   (6,217,431 )   (438,744 )   (39,053 )
Net Increase (Decrease) in Net Assets Resulting from Operations $ 88,112   $ 25,819   $ (22,393 )

 

See accompanying notes.

8


 

Statements of Operations              
Principal Exchange-Traded Funds              
Six Months Ended December 31, 2021 (unaudited)              
 
  Principal U.S.           Principal U.S.  
    Large-Cap         Small-Cap  
    Adaptive     Principal U.S.     Adaptive  
    Multi-Factor   Mega-Cap     Multi-Factor  
    ETF     ETF     ETF  
Net Investment Income (Loss)                  
Income:                  
Dividend $ 729,220   $ 17,250,907   $ 72,035  
Withholding tax   (102 )       (62 )
Total Income   729,118     17,250,907     71,973  
 
Expenses:                  
Management and investment advisory fees   82,432     1,549,433     6,228  
Total Gross Expenses   82,432     1,549,433     6,228  
Less: Reimbursement from Advisor       (309,887 )    
Total Net Expenses   82,432     1,239,546     6,228  
Net Investment Income (Loss)   646,686     16,011,361     65,745  
 
Net Realized and Unrealized Gain (Loss) on Investments:                  
Net realized gain (loss) from:                  
Investment transactions   (795,716 )   32,206,008     (13,745 )
In-kind redemptions   4,939,114     220,013,534      
Change in unrealized appreciation (depreciation) of:                  
Investments   7,766,450     (19,503,795 )   311,897  
Net Realized and Unrealized Gain (Loss) on Investments   11,909,848     232,715,747     298,152  
Net Increase (Decrease) in Net Assets Resulting from Operations $ 12,556,534   $ 248,727,108   $ 363,897  

 

See accompanying notes.

9


 

Statements of Operations        
Principal Exchange-Traded Funds        
Six Months Ended December 31, 2021 (unaudited)        
 
    Principal U.S.        
  Small-Cap        
    Multi-Factor     Principal  
    ETF     Value ETF  
Net Investment Income (Loss)            
Income:            
Dividend $ 16,956,641   $ 1,114,036  
Withholding tax   (4,498 )    
Securities lending — net   80,527     11  
Total Income   17,032,670     1,114,047  
 
Expenses:            
Management and investment advisory fees   3,010,912     44,347  
Total Expenses   3,010,912     44,347  
Net Investment Income (Loss)   14,021,758     1,069,700  
 
Net Realized and Unrealized Gain (Loss) on Investments:            
Net realized gain (loss) from:            
Investment transactions   (11,824,431 )   81,228  
In-kind redemptions   197,028,867     3,961,281  
Change in unrealized appreciation (depreciation) of:            
Investments   (168,080,184 )   (622,242 )
Net Realized and Unrealized Gain (Loss) on Investments   17,124,252     3,420,267  
Net Increase (Decrease) in Net Assets Resulting from Operations $ 31,146,010   $ 4,489,967  

 

See accompanying notes.

10


 

Statement of Changes in Net Assets            
Principal Exchange-Traded Funds            
(unaudited)            
 
    Principal Active High Yield ETF (a)  
    Period ended     Year ended  
    December 31, 2021     June 30, 2021  
Operations            
Net investment income (loss) $ 4,667,701   $ 9,199,173  
Net realized gain (loss) on investments and foreign currency   25,262,987     (6,479,099 )
Change in unrealized appreciation (depreciation) of investments and foreign currency   (25,071,847 )   42,205,061  
Net Increase (Decrease) in Net Assets Resulting from Operations   4,858,841     44,925,135  
 
Dividends to Shareholders            
From net investment income and net realized gain on investments   (6,251,383 )   (9,881,656 )
Total Dividends   (6,251,383 )   (9,881,656 )
 
Capital Share Transactions            
Net increase (decrease) in capital share transactions   13,664,114     (72,696,915 )
Total Increase (Decrease) in Net Assets   12,271,572     (37,653,436 )
 
Net Assets            
Beginning of period   232,442,612     270,096,048  
End of period $ 244,714,184   $ 232,442,612  
 
Capital Share Transactions            
Dollars:            
Sold $ 71,762,801   $ 2,059,299  
Redeemed   (58,098,687 )   (74,756,214 )
Net Increase (Decrease) $ 13,664,114   $ (72,696,915 )
Shares: (b)            
Sold   2,050,000     100,000  
Redeemed   (1,400,000 )   (3,900,000 )
Net Increase (Decrease)   650,000     (3,800,000 )

 

(a)      Effective September 1, 2021, Principal Active Income ETF changed its name to Principal Active High Yield ETF.
(b)      Reflects a 2 to 1 stock split effective after the close of trading on August 30, 2021; see Notes to Financial Statements.

See accompanying notes.

11


 

Statement of Changes in Net Assets            
Principal Exchange-Traded Funds            
(unaudited)            
 
  Principal Healthcare Innovators ETF (a)  
    Period ended   Year ended  
  December 31, 2021   June 30, 2021  
Operations            
Net investment income (loss) $ (230,704 ) $ (372,510 )
Net realized gain (loss) on investments   9,773,681     28,979,751  
Change in unrealized appreciation (depreciation) of investments   (42,533,785 )   6,955,733  
Net Increase (Decrease) in Net Assets Resulting from Operations   (32,990,808 )   35,562,974  
 
Dividends to Shareholders            
From net investment income and net realized gain on investments   (861,124 )   (527,787 )
Total Dividends   (861,124 )   (527,787 )
 
Capital Share Transactions            
Net increase (decrease) in capital share transactions   (52,363,718 )   45,823,914  
Total Increase (Decrease) in Net Assets   (86,215,650 )   80,859,101  
 
Net Assets            
Beginning of period   176,197,362     95,338,261  
End of period $ 89,981,712   $ 176,197,362  
 
Capital Share Transactions            
Dollars:            
Sold $ 2,777,910   $ 111,095,936  
Redeemed   (55,141,628 )   (65,272,022 )
Net Increase (Decrease) $ (52,363,718 ) $ 45,823,914  
Shares:            
Sold   50,000     1,900,000  
Redeemed   (1,050,000 )   (1,150,000 )
Net Increase (Decrease)   (1,000,000 )   750,000  
 
(a) Effective October 29, 2021, Principal Healthcare Innovators Index ETF changed its name to Principal Healthcare Innovators ETF.    

 

See accompanying notes.

12


 

Statement of Changes in Net Assets            
Principal Exchange-Traded Funds            
(unaudited)            
 
    Principal International Adaptive Multi-  
    Factor ETF    
    Period ended   Period ended  
    December 31, 2021   June 30, 2021 (a)  
Operations            
Net investment income (loss) $ 983,883   $ 67,312  
Net realized gain (loss) on investments and foreign currency   (900,011 )   13,912  
Change in unrealized appreciation (depreciation) of investments and foreign currency   2,016,344     (1,026,037 )
Net Increase (Decrease) in Net Assets Resulting from Operations   2,100,216     (944,813 )
 
Dividends to Shareholders            
From net investment income and net realized gain on investments   (1,153,177 )    
Total Dividends   (1,153,177 )    
 
Capital Share Transactions            
Net increase (decrease) in capital share transactions   83,231,311     48,062,850  
Total Increase (Decrease) in Net Assets   84,178,350     47,118,037  
 
Net Assets            
Beginning of period   47,118,037      
End of period $ 131,296,387   $ 47,118,037  
 
Capital Share Transactions            
Dollars:            
Sold $ 93,195,278   $ 48,062,850  
Redeemed   (9,963,967 )    
Net Increase (Decrease) $ 83,231,311   $ 48,062,850  
Shares:            
Sold   3,700,000     1,900,001  
Redeemed   (400,000 )    
Net Increase (Decrease)   3,300,000     1,900,001  
 
(a) Period from May 26, 2021, date operations commenced, through June 30, 2021.            

 

See accompanying notes.

13


 

Statement of Changes in Net Assets            
Principal Exchange-Traded Funds            
(unaudited)            
 
    Principal Investment Grade Corporate Active  
    ETF        
    Period ended     Year ended  
    December 31, 2021   June 30, 2021  
Operations            
Net investment income (loss) $ 5,783,358   $ 7,616,986  
Net realized gain (loss) on investments and futures   2,178,066     3,895,398  
Change in unrealized appreciation (depreciation) of investments and futures   (7,018,301 )   403,989  
Net Increase (Decrease) in Net Assets Resulting from Operations   943,123     11,916,373  
 
Dividends to Shareholders            
From net investment income and net realized gain on investments   (9,710,687 )   (14,392,204 )
Total Dividends   (9,710,687 )   (14,392,204 )
 
Capital Share Transactions            
Net increase (decrease) in capital share transactions   17,302,572     373,054,558  
Total Increase (Decrease) in Net Assets   8,535,008     370,578,727  
 
Net Assets            
Beginning of period   481,271,262     110,692,535  
End of period $ 489,806,270   $ 481,271,262  
 
Capital Share Transactions            
Dollars:            
Sold $ 17,302,572   $ 383,550,803  
Redeemed       (10,496,245 )
Net Increase (Decrease) $ 17,302,572   $ 373,054,558  
Shares:            
Sold   650,000     14,250,000  
Redeemed       (400,000 )
Net Increase (Decrease)   650,000     13,850,000  

 

See accompanying notes.

14


 

Statement of Changes in Net Assets            
Principal Exchange-Traded Funds            
(unaudited)            
 
    Principal Millennials ETF (a)  
    Period ended   Year ended  
  December 31, 2021   June 30, 2021  
Operations            
Net investment income (loss) $ 2,631,990   $ 331,354  
Net realized gain (loss) on investments and foreign currency   5,143,446     21,712,308  
Change in unrealized appreciation (depreciation) of investments and foreign currency   (19,962,907 )   7,404,266  
Net Increase (Decrease) in Net Assets Resulting from Operations   (12,187,471 )   29,447,928  
 
Dividends to Shareholders            
From net investment income and net realized gain on investments   (2,713,066 )   (481,261 )
Total Dividends   (2,713,066 )   (481,261 )
 
Capital Share Transactions            
Net increase (decrease) in capital share transactions   (7,468,588 )   71,724,249  
Total Increase (Decrease) in Net Assets   (22,369,125 )   100,690,916  
 
Net Assets            
Beginning of period   126,399,296     25,708,380  
End of period $ 104,030,171   $ 126,399,296  
 
Capital Share Transactions            
Dollars:            
Sold $ 30,366,003   $ 147,097,949  
Redeemed   (37,834,591 )   (75,373,700 )
Net Increase (Decrease) $ (7,468,588 ) $ 71,724,249  
Shares:            
Sold   500,000     2,550,000  
Redeemed   (600,000 )   (1,250,000 )
Net Increase (Decrease)   (100,000 )   1,300,000  
 
(a) Effective October 29, 2021, Principal Millennials Index ETF changed its name to Principal Millennials ETF.        

 

See accompanying notes.

15


 

Statement of Changes in Net Assets            
Principal Exchange-Traded Funds            
(unaudited)            
 
    Principal Quality ETF  
    Period ended   Year ended  
    December 31, 2021   June 30, 2021  
Operations            
Net investment income (loss) $ 467,202   $ 380,155  
Net realized gain (loss) on investments   7,452,553     7,418,259  
Change in unrealized appreciation (depreciation) of investments   3,123,274     1,633,115  
Net Increase (Decrease) in Net Assets Resulting from Operations   11,043,029     9,431,529  
 
Dividends to Shareholders            
From net investment income and net realized gain on investments   (614,556 )   (296,923 )
Total Dividends   (614,556 )   (296,923 )
 
Capital Share Transactions            
Net increase (decrease) in capital share transactions   27,814,769     31,399,812  
Total Increase (Decrease) in Net Assets   38,243,242     40,534,418  
 
Net Assets            
Beginning of period   58,485,627     17,951,209  
End of period $ 96,728,869   $ 58,485,627  
 
Capital Share Transactions            
Dollars:            
Sold $ 106,111,513   $ 83,793,358  
Redeemed   (78,296,744 )   (52,393,546 )
Net Increase (Decrease) $ 27,814,769   $ 31,399,812  
Shares:            
Sold   1,900,000     1,700,000  
Redeemed   (1,400,000 )   (1,050,000 )
Net Increase (Decrease)   500,000     650,000  

 

See accompanying notes.

16


 

Statement of Changes in Net Assets            
Principal Exchange-Traded Funds            
(unaudited)            
 
    Principal Spectrum Preferred Securities  
    Active ETF    
    Period ended   Year ended  
    December 31, 2021   June 30, 2021  
Operations            
Net investment income (loss) $ 6,305,543   $ 8,156,646  
Net realized gain (loss) on investments   551,714     550,789  
Change in unrealized appreciation (depreciation) of investments   (6,769,145 )   13,134,839  
Net Increase (Decrease) in Net Assets Resulting from Operations   88,112     21,842,274  
 
Dividends to Shareholders            
From net investment income and net realized gain on investments   (9,470,707 )   (9,608,037 )
Total Dividends   (9,470,707 )   (9,608,037 )
 
Capital Share Transactions            
Net increase (decrease) in capital share transactions   97,427,743     211,103,817  
Total Increase (Decrease) in Net Assets   88,045,148     223,338,054  
 
Net Assets            
Beginning of period   363,333,134     139,995,080  
End of period $ 451,378,282   $ 363,333,134  
 
Capital Share Transactions            
Dollars:            
Sold $ 97,427,743   $ 211,103,817  
Redeemed        
Net Increase (Decrease) $ 97,427,743   $ 211,103,817  
Shares:            
Sold   4,750,000     10,350,000  
Redeemed        
Net Increase (Decrease)   4,750,000     10,350,000  

 

See accompanying notes.

17


 

Statement of Changes in Net Assets            
Principal Exchange-Traded Funds            
(unaudited)            
 
    Principal Spectrum Tax-Advantaged  
    Dividend Active ETF  
    Period ended     Year ended  
    December 31, 2021   June 30, 2021  
Operations            
Net investment income (loss) $ 464,563   $ 919,696  
Net realized gain (loss) on investments   30,825     129,559  
Change in unrealized appreciation (depreciation) of investments   (469,569 )   1,712,911  
Net Increase (Decrease) in Net Assets Resulting from Operations   25,819     2,762,166  
 
Dividends to Shareholders            
From net investment income and net realized gain on investments   (738,053 )   (1,062,462 )
Total Dividends   (738,053 )   (1,062,462 )
 
Capital Share Transactions            
Net increase (decrease) in capital share transactions   2,129,041     1,000,132  
Total Increase (Decrease) in Net Assets   1,416,807     2,699,836  
 
Net Assets            
Beginning of period   22,647,431     19,947,595  
End of period $ 24,064,238   $ 22,647,431  
 
Capital Share Transactions            
Dollars:            
Sold $ 2,129,041   $ 1,000,132  
Redeemed        
Net Increase (Decrease) $ 2,129,041   $ 1,000,132  
Shares:            
Sold   100,000     50,000  
Redeemed        
Net Increase (Decrease)   100,000     50,000  

 

See accompanying notes.

18


 

Statement of Changes in Net Assets            
Principal Exchange-Traded Funds            
(unaudited)            
 
    Principal Ultra-Short Active  
    Income ETF  
    Period ended   Year ended  
    December 31, 2021   June 30, 2021  
Operations            
Net investment income (loss) $ 16,660   $ 89,020  
Net realized gain (loss) on investments   322     13,955  
Change in unrealized appreciation (depreciation) of investments   (39,375 )   (32,874 )
Net Increase (Decrease) in Net Assets Resulting from Operations   (22,393 )   70,101  
 
Dividends to Shareholders            
From net investment income and net realized gain on investments   (56,101 )   (215,987 )
Total Dividends   (56,101 )   (215,987 )
 
Capital Share Transactions            
Net increase (decrease) in capital share transactions       (3,706,573 )
Total Increase (Decrease) in Net Assets   (78,494 )   (3,852,459 )
 
Net Assets            
Beginning of period   8,657,019     12,509,478  
End of period $ 8,578,525   $ 8,657,019  
 
Capital Share Transactions            
Dollars:            
Sold $   $ 1,238,181  
Redeemed       (4,944,754 )
Net Increase (Decrease) $   $ (3,706,573 )
Shares:            
Sold       50,000  
Redeemed       (200,000 )
Net Increase (Decrease)       (150,000 )

 

See accompanying notes.

19


 

Statement of Changes in Net Assets          
Principal Exchange-Traded Funds          
(unaudited)          
 
    Principal U.S. Large-Cap Adaptive Multi-
    Factor ETF
    Period ended     Period ended
    December 31, 2021   June 30, 2021 (a)
Operations          
Net investment income (loss) $ 646,686   $ 15,311
Net realized gain (loss) on investments   4,143,398     110
Change in unrealized appreciation (depreciation) of investments   7,766,450     372,964
Net Increase (Decrease) in Net Assets Resulting from Operations   12,556,534     388,385
 
Dividends to Shareholders          
From net investment income and net realized gain on investments   (660,123 )  
Total Dividends   (660,123 )  
 
Capital Share Transactions          
Net increase (decrease) in capital share transactions   90,002,261     29,453,588
Total Increase (Decrease) in Net Assets   101,898,672     29,841,973
 
Net Assets          
Beginning of period   29,841,973    
End of period $ 131,740,645   $ 29,841,973
 
Capital Share Transactions          
Dollars:          
Sold $ 138,799,895   $ 29,453,588
Redeemed   (48,797,634 )  
Net Increase (Decrease) $ 90,002,261   $ 29,453,588
Shares:          
Sold   5,150,000     1,150,001
Redeemed   (1,750,000 )  
Net Increase (Decrease)   3,400,000     1,150,001
 
(a) Period from May 19, 2021, date operations commenced, through June 30, 2021.          

 

See accompanying notes.

20


 

Statement of Changes in Net Assets            
Principal Exchange-Traded Funds            
(unaudited)            
 
    Principal U.S. Mega-Cap ETF  
    Period ended     Year ended  
    December 31, 2021     June 30, 2021  
Operations            
Net investment income (loss) $ 16,011,361   $ 28,827,265  
Net realized gain (loss) on investments   252,219,542     192,160,118  
Change in unrealized appreciation (depreciation) of investments   (19,503,795 )   284,619,935  
Net Increase (Decrease) in Net Assets Resulting from Operations   248,727,108     505,607,318  
 
Dividends to Shareholders            
From net investment income and net realized gain on investments   (24,965,735 )   (27,303,682 )
Total Dividends   (24,965,735 )   (27,303,682 )
 
Capital Share Transactions            
Net increase (decrease) in capital share transactions   (316,124,669 )   (25,285,343 )
Total Increase (Decrease) in Net Assets   (92,363,296 )   453,018,293  
 
Net Assets            
Beginning of period   1,958,064,176     1,505,045,883  
End of period $ 1,865,700,880   $ 1,958,064,176  
 
Capital Share Transactions            
Dollars:            
Sold $ 407,861,839   $ 526,851,840  
Redeemed   (723,986,508 )   (552,137,183 )
Net Increase (Decrease) $ (316,124,669 ) $ (25,285,343 )
Shares:            
Sold   9,600,000     14,150,000  
Redeemed   (16,850,000 )   (14,900,000 )
Net Increase (Decrease)   (7,250,000 )   (750,000 )

 

See accompanying notes.

21


 

Statement of Changes in Net Assets          
Principal Exchange-Traded Funds          
(unaudited)          
 
    Principal U.S. Small-Cap Adaptive Multi-
    Factor ETF  
    Period ended   Period ended
    December 31, 2021   June 30, 2021 (a)
Operations          
Net investment income (loss) $ 65,745   $ 6,980
Net realized gain (loss) on investments   (13,745 )   1,295
Change in unrealized appreciation (depreciation) of investments   311,897     131,664
Net Increase (Decrease) in Net Assets Resulting from Operations   363,897     139,939
 
Dividends to Shareholders          
From net investment income and net realized gain on investments   (105,510 )  
Total Dividends   (105,510 )  
 
Capital Share Transactions          
Net increase (decrease) in capital share transactions       6,262,759
Total Increase (Decrease) in Net Assets   258,387     6,402,698
 
Net Assets          
Beginning of period   6,402,698    
End of period $ 6,661,085   $ 6,402,698
 
Capital Share Transactions          
Dollars:          
Sold $   $ 6,262,759
Redeemed      
Net Increase (Decrease) $   $ 6,262,759
Shares:          
Sold       250,001
Redeemed      
Net Increase (Decrease)       250,001
 
(a) Period from May 19, 2021, date operations commenced, through June 30, 2021.          

 

See accompanying notes.

22


 

Statement of Changes in Net Assets            
Principal Exchange-Traded Funds            
(unaudited)            
 
    Principal U.S. Small-Cap Multi-Factor ETF  
    Period ended     Year ended  
    December 31, 2021     June 30, 2021  
Operations            
Net investment income (loss) $ 14,021,758   $ 13,278,051  
Net realized gain (loss) on investments   185,204,436     186,577,277  
Change in unrealized appreciation (depreciation) of investments   (168,080,184 )   264,338,863  
Net Increase (Decrease) in Net Assets Resulting from Operations   31,146,010     464,194,191  
 
Dividends to Shareholders            
From net investment income and net realized gain on investments   (17,349,751 )   (10,376,768 )
Total Dividends   (17,349,751 )   (10,376,768 )
 
Capital Share Transactions            
Net increase (decrease) in capital share transactions   (404,496,326 )   845,880,659  
Total Increase (Decrease) in Net Assets   (390,700,067 )   1,299,698,082  
 
Net Assets            
Beginning of period   1,628,003,299     328,305,217  
End of period $ 1,237,303,232   $ 1,628,003,299  
 
Capital Share Transactions            
Dollars:            
Sold $ 424,307,185   $ 1,451,694,258  
Redeemed   (828,803,511 )   (605,813,599 )
Net Increase (Decrease) $ (404,496,326 ) $ 845,880,659  
Shares:            
Sold   9,050,000     36,050,000  
Redeemed   (17,650,000 )   (13,350,000 )
Net Increase (Decrease)   (8,600,000 )   22,700,000  

 

See accompanying notes.

23


 

Statement of Changes in Net Assets            
Principal Exchange-Traded Funds            
(unaudited)            
 
    Principal Value ETF  
    Period ended     Year ended  
    December 31, 2021   June 30, 2021  
Operations            
Net investment income (loss) $ 1,069,700   $ 826,275  
Net realized gain (loss) on investments   4,042,509     7,607,296  
Change in unrealized appreciation (depreciation) of investments   (622,242 )   1,803,600  
Net Increase (Decrease) in Net Assets Resulting from Operations   4,489,967     10,237,171  
 
Dividends to Shareholders            
From net investment income and net realized gain on investments   (1,428,275 )   (700,888 )
Total Dividends   (1,428,275 )   (700,888 )
 
Capital Share Transactions            
Net increase (decrease) in capital share transactions   34,580,463     3,055,086  
Total Increase (Decrease) in Net Assets   37,642,155     12,591,369  
 
Net Assets            
Beginning of period   44,498,336     31,906,967  
End of period $ 82,140,491   $ 44,498,336  
 
Capital Share Transactions            
Dollars:            
Sold $ 64,496,194   $ 38,529,990  
Redeemed   (29,915,731 )   (35,474,904 )
Net Increase (Decrease) $ 34,580,463   $ 3,055,086  
Shares:            
Sold   1,500,000     950,000  
Redeemed   (700,000 )   (1,050,000 )
Net Increase (Decrease)   800,000     (100,000 )

 

See accompanying notes.

24


 

Notes to Financial Statements
Principal Exchange-Traded Funds
December 31, 2021 (unaudited)

1. Organization

The Principal Exchange-Traded Funds (the “Trust”) is a statutory trust organized under the laws of the State of Delaware in 2013 and is authorized to have multiple series or portfolios. The Trust is an open-end management investment company, registered under the Investment Company Act of 1940, as amended (the “1940 Act”). The Trust currently consists of fourteen series, Principal Active High Yield ETF, Principal Healthcare Innovators ETF, Principal International Adaptive Multi-Factor ETF, Principal Investment Grade Corporate Active ETF, Principal Millennials ETF, Principal Quality ETF, Principal Spectrum Preferred Securities Active ETF, Principal Spectrum Tax-Advantaged Dividend Active ETF, Principal Ultra-Short Active Income ETF, Principal U.S. Large-Cap Adaptive Multi-Factor ETF, Principal U.S. Mega-Cap ETF, Principal U.S. Small-Cap Adaptive Multi-Factor ETF, Principal U.S. Small-Cap Multi-Factor ETF and Principal Value ETF (collectively, the “Funds” and individually, a “Fund”). The Funds are “diversified”, and as such, the Funds' investments are required to meet certain diversification requirements under the 1940 Act. The shares of the Funds are referred to herein as “Shares”.

Each of the Funds is an investment company and applies specialized accounting and reporting under Accounting Standards Codification Topic 946, Financial Services - Investment Companies. The Funds have not provided financial support and are not contractually required to provide financial support to any investee.

The Trust issues and redeems Shares at net asset value (“NAV”) only with Authorized Participants (“APs”) and only in aggregations of 50,000 Shares with the exception of Principal International Adaptive Multi-Factor ETF which is issued and redeemed in aggregations of 100,000 shares (each a “Creation Unit” or multiples thereof “Creation Unit Aggregations”), which is subject to change. The Trust issues and redeems Creation Unit Aggregations in exchange for portfolio securities and/or cash, plus a fixed and/or variable transaction fee.

Shares trade on exchanges at market prices that may be below, at, or above NAV. Shares are listed on the respective exchanges as listed below:

Fund Exchange
Principal Active High Yield ETF NYSE Arca
Principal Healthcare Innovators ETF The Nasdaq Stock Market LLC
Principal International Adaptive Multi-Factor ETF Cboe BZX Exchange, Inc.
Principal Investment Grade Corporate Active ETF NYSE Arca
Principal Millennials ETF The Nasdaq Stock Market LLC
Principal Quality ETF The Nasdaq Stock Market LLC
Principal Spectrum Preferred Securities Active ETF NYSE Arca
Principal Spectrum Tax-Advantaged Dividend Active ETF NYSE Arca
Principal Ultra-Short Active Income ETF NYSE Arca
Principal U.S. Large-Cap Adaptive Multi-Factor ETF Cboe BZX Exchange, Inc.
Principal U.S. Mega-Cap ETF The Nasdaq Stock Market LLC
Principal U.S. Small-Cap Adaptive Multi-Factor ETF Cboe BZX Exchange, Inc.
Principal U.S. Small-Cap Multi-Factor ETF The Nasdaq Stock Market LLC
Principal Value ETF The Nasdaq Stock Market LLC

 

Principal U.S. Large-Cap Adaptive Multi-Factor ETF and Principal U.S. Small-Cap Adaptive Multi-Factor ETF initial investments and commencement of operations was May 19, 2021. Principal International Adaptive Multi-Factor ETF initial investment and commencement of operations was May 26, 2021.

Effective September 1, 2021, Principal Active Income ETF changed its name to Principal Active High Yield ETF. In addition to the name change, the Trust's Board of Trustees authorized a 2 for 1 stock split effective after the close of trading on August 30, 2021. The stock split has been retroactively reflected on the Statement of Changes in Net Assets and Financial Highlights.

25


 

Notes to Financial Statements
Principal Exchange-Traded Funds
December 31, 2021 (unaudited)

1. Organization (continued)

Effective October 29, 2021, the following Funds changed their names as shown below:

Previous Name New Name
Principal Healthcare Innovators Index ETF Principal Healthcare Innovators ETF
Principal Millennials Index ETF Principal Millennials ETF

 

2. Significant Accounting Policies

The preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following summarizes the significant accounting policies of the Funds:

Security Valuation. The Funds may invest in series of Principal Funds, Inc. and other investment funds, which may include money market funds and other registered open-end investment companies. Investments in registered open-end investment companies are valued at the respective fund's closing NAV per share on the day of valuation.

The Funds value securities for which market quotations are readily available at fair value, which is determined using the last reported sale price. If no sales are reported, as is regularly the case for some securities traded over-the-counter, securities are valued using the last reported bid price or an evaluated bid price provided by a pricing service. Pricing services use modeling techniques that incorporate security characteristics such as current quotations by broker/dealers, coupon, maturity, quality, type of issue, trading characteristics, other yield and risk factors and other market conditions to determine an evaluated bid price. When reliable market quotations are not considered to be readily available, which may be the case, for example, with respect to restricted securities, certain debt securities, preferred stocks, and foreign securities, the investments are valued at their fair value as determined in good faith by the Principal Global Investors, LLC (“the Advisor”) under procedures established and periodically reviewed by the Fund's Board of Trustees.

The value of foreign securities used in computing the NAV per share is generally determined as of the close of the foreign exchange where the security is principally traded. Events that occur after the close of the applicable foreign market or exchange but prior to the calculation of the Fund’s NAV are reflected in the Fund’s NAV and these securities are valued at fair value. Many factors, provided by independent pricing services, are reviewed in the course of making a good faith determination of a security's fair value including, but not limited to, price movements in American Depository Receipts (“ADRs”), futures contracts, industry indices, general indices, and foreign currencies.

To the extent the Funds invest in foreign securities listed on foreign exchanges which trade on days on which the Funds do not determine NAV, for example, weekends and other customary national U.S. holidays, the Fund’s NAV could be significantly affected on days when shares are not able to be issued or redeemed by APs.

Certain securities issued by companies in emerging market countries may have more than one quoted valuation at any given point in time, sometimes referred to as a “local” price and a “premium” price. The premium price is often a negotiated price, which may not consistently represent a price at which a specific transaction can be effected. It is the policy of the Funds to value such securities at prices at which it is expected those shares may be sold, and the Advisor, or any sub-advisor, is authorized to make such determinations subject to such oversight by the Trust's Board of Trustees, as may occasionally be necessary.

Currency Translation. Foreign holdings are translated to U.S. dollars using the exchange rate at the daily close of the New York Stock Exchange. The identified cost of the Funds’ holdings is translated at approximate rates prevailing when acquired. Income and expense amounts are translated at approximate rates prevailing when received or paid, with daily accruals of such amounts reported at approximate rates prevailing at the date of valuation. Since the carrying amount of the foreign securities is determined based on the exchange rate and market values at the close of the period, it is not practicable to isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of securities during the period.

26


 

Notes to Financial Statements
Principal Exchange-Traded Funds
December 31, 2021 (unaudited)

2. Significant Accounting Policies (continued)

Net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between trade and settlement dates on security transactions, and the difference between the amount of dividends, interest income, interest expense, and foreign withholding taxes recorded on the books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies arise from changes in the exchange rate relating to assets and liabilities, other than investments in securities, purchased and held in non-U.S. denominated currencies.

The following Funds held securities denominated in foreign currencies that exceeded 5% of net assets of the respective Fund as of December 31, 2021:

Principal International Adaptive Multi-Factor ETF    
Australian Dollar 6.13 %
British Pound Sterling 11.19 %
Canadian Dollar 13.44 %
Euro 25.73 %
Japanese Yen 20.24 %
Swiss Franc 10.01 %
Principal Millennials ETF    
Euro 12.65 %
Japanese Yen 5.50 %
Korean Won 7.89 %

 

Income and Investment Transactions. The Funds record investment transactions on a trade date basis. Trade date for senior floating rate interests purchased in the primary market is considered the date on which the loan allocations are determined. Trade date for senior floating rate interests purchased in the secondary market is the date on which the transaction is entered into. The identified cost basis has been used in determining the net realized gain or loss from investment transactions and unrealized appreciation or depreciation of investments. The Funds record dividend income on the ex-dividend date, except dividend income from foreign securities whereby the ex-dividend date has passed; such dividends are recorded as soon as the Funds are informed of the ex-dividend date. Interest income is recognized on an accrual basis. Discounts and premiums on securities are accreted/amortized, respectively, on the level yield method over the expected lives of the respective securities. Callable debt securities purchased at a premium are amortized to the earliest call date and to the callable amount, if other than par.

Capital Share Transactions. Capital shares are issued and redeemed by the Funds only in a Creation Unit or Creation Unit Aggregations. Except when aggregated into at least a Creation Unit, Shares are not redeemable.

The consideration for the purchase of a Creation Unit or Creation Unit Aggregations of a Fund generally consists of a basket of cash and/or securities that the Fund specifies each business day. To offset transfer and other transaction costs associated with the issuance and redemption of Creation Unit Aggregations, APs are subject to standard creation and redemption transaction fees.

Expenses. For all Funds, a unitary investment management and advisory fee is charged. The Advisor covers all operating expenses through the investment management and advisory fee with the exception of 12b-1 fees, brokerage commissions and other expenses connected to the execution of portfolio transactions, interest expense, taxes, acquired fund fees and expenses, litigation expenses and other extraordinary expenses, if applicable.

Dividends to Shareholders. Dividends to shareholders of the Funds are recorded on the ex-dividend date. Dividends to shareholders from net investment income and net realized gain from investments and foreign currency transactions are determined in accordance with federal tax regulations, which may differ from U.S. GAAP. These differences are primarily due to differing treatments for amortization of premiums and discounts, futures contracts, net operating losses, sales of passive foreign investment companies, partnership investments, foreign currency transactions, losses deferred due to wash sales, tax straddles, mortgage-backed securities, certain preferred securities, redemptions-in-kind, real estate investment trusts (“REITs”), utilization of earnings and profits distributed to shareholders on redemption of Shares, and limitations imposed by Sections 381-384 of the Internal Revenue Code (“IRC”). Permanent

27


 

Notes to Financial Statements
Principal Exchange-Traded Funds
December 31, 2021 (unaudited)

2. Significant Accounting Policies (continued)

book and tax basis differences are reclassified within the capital accounts based on federal tax-basis treatment; temporary differences do not require reclassification. To the extent dividends exceed current and accumulated earnings and profits for federal income tax purposes, they are reported as return of capital distributions.

Federal Income Taxes. No provision for federal income taxes is considered necessary because the Funds each intend to qualify as a “regulated investment company” under the IRC and they intend to distribute each year substantially all of their net investment income and realized capital gains to shareholders.

Management evaluates tax positions taken or expected to be taken in the course of preparing the Funds' tax returns to determine whether it is “more likely than not” that each tax position would be sustained upon examination by a taxing authority based on the technical merits of their position. Tax positions not deemed to meet the “more likely than not” threshold would be recorded as a tax benefit or expense in the current year. During the period ended December 31, 2021, the Funds did not record any such tax benefit or expense in the accompanying financial statements. The statute of limitations remains open for the last three years, once a return is filed. No examinations are in progress at this time.

Foreign Taxes. Certain Funds are subject to foreign income taxes imposed by certain countries in which they invest. Foreign income taxes are accrued by the Funds as a reduction of income. These amounts are shown as withholding tax on the Statements of Operations.

Recent Accounting Pronouncements. In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-04, Reference Rate Reform (Topic 848); Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform. The guidance is applicable to contracts referencing London Inter-Bank Offered Rate (“LIBOR”) or another reference rate that is expected to be discontinued due to reference rate reform. The ASU is effective as of March 12, 2020 and generally can be applied through December 31, 2022. Management is evaluating the impact of the ASU over the period of time the ASU is effective.

3. Operating Policies

Contingent Convertible Securities (“CoCos”). As footnoted in the Schedules of Investments, certain of the Funds invest in contingent convertible securities. CoCos are hybrid debt securities that may convert into equity or have their principal written down upon the occurrence of certain “triggers”. Although a contingent convertible security's equity conversion and principal write-down features are tailored to the particular issuing banking institution and its regulatory requirements, triggers are generally linked to regulatory capital thresholds or regulatory actions calling into question such institution's continued viability as a going-concern. CoCos may have no stated maturity and fully discretionary coupons, which means coupon payments can be canceled at the issuing banking institution's discretion or at the request of the relevant regulatory authority without causing a default. To provide the appropriate regulatory capital treatment, CoCos are usually issued in the form of subordinated debt instruments that rank junior to the claims of holders of more senior obligations in the event of the issuer's liquidation. If CoCos are converted into equity securities due to a trigger event, holders will be further subordinated. The future 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. Due to these features, CoCos may have substantially greater risk than other securities in times of financial stress. Because of the uncertainty regarding whether a conversion event will occur, it may be difficult to predict when, if at all, a contingent convertible security will be converted to equity, and a fund may suffer losses as a result. If the trigger level is breached, the issuer's decision to write down, write off or convert a contingent convertible security 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.

28


 

Notes to Financial Statements
Principal Exchange-Traded Funds
December 31, 2021 (unaudited)

3. Operating Policies (continued)

Cross Trades. The Funds may engage in cross trades. A cross trade is a purchase or sale transaction between affiliated portfolios executed directly or through an intermediary. Mutual funds and other managed portfolios may be considered affiliated if they have a common investment advisor, so a fund may be considered affiliated with any portfolio for which the fund's sub-advisor acts as an investment advisor. Such transactions are permissible provided that the conditions of Rule 17a-7 under the 1940 Act are satisfied. For the period ended December 31, 2021, the Funds did not engage in cross trades.

Deposits with Counterparty. Cash pledged as collateral is reflected as an asset on the Statements of Assets and Liabilities as deposits with counterparty. There are a variety of security types which require varying levels of pledged collateral. Customer account agreements govern cleared derivatives transactions such as futures contracts. Such transactions require posting of initial margin as determined by each relevant clearing agency which is segregated in an account at a futures commission merchant (“FCM”) registered with the Commodity Futures Trading Commission. As of December 31,2021, deposits with counterparty for Principal Investment Grade Corporate Active ETF and Principal Spectrum Tax-Advantaged Dividend Active ETF were $643,400 and $14,955.

Futures Contracts. The Funds are subject to equity price risk, interest rate risk, and foreign currency exchange rate risk in the normal course of pursuing its investment objectives. The Funds may enter into futures contracts to hedge against changes in, or to gain exposure to, change in the value of equities, interest rates and foreign currencies. Initial margin deposits are made by cash deposits or segregation of specific securities as may be required by the exchange on which the transaction was conducted. Pursuant to the contracts, typically a Fund agrees to receive from or pay to the broker, an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as “variation margin” and are recorded by the Funds as variation margin receivable or payable on financial derivative instruments. For those contracts where daily variation margin payments are not received from or paid to the broker, the cumulative unrealized gains or losses are included in variation margin receivable or payable on financial derivative instruments. Futures contracts are marked to market daily at the closing settlement price or in the absence of such a price, the most recent quoted bid price. If there are no quotations available, the security is valued at the last available closing settlement price. During the period the futures contracts are open, daily changes in the fair value of the contracts are recognized as unrealized gains or losses. These unrealized gains or losses are included as a component of net unrealized appreciation (depreciation) of investments on the Statements of Assets and Liabilities. When the contracts are closed, the Funds recognize a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Fund’s cost basis in the contract. There is minimal counterparty credit risk to the Funds because futures are exchange traded and the exchange’s clearinghouse, as counterparty to all exchange traded futures, guarantees the futures against default.

Long and short U.S. Treasury futures contracts are used to obtain interest rate exposure in order to manage duration of the Principal Investment Grade Corporate Active ETF. The notional values of the futures contracts will vary in accordance with changing duration of this Fund.

Illiquid Securities. Illiquid securities generally cannot be sold or disposed of in the ordinary course of business (within seven calendar days) at approximately the value at which each of the Funds has valued the investments. This may have an adverse effect on each of the Funds’ ability to dispose of particular illiquid securities at fair value and may limit each of the Funds’ ability to obtain accurate market quotations for purposes of valuing the securities.

Indemnification. In a normal course of business, the Funds enter into contracts that contain a variety of indemnifications. The Funds’ maximum exposure under these arrangements is unknown as this would involve potential future claims against the Funds that have not yet occurred. Based on management's experience, the risk of loss would be remote.

Restricted Securities. Certain of the Funds may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult.

29


 

Notes to Financial Statements
Principal Exchange-Traded Funds
December 31, 2021 (unaudited)

3. Operating Policies (continued)

Securities Lending. As footnoted in the Schedules of Investments, certain of the Funds may lend portfolio securities to approved brokerage firms to earn additional income. The Funds receive collateral, in the form of cash, against the loaned securities. During the period of the loan, the borrower must maintain collateral in an amount not less than 102% of the market value of the domestic and foreign fixed income loaned securities and 105% of the market value of the foreign equity loaned securities. The market value of the loaned securities is determined at the close of business of the Funds and any additional required collateral is delivered to the Funds on the next business day. The cash collateral received is usually invested in a SEC-registered money market mutual fund and the Funds could realize a loss on such investments. Further, the Funds could experience a delay in recovering their securities and possible loss of income or value if the borrower fails to return them. Securities lending income, net of related fees, is shown on the Statements of Operations.

Senior Floating Rate Interests. The Fund may invest in senior floating rate interests (bank loans). Senior floating rate interests hold the most senior position in the capital structure of a business entity (the “Borrower”), are typically secured by specific collateral and have a claim on the assets and/or stock of the Borrower that is senior to that held by subordinated debtholders and stockholders of the Borrower. Senior floating rate interests are typically structured and administered by a financial institution that acts as the agent of the lenders participating in the senior floating rate interest. Borrowers of senior floating rate interests are typically rated below investment grade, 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.

Senior floating rate interests 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 LIBOR rate.

Senior floating rate interests generally are subject to mandatory and/or optional prepayment. Because of these mandatory prepayment conditions and because there may be significant economic incentives for the Borrower to repay, prepayments of senior floating rate interests may occur. As a result, the actual remaining maturity of senior floating rate interests may be substantially less than stated maturities shown in the Schedule of Investments.

In connection with the senior floating rate interests, the Fund may also enter into unfunded loan commitments. All or a portion of the loan commitments may be unfunded. The Fund is obligated to fund these commitments at the Borrower’s discretion. Therefore, the Fund must have funds sufficient to cover its contractual obligation. Unfunded loan commitments are marked to market daily and the unrealized gain or loss is shown as a separate line item called unrealized gain or loss on unfunded commitments on the statement of assets and liabilities and included in the net change in unrealized appreciation/(depreciation) of investments on the statements of operations, as applicable. As of period end, the unfunded loan commitments are categorized as Level 2 within the disclosure hierarchy. As of December 31, 2021, there were no unfunded loan commitments.

Underlying Funds. An underlying fund may experience relatively large redemptions or purchases as the investee fund periodically reallocates or rebalances its assets. These transactions may accelerate the realization of taxable income if sales of portfolio securities result in gains and could increase transaction costs.

The Advisor is the advisor to Principal Funds, Inc., Principal Variable Contracts Funds, Inc., affiliates of the Advisor, and other asset allocation programs. The Advisor is committed to minimizing the potential impact of underlying fund risk to the extent consistent with pursuing the investment objectives of the investee funds which it manages. Each may face conflicts of interest in fulfilling its responsibilities to all such funds.

30


 

Notes to Financial Statements
Principal Exchange-Traded Funds
December 31, 2021 (unaudited)

3. Operating Policies (continued)

As of December 31, 2021, series of Principal Funds, Inc. and Principal Variable Contracts Funds, Inc. owned the following percentages, in aggregate, of the outstanding Shares of the Funds listed below:

  Total Percentage of  
Fund Outstanding Shares Owned  
Principal Active High Yield ETF 80.46 %
Principal Investment Grade Corporate Active ETF 93.57  
Principal U.S. Mega-Cap ETF 83.25  
Principal U.S. Small-Cap Multi-Factor ETF 93.68  

 

U.S. Government Agencies or Government-Sponsored Enterprises. Certain of the Funds may invest in U.S. Government agencies or government-sponsored enterprises. U.S. Government securities are obligations of, and in certain cases, guaranteed by, the U.S. Government or its agencies. The U.S. Government does not guarantee the NAV of the Funds’ Shares. Some U.S. Government securities such as treasury bills, notes and bonds, and securities guaranteed by the Government National Mortgage Association (“GNMA”) are supported by the full faith and credit of the U.S. Government. Other securities, such as those of the Federal Home Loan Bank, are supported by the right of the issuer to borrow from the U.S. Department of the Treasury. Still other securities, such as those of the Federal National Mortgage Association (“FNMA”), are supported by the discretionary authority of the U.S. Government to purchase the agency’s obligations.

Government related guarantors (those not backed by the full faith and credit of the U.S. Government) include FNMA and Federal Home Loan Mortgage Corporation (“FHLMC”). FNMA is a government sponsored corporation, the common stock of which is owned entirely by private stockholders. FNMA purchases conventional residential mortgages from a list of approved seller/servicers which include state and federally chartered savings and loan associations, mutual savings banks, commercial banks, credit unions, and mortgage bankers. Pass-through securities issued by FNMA are guaranteed as to the timely payment of principal and interest by FNMA, but are not backed by the full faith and credit of the U.S. Government. FHLMC issues participation certificates, which are pass-through securities, each representing an undivided interest in a pool of residential mortgages. FHLMC guarantees the timely payment of interest and ultimate collection of principal, but participation certificates are not backed by the full faith and credit of the U.S. Government.

Derivatives. The following tables provide information about where on the Statements of Assets and Liabilities and Statements of Operations information about derivatives can be found:

  Asset Derivatives   Liability Derivatives      
  December 31, 2021   December 31, 2021      
 
  Statement of Assets and   Statement of Assets and      
Derivatives not accounted for as hedging instruments Liabilities Location Fair Value Liabilities Location   Fair Value  
Principal Investment Grade Corporate Active ETF            
Interest rate contracts Receivables, Total   Payables, Total      
  distributable earnings   distributable earnings      
  (accumulated loss) $ —* (accumulated loss) $ (111,634 )*

 

* Includes cumulative unrealized appreciation (depreciation) of futures contracts as shown in the Schedule of Investments. Only the portion of the unrealized appreciation (depreciation) not yet cash settled is shown in the Statements of Assets and Liabilities as variation margin.

31


 

Notes to Financial Statements        
Principal Exchange-Traded Funds
December 31, 2021 (unaudited)

 
 
3. Operating Policies (continued)              
 
    Net Realized Gain or     Net Change in Unrealized  
    (Loss) on Derivatives     Appreciation  
  Location of Gain or (Loss) on   Recognized in     (Depreciation) of  
  Derivatives Recognized in   Statement of     Derivatives Recognized in  
Derivatives not accounted for as hedging instruments Statement of Operations   Operations     Statement of Operations  
Principal Investment Grade Corporate Active ETF              
Interest rate contracts Net realized gain (loss) from            
  Futures contracts/Net change            
in unrealized appreciation/
(depreciation) of Futures
  contracts $ 453,652   $ (21,855 )
 
Principal Spectrum Tax-Advantaged Dividend Active ETF            
Interest rate contracts Net realized gain (loss) from            
Investment transactions,
  Futures contracts and Options            
  /Change in unrealized            
  appreciation (depreciation) of $ (45 ) $  
  Investments, Futures contracts            
  and Options            

 

The following table includes a summary of the monthly average outstanding notional by derivative instrument type for the period ended December 31, 2021:

      Average Notional or
Contract Type Derivative Type   Number of Contracts
Principal Investment Grade Corporate Active ETF      
Interest rate contracts Futures — Short $ 60,963,461
 
Principal Spectrum Tax-Advantaged Dividend Active ETF      
Interest rate contracts Purchased options   3
  Written options   3
 
4. Fair Valuation      

 

Fair value is defined as the price that the Funds would receive upon selling a security or transferring a liability in a timely transaction to an independent buyer in the principal or most advantageous market of the security at the measurement date. In determining fair value, the Funds may use one or more of the following approaches: market, income and/or cost. A hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.

Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Funds. Unobservable inputs are inputs that reflect the Fund’s own estimates about the estimates market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

The three-tier hierarchy of inputs is summarized in the three broad levels listed below.

Level 1 — Quoted prices are available in active markets for identical securities as of the reporting date. Investments which are generally included in this category include listed equities and listed derivatives.

Level 2 — Other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.). Investments which are generally included in this category include certain corporate bonds, senior floating rate interests, over-the-counter (“OTC”) derivatives, mortgage-backed securities and municipal bonds.

Level 3 — Significant unobservable inputs (including the Funds' assumptions in determining the fair value of investments). Investments which are generally included in this category include certain corporate bonds and certain common stocks.

32


 

Notes to Financial Statements
Principal Exchange-Traded Funds
December 31, 2021 (unaudited)

4. Fair Valuation (continued)

The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the market place, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Funds in determining fair value is greatest for instruments categorized in Level 3.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Fair value is a market based measure considered from the perspective of a market participant who holds the asset rather than an entity specific measure. Therefore, even when market assumptions are not readily available, the Funds’ own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. The Funds use prices and inputs that are current as of the measurement date, to the extent available.

Investments which are included in the Level 3 category may be valued using quoted prices from brokers and dealers participating in the market for these investments. These investments are classified as Level 3 investments due to the lack of market transparency and market corroboration to support these quoted prices.

Valuation models may be used as the pricing source for other investments classified as Level 3. Valuation models rely on one or more significant unobservable inputs such as prepayment rates, probability of default, or loss severity in the event of default. Significant increases in any of those inputs in isolation would result in a significantly lower fair value measurement.

The fair values of these entities are dependent on economic, political and other considerations. The values of the underlying investee entities may be affected by significant changes in the economic conditions, changes in government policies, and other factors (e.g., natural disasters, pandemics, accidents, conflicts, etc.).

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those instruments.

During the period there were no significant purchases, sales, or transfers into or out of Level 3.

The following is a summary of the inputs used as of December 31, 2021, in valuing the Funds' securities carried at fair value:

        Level 2 —        
        Other   Level 3 —    
    Level 1 —   Significant   Significant    
    Quoted   Observable   Unobservable    
Fund   Prices   Inputs   Inputs   Totals (Level 1,2,3)
 
Principal Active High Yield ETF                
Common Stocks* $ 2,064,161 $ — $     — $ 2,064,161
Bonds*     216,847,714     216,847,714
Senior Floating Rate Interests*     21,401,924     21,401,924
Investment Companies   9,349,979       9,349,979
Total investments in securities $ 11,414,140 $ 238,249,638 $   — $ 249,663,778
 
Principal Healthcare Innovators ETF                
Common Stocks* $ 89,836,056 $ — $     — $ 89,836,056
Investment Companies   4,855,246       4,855,246
Total investments in securities $ 94,691,302 $ — $     — $ 94,691,302

 

33


 

Notes to Financial Statements
Principal Exchange-Traded Funds
December 31, 2021 (unaudited)

 
 
4. Fair Valuation (continued)                  
 
        Level 2 —          
        Other   Level 3 —      
    Level 1 —   Significant   Significant      
    Quoted   Observable   Unobservable      
Fund   Prices   Inputs   Inputs   Totals (Level 1,2,3)  
 
Principal International Adaptive Multi-Factor ETF              
Common Stocks*                  
Basic Materials $ 8,530,029 $ — $     — $ 8,530,029  
Communications   8,089,493       8,089,493  
Consumer, Cyclical   17,247,739       17,247,739  
Consumer, Non-cyclical   30,440,310       30,440,310  
Diversified   232,664       232,664  
Energy   3,136,210       3,136,210  
Financial   30,340,004   63,817     30,403,821  
Industrial   17,760,648   94,793     17,855,441  
Technology   9,428,101       9,428,101  
Utilities   5,240,767       5,240,767  
Preferred Stocks*   320,980       320,980  
Investment Companies   927,307       927,307  
Total investments in securities $ 131,694,252 $ 158,610 $   — $ 131,852,862  
 
Principal Investment Grade Corporate Active ETF              
Bonds* $ — $   482,353,183 $   — $ 482,353,183  
Investment Companies   5,723,763       5,723,763  
Total investments in securities $ 5,723,763 $ 482,353,183 $   — $ 488,076,946  
Derivatives                  
Liabilities                  
Interest rate contracts                  
Futures $ (111,634 ) $ — $     — $ (111,634 )
 
Principal Millennials ETF                  
Common Stocks* $ 103,313,440 $ — $     — $ 103,313,440  
Investment Companies   3,097,306       3,097,306  
Total investments in securities $ 106,410,746 $ — $     — $ 106,410,746  
 
Principal Quality ETF                  
Common Stocks* $ 96,527,314 $ — $     — $ 96,527,314  
Investment Companies   270,326       270,326  
Total investments in securities $ 96,797,640 $ — $     — $ 96,797,640  
 
Principal Spectrum Preferred Securities Active ETF              
Bonds* $ — $   437,462,705 $   — $ 437,462,705  
Investment Companies   19,134,573       19,134,573  
Total investments in securities $ 19,134,573 $ 437,462,705 $   — $ 456,597,278  
 
Principal Spectrum Tax-Advantaged Dividend Active ETF              
Preferred Stocks* $ 2,978,397 $ — $     — $ 2,978,397  
Bonds*     20,811,607     20,811,607  
Investment Companies   154,820       154,820  
Total investments in securities $ 3,133,217 $ 20,811,607 $   — $ 23,944,824  
 
Principal Ultra-Short Active Income ETF                  
Bonds* $ — $   8,086,931 $   — $ 8,086,931  
U.S. Government & Government                  
Agency Obligations*     199,984     199,984  
Investment Companies   285,397       285,397  
Total investments in securities $ 285,397 $ 8,286,915 $   — $ 8,572,312  
 
Principal U.S. Large-Cap Adaptive Multi-Factor ETF              
Common Stocks* $ 131,396,617 $ — $     — $ 131,396,617  
Investment Companies   514,794       514,794  
Total investments in securities $ 131,911,411 $ — $     — $ 131,911,411  
 
Principal U.S. Mega-Cap ETF                  
Common Stocks* $ 1,862,074,458 $ — $     — $ 1,862,074,458  
Investment Companies   4,266,564       4,266,564  
Total investments in securities $ 1,866,341,022 $ — $     — $ 1,866,341,022  

 

34


 

Notes to Financial Statements
Principal Exchange-Traded Funds
December 31, 2021 (unaudited)

 
 
4. Fair Valuation (continued)              
 
        Level 2 —      
        Other Level 3 —    
    Level 1 —   Significant Significant    
    Quoted   Observable Unobservable    
Fund   Prices   Inputs Inputs   Totals (Level 1,2,3)
 
Principal U.S. Small-Cap Adaptive Multi-Factor ETF          
Common Stocks* $ 6,644,495 $ — $   — $ 6,644,495
Investment Companies   15,999     15,999
Total investments in securities $ 6,660,494 $ — $   — $ 6,660,494
 
Principal U.S. Small-Cap Multi-Factor ETF            
Common Stocks* $ 1,233,473,213 $ — $   — $ 1,233,473,213
Investment Companies   15,395,844     15,395,844
Total investments in securities $ 1,248,869,057 $ — $   — $ 1,248,869,057
 
Principal Value ETF              
Common Stocks* $ 81,818,381 $ — $   — $ 81,818,381
Investment Companies   273,672     273,672
Total investments in securities $ 82,092,053 $ — $   — $ 82,092,053

 

*      For additional detail regarding sector classifications, please see the Schedules of Investments.
5.      Management Agreement and Transactions with Affiliates

Management Services. The Funds have agreed to pay management and investment advisory fees to the Advisor computed at an annual percentage rate of each of the Funds' average daily net assets. A portion of the management fee is paid by the Advisor to the sub-advisor of the Funds, which is also an affiliate of the Advisor. The management fee schedule for the Funds is as follows:

  First   Next   Next   Over  
Fund $500 Million   $500 Million   $500 Million   $1.5 Billion  
Principal Healthcare Innovators ETF 0.42 % 0.40 % 0.38 % 0.37 %
Principal Millennials ETF 0.45   0.43   0.41   0.40  
 
Fund             All Assets  
Principal Active High Yield ETF             0.39 %*
Principal International Adaptive Multi-Factor ETF             0.24  
Principal Investment Grade Corporate Active ETF             0.19  
Principal Quality ETF             0.15  
Principal Spectrum Preferred Securities Active ETF             0.55  
Principal Spectrum Tax-Advantaged Dividend Active ETF             0.60  
Principal Ultra-Short Active Income ETF             0.18  
Principal U.S. Large-Cap Adaptive Multi-Factor ETF             0.15  
Principal U.S. Mega-Cap ETF             0.15  
Principal U.S. Small-Cap Adaptive Multi-Factor ETF             0.19  
Principal U.S. Small-Cap Multi-Factor ETF             0.38  
Principal Value ETF             0.15  
* Prior to September 1, 2021, the management fee was 0.49%.                

 

The Advisor has contractually agreed to limit the expenses (excluding interest expense, expenses related to fund investments, acquired fund fees and expenses, tax reclaim recovery expenses, and other extraordinary expenses) for certain of the Funds. The reductions and reimbursements are in amounts that maintain total operating expenses at or below certain limits.

35


 

Notes to Financial Statements
Principal Exchange-Traded Funds
December 31, 2021 (unaudited)

5. Management Agreement and Transactions with Affiliates (continued)

The limit is expressed as a percentage of average daily net assets attributable to each Fund on an annualized basis during the reporting period. The expenses borne by the Advisor are subject to reimbursement by the Fund through the fiscal year end, provided no reimbursement will be made if it would result in the Fund exceeding the total operating expense limit. Any amount outstanding at the end of the period are shown as an expense reimbursement from Advisor or expense reimbursement to Advisor on the Statements of Assets and Liabilities. The expense limit for Principal U.S. Mega-Cap ETF is 0.12% through October 31, 2022.

Affiliated Ownership. At December 31, 2021, Principal Financial Services, Inc., Principal Funds, Inc., and Principal Variable Contracts Funds, Inc. (each an affiliate of the Advisor) owned Shares of the Funds as follows:

Fund Shares
Principal Active High Yield ETF 9,494,200
Principal International Adaptive Multi-Factor ETF 390,001
Principal Investment Grade Corporate Active ETF 17,450,000
Principal Spectrum Tax-Advantaged Dividend Active ETF 995,521
Principal Ultra-Short Active Income ETF 199,681
Principal U.S. Large-Cap Adaptive Multi-Factor ETF 198,571
Principal U.S. Mega-Cap ETF 35,050,000
Principal U.S. Small-Cap Adaptive Multi-Factor ETF 200,965
Principal U.S. Small-Cap Multi-Factor ETF 24,450,000

 

Affiliated Brokerage Commissions. With respect to Principal Spectrum Tax-Advantaged Dividend Active ETF, $248 of brokerage commissions were paid to SAMI Brokerage LLC, a member of the Principal Financial Group. The other Funds did not pay brokerage commissions to any member of the Principal Financial Group during the period ended December 31, 2021.

6. Investment Transactions

For the period ended December 31, 2021, the cost of investment securities purchased and proceeds from investment securities sold (not including short-term investments and in-kind transactions) by the Funds were as follows:

    Non-U.S. Government   U.S. Government
Fund   Purchases   Sales   Purchases   Sales
Principal Active High Yield ETF $ 270,364,742 $ 205,187,908 $ $
Principal Healthcare Innovators ETF   34,728,454   35,743,564    
Principal International Adaptive Multi-Factor ETF   40,839,319   29,769,802    
Principal Investment Grade Corporate Active ETF   123,945,795   112,130,226    
Principal Millennials ETF   7,407,698   7,976,072    
Principal Quality ETF   196,375   349,761    
Principal Spectrum Preferred Securities Active ETF   78,370,634   12,094,490    
Principal Spectrum Tax-Advantaged Dividend Active ETF   508,643   322,197    
Principal Ultra-Short Active Income ETF   3,717,965   2,774,116    
Principal U.S. Large-Cap Adaptive Multi-Factor ETF   38,380,416   38,316,738    
Principal U.S. Mega-Cap ETF   220,693,294   225,620,738    
Principal U.S. Small-Cap Adaptive Multi-Factor ETF   2,719,076   2,744,313    
Principal U.S. Small-Cap Multi-Factor ETF   506,914,962   507,628,721    
Principal Value ETF   1,231,138   1,688,264    
 
For the period ended December 31, 2021, in-kind transactions were as follows:        

 

36


 

Notes to Financial Statements
Principal Exchange-Traded Funds
December 31, 2021 (unaudited)

 
7. Federal Tax Information        
 
Fund   Purchases   Sales
Principal Active High Yield ETF $ 10,921,581 $ 57,639,903
Principal Healthcare Innovators ETF   2,778,151   55,147,594
Principal International Adaptive Multi-Factor ETF   81,561,771   9,526,463
Principal Investment Grade Corporate Active ETF   16,289,109  
Principal Millennials ETF   27,938,128   35,328,764
Principal Quality ETF   106,083,308   78,270,451
Principal Spectrum Preferred Securities Active ETF   26,631,448  
Principal Spectrum Tax-Advantaged Dividend Active ETF   1,940,785  
Principal U.S. Large-Cap Adaptive Multi-Factor ETF   135,627,856   45,930,003
Principal U.S. Mega-Cap ETF   407,732,001   726,593,827
Principal U.S. Small-Cap Multi-Factor ETF   421,813,647   828,119,640
Principal Value ETF   64,486,566   29,924,001

 

Unsettled in-kind purchases and sales at the end of the period are included in investment securities purchased and investment securities sold, respectively, on the Statements of Assets and Liabilities.

Distributions to Shareholders. The federal income tax character of distributions paid for the periods ended June 30, 2021, and December 31, 2021 was as follows:

    Ordinary Income   Long-Term Capital Gain*
    Period ended   Period ended   Period ended Period ended
Fund   December 31, 2021   June 30, 2021   December 31, 2021 June 30, 2021
Principal Active High Yield ETF $ 6,251,383 $ 9,881,656 $ — $
Principal Healthcare Innovators ETF   861,124   527,787  
Principal International Adaptive Multi-Factor ETF   1,153,177    
Principal Investment Grade Corporate Active ETF   9,076,520   10,618,462   634,167 3,773,742
Principal Millennials ETF   2,713,066   481,261  
Principal Quality ETF   614,556   296,923  
Principal Spectrum Preferred Securities Active ETF   9,470,707   9,608,037  
Principal Spectrum Tax-Advantaged Dividend Active ETF   707,569   1,062,462   30,484
Principal Ultra-Short Active Income ETF   56,101   215,987  
Principal U.S. Large-Cap Adaptive Multi-Factor ETF   660,123    
Principal U.S. Mega-Cap ETF   24,965,735   27,303,682  
Principal U.S. Small-Cap Adaptive Multi-Factor ETF   105,510    
Principal U.S. Small-Cap Multi-Factor ETF   17,349,751   10,376,768  
Principal Value ETF   1,428,275   700,888  

 

* The Funds designate these distributions as long-term capital gain dividends per IRC Sec. 852(b)(3)(C) in the 20-percent group (which may be taxed at a 20-percent rate, a 15-percent rate or a 0-percent rate, depending on the shareholder’s taxable income).

For U.S. federal income tax purposes, short-term capital gain distributions are considered ordinary income distributions.

Distributable Earnings. As of June 30, 2021, the components of distributable earnings (accumulated loss) on a federal income tax basis were:

37


 

Notes to Financial Statements
Principal Exchange-Traded Funds
December 31, 2021 (unaudited)

 
7. Federal Tax Information (continued)                          
 
                Late Year          
                Ordinary and          
    Undistributed   Undistributed Unrealized   Post Oct          
    Ordinary   Long-Term Appreciation/   Capital Loss       Capital Loss  
Fund   Income   Capital Gains  (Depreciation)   Deferrals       Carryforward  
Principal Active High Yield ETF $831,649 $ $24,849,782   $   $  (14,379,385) 
Principal Healthcare Innovators ETF   861,124   19,384,511   (1,381,846)     (854,489)
Principal International Adaptive Multi-Factor ETF   75,711   (1,035,524)        
Principal Investment Grade Corporate Active ETF   1,067,183   65,131 6,993,476          
Principal Millennials ETF   65,272   11,188,422         (2,828,381)
Principal Quality ETF   142,898   2,374,987         (1,538,325)
Principal Spectrum Preferred Securities Active ETF   1,381,160   10,176,459         (1,875,171)
Principal Spectrum Tax-Advantaged Dividend Active ETF   149,815   1,427,464          
Principal Ultra-Short Active Income ETF   9,140   (26,912)       (125,628)
Principal U.S. Large-Cap Adaptive Multi-Factor ETF   15,441   247 372,697          
Principal U.S. Mega-Cap ETF   8,465,068   389,916,580         (63,824,955)
Principal U.S. Small-Cap Adaptive Multi-Factor ETF   8,240   35 131,664          
Principal U.S. Small-Cap Multi-Factor ETF   4,414,408   223,375,303         (85,559,823)
Principal Value ETF   340,273   2,791,996         (2,182,414)

 

Capital Loss Carryforwards. For federal income tax purposes, capital loss carryforwards are losses that can be used to offset future capital gains of the Fund. As of June 30, 2021, the Funds had approximate net capital loss carryforwards as follows:

    No Expiration   No Expiration     Annual  
Fund   Short-Term   Long-Term   Total Limitations*  
Principal Active High Yield ETF $ 5,508,508 $ 8,870,877 $ 14,379,385 $ 1,874,152 
Principal Healthcare Innovators ETF     854,489   854,489  
Principal International Adaptive Multi-Factor ETF        
Principal Investment Grade Corporate Active ETF        
Principal Millennials ETF   2,819,136   9,245   2,828,381  
Principal Quality ETF   1,157,520   380,805   1,538,325 294,429  
Principal Spectrum Preferred Securities Active ETF   957,946   917,225   1,875,171  
Principal Spectrum Tax-Advantaged Dividend Active ETF        
Principal Ultra-Short Active Income ETF   71,425   54,203   125,628  
Principal U.S. Large-Cap Adaptive Multi-Factor ETF        
Principal U.S. Mega-Cap ETF   57,299,653   6,525,302   63,824,955  
Principal U.S. Small-Cap Adaptive Multi-Factor ETF        
Principal U.S. Small-Cap Multi-Factor ETF   56,960,496   28,599,327   85,559,823  
Principal Value ETF   869,689   1,312,725   2,182,414 230,798  

 

* In accordance with IRC Sections 381-384, a portion of certain Funds’ losses have been subjected to an annual limitation.

All of these capital losses were generated in taxable years beginning after the enactment date of the Regulated Investment Company Modernization Act of 2010 on December 22, 2010, and will be carried forward with no expiration and with the character of the loss retained.

For the year ended June 30, 2021, the Funds utilized capital loss carryforwards as follows:

Fund   Utilized
Principal Healthcare Innovators ETF $ 2,985,702
Principal Spectrum Tax-Advantaged Dividend Active ETF   5,892
Principal U.S. Mega-Cap ETF   16,646,055

 

38


 

Notes to Financial Statements
Principal Exchange-Traded Funds
December 31, 2021 (unaudited)

7. Federal Tax Information (continued)

Late-Year Losses. A regulated investment company may elect to treat any portion of its qualified late-year loss as arising on the first day of the next taxable year. Qualified late-year losses are certain capital and ordinary losses which occur during the portion of the Fund’s taxable year subsequent to October 31 and December 31, respectively.

For the taxable year ended June 30, 2021, the Funds intend to defer late-year capital and ordinary losses as follows:

Fund   Late Year Ordinary Loss   Post October Loss Capital Loss  
Principal Healthcare Innovators ETF $ $ (1,381,846 )

 

Reclassification of Capital Accounts. The Funds may record reclassifications in their capital accounts. These reclassifications have no impact on the total net assets of the Funds. The reclassifications are a result of permanent differences between U.S. GAAP and tax accounting. Adjustments are made to reflect the impact these items have on current and future distributions to shareholders. Therefore, the source of the Funds’ distributions may be shown in the accompanying Statement of Changes in Net Assets as from net investment income and net realized gains on investments or from tax return of capital depending on the type of book and tax differences that exist. For the period ended June 30, 2021, the Funds recorded reclassifications as follows:

    Total      
    Distributable Earnings      
Fund   (Accumulated Loss)     Paid In Capital
Principal Active High Yield ETF $ (268,856 ) $ 268,856
Principal Healthcare Innovators ETF   (26,764,189 )   26,764,189
Principal International Adaptive Multi-Factor ETF   (15,000 )   15,000
Principal Investment Grade Corporate Active ETF   (1,023,845 )   1,023,845
Principal Millennials ETF   (22,957,641 )   22,957,641
Principal Quality ETF   (7,315,778 )   7,315,778
Principal Spectrum Preferred Securities Active ETF   (757,854 )   757,854
Principal Spectrum Tax-Advantaged Dividend Active ETF      
Principal Ultra-Short Active Income ETF   (3,091 )   3,091
Principal U.S. Large-Cap Adaptive Multi-Factor ETF      
Principal U.S. Mega-Cap ETF   (175,651,470 )   175,651,470
Principal U.S. Small-Cap Adaptive Multi-Factor ETF      
Principal U.S. Small-Cap Multi-Factor ETF   (208,573,293 )   208,573,293
Principal Value ETF   (7,817,645 )   7,817,645

 

Federal Income Tax Basis. As of June 30, 2021, the net federal income tax unrealized appreciation (depreciation) and federal tax cost of investments held by each Fund were as follows:

                    Cost for
              Net Unrealized     Federal
    Unrealized   Unrealized     Appreciation     Income Tax
Fund   Appreciation   Depreciation     (Depreciation)     Purposes
Principal Active High Yield ETF $ 27,746,110 $ (2,896,082 ) $ 24,850,028   $ 209,215,515
Principal Healthcare Innovators ETF   32,133,352   (12,748,841 )   19,384,511     163,391,512
Principal International Adaptive Multi-Factor ETF   284,101   (1,319,182 )   (1,035,081 )   48,109,836
Principal Investment Grade Corporate Active ETF   8,896,060   (1,902,584 )   6,993,476     473,764,748
Principal Millennials ETF   13,595,959   (2,407,370 )   11,188,589     120,014,188
Principal Quality ETF   2,915,066   (540,078 )   2,374,988     56,082,189
Principal Spectrum Preferred Securities Active ETF   11,030,241   (853,781 )   10,176,460     359,885,216
Principal Spectrum Tax-Advantaged Dividend Active ETF   1,430,511   (3,048 )   1,427,463     21,025,470
Principal Ultra-Short Active Income ETF   9,124   (36,036 )   (26,912 )   8,664,026
Principal U.S. Large-Cap Adaptive Multi-Factor ETF   666,512   (293,815 )   372,697     29,514,328

 

39


 

Notes to Financial Statements
Principal Exchange-Traded Funds
December 31, 2021 (unaudited)

 
7. Federal Tax Information (continued)          
 
          Cost for
        Net Unrealized Federal
  Unrealized Unrealized   Appreciation Income Tax
Fund Appreciation Depreciation   (Depreciation) Purposes
Principal U.S. Mega-Cap ETF 395,022,185 (5,105,605 ) 389,916,580 1,567,391,432
Principal U.S. Small-Cap Adaptive Multi-Factor ETF 331,137 (199,473 ) 131,664 6,267,882
Principal U.S. Small-Cap Multi-Factor ETF 250,054,123 (26,678,820 ) 223,375,303 1,420,240,060
Principal Value ETF 3,225,909 (433,914 ) 2,791,995 41,630,219
 
8. Subsequent Events          

 

Management has evaluated events or transactions that have occurred through the date the financial statements were issued that would merit recognition or disclosure in the financial statement. There were no additional items requiring adjustment of the financial statements or additional disclosure.

40


 

Schedule of Investments
Principal Active High Yield ETF
December 31, 2021 (unaudited)
 
COMMON STOCKS 0.84%   Shares Held   Value
 
REITs 0.84%        
CBL & Associates Properties Inc (a)   66,159 $ 2,064,161
TOTAL COMMON STOCKS     $ 2,064,161
    Principal    
BONDS 88.61%   Amount   Value
 
Aerospace & Defense 1.78%        
Bombardier, Inc.        
7.13%, 06/15/2026 (b) $ 848,000 $ 879,723
Triumph Group, Inc.        
7.75%, 08/15/2025 (c)   3,312,000   3,287,160
8.88%, 06/01/2024 (b)   185,000   201,776
      $ 4,368,659
 
Airlines 0.12%        
United Airlines Pass-Through Trust        
3.65%, 07/07/2027   288,587   285,375
 
Auto Manufacturers 1.98%        
Ford Motor Co.        
3.25%, 02/12/2032   1,497,000   1,532,928
Ford Motor Credit Co. LLC        
3.38%, 11/13/2025   1,889,000   1,962,520
4.39%, 01/08/2026   217,000   233,818
4.54%, 08/01/2026   1,037,000   1,126,441
      $ 4,855,707
 
Auto Parts & Equipment 1.52%        
Tenneco, Inc.        
7.88%, 01/15/2029 (b)   3,445,000   3,720,600
 
Banks 1.43%        
Deutsche Bank AG        
(5-year Treasury Constant Maturity Rate + 4.52%),      
6.00%, 10/30/2025 (d),(e),(f)   3,360,000   3,490,200
 
Chemicals 3.81%        
Consolidated Energy Finance SA        
5.63%, 10/15/2028 (b)   3,560,000   3,479,900
Kobe U.S. Midco 2, Inc.        
9.25%, PIK 10.00%; 11/01/2026 (b),(g)   943,000   963,039
Olympus Water U.S. Holding Corp.        
6.25%, 10/01/2029 (b)   2,470,000   2,408,250
Tronox, Inc.        
4.63%, 03/15/2029 (b)   2,470,000   2,466,912
      $ 9,318,101
 
Commercial Services 4.01%        
Ahern Rentals, Inc.        
7.38%, 05/15/2023 (b)   1,665,000   1,583,831
Albion Financing 1 SARL/Aggreko Holdings, Inc.      
6.13%, 10/15/2026 (b)   2,048,000   2,068,480
Garda World Security Corp.        
6.00%, 06/01/2029 (b)   366,000   349,530
9.50%, 11/01/2027 (b)   2,395,000   2,582,253
WASH Multifamily Acquisition, Inc.        
5.75%, 04/15/2026 (b)   3,079,000   3,235,875
      $ 9,819,969
 
Construction Materials 2.63%        
Patrick Industries, Inc.        
4.75%, 05/01/2029 (b)   838,000   833,810
7.50%, 10/15/2027 (b)   1,523,000   1,621,995

 

See accompanying notes.

41


 

Schedule of Investments
Principal Active High Yield ETF
December 31, 2021 (unaudited)
 
    Principal    
BONDS (continued)   Amount   Value
 
Construction Materials (continued)        
SRM Escrow Issuer LLC        
6.00%, 11/01/2028 (b) $ 3,718,000 $ 3,969,151
      $ 6,424,956
 
Diversified Financial Services 5.89%        
AerCap Holdings NV        
(5-year Treasury Constant Maturity Rate + 4.54%),        
5.88%, 10/10/2079 (d)   3,485,000   3,606,975
Coinbase Global, Inc.        
3.63%, 10/01/2031 (b),(c)   591,000   543,720
Credit Acceptance Corp.        
6.63%, 03/15/2026   3,392,000   3,530,529
Global Aircraft Leasing Co. Ltd.        
6.50%, PIK 7.25%; 09/15/2024 (b),(g)   3,481,789   3,359,926
OneMain Finance Corp.        
4.00%, 09/15/2030   2,425,000   2,384,697
6.63%, 01/15/2028   872,000   976,640
      $ 14,402,487
 
Electric 2.05%        
Clearway Energy Operating LLC        
4.75%, 03/15/2028 (b)   1,095,000   1,151,119
GenOn Energy, Inc.        
0.00%, 10/15/2049 (a),(h),(i)   3,100,000  
Vistra Corp.        
(5-year Treasury Constant Maturity Rate + 5.74%),        
7.00%, 12/15/2026 (b),(d),(e)   1,560,000   1,580,108
Vistra Operations Co. LLC        
4.38%, 05/01/2029 (b)   2,285,000   2,288,725
      $ 5,019,952
 
Engineering & Construction 1.59%        
MasTec, Inc.        
4.50%, 08/15/2028 (b)   3,738,000   3,882,847
 
Entertainment 6.41%        
Boyne USA, Inc.        
4.75%, 05/15/2029 (b)   2,295,000   2,363,850
Caesars Entertainment, Inc.        
6.25%, 07/01/2025 (b)   406,000   426,148
8.13%, 07/01/2027 (b)   1,869,000   2,069,805
CCM Merger, Inc.        
6.38%, 05/01/2026 (b)   3,470,000   3,613,138
International Game Technology PLC        
5.25%, 01/15/2029 (b)   2,133,000   2,260,020
Lions Gate Capital Holdings LLC        
5.50%, 04/15/2029 (b)   1,546,000   1,573,055
Peninsula Pacific Entertainment LLC/Peninsula Pacific Entertainment Finance, Inc.      
8.50%, 11/15/2027 (b)   3,136,000   3,386,880
      $ 15,692,896
 
Food 5.45%        
Albertsons Cos., Inc./Safeway, Inc./New Albertsons LP/Albertsons LLC        
4.63%, 01/15/2027 (b)   722,000   757,696
Chobani LLC/Chobani Finance Corp, Inc.        
7.50%, 04/15/2025 (b)   2,861,000   2,945,256
Fresh Market, Inc.        
9.75%, 05/01/2023 (b)   2,315,000   2,381,556
Kraft Heinz Foods Co.        
3.75%, 04/01/2030   3,297,000   3,558,865

 

See accompanying notes.

42


 

Schedule of Investments
Principal Active High Yield ETF
December 31, 2021 (unaudited)
 
    Principal    
BONDS (continued)   Amount   Value
 
Food (continued)        
Pilgrim's Pride Corp.        
3.50%, 03/01/2032 (b) $ 3,002,000 $ 3,032,020
4.25%, 04/15/2031 (b)   624,000   655,200
      $ 13,330,593
 
Forest Products & Paper 1.01%        
Mercer International, Inc.        
5.13%, 02/01/2029   2,410,000   2,461,502
 
Healthcare Services 5.40%        
Acadia Healthcare Co., Inc.        
5.00%, 04/15/2029 (b)   3,214,000   3,302,385
Centene Corp.        
2.50%, 03/01/2031   531,000   516,936
3.38%, 02/15/2030   1,929,000   1,964,474
CHS/Community Health Systems, Inc.        
6.00%, 01/15/2029 (b)   3,438,000   3,665,768
LifePoint Health, Inc.        
5.38%, 01/15/2029 (b)   3,792,000   3,773,040
      $ 13,222,603
 
Home Builders 2.19%        
Empire Communities Corp.        
7.00%, 12/15/2025 (b)   2,315,000   2,396,025
Forestar Group, Inc.        
3.85%, 05/15/2026 (b)   566,000   567,415
5.00%, 03/01/2028 (b)   2,335,000   2,396,294
      $ 5,359,734
 
Insurance 0.80%        
Acrisure LLC/Acrisure Finance, Inc.        
4.25%, 02/15/2029 (b)   431,000   419,148
7.00%, 11/15/2025 (b)   1,546,000   1,544,871
      $ 1,964,019
 
Investment Companies 1.01%        
Compass Group Diversified Holdings LLC        
5.25%, 04/15/2029 (b)   2,352,000   2,463,720
 
Iron & Steel 0.97%        
TMS International Corp.        
6.25%, 04/15/2029 (b)   2,380,000   2,368,100
 
Leisure Time 2.00%        
Life Time, Inc.        
5.75%, 01/15/2026 (b)   2,395,000   2,478,825
NCL Corp. Ltd.        
10.25%, 02/01/2026 (b)   65,000   75,604
12.25%, 05/15/2024 (b)   1,087,000   1,288,095
NCL Finance Ltd.        
6.13%, 03/15/2028 (b)   1,070,000   1,053,950
      $ 4,896,474
 
Media 6.26%        
DIRECTV Holdings LLC/DIRECTV Financing Co., Inc.      
5.88%, 08/15/2027 (b)   3,550,000   3,634,171
DISH DBS Corp.        
5.13%, 06/01/2029   469,000   426,790
5.25%, 12/01/2026 (b)   674,284   684,928
5.88%, 11/15/2024   1,240,000   1,273,802
7.38%, 07/01/2028   2,072,000   2,097,900
Scripps Escrow II, Inc.        
5.38%, 01/15/2031 (b)   983,000   998,974

 

See accompanying notes.

43


 

Schedule of Investments
Principal Active High Yield ETF
December 31, 2021 (unaudited)
 
    Principal    
BONDS (continued)   Amount   Value
 
Media (continued)        
Sirius XM Radio, Inc.        
3.13%, 09/01/2026 (b) $ 2,305,000 $ 2,305,668
UPC Holding BV        
5.50%, 01/15/2028 (b)   1,606,000   1,666,225
Ziggo BV        
5.50%, 01/15/2027 (b)   2,172,000   2,231,730
      $ 15,320,188
 
Mining 4.69%        
Copper Mountain Mining Corp.        
8.00%, 04/09/2026 (b)   2,130,600   2,229,247
First Quantum Minerals Ltd.        
6.88%, 10/15/2027 (b)   3,090,000   3,325,612
Novelis Corp.        
3.88%, 08/15/2031 (b)   3,054,000   3,034,913
Taseko Mines Ltd.        
7.00%, 02/15/2026 (b)   2,769,000   2,879,760
      $ 11,469,532
 
Oil & Gas 6.68%        
Aethon United BR LP/Aethon United Finance Corp.        
8.25%, 02/15/2026 (b)   3,292,000   3,536,267
Antero Resources Corp.        
7.63%, 02/01/2029 (b)   2,813,000   3,122,430
Ascent Resources Utica Holdings LLC/ARU Finance Corp.        
5.88%, 06/30/2029 (b)   526,000   506,112
7.00%, 11/01/2026 (b)   2,403,000   2,436,041
Oasis Petroleum, Inc.        
6.38%, 06/01/2026 (b)   3,520,000   3,687,200
Occidental Petroleum Corp.        
3.40%, 04/15/2026   918,000   941,574
4.40%, 04/15/2046   218,000   223,450
6.13%, 01/01/2031   318,000   386,370
6.63%, 09/01/2030   1,220,000   1,509,750
      $ 16,349,194
 
Packaging & Containers 0.66%        
LABL, Inc.        
5.88%, 11/01/2028 (b)   257,000   264,871
8.25%, 11/01/2029 (b)   1,352,000   1,359,503
      $ 1,624,374
 
Pharmaceuticals 0.83%        
Jazz Securities DAC        
4.38%, 01/15/2029 (b)   1,974,000   2,043,959
 
Pipelines 6.06%        
Antero Midstream Partners LP/Antero Midstream Finance Corp.        
5.38%, 06/15/2029 (b)   2,265,000   2,389,609
5.75%, 03/01/2027 (b)   1,433,000   1,484,946
CNX Midstream Partners LP        
4.75%, 04/15/2030 (b)   3,667,000   3,653,249
Crestwood Midstream Partners LP/Crestwood Midstream Finance Corp.        
5.63%, 05/01/2027 (b)   3,550,000   3,616,562
Targa Resources Partners LP/Targa Resources Partners Finance Corp.        
4.88%, 02/01/2031   3,402,000   3,694,402
      $ 14,838,768
 
REITs 2.26%        
CBL & Associates HoldCo II LLC        
10.00%, 11/15/2029   1,735,616   1,739,955

 

See accompanying notes.

44


 

Schedule of Investments
Principal Active High Yield ETF
December 31, 2021 (unaudited)
 
    Principal    
BONDS (continued)   Amount   Value
 
REITs (continued)        
CBL & Associates LP        
0.00%, 12/15/2026 (a),(h),(i) $ 6,000,000 $
Ladder Capital Finance Holdings LLLP/Ladder Capital Finance Corp.        
4.75%, 06/15/2029 (b)   3,698,000   3,790,450
      $ 5,530,405
 
Retail 5.73%        
At Home Group, Inc.        
4.88%, 07/15/2028 (b)   1,956,000   1,926,660
Bath & Body Works, Inc.        
5.25%, 02/01/2028   386,000   426,530
6.63%, 10/01/2030 (b)   1,090,000   1,234,425
9.38%, 07/01/2025 (b)   416,000   507,520
BCPE Ulysses Intermediate, Inc.        
7.75%, PIK 7.75%; 04/01/2027 (b),(g)   2,846,000   2,810,425
Dave & Buster's, Inc.        
7.63%, 11/01/2025 (b)   1,755,000   1,871,269
Golden Nugget, Inc.        
6.75%, 10/15/2024 (b)   1,200,000   1,200,000
LSF9 Atlantis Holdings LLC/Victra Finance Corp.        
7.75%, 02/15/2026 (b)   2,360,000   2,386,361
Park River Holdings, Inc.        
5.63%, 02/01/2029 (b)   1,736,000   1,657,880
      $ 14,021,070
 
Telecommunications 1.46%        
DKT Finance ApS        
9.38%, 06/17/2023 (b)   3,548,000   3,583,480
 
Transportation 1.93%        
Navios Maritime Holdings, Inc./Navios Maritime Finance II US, Inc.        
7.38%, 01/15/2022 (b)   1,076,000   1,067,930
11.25%, 08/15/2022 (b)   1,296,000   1,289,520
Watco Cos LLC/Watco Finance Corp.        
6.50%, 06/15/2027 (b)   2,270,000   2,360,800
      $ 4,718,250
TOTAL BONDS     $ 216,847,714
    Principal    
SENIOR FLOATING RATE INTERESTS 8.75%   Amount   Value
 
Airlines 2.35%        
AAdvantage Loyalty IP Ltd., 2021 Term Loan        
(3-month USD LIBOR + 4.75%),        
5.50%, 04/20/2028 $ 3,355,000 $ 3,470,613
United Airlines, Inc., 2021 Term Loan B        
(3-month USD LIBOR + 3.75%),        
4.50%, 04/21/2028   2,278,521   2,281,620
      $ 5,752,233
 
Entertainment 1.07%        
Lions Gate Capital Holdings LLC, 2018 Term Loan B        
(1-month USD LIBOR + 2.25%),        
2.35%, 03/24/2025   1,757,039   1,740,207
The Enterprise Development Authority, Term Loan B        
0.00%, 02/28/2028 (j)   877,215   875,390
      $ 2,615,597

 

See accompanying notes.

45


 

Schedule of Investments
Principal Active High Yield ETF
December 31, 2021 (unaudited)
 
    Principal      
SENIOR FLOATING RATE INTERESTS (continued)   Amount   Value  
 
Forest Products & Paper 1.40%          
Pixelle Specialty Solutions LLC, Term Loan B          
(1-month USD LIBOR + 6.50%),          
7.50%, 10/31/2024 $ 3,445,000 $ 3,424,709  
 
Insurance 1.61%          
Acrisure LLC, 2020 Term Loan B          
(3-month USD LIBOR + 3.50%),          
3.72%, 02/15/2027   422,848   417,563  
Asurion LLC, 2021 2nd Lien Term Loan B3          
(1-month USD LIBOR + 5.25%),          
5.35%, 01/31/2028   3,505,000   3,513,763