ck0000898745-20230831
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PRINCIPAL
FUNDS, INC. |
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("PFI"
or the "Registrant") |
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Class
A Shares |
Class
C Shares |
Class
J Shares |
Institutional
Class Shares |
Class
R-1 Shares |
Class
R-3 Shares |
Class
R-4 Shares |
Class
R-5 Shares |
Class
R-6 Shares |
Class
S Shares |
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The
date of this Prospectus is December 31,
2023. |
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FUNDS
OF THE REGISTRANT |
(each,
a "Fund" and, together, the "Funds") |
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Ticker
Symbols by Share Class |
Fund |
A |
C |
J |
Inst. |
R-1 |
R-3 |
R-4 |
R-5 |
R-6 |
S |
Blue
Chip |
PBLAX |
PBLCX |
PBCJX |
PBCKX |
| PGBEX
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PGBFX |
PGBGX |
PGBHX |
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Bond
Market Index |
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| PBIJX |
PNIIX |
PBIMX |
PBOIX |
PBIPX |
PBIQX |
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Capital
Securities |
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| PCSFX |
Diversified
Real Asset |
PRDAX |
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| PDRDX |
| PGDRX |
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| PDARX |
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Edge
MidCap |
PEMCX |
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| PEDGX |
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| PEDMX |
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Global
Multi-Strategy |
PMSAX |
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| PSMIX |
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| PGLSX |
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Global
Sustainable Listed Infrastructure |
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| PGSLX |
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International
Equity Index |
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| PIDIX |
PILIX |
PIIOX |
PIIPX |
PIIQX |
PFIEX |
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International
Small Company |
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| PISMX |
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| PFISX |
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Opportunistic
Municipal |
PMOAX |
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| POMFX |
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Origin
Emerging Markets |
POEYX |
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| POEIX |
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| POEFX |
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Small-MidCap
Dividend Income |
PMDAX |
PMDDX |
| PMDIX |
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| PMDHX |
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Spectrum
Preferred and Capital Securities Income |
PPSAX |
PRFCX |
PPSJX |
PPSIX |
PUSAX |
PNARX |
PQARX |
PPARX |
PPREX |
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The
Securities and Exchange Commission and the Commodity Futures Trading
Commission have not approved or disapproved these securities or passed
upon the adequacy of this Prospectus. Any representation to the contrary
is a criminal offense. |
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TABLE
OF CONTENTS |
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FUND
SUMMARIES |
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Blue
Chip Fund |
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Bond
Market Index Fund |
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Capital
Securities Fund |
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Diversified
Real Asset Fund |
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Edge
MidCap Fund |
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Global
Multi-Strategy Fund |
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Global
Sustainable Listed Infrastructure Fund |
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International
Equity Index Fund |
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International
Small Company Fund |
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Opportunistic
Municipal Fund |
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Origin
Emerging Markets Fund |
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Small-MidCap
Dividend Income Fund |
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Spectrum
Preferred and Capital Securities Income Fund |
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ADDITIONAL
INFORMATION ABOUT INVESTMENT STRATEGIES AND RISKS |
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PORTFOLIO
HOLDINGS INFORMATION |
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MANAGEMENT
OF THE FUNDS |
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PRICING
OF FUND SHARES |
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CONTACT
PRINCIPAL FUNDS, INC. |
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PURCHASE
OF FUND SHARES |
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REDEMPTION
OF FUND SHARES |
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EXCHANGE
OF FUND SHARES |
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DIVIDENDS
AND DISTRIBUTIONS |
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FREQUENT
PURCHASES AND REDEMPTIONS |
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TAX
CONSIDERATIONS |
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CHOOSING
A SHARE CLASS AND THE COSTS OF INVESTING |
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DISTRIBUTION
PLANS AND INTERMEDIARY COMPENSATION |
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FUND
ACCOUNT INFORMATION |
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APPENDIX A
– DESCRIPTION OF BOND RATINGS |
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APPENDIX
B – INTERMEDIARY-SPECIFIC SALES CHARGE WAIVERS AND
REDUCTIONS |
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APPENDIX
C – ADDITIONAL FUND-SPECIFIC INFORMATION |
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APPENDIX
D – FINANCIAL HIGHLIGHTS |
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ADDITIONAL
INFORMATION |
E |
BLUE CHIP
FUND
Objective
The
Fund seeks long-term growth of capital.
Fees and Expenses of the
Fund
This
table describes the fees and expenses that you may pay if you buy, hold, and
sell shares of the Fund. You may pay other fees, such as brokerage commissions
and other fees to financial intermediaries, which are not reflected in the
tables and examples below. You may qualify for sales charge discounts
if you and your family invest, or agree to invest in the future, at least
$50,000 in Class A shares of Principal
Funds, Inc. More
information about these and other discounts is available from your financial
intermediary and in “Choosing a Share Class and The Costs of Investing”
beginning on page 115 of the Fund’s Prospectus, Appendix B to the Prospectus
titled "Intermediary-Specific Sales Charge Waivers and Reductions," and
“Multiple Class Structure” beginning on page 4 of the Fund’s Statement of
Additional Information.
If
you purchase Institutional Class or Class R-6 shares through certain programs
offered by certain financial intermediaries, you may be required to pay a
commission and/or other forms of compensation to the broker, or to your
Financial Professional or other financial
intermediary.
Shareholder Fees
(fees paid directly from your investment)
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| Share
Class |
| A |
C |
J |
Inst. |
R-3 |
R-4 |
R-5 |
R-6 |
Maximum
Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) |
5.50% |
None |
None |
None |
None |
None |
None |
None |
Maximum
Deferred Sales Charge (Load) (as a percentage of the offering price or NAV
when Sales Load is paid, whichever is less) |
1.00% |
1.00% |
1.00% |
None |
None |
None |
None |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
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Share
Class |
| A |
C |
J |
Inst. |
R-3 |
R-4 |
R-5 |
R-6 |
Management
Fees |
0.59 % |
0.59 % |
0.59 % |
0.59 % |
0.59 % |
0.59 % |
0.59 % |
0.59
% |
Distribution
and/or Service (12b-1) Fees |
0.25 % |
1.00 % |
0.15 % |
N/A |
0.25 % |
0.10 % |
N/A |
N/A |
Other
Expenses |
0.15 % |
0.12 % |
0.10 % |
0.12 % |
0.33 % |
0.29 % |
0.27 % |
0.01
% |
Total
Annual Fund Operating Expenses |
0.99 % |
1.71 % |
0.84 % |
0.71 % |
1.17 % |
0.98 % |
0.86 % |
0.60 % |
Fee
Waiver and Expense Reimbursement(1)(2) |
(0.03)% |
(0.03)% |
(0.03)% |
(0.05)% |
(0.03)% |
(0.03)% |
(0.03)% |
(0.03)% |
Total
Annual Fund Operating Expenses after Fee Waiver and Expense
Reimbursement |
0.96 % |
1.68 % |
0.81 % |
0.66 % |
1.14 % |
0.95 % |
0.83 % |
0.57
% |
(1)Principal
Global Investors, LLC (“PGI”), the investment advisor, has contractually agreed
to waive a portion of the Fund’s management fees through the period ending
December 30, 2024. The fee waiver will reduce the Fund's management fees by
0.03% (expressed as a percent of average net assets on an annualized basis). It
is expected that the fee waiver will continue through the period disclosed;
however, Principal Funds, Inc. and PGI, the parties to the agreement, may
mutually agree to terminate the fee waiver prior to the end of the
period.
(2)Principal
Global Investors, LLC (“PGI”), the investment advisor, has contractually agreed
to limit the Fund’s expenses by paying, if necessary, expenses normally payable
by the Fund (excluding interest expense, expenses related to fund investments,
acquired fund fees and expenses, and tax reclaim recovery expenses and other
extraordinary expenses) to maintain a total level of operating expenses
(expressed as a percent of average net assets on an annualized basis) not to
exceed 0.66% for Institutional Class shares. It is expected that the expense
limit will continue through the period ending December 30,
2024; however, Principal Funds, Inc. and PGI, the parties to the
agreement, may mutually agree to terminate the expense limit prior to the end of
the period. Subject to applicable expense limits, the Fund may reimburse PGI for
expenses incurred during the current fiscal year.
Example
This Example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds.
The Example assumes that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The Example assumes conversion of the Class
C shares to Class A shares after the eighth year. The Example also assumes that
your investment has a 5% return each year and that the Fund’s operating expenses
remain the same. The calculation of costs takes into account any applicable
contractual fee waivers and/or expense reimbursements for the period noted in
the table above. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
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year |
3
years |
5
years |
10
years |
Class
A |
$643 |
$845 |
$1,064 |
$1,694 |
Class
C |
271 |
536 |
925 |
1,826 |
Class
J |
183 |
265 |
463 |
1,034 |
Institutional
Class |
67 |
222 |
390 |
878 |
Class
R-3 |
116 |
369 |
641 |
1,418 |
Class
R-4 |
97 |
309 |
539 |
1,199 |
Class
R-5 |
85 |
271 |
474 |
1,058 |
Class
R-6 |
58 |
189 |
332 |
747
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With respect to Classes C and
J shares, you would pay the following expenses if you did not redeem your shares
(all other classes would be the same as in the above
example):
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| 1
year |
3
years |
5
years |
10
years |
Class
C |
$171 |
$536 |
$925 |
$1,826 |
Class
J |
83 |
265 |
463 |
1,034 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
Annual Fund Operating Expenses or in the Example, affect the Fund’s performance.
During
the most recent fiscal year, the Fund’s portfolio turnover rate was
10.0% of the average
value of its portfolio.
Principal Investment
Strategies
Under normal
circumstances, the Fund invests at least 80% of its net assets, plus any
borrowings for investment purposes, in equity securities of companies with large
market capitalizations at the time of purchase that, in the opinion of Principal
Global Investors, LLC (“PGI”), the Fund’s investment advisor, display
characteristics of a “blue chip” company. For this Fund,
companies with large market capitalizations are those with market
capitalizations similar to companies in the Russell 1000®
Growth Index (as of November 30, 2023, this was between approximately $651.9
million and $3.0 trillion). In PGI’s view, “blue chip” companies typically
display some or all of the following characteristics: (1) large,
well-established, and financially sound companies; (2) issuers with market
capitalizations in the billions; (3) are considered market leaders or among the
top three companies in its sector; and (4) commonly considered household names.
The Fund tends to focus on securities of companies that show potential for
growth of capital as well as an expectation for above-average earnings. In
selecting securities in which to invest, PGI uses a bottom-up, fundamental
process, focusing on a fundamental analysis of individual companies. The Fund
invests in securities of foreign companies. The Fund invested significantly in
industries within the financials and information technology sectors as of
November 30, 2023.
Principal
Risks
The
value of your investment in the Fund changes with the value of the Fund’s
investments. Many factors affect that value, and it is possible to lose money
by investing in the Fund. An investment in the
Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.
The principal risks of investing in the Fund are listed below in alphabetical
order and not in order of significance.
Equity
Securities Risk. A
variety of factors can negatively impact the value of equity securities held by
a fund, including a decline in the issuer’s financial condition, unfavorable
performance of the issuer’s sector or industry, or changes in response to
overall market and economic conditions. A fund’s principal market segment(s)
(such as market capitalization or style) may underperform other market segments
or the equity markets as a whole.
•Growth
Style Risk.
Growth investing entails the risk that if growth companies do not increase their
earnings at a rate expected by investors, the market price of their stock may
decline significantly, even if earnings show an absolute increase. Growth
company stocks also typically lack the dividend yield that can lessen price
declines in market downturns.
Financials
Sector Risk. A
fund that invests significantly in financial services companies may be more
susceptible to adverse economic or regulatory occurrences affecting financial
services companies. Financial companies may be adversely affected in certain
market cycles, including periods of rising interest rates, which may restrict
the availability and increase the cost of capital, and declining economic
conditions, which may cause credit losses due to financial difficulties of
borrowers. Because many types of financial companies are especially vulnerable
to these economic cycles, the Fund’s investments in these companies may lose
significant value during such
periods.
Foreign
Currency Risk. Risks
of investing in securities denominated in, or that trade in, foreign (non-U.S.)
currencies include changes in foreign exchange rates and foreign exchange
restrictions.
Foreign
Securities Risk. The
risks of foreign securities include loss of value as a result of: political or
economic instability; nationalization, expropriation, or confiscatory taxation;
settlement delays; and limited government regulation (including less stringent
reporting, accounting, and disclosure standards than are required of U.S.
companies).
Information
Technology Sector Risk. Companies
in the information technology sector may face dramatic and often unpredictable
changes in growth rates and are particularly vulnerable to changes in technology
product cycles, product obsolescence, government regulation, and competition,
both domestically and internationally. Such companies are heavily dependent on
patent and intellectual property rights, the loss or impairment of which may
adversely affect profitability.
Redemption
and Large Transaction Risk. Ownership
of the Fund’s shares may be concentrated in one or a few large investors (such
as funds of funds, institutional investors, and asset allocation programs) that
may redeem or purchase shares in large quantities. These transactions may cause
the Fund to sell securities to meet redemptions or to invest additional cash at
times it would not otherwise do so, which may result in increased transaction
costs, increased expenses, changes to expense ratios, and adverse effects to
Fund performance. Such transactions may also accelerate the realization of
taxable income if sales of portfolio securities result in gains. Moreover,
reallocations by large shareholders among share classes of a fund may result in
changes to the expense ratios of affected classes, which may increase the
expenses paid by shareholders of the class that experienced the
redemption.
Performance
The following
information provides some indication of the risks of investing in the
Fund. Past performance (before and
after taxes) is not necessarily an indication of how the Fund will perform in
the future. You may get updated performance information at
www.PrincipalAM.com.
Using
the historical performance of the Fund's Institutional Class shares, adjusted as
described below, the bar chart shows the investment returns of the Fund’s Class
A shares for each full calendar year of operations for 10 years (or, if shorter,
the life of the Fund). These annual returns do not reflect
sales charges on Class A shares; if they did, results would be
lower. The table shows for the last one, five, and ten calendar
year periods (or, if shorter, the life of the Fund), how the Fund’s average
annual total returns compare with those of one or more broad measures of market
performance.
For
periods prior to the inception date of Classes A and C shares (September 30,
2013), Classes R-3, R-4, and R-5 shares (March 29, 2016), Class R-6 shares
(January 3, 2017), and Class J shares (September 11, 2017), the performance
shown in the bar chart for Class A shares and the table for Classes A, C, J,
R-3, R-4, R-5, and R-6 shares is that of the Fund’s Institutional Class shares,
adjusted to reflect the respective fees and expenses of each class. However,
where this adjustment for fees and expenses results in performance for a newer
class that is higher than the historical performance of the Institutional Class
shares, the historical performance of the Institutional Class shares is used.
These adjustments for these newer classes result in performance for such periods
that is no higher than the historical performance of the Institutional Class
shares, which were first sold June 14, 2012.
Total Returns as of
December 31
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Highest
return for a quarter during the period of the bar chart
above: |
Q2
2020 |
27.66% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q2
2022 |
(20.37)% |
Year-to-date
return for Class A shares: |
Q3 2023 |
18.51% |
Average
Annual Total Returns
For
the periods ended December 31, 2022
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1 Year |
5
Years |
10
Years |
Class A
Return Before Taxes |
(34.72)% |
9.24% |
12.34% |
Class A
Return After Taxes on Distributions |
(34.83)% |
8.06% |
11.49% |
Class A
Return After Taxes on Distributions and Sale of Fund
Shares |
(20.47)% |
7.28% |
10.21% |
Class C
Return Before Taxes |
(32.11)% |
9.66% |
12.24% |
Class J
Return Before Taxes |
(31.51)% |
10.59% |
13.17% |
Institutional
Class Return Before Taxes |
(30.74)% |
10.79% |
13.46% |
Class R-3
Return Before Taxes |
(31.05)% |
10.27% |
12.88% |
Class R-4
Return Before Taxes |
(30.93)% |
10.47% |
13.10% |
Class R-5
Return Before Taxes |
(30.85)% |
10.62% |
13.24% |
Class R-6
Return Before Taxes |
(30.68)% |
10.90% |
13.50% |
Russell 1000
Index (reflects no deduction for
fees, expenses, or taxes) |
(19.14)% |
9.13% |
12.38% |
Russell 1000
Growth Index (reflects no deduction for
fees, expenses, or taxes) |
(29.15)% |
10.96% |
14.10% |
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns
depend on an investor’s tax situation and may differ from those shown. The
after-tax returns shown are not relevant to investors who hold their Fund shares
through tax-deferred arrangements, such as 401(k) plans or individual retirement
accounts. After-tax returns are shown
for Class A shares only and would be different for the other share
classes.
Effective
December 31, 2023, the Fund changed its primary broad-based index to the Russell
1000 Index in order to meet the revised definition of “broad-based securities
market index.” The Russell 1000 Growth Index is included as an additional index
for the Fund as it shows how the Fund’s performance compares with the returns of
an index of funds with similar investment
objectives.
Investment
Advisor and Portfolio Managers
Principal
Global Investors, LLC
•K.
William Nolin (since 2012), Portfolio Manager
•Tom
Rozycki (since 2012), Portfolio Manager
Purchase
and Sale of Fund Shares
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Share
Class |
Investment
Type |
Purchase
Minimum Per Fund |
A,
C, and J |
Initial
Investment |
$1,000(1) |
A,
C, and J |
Initial
Investment for accounts with an Automatic Investment Plan (AIP) |
$100 |
A,
C, and J |
Subsequent
Investments |
$100(1)(2) |
Institutional,
R-3, R-4, R-5, and R-6 |
There
are no minimum initial or subsequent investment requirements for eligible
purchasers. |
N/A |
(1)Some
exceptions apply; see "Purchase of Fund Shares - Minimum Investments" for more
information.
(2)For
accounts with an AIP, the subsequent automatic investments must total $1,200
annually if the initial $1,000 minimum has not been met.
You
may purchase or redeem shares on any business day (normally any day when the New
York Stock Exchange is open for regular trading) through your plan,
intermediary, or Financial Professional by sending a written request to
Principal Funds at P.O. Box 219971, Kansas City, MO 64121-9971 (regular mail) or
430 W. 7th Street, Ste. 219971, Kansas City, MO 64105-1407 (overnight mail);
calling us at 1-800-222-5852; or accessing our website
(www.principal.com).
Class
C shares are subject to an 8-year automatic conversion plan whereby Class C
shares held for eight years after purchase will automatically convert to Class A
shares of the same Fund. See Purchase of Fund Shares for more
information.
Tax
Information
The
Fund’s distributions you receive are generally subject to federal income tax as
ordinary income or capital gain and may also be subject to state and local
taxes, unless you are tax-exempt or your account is tax-deferred in which case
your distributions would be taxed when withdrawn from the tax-deferred
account.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker-dealer or other financial intermediary
(such as a bank), the Fund and its related companies may pay the intermediary
for the sale of Fund shares and related services. These payments may create a
conflict of interest by influencing the broker-dealer or other intermediary and
your salesperson to recommend the Fund over another investment, or to recommend
one share class of the Fund over another share class. Ask your salesperson or
visit your financial intermediary’s website for more information.
BOND MARKET INDEX
FUND
Objective
The
Fund seeks to provide current income.
Fees and Expenses of the
Fund
This
table describes the fees and expenses that you may pay if you buy, hold, and
sell shares of the Fund. You may pay other fees, such as brokerage commissions
and other fees to financial intermediaries, which are not reflected in the
tables and examples below.
If
you purchase Institutional Class shares through certain programs offered by
certain financial intermediaries, you may be required to pay a commission and/or
other forms of compensation to the broker, or to your Financial Professional or
other financial intermediary.
Shareholder Fees
(fees paid directly from your investment)
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Class |
| J |
Inst. |
R-1 |
R-3 |
R-4 |
R-5 |
Maximum
Deferred Sales Charge (Load) (as a percentage of the offering price or NAV
at the time Sales Load is paid, whichever is less) |
1.00% |
None |
None |
None |
None |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
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| Share
Class |
| J |
Inst. |
R-1 |
R-3 |
R-4 |
R-5 |
Management
Fees |
0.14 % |
0.14 % |
0.14 % |
0.14 % |
0.14 % |
0.14
% |
Distribution
and/or Service (12b-1) Fees |
0.15 % |
N/A |
0.35 % |
0.25 % |
0.10 % |
N/A |
Other
Expenses |
0.30 % |
0.02 % |
0.54 % |
0.33 % |
0.29 % |
0.27
% |
Acquired
Fund Fees and Expenses |
0.01 % |
0.01 % |
0.01 % |
0.01 % |
0.01 % |
0.01
% |
Total
Annual Fund Operating Expenses |
0.60 % |
0.17 % |
1.04 % |
0.73 % |
0.54 % |
0.42 % |
Fee
Waiver(1) |
(0.02)% |
(0.02)% |
(0.02)% |
(0.02)% |
(0.02)% |
(0.02)% |
Total
Annual Fund Operating Expenses after Fee Waiver |
0.58 % |
0.15 % |
1.02 % |
0.71 % |
0.52 % |
0.40
% |
(1)Principal
Global Investors, LLC ("PGI"), the investment advisor, has contractually agreed
to waive a portion of the Fund’s management fees through the period ending
December 30,
2024. The fee waiver will reduce the Fund's management fees by
0.015% (expressed as a percent of average net assets on an annualized basis). It
is expected that the fee waiver will continue through the period disclosed;
however, Principal Funds, Inc. and PGI, the parties to the agreement, may
mutually agree to terminate the fee waiver prior to the end of the
period.
Example
This Example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds.
The Example assumes that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. The calculation of costs takes into account any applicable
contractual fee waivers and/or expense reimbursements for the period noted in
the table above. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| 1
year |
3
years |
5
years |
10
years |
Class
J |
$159 |
$190 |
$333 |
$748 |
Institutional
Class |
15 |
53 |
94 |
215 |
Class
R-1 |
104 |
329 |
572 |
1,269 |
Class
R-3 |
73 |
231 |
404 |
905 |
Class
R-4 |
53 |
171 |
300 |
675 |
Class
R-5 |
41 |
133 |
233 |
528
|
With respect to Class J
shares, you would pay the following expenses if you did not redeem your shares
(all other classes would be the same as in the above
example):
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| 1
year |
3
years |
5
years |
10
years |
Class
J |
$59 |
$190 |
$333 |
$748 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
Annual Fund Operating Expenses or in the Example, affect the Fund’s performance.
During
the most recent fiscal year, the Fund’s portfolio turnover rate was
89.7% of the average
value of its portfolio.
Principal Investment
Strategies
Under normal circumstances, the Fund uses a passive investment
approach known as “sampling” to invest at least 80% of its net assets, plus any
borrowings for investment purposes, in investments designed to track the
Bloomberg U.S. Aggregate Bond Index (the “Index”) at the time of purchase. The
Index is composed of investment-grade, fixed-rate debt issues with maturities of
one year or more, including government securities, corporate securities, and
asset-backed and mortgage-backed securities (securitized products). As of
November 30, 2023, the Index was composed of 13,378 issues. The Index is
rebalanced monthly to reflect securities that have dropped out of or entered the
Index in the preceding month. Generally, the Fund makes corresponding changes to
its portfolio shortly after Index changes are made public. Because of the
practical difficulties and expense of purchasing all of the securities in the
Index, the Fund does not purchase all of the securities in the Index. Instead,
the Fund uses a sampling methodology to purchase securities with generally the
same risk and return characteristics of the Index. Under normal circumstances,
the Fund maintains an average portfolio duration that is in line with the
duration of the Index, which as of November 30, 2023 was 6.19 years. The Fund
will not concentrate (i.e., invest more than 25% of its assets) its investments
in a particular industry except to the extent the Index is so concentrated. As
of November 30, 2023, the Index was not concentrated in any
industry.
Principal
Risks
The
value of your investment in the Fund changes with the value of the Fund’s
investments. Many factors affect that value, and it is possible to lose money
by investing in the Fund. An investment in the
Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.
The principal risks of investing in the Fund are listed below in alphabetical
order and not in order of significance.
Fixed-Income
Securities Risk. Fixed-income
securities are subject to interest rate, credit quality, and liquidity risks.
The market value of fixed-income securities generally declines when interest
rates rise, and increased interest rates may adversely affect the liquidity of
certain fixed-income securities. Moreover, an issuer of fixed-income securities
could default on its payment obligations due to increased interest rates or for
other reasons.
Index
Fund Risk. Index
funds use a passive investment approach and generally do not attempt to manage
market volatility, use defensive strategies, or reduce the effect of any
long-term periods of poor investment performance. Therefore, the Fund may hold
securities that present risks that an investment advisor researching individual
securities might seek to avoid. An index fund has operating and other expenses
while an index does not. As a result, over time, index funds tend to
underperform the index. The correlation between fund performance and index
performance may also be affected by the type of passive investment approach used
by a fund (sampling or replication), changes in securities markets, changes in
the composition of the index, and the timing of purchases and sales of fund
shares. Errors or delays in compiling or rebalancing the Index may impact the
performance of the Fund and increase transaction
costs.
Industry
Concentration Risk. A fund that concentrates investments in a particular industry or
group of industries has greater exposure than other funds to market, economic,
and other factors affecting that industry or group of
industries.
Portfolio
Duration Risk. Portfolio
duration is a measure of the expected life of a fixed-income security and its
sensitivity to changes in interest rates. The longer a fund’s average portfolio
duration, the more sensitive the fund will be to changes in interest rates,
which means funds with longer average portfolio durations may be more volatile
than those with shorter durations.
Real
Estate Securities Risk. Investing
in real estate securities subjects the fund to the risks associated with the
real estate market (which are similar to the risks associated with direct
ownership in real estate), including declines in real estate values, loss due to
casualty or condemnation, property taxes, interest rate changes, increased
expenses, cash flow of underlying real estate assets, regulatory changes
(including zoning, land use, and rents), and environmental problems, as well as
to the risks related to the management skill and creditworthiness of the
issuer.
Redemption
and Large Transaction Risk. Ownership
of the Fund’s shares may be concentrated in one or a few large investors (such
as funds of funds, institutional investors, and asset allocation programs) that
may redeem or purchase shares in large quantities. These transactions may cause
the Fund to sell securities to meet redemptions or to invest additional cash at
times it would not otherwise do so, which may result in increased transaction
costs, increased expenses, changes to expense ratios, and adverse effects to
Fund performance. Such transactions may also accelerate the realization of
taxable income if sales of portfolio securities result in gains. Moreover,
reallocations by large shareholders among share classes of a fund may result in
changes to the expense ratios of affected classes, which may increase the
expenses paid by shareholders of the class that experienced the
redemption.
Securitized
Products Risk. Investments
in securitized products are subject to risks similar to traditional fixed-income
securities, such as credit, interest rate, liquidity, prepayment, extension, and
default risk, as well as additional risks associated with the nature of the
assets and the servicing of those assets. Unscheduled prepayments on securitized
products may have to be reinvested at lower rates. A reduction in prepayments
may increase the effective maturities of these securities, exposing them to the
risk of decline in market value over time (extension
risk).
U.S.
Government Securities Risk. Yields
available from U.S. government securities are generally lower than yields from
many other fixed-income securities.
U.S.
Government-Sponsored Securities Risk. Securities
issued by U.S. government-sponsored enterprises such as the Federal Home Loan
Mortgage Corporation, the Federal National Mortgage Association, and the Federal
Home Loan Banks are not issued or guaranteed by the U.S.
government.
Performance
The following
information provides some indication of the risks of investing in the
Fund. Past performance (before and
after taxes) is not necessarily an indication of how the Fund will perform in
the future. You may get updated performance information at
www.PrincipalAM.com.
The
bar chart shows the investment returns of the Fund’s Institutional Class shares
for each full calendar year of operations for 10 years (or, if shorter, the life
of the Fund). The table shows for the last one, five, and ten calendar year
periods (or, if shorter, the life of the Fund), how the Fund’s average annual
total returns compare with those of one or more broad measures of market
performance.
During
2014, the Institutional Class experienced a significant withdrawal of monies by
an affiliate. As the remaining shareholders held relatively small positions, the
total return amounts expressed herein are greater than those that would have
been experienced without the withdrawal.
Total Returns as of
December 31
|
|
|
|
|
|
|
| |
Highest
return for a quarter during the period of the bar chart
above: |
Q1
2020 |
3.28% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q1
2022 |
(5.91)% |
Year-to-date
return for Institutional Class shares: |
Q3 2023 |
(1.07)% |
Average
Annual Total Returns
For
the periods ended December 31, 2022
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
1 Year |
5
Years |
10
Years |
Institutional Class Return Before
Taxes |
(13.27)% |
(0.19)% |
0.87 |
% |
(1) |
Institutional Class Return After Taxes
on Distributions |
(13.84)% |
(1.92)% |
(0.47) |
% |
(1) |
Institutional Class Return After Taxes
on Distributions and Sale of Fund Shares |
(7.85)% |
(0.58)% |
0.23 |
% |
(1) |
Class J
Return Before Taxes |
(14.42)% |
(0.62)% |
0.31 |
% |
|
Class R-1
Return Before Taxes |
(13.94)% |
(1.05)% |
(0.11) |
% |
|
Class R-3
Return Before Taxes |
(13.67)% |
(0.75)% |
0.20 |
% |
|
Class R-4
Return Before Taxes |
(13.58)% |
(0.51)% |
0.41 |
% |
|
Class R-5
Return Before Taxes |
(13.41)% |
(0.44)% |
0.51 |
% |
|
Bloomberg
U.S. Aggregate Bond Index (reflects no deduction for
fees, expenses, or taxes) |
(13.02)% |
0.02% |
1.06 |
% |
|
(1)During
2014, the Institutional Class experienced a significant withdrawal of monies by
an affiliate. As the remaining shareholders held relatively small positions, the
total return amounts expressed herein are greater than those that would have
been experienced without the
withdrawal.
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns
depend on an investor’s tax situation and may differ from those shown. The
after-tax returns shown are not relevant to investors who hold their Fund shares
through tax-deferred arrangements, such as 401(k) plans or individual retirement
accounts. After-tax returns are shown
for Institutional Class shares only and would be different for the other share
classes.
Investment
Advisor and Portfolio Managers
Principal
Global Investors, LLC
•Jeff
Callahan (since 2020), Portfolio Manager
•Darryl
Trunnel (since 2019), Portfolio Manager
Purchase
and Sale of Fund Shares
|
|
|
|
|
|
|
| |
Share
Class |
Investment
Type |
Purchase
Minimum Per Fund |
J |
Initial
Investment |
$1,000(1) |
J |
Initial
Investment for accounts with an Automatic Investment Plan
(AIP) |
$100 |
J |
Subsequent
Investments |
$100(1)(2) |
Institutional,
R-1, R-3, R-4, and R-5 |
There
are no minimum initial or subsequent investment requirements for eligible
purchasers. |
N/A |
(1)Some
exceptions apply; see "Purchase of Fund Shares - Minimum Investments" for more
information.
(2)For
accounts with an AIP, the subsequent automatic investments must total $1,200
annually if the initial $1,000 minimum has not been met.
You
may purchase or redeem shares on any business day (normally any day when the New
York Stock Exchange is open for regular trading) through your plan,
intermediary, or Financial Professional by sending a written request to
Principal Funds at P.O. Box 219971, Kansas City, MO 64121-9971 (regular mail) or
430 W. 7th Street, Ste. 219971, Kansas City, MO 64105-1407 (overnight mail);
calling us at 1-800-222-5852; or accessing our website
(www.principal.com).
Effective
January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase
from new retirement plans except in limited circumstances. See Purchase of Fund
Shares for more information.
Tax
Information
The
Fund’s distributions you receive are generally subject to federal income tax as
ordinary income or capital gain and may also be subject to state and local
taxes, unless you are tax-exempt or your account is tax-deferred in which case
your distributions would be taxed when withdrawn from the tax-deferred
account.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker-dealer or other financial intermediary
(such as a bank), the Fund and its related companies may pay the intermediary
for the sale of Fund shares and related services. These payments may create a
conflict of interest by influencing the broker-dealer or other intermediary and
your salesperson to recommend the Fund over another investment, or to recommend
one share class of the Fund over another share class. Ask your salesperson or
visit your financial intermediary’s website for more information.
CAPITAL SECURITIES
FUND
Objective
The
Fund seeks to provide current income.
Fees and Expenses of the
Fund
This table describes the fees and expenses that you may pay if you
buy, hold, and sell shares of the Fund. You may pay other fees, such as
brokerage commissions and other fees to financial intermediaries, which are not
reflected in the tables and examples below.
Shareholder Fees
(fees paid directly from your
investment): None
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
|
|
|
|
| |
|
Share
Class |
|
S |
Management
Fees |
0.00% |
Other
Expenses |
0.05% |
Total
Annual Fund Operating Expenses |
0.05% |
Expense
Reimbursement(1) |
(0.05)% |
Total
Annual Fund Operating Expenses after Expense Reimbursement(2) |
0.00% |
(1)Principal
Global Investors, LLC (“PGI”), the investment advisor, has contractually agreed
to limit the Fund's expenses attributable to Class S shares by paying expenses
normally payable by the Fund (excluding interest expense, expenses related to
fund investments, acquired fund fees and expenses, and tax reclaim recovery
expenses and other extraordinary expenses) to maintain a total level of
operating expenses (expressed as a percent of average net assets on an
annualized basis) not to exceed 0.00%. It is expected that the expense limit
will continue permanently (and in any event, through December 30,
2024); however, Principal Funds, Inc. and PGI, the parties to
the agreement, may mutually agree to terminate the expense
limit.
(2)The
table reflects that Principal Global Investors, LLC (“PGI”), the investment
advisor, is absorbing all expenses of the Fund. You should be aware, however,
that the Fund is an integral part of “wrap-fee” programs, including those
sponsored by registered investment advisors and broker-dealers unaffiliated with
the Fund. Participants in these programs pay a “wrap” fee to the sponsor of the
program. You should carefully read the wrap-fee brochure provided to you by your
sponsor or your registered investment advisor. The brochure is required to
include information about the fees charged to you by the sponsor and the fees
paid to the registered investment advisor.
Example
This Example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds.
The Example assumes that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. The calculation of costs takes into account any applicable
contractual fee waivers and/or expense reimbursements for the period noted in
the table above. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| 1
year |
3
years |
5
years |
10
years |
Class
S |
$0 |
$0 |
$0 |
$0 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
Annual Fund Operating Expenses or in the Example, affect the Fund’s performance.
During
the most recent fiscal year, the Fund’s portfolio turnover rate was
14.7% of the average
value of its portfolio.
Principal Investment
Strategies
Under
normal circumstances, the Fund invests at least 80% of its net assets, plus any
borrowings for investment purposes, in capital securities at the time of
purchase. Capital securities include Tier 2 subordinated debt securities issued
by U.S. and non-U.S. financial institutions (including, but not limited to,
banks and insurance companies) and contingent convertible securities (“CoCos”),
as well as preferred securities, including preferred stock and junior
subordinated debt, issued by U.S. and non-U.S. corporations, financial
institutions, and other issuers for purposes of satisfying regulatory capital
requirements or obtaining rating agency credit. Capital securities may pay
fixed-rate or adjustable-rate distributions and generally have a payment
“preference” over common stock, but are junior to the issuer’s senior debt in a
liquidation of the issuer’s assets.
CoCos
are hybrid debt securities typically issued by banking institutions that have
contractual equity conversion or principal write-down features that are
triggered by regulatory capital thresholds or regulatory actions calling into
question the issuing banking institution’s continued viability as a
going-concern if the conversion trigger were not exercised.
Tier
2 and preferred securities purchased by the Fund are issued by companies with
senior debt rated at the time of purchase BBB- or higher by S&P Global
Ratings (“S&P Global”) or Baa3 or higher by Moody’s Investors Service, Inc.
(“Moody’s”). The Fund may invest up to 100% of its assets in
below-investment-grade (sometimes called “junk”) preferred securities, which are
rated at the time of purchase Ba1 or lower by Moody’s and BB+ or lower by
S&P Global. If the preferred security has been rated by only one of the
rating agencies, that rating will determine the preferred security's rating; if
the preferred security is rated differently by the rating agencies, the highest
rating will be used; and if the preferred security has not been rated by either
of the rating agencies, those selecting such investments will determine the
preferred security's quality; provided, however, that the issuer of such
below-investment-grade preferred securities has senior debt outstanding that is
rated at the time of purchase BBB- or higher by S&P Global or Baa3 or higher
by Moody’s. The Fund is not managed to a particular maturity or
duration.
The Fund
concentrates its investments (invests more than 25% of its net assets) in
securities in one or more industries (i.e., banking, insurance, and commercial
finance) within the U.S. and non-U.S. (foreign) financial services
sector.
Principal
Risks
The
value of your investment in the Fund changes with the value of the Fund’s
investments. Many factors affect that value, and it is possible to lose money
by investing in the Fund. An investment in the
Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.
The principal risks of investing in the Fund are listed below in alphabetical
order and not in order of significance.
Capital
Securities Risk. In
addition to the risks associated with other types of preferred securities and
fixed-income securities, investing in capital securities includes the risk that
the value of securities may decline in response to changes in legislation and
regulations applicable to financial institutions and financial markets,
increased competition, adverse changes in general or industry-specific economic
conditions, or unfavorable interest
rates.
Contingent
Convertible Securities Risk. In
addition to the general risks associated with fixed-income securities and
convertible securities, the risks of investing in contingent convertible
securities (“CoCos”) include the risk that a CoCo may be written down, written
off, or converted into an equity security when the issuer’s capital ratio falls
below a specified trigger level, or in a regulator’s discretion depending on the
regulator’s judgment about the issuer’s solvency prospects. Due to these
features, CoCos may have substantially greater risk than other securities in
times of financial stress. If the trigger level is breached, the issuer’s
decision to write down, write off, or convert a CoCo may result in the fund’s
complete loss on an investment in CoCos with no chance of recovery even if the
issuer remains in existence.
Fixed-Income
Securities Risk. Fixed-income
securities are subject to interest rate, credit quality, and liquidity risks.
The market value of fixed-income securities generally declines when interest
rates rise, and increased interest rates may adversely affect the liquidity of
certain fixed-income securities. Moreover, an issuer of fixed-income securities
could default on its payment obligations due to increased interest rates or for
other reasons.
Foreign
Securities Risk. The
risks of foreign securities include loss of value as a result of: political or
economic instability; nationalization, expropriation, or confiscatory taxation;
settlement delays; and limited government regulation (including less stringent
reporting, accounting, and disclosure standards than are required of U.S.
companies).
High
Yield Securities Risk. High
yield fixed-income securities (commonly referred to as “junk bonds”) are subject
to greater credit quality risk than higher rated fixed-income securities and
should be considered speculative.
Industry
Concentration Risk. A fund that concentrates investments in a particular industry or
group of industries has greater exposure than other funds to market, economic,
and other factors affecting that industry or group of
industries.
•Financial
Services. A
fund concentrating in financial services companies may be more susceptible to
adverse economic or regulatory occurrences affecting financial services
companies. Financial companies may be adversely affected in certain market
cycles, including periods of rising interest rates, which may restrict the
availability and increase the cost of capital, and declining economic
conditions, which may cause credit losses due to financial difficulties of
borrowers. Because many types of financial companies are especially vulnerable
to these economic cycles, the Fund’s investments in these companies may lose
significant value during such
periods.
Portfolio
Duration Risk. Portfolio
duration is a measure of the expected life of a fixed-income security and its
sensitivity to changes in interest rates. The longer a fund’s average portfolio
duration, the more sensitive the fund will be to changes in interest rates,
which means funds with longer average portfolio durations may be more volatile
than those with shorter durations.
Preferred
Securities Risk. Because
preferred securities have a lower priority claim on assets or earnings than
senior bonds and other debt instruments in a company’s capital structure, they
are subject to greater credit and liquidation risk than more senior debt
instruments. In addition, preferred securities are subject to other risks, such
as limited or no voting rights, deferring or skipping distributions, interest
rate risk, and redeeming the security prior to any stated maturity
date.
Performance
The
following information provides some indication of the risks of investing in the
Fund. Past performance (before and
after taxes) is not necessarily an indication of how the Fund will perform in
the future. You may get updated performance information at
www.PrincipalAM.com.
The bar chart
shows the investment returns of the Fund’s Class S shares for each full calendar
year of operations for 10 years (or, if shorter, the life of the Fund). The
table shows for the last one, five, and ten calendar year periods (or, if
shorter, the life of the Fund), how the Fund’s average annual total returns
compare with those of one or more broad measures of market
performance.
Life
of Fund returns are measured from the date the Fund’s shares were first sold
(March 14,
2014).
Performance
does not reflect fees charged in the wrap-fee
program.
Total Returns as of
December 31
|
|
|
|
|
|
|
| |
Highest
return for a quarter during the period of the bar chart
above: |
Q2
2020 |
12.13% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q1
2020 |
(12.72)% |
Year-to-date
return for Class S shares: |
Q3 2023 |
0.55% |
Average
Annual Total Returns
For
the periods ended December 31, 2022
|
|
|
|
|
|
|
|
|
|
| |
|
1 Year |
5
Years |
Life
of Fund |
Class S
Return Before Taxes |
(11.35)% |
2.09% |
3.95% |
Class S
Return After Taxes on Distributions |
(12.76)% |
0.47% |
2.17% |
Class S
Return After Taxes on Distributions and Sale of Fund
Shares |
(6.16)% |
1.25% |
2.52% |
Bloomberg
Global Aggregate Bond Index (reflects no deduction for
fees, expenses, or taxes) |
(16.26)% |
(1.66)% |
(0.52)% |
ICE BofA
U.S. All Capital Securities Index (reflects
no deduction for fees, expenses, or
taxes) |
(14.86)% |
1.41% |
3.84% |
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns
depend on an investor’s tax situation and may differ from those shown. The
after-tax returns shown are not relevant to investors who hold their Fund shares
through tax-deferred arrangements, such as 401(k) plans or individual retirement
accounts. After-tax returns are shown
for Class S shares only and would be different for the other share
classes.
Effective
December 31, 2023, the Fund changed its primary broad-based index to the
Bloomberg Global Aggregate Bond Index in order to meet the revised definition of
“broad-based securities market index.” The ICE BofA U.S. All Capital Securities
Index is included as an additional index for the Fund as it shows how the Fund’s
performance compares with the returns of an index of funds with similar
investment objectives.
Investment
Advisor
Principal
Global Investors, LLC
Sub-Advisor
and Portfolio Managers
Spectrum
Asset Management, Inc. ("Spectrum")
•Fernando
(“Fred”) Diaz (since 2014), Portfolio Manager
•Roberto
Giangregorio (since 2014), Portfolio Manager
•L.
Phillip Jacoby, IV (since 2014), Chief Investment Officer and Portfolio
Manager
•Manu
Krishnan (since 2014), Portfolio Manager
•Mark
A. Lieb (since 2014), President and Chief Executive Officer
•Satomi
Yarnell (since 2021), Portfolio Manager
Purchase
and Sale of Fund Shares
Eligibility
to invest in the Fund is limited to certain wrap-fee program accounts. Only
wrap-fee program accounts as to which Spectrum and/or PGI have an agreement with
the wrap-fee program’s sponsor (“Sponsor”) or the wrap account owner to provide
investment advisory or sub-advisory services (either directly or by providing a
model investment portfolio created and maintained by Spectrum and/or PGI to the
Sponsor or one or more Sponsor-designated investment managers (“Eligible Wrap
Accounts”)) are eligible to purchase shares of the Fund. References to Wrap Fee
Advisor shall mean Spectrum and/or PGI in their role providing such services to
Eligible Wrap Accounts.
A
client agreement with the Sponsor to open an account in the Sponsor’s wrap-fee
program typically may be obtained by contacting the Sponsor or your financial
advisor. Purchase and sale decisions regarding Fund shares for your wrap-fee
account ordinarily will be made by the Wrap Fee Advisor, the Sponsor, or a
Sponsor-designated investment manager, depending on the particular wrap-fee
program in which your wrap-fee account participates. If your wrap-fee account’s
use of the Wrap Fee Advisor’s investment style is terminated by you, the
Sponsor, or the Wrap Fee Advisor, your wrap-fee account will cease to be an
Eligible Wrap Account, and you will be required to redeem all your shares of the
Fund. Each Eligible Wrap Account, by purchasing shares, agrees to any such
redemption.
There
are no minimum initial or subsequent investment requirements for Eligible Wrap
Accounts. Eligible Wrap Accounts may purchase or redeem shares on any business
day (normally any day when the New York Stock Exchange is open for regular
trading) through its intermediary.
Tax
Information
The
Fund’s distributions you receive are generally subject to federal income tax as
ordinary income or capital gain and may also be subject to state and local
taxes, unless you are tax-exempt or your account is tax-deferred in which case
your distributions would be taxed when withdrawn from the tax-deferred
account.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker-dealer or other financial intermediary
(such as a bank), the Fund and its related companies may pay the intermediary
for the sale of Fund shares and related services. These payments may create a
conflict of interest by influencing the broker-dealer or other intermediary and
your salesperson to recommend the Fund over another investment, or to recommend
one share class of the Fund over another share class. Ask your salesperson or
visit your financial intermediary’s website for more information.
DIVERSIFIED REAL ASSET
FUND
Objective
The
Fund seeks a long-term total return in excess of inflation.
Fees and Expenses of the
Fund
This
table describes the fees and expenses that you may pay if you buy, hold, and
sell shares of the Fund. You may pay other fees, such as brokerage commissions
and other fees to financial intermediaries, which are not reflected in the
tables and examples below. You may qualify for sales charge discounts
if you and your family invest, or agree to invest in the future, at least
$100,000 in Class A shares of Principal
Funds, Inc. More
information about these and other discounts is available from your financial
intermediary and in “Choosing a Share Class and The Costs of Investing”
beginning on page 115 of the Fund’s Prospectus, Appendix B to the Prospectus
titled "Intermediary-Specific Sales Charge Waivers and Reductions," and
“Multiple Class Structure” beginning on page 4 of the Fund’s Statement of
Additional Information.
If
you purchase Institutional Class or Class R-6 shares through certain programs
offered by certain financial intermediaries, you may be required to pay a
commission and/or other forms of compensation to the broker, or to your
Financial Professional or other financial
intermediary.
Shareholder Fees
(fees paid directly from your investment)
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Share
Class |
| A |
Inst. |
R-3 |
R-6 |
Maximum
Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) |
3.75% |
None |
None |
None |
Maximum
Deferred Sales Charge (Load) (as a percentage of the offering price or NAV
at the time Sales Load is paid, whichever is less) |
1.00% |
None |
None |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
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| |
|
Share
Class |
| A |
Inst. |
R-3 |
R-6 |
Management
Fees(1) |
0.76 % |
0.76 % |
0.76 % |
0.76
% |
Distribution
and/or Service (12b-1) Fees |
0.25 % |
N/A |
0.25 % |
N/A |
Other
Expenses |
0.22 % |
0.12 % |
0.33 % |
0.01
% |
Acquired
Fund Fees and Expenses |
0.01 % |
0.01 % |
0.01 % |
0.01
% |
Total
Annual Fund Operating Expenses |
1.24 % |
0.89 % |
1.35 % |
0.78 % |
Expense
Reimbursement(2) |
(0.03)% |
(0.05)% |
N/A
|
0.00% |
Total
Annual Fund Operating Expenses after Expense Reimbursement |
1.21 % |
0.84 % |
1.35 % |
0.78
% |
(1)Fees have
been restated to reflect current
fees.
(2)
Principal Global Investors, LLC (“PGI”), the investment advisor, has
contractually agreed to limit the Fund’s expenses by paying, if necessary,
expenses normally payable by the Fund (excluding interest expense, expenses
related to fund investments, acquired fund fees and expenses, and tax reclaim
recovery expenses and other extraordinary expenses) to maintain a total level of
operating expenses (expressed as a percent of average net assets on an
annualized basis) not to exceed 1.20% for Class A and 0.83% for Institutional
Class shares. In addition, for Class R-6, the expense limit will maintain “Other
Expenses” (expressed as a percent of average net assets on an annualized basis)
not to exceed 0.02% (excluding interest expense, expenses related to fund
investments, acquired fund fees and expenses, and tax reclaim recovery expenses
and other extraordinary expenses). It is expected that the expense limits will
continue through the period ending December 30,
2024; however, Principal Funds, Inc. and PGI, the parties to the
agreement, may mutually agree to terminate the expense limits prior to the end
of the period. Subject to applicable expense limits, the Fund may reimburse PGI
for expenses incurred during the current fiscal year.
Example
This Example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds.
The Example assumes that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. The calculation of costs takes into account any applicable
contractual fee waivers and/or expense reimbursements for the period noted in
the table above. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
|
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| |
|
1
year |
3
years |
5
years |
10
years |
Class
A |
$494 |
$751 |
$1,028 |
$1,816 |
Institutional
Class |
86 |
279 |
488 |
1,091 |
Class
R-3 |
137 |
428 |
739 |
1,624 |
Class
R-6 |
80 |
249 |
433 |
966
|
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
Annual Fund Operating Expenses or in the Example, affect the Fund’s performance.
During
the most recent fiscal year, the Fund’s portfolio turnover rate was
72.4% of the average
value of its portfolio.
Principal Investment
Strategies
Under normal
circumstances, the Fund invests at least 80% of its net assets, plus any
borrowings for investment purposes, in investments related to real assets and
real asset companies. The Fund allocates its assets among
general investment categories related to real assets, which include tangible
assets and investments that are expected to perform well in periods of rising or
high inflation, such as the following: infrastructure, natural resources,
commodities, real estate, inflation-indexed bonds, and floating rate debt. In
pursuing these strategies, the Fund invests in equity securities, including
growth and value securities, of any market capitalization size (small, medium,
large); fixed-income securities, which are not managed to any particular
maturity or duration; U.S. and foreign securities; and derivative instruments,
such as forwards, futures, swaps, and options. A derivative is a financial
arrangement, the value of which is derived from, or based on, a traditional
security, asset, or market index. The Fund concentrates its investments (invests
more than 25% of its net assets) in securities of one or more of the following
industries: real estate, energy, natural resources, and
infrastructure.
In
managing the Fund, Principal Global Investors, LLC (“PGI”), the Fund’s
investment advisor, determines the Fund’s strategic asset allocation among
actively managed and passively managed (index) strategies that are executed by
PGI and multiple sub-advisors. PGI has considerable latitude in allocating the
Fund’s assets among the general investment categories listed below. The Fund
uses strategies and sub-advisors to varying degrees and may change allocations,
add new or eliminate existing strategies and sub-advisors, and temporarily or
permanently reduce allocations from time to time such that the Fund would have
little or no assets allocated to a particular strategy or
sub-advisor.
Infrastructure. The
Fund invests in companies that own or operate infrastructure assets related to
the transportation, communications, water, electricity transmission and
distribution, and oil and gas storage, processing, and transportation
industries.
Natural
Resources. The
Fund invests in securities of companies that primarily own, explore, mine,
process, or otherwise develop natural resources, renewable energy, or
agricultural commodities and products, or that supply goods and services to such
companies. These include companies contributing to and/or profiting from, these
sectors, especially those active in production, processing, and supply chain
services. These also include companies that are developing technologies,
processes, products, and services relating to more efficient use, delivery,
storage, management, or conversion of natural resources or products derived from
natural resources, such as water treatment companies, smart electricity grid
companies, companies that focus on creating energy efficiency for industrial
processes, and companies focused on renewable energy resources. Natural
resources generally include precious metals, such as gold, silver and platinum;
ferrous and nonferrous metals, such as iron, aluminum, and copper; strategic
metals, such as uranium and titanium; hydrocarbons, such as coal, oil, and
natural gas; timber and wood products; and undeveloped real
property.
Commodities. Commodities
are assets that have tangible properties, such as oil, coal, natural gas,
agricultural products, industrial metals, livestock, and precious metals. To
gain exposure to the commodities markets without investing directly in physical
commodities, the Fund invests in a wholly-owned subsidiary of the Fund organized
under the laws of the Cayman Islands (the “Cayman Subsidiary”) and fixed-income
securities (primarily short-term U.S. Treasury and Agency notes and bonds). In
order to gain exposure to the commodity markets within the limitations of
certain federal tax law requirements, the Cayman Subsidiary invests in
commodity-linked equities, commodity-linked exchange traded funds (ETFs), and
commodity-linked derivatives, including commodity-linked swaps, commodity
futures, and forward contracts and/or options on commodities, as well as
instruments such as fixed-income securities (cash, cash equivalents, and/or U.S.
Treasury and Agency notes and bonds), either as investments or to serve as
margin or collateral for the Cayman Subsidiary’s derivatives
positions.
Real
Estate. The
Fund invests in equity securities of companies that have at least 50% of their
assets, income, or profits derived from products or services related to the real
estate industry (“real estate companies”). Real estate companies include real
estate investment trusts (“REITs”), REIT-like entities, and companies with
substantial real estate holdings such as paper, lumber, hotel, and entertainment
companies, as well as building supply manufacturers, mortgage lenders, and
mortgage servicing companies.
Inflation-Indexed
Bonds. The
Fund invests in inflation-indexed bonds issued by the U.S. and non-U.S.
governments, their agencies, or instrumentalities and by U.S. and non-U.S.
corporations. Inflation-indexed bonds are fixed-income securities that are
structured to provide protection against inflation. The value of the bond’s
principal or the interest income paid on the bond is adjusted to track changes
in an official inflation measure.
Floating
Rate Debt. The
Fund invests in below-investment-grade (sometimes called “junk”) or comparable
unrated floating rate debt (also known as bank loans, syndicated loans,
leveraged loans, or senior floating rate interests). Floating rate debt has a
variable coupon that resets periodically, with interest payments determined by a
representative interest rate index (e.g., SOFR, the federal funds rate, or a
similar reference rate) plus a fixed spread. As a result, the coupon payments
vary, or “float” with prevailing market interest
rates.
Principal
Risks
The
value of your investment in the Fund changes with the value of the Fund’s
investments. Many factors affect that value, and it is possible to lose money
by investing in the Fund. An investment in the
Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.
The principal risks of investing in the Fund are listed below in alphabetical
order and not in order of significance.
Asset
Allocation Risk. A
fund’s selection and weighting of asset classes and allocation among
sub-advisors may cause it to underperform other funds with a similar investment
objective.
Bank
Loans Risk. Changes
in economic conditions are likely to cause issuers of bank loans (also known as
senior floating rate interests) to be unable to meet their obligations. In
addition, the value of the collateral securing the loan (if any) may decline,
causing a loan to be substantially unsecured. Underlying credit agreements
governing the bank loans, reliance on market makers, priority of repayment, and
overall market volatility may harm the liquidity of
loans.
Cayman
Subsidiary Risk. The
Fund is subject to the particular risks associated with the investments of the
Fund’s wholly-owned Cayman Subsidiary, namely commodity-related investments
risk, counterparty risk, and derivatives risk. The Cayman Subsidiary is not
registered under the Investment Company Act of 1940 and is not subject to all
the investor protections of the Investment Company Act of 1940. The laws of the
Cayman Islands and/or the United States (including the IRS position on income
earned from wholly-owned subsidiaries described in past IRS private letter
rulings) may change, resulting in the inability of the Fund and/or the Cayman
Subsidiary to operate as described in this
Prospectus.
Commodity-Related
Investments Risk. The
value of commodities investments will generally be affected by overall market
movements and factors specific to a particular industry or commodity, which may
include weather, embargoes, tariffs, and economic health, political,
international, regulatory, and other developments. Exposure to the commodities
markets may subject the Fund to greater volatility than investments in
traditional securities.
Counterparty
Risk. Counterparty
risk is the risk that the counterparty to a contract or other obligation will be
unable or unwilling to honor its
obligations.
Derivatives
Risk. Derivatives
may not move in the direction anticipated by the portfolio manager. Transactions
in derivatives may increase volatility, cause the liquidation of portfolio
positions when not advantageous to do so, and result in disproportionate losses
that may be substantially greater than a fund’s initial
investment.
•Forward
Contracts, Futures, and Swaps. Forward
contracts, futures, and swaps involve specific risks, including: the imperfect
correlation between the change in market value of the instruments held by the
fund and the price of the forward contract, future, or swap; possible lack of a
liquid secondary market for a forward contract, future, or swap and the
resulting inability to close a forward contract, future, or swap when desired;
counterparty risk; and if the fund has insufficient cash, it may have to sell
securities from its portfolio to meet daily variation margin
requirements.
•Options.
Options
involve specific risks, including: the imperfect correlation between the change
in market value of the instruments held by the Fund and the price of the
options; counterparty risk; difference in trading hours for the options markets
and the markets for the underlying securities (rate movements can take place in
the underlying markets that cannot be reflected in the options markets); and an
insufficient liquid secondary market for particular
options.
Energy
Sector Risk. The
market value of securities in the energy sector may decline for many reasons,
including, among others, changes in energy prices, energy supply and demand,
government regulations, and energy conservation efforts. Energy companies can be
significantly affected by the supply of, and demand for, specific products
(e.g., oil and natural gas) and services, exploration and production spending,
government subsidization and tax incentives, world events, and general economic
conditions. In addition, renewable energy companies may be more volatile than
companies operating in more established industries. Seasonal weather conditions,
extreme weather, or other natural disasters could have a disproportionate effect
on renewable energy companies versus other types of energy companies. These
factors could impact the ability of renewable energy companies to pay dividends
comparable to those paid by other types of energy
companies.
Equity
Securities Risk. A
variety of factors can negatively impact the value of equity securities held by
a fund, including a decline in the issuer’s financial condition, unfavorable
performance of the issuer’s sector or industry, or changes in response to
overall market and economic conditions. A fund’s principal market segment(s)
(such as market capitalization or style) may underperform other market segments
or the equity markets as a whole.
•Growth
Style Risk.
Growth investing entails the risk that if growth companies do not increase their
earnings at a rate expected by investors, the market price of their stock may
decline significantly, even if earnings show an absolute increase. Growth
company stocks also typically lack the dividend yield that can lessen price
declines in market downturns.
•Smaller
Companies Risk. Investments
in smaller companies may involve greater risk and price volatility than
investments in larger, more mature companies. Smaller companies may have limited
product lines, markets, or financial resources; lack the competitive strength of
larger companies; have less experienced managers; or depend on a few key
employees. Their securities often are less widely held and trade less frequently
and in lesser quantities, and their market prices often fluctuate more, than
securities of larger companies.
•Value
Style Risk. Value
investing entails the risk that value stocks may continue to be undervalued by
the market for extended periods, including the entire period during which the
stock is held by a fund, or the events that would cause the stock price to
increase may not occur as anticipated or at all. Moreover, a stock that appears
to be undervalued actually may be appropriately priced at a low level and,
therefore, would not be profitable for the
fund.
Fixed-Income
Securities Risk. Fixed-income
securities are subject to interest rate, credit quality, and liquidity risks.
The market value of fixed-income securities generally declines when interest
rates rise, and increased interest rates may adversely affect the liquidity of
certain fixed-income securities. Moreover, an issuer of fixed-income securities
could default on its payment obligations due to increased interest rates or for
other reasons.
Foreign
Currency Risk. Risks
of investing in securities denominated in, or that trade in, foreign (non-U.S.)
currencies include changes in foreign exchange rates and foreign exchange
restrictions.
Foreign
Securities Risk. The
risks of foreign securities include loss of value as a result of: political or
economic instability; nationalization, expropriation, or confiscatory taxation;
settlement delays; and limited government regulation (including less stringent
reporting, accounting, and disclosure standards than are required of U.S.
companies).
High
Yield Securities Risk. High
yield fixed-income securities (commonly referred to as “junk bonds”) are subject
to greater credit quality risk than higher rated fixed-income securities and
should be considered speculative.
Industry
Concentration Risk. A fund that concentrates investments in a particular industry or
group of industries has greater exposure than other funds to market, economic,
and other factors affecting that industry or group of
industries.
•Energy/Natural
Resources. A
fund concentrating in energy/natural resource companies may be affected by
numerous factors, including events occurring in nature, inflationary pressures,
international politics, the success of exploration projects, commodity prices,
energy conservation and environmental concerns, rapid product development and/or
product obsolescence due to technological advancements and changing consumer
demand and societal trends, taxes, and other government regulations. In
addition, interest rates and general economic conditions may affect the demand
for energy/natural resources. For example, events occurring in nature (such as
earthquakes or fires in prime energy/natural resource areas) and political
events (such as coups, military confrontations, or acts of terrorism) can affect
overall supply of energy/natural resources and the value of companies involved
in energy/natural resources.
•Infrastructure.
A fund concentrating in infrastructure-related assets is subject to numerous
related risks, including the following: supply and demand for services from and
access to infrastructure; operational and technical risks; government and
political involvement, including changes in laws and regulations; environmental
claims; changes in energy prices; natural disasters, terrorist events, and
under-insured or uninsurable losses; and complex legal agreements and claims.
Moreover, it may be difficult for the Fund to dispose of an infrastructure
investment at an attractive price or at the appropriate time or in response to
changing market conditions, or the Fund may otherwise be unable to complete a
favorable exit strategy.
•Real
Estate.
A fund concentrating in the real estate industry is subject to the risks
associated with direct ownership of real estate, securities of companies in the
real estate industry, and/or real estate investment
trusts.
Leverage
Risk. Leverage
created by borrowing or certain types of transactions or investments may impair
the fund’s liquidity, cause it to liquidate positions at an unfavorable time,
increase volatility of the fund’s net asset value, or diminish the fund’s
performance.
Portfolio
Duration Risk. Portfolio
duration is a measure of the expected life of a fixed-income security and its
sensitivity to changes in interest rates. The longer a fund’s average portfolio
duration, the more sensitive the fund will be to changes in interest rates,
which means funds with longer average portfolio durations may be more volatile
than those with shorter durations.
Real
Estate Investment Trusts (“REITs”) Risk. In
addition to risks associated with investing in real estate securities, REITs are
dependent upon management skills, are not diversified, and are subject to heavy
cash flow dependency, risks of default by borrowers, and self-liquidation.
Investment in REITs also involves risks similar to risks of investing in small
market capitalization companies, such as limited financial resources, less
frequent and limited volume trading, and may be subject to more abrupt or
erratic price movements than larger company securities. A REIT could fail to
qualify for tax-free pass-through of income under the Internal Revenue Code.
Fund shareholders will indirectly bear their proportionate share of the expenses
of REITs in which the fund invests.
Real
Estate Securities Risk. Investing
in real estate securities subjects the fund to the risks associated with the
real estate market (which are similar to the risks associated with direct
ownership in real estate), including declines in real estate values, loss due to
casualty or condemnation, property taxes, interest rate changes, increased
expenses, cash flow of underlying real estate assets, regulatory changes
(including zoning, land use, and rents), and environmental problems, as well as
to the risks related to the management skill and creditworthiness of the
issuer.
Redemption
and Large Transaction Risk. Ownership of the Fund’s shares may be concentrated in one or a few
large investors (such as funds of funds, institutional investors, and asset
allocation programs) that may redeem or purchase shares in large quantities.
These transactions may cause the Fund to sell securities to meet redemptions or
to invest additional cash at times it would not otherwise do so, which may
result in increased transaction costs, increased expenses, changes to expense
ratios, and adverse effects to Fund performance. Such transactions may also
accelerate the realization of taxable income if sales of portfolio securities
result in gains. Moreover, reallocations by large shareholders among share
classes of a fund may result in changes to the expense ratios of affected
classes, which may increase the expenses paid by shareholders of the class that
experienced the redemption.
U.S.
Government Securities Risk. Yields
available from U.S. government securities are generally lower than yields from
many other fixed-income securities.
Utilities
Sector Risk. Companies
in the utilities sector are sensitive to changes in interest rates and other
economic conditions, government regulation, uncertainties created by
deregulation, environmental protection or energy conservation policies and
practices, the level and demand for services, and the cost and delay of
technological developments. In addition, securities of utility companies are
volatile and may underperform in a sluggish
economy.
Performance
The following
information provides some indication of the risks of investing in the
Fund. Past performance (before and
after taxes) is not necessarily an indication of how the Fund will perform in
the future. You may get updated performance information at
www.PrincipalAM.com.
The
bar chart shows the investment returns of the Fund’s Class A shares for each
full calendar year of operations for 10 years (or, if shorter, the life of the
Fund). These annual returns do not reflect
sales charges on Class A shares; if they did, results would be
lower. The table shows for the last one, five, and ten calendar
year periods (or, if shorter, the life of the Fund), how the Fund’s average
annual total returns compare with those of one or more broad measures of market
performance.
For
periods prior to the inception date of Class R-6 shares (December 31, 2014) and
Class R-3 shares (March 29, 2016), the performance shown in the table for these
newer classes is that of the Fund’s Institutional Class shares, adjusted to
reflect the respective fees and expenses of each class. However, where this
adjustment for fees and expenses results in performance for a newer class that
is higher than the historical performance of the Institutional Class shares, the
historical performance of the Institutional Class shares is used. These
adjustments result in performance for such periods that is no higher than the
historical performance of the Institutional Class shares, which were first sold
March 16, 2010.
Total Returns as of
December 31
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Highest
return for a quarter during the period of the bar chart
above: |
Q2
2020 |
11.09% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q1
2020 |
(19.62)% |
Year-to-date
return for Class A shares: |
Q3 2023 |
(3.74)% |
Average
Annual Total Returns
For
the periods ended December 31, 2022
|
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|
|
|
|
| |
| 1
Year |
5
Years |
10
Years |
Class A
Return Before Taxes |
(10.10)% |
2.76% |
2.18% |
Class A
Return After Taxes on Distributions |
(13.17)% |
1.30% |
1.18% |
Class A
Return After Taxes on Distributions and Sale of Fund
Shares |
(4.88)% |
1.76% |
1.40% |
Institutional Class Return Before
Taxes |
(6.16)% |
3.93% |
2.96% |
Class R-3
Return Before Taxes |
(6.65)% |
3.40% |
2.42% |
Class R-6
Return Before Taxes |
(6.11)% |
3.98% |
2.99% |
MSCI ACWI
NR USD Index (reflects withholding taxes
on foreign dividends, but no deduction for fees, expenses, or other
taxes) |
(18.38)% |
5.23% |
7.98% |
Diversified
Real Asset Index (Linked) (except as noted for the
below indexes, reflects no deduction for fees, expenses, or
taxes) |
15.87% |
6.82% |
4.03% |
S&P
Global Infrastructure Index NTR (reflects withholding taxes
on foreign dividends, but no deduction for fees, expenses, or other
taxes) |
(0.99)% |
2.99% |
5.61% |
FTSE
EPRA/NAREIT Developed Markets Index NTR (reflects withholding taxes
on foreign dividends, but no deduction for fees, expenses, or other
taxes) |
(25.10)% |
(0.23)% |
2.99% |
S&P
Global Natural Resources Index NTR (reflects withholding taxes
on foreign dividends, but no deduction for fees, expenses, or other
taxes) |
9.60% |
6.64% |
4.23% |
Bloomberg
Commodity Index TR (reflects no deduction for
fees, expenses, or taxes) |
16.11% |
6.44% |
(1.29)% |
Bloomberg
U.S. Treasury TIPS Index (reflects no deduction for
fees, expenses, or taxes) |
(11.85)% |
2.11% |
1.12% |
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns
depend on an investor’s tax situation and may differ from those shown. The
after-tax returns shown are not relevant to investors who hold their Fund shares
through tax-deferred arrangements, such as 401(k) plans or individual retirement
accounts. After-tax returns are shown
for Class A shares only and would be different for the other share
classes.
Effective
December 31, 2023, the Fund changed its primary broad-based index to the MSCI
ACWI NR USD Index in order to meet the revised definition of “broad-based
securities market index.” The Diversified Real Asset Index (Linked) is a blended
index and is included as an additional index for the Fund to show how the Fund’s
performance compares with returns of indices of funds with similar investment
objectives. Performance of the components of the blended index are also shown.
The weightings of the Diversified Real Asset Index (Linked) are as follows: 30%
S&P Global Infrastructure Index NTR, 25% FTSE EPRA/NAREIT Developed Markets
Index NTR, 15% S&P Global Natural Resources Index NTR, 15% Bloomberg
Commodity Index TR, and 15% Bloomberg U.S. Treasury TIPS Index. The blended
index returns reflect the allocation described in the preceding
sentence.
Investment
Advisor and Portfolio Managers
Principal
Global Investors, LLC
•Jessica
S. Bush (since 2014), Portfolio Manager
•Benjamin
E. Rotenberg (since 2014), Portfolio Manager
•May
Tong (since 2021), Portfolio Manager
Sub-Advisors
BlackRock
Financial Management, Inc.
ClearBridge
Investments (North America) Pty Limited
CoreCommodity
Management, LLC
Delaware
Investments Fund Advisers
Impax
Asset Management Limited
Newton
Investment Management North America LLC
Nuveen
Asset Management, LLC
Pictet
Asset Management SA
Principal
Real Estate Investors, LLC
Wellington
Management Company LLP
Sub-Sub-Advisor
BlackRock
International Limited
Purchase
and Sale of Fund Shares
|
|
|
|
|
|
|
| |
Share
Class |
Investment
Type |
Purchase
Minimum Per Fund |
A
|
Initial
Investment |
$1,000(1) |
A |
Initial
Investment for accounts with an Automatic Investment Plan
(AIP) |
$100 |
A |
Subsequent
Investments |
$100(1)(2) |
Institutional,
R-3, and R-6 |
There
are no minimum initial or subsequent investment requirements for eligible
purchasers. |
N/A |
(1)Some
exceptions apply; see "Purchase of Fund Shares - Minimum Investments" for more
information.
(2)For
accounts with an AIP, the subsequent automatic investments must total $1,200
annually if the initial $1,000 minimum has not been met.
You
may purchase or redeem shares on any business day (normally any day when the New
York Stock Exchange is open for regular trading) through your plan,
intermediary, or Financial Professional by sending a written request to
Principal Funds at P.O. Box 219971, Kansas City, MO 64121-9971 (regular mail) or
430 W. 7th Street, Ste. 219971, Kansas City, MO 64105-1407 (overnight mail);
calling us at 1-800-222-5852; or accessing our website (www.principal.com).
Tax
Information
The
Fund’s distributions you receive are generally subject to federal income tax as
ordinary income or capital gain and may also be subject to state and local
taxes, unless you are tax-exempt or your account is tax-deferred in which case
your distributions would be taxed when withdrawn from the tax-deferred
account.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker-dealer or other financial intermediary
(such as a bank), the Fund and its related companies may pay the intermediary
for the sale of Fund shares and related services. These payments may create a
conflict of interest by influencing the broker-dealer or other intermediary and
your salesperson to recommend the Fund over another investment, or to recommend
one share class of the Fund over another share class. Ask your salesperson or
visit your financial intermediary’s website for more information.
EDGE MIDCAP
FUND
Objective
The
Fund seeks long-term growth of capital.
Fees and Expenses of the
Fund
This
table describes the fees and expenses that you may pay if you buy, hold, and
sell shares of the Fund. You may pay other fees, such as brokerage commissions
and other fees to financial intermediaries, which are not reflected in the
tables and examples below. You may qualify for sales charge discounts
if you and your family invest, or agree to invest in the future, at least
$50,000 in Class A shares of Principal
Funds, Inc. More
information about these and other discounts is available from your financial
intermediary and in “Choosing a Share Class and The Costs of Investing”
beginning on page 115 of the Fund’s Prospectus, Appendix B to the Prospectus
titled "Intermediary-Specific Sales Charge Waivers and Reductions," and
“Multiple Class Structure” beginning on page 4 of the Fund’s Statement of
Additional Information.
If
you purchase Institutional Class or Class R-6 shares through certain programs
offered by certain financial intermediaries, you may be required to pay a
commission and/or other forms of compensation to the broker, or to your
Financial Professional or other financial
intermediary.
Shareholder Fees
(fees paid directly from your investment)
|
|
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|
|
|
|
|
|
|
| |
|
Share
Class |
|
A |
Inst. |
R-6 |
Maximum
Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) |
5.50% |
None |
None |
Maximum
Deferred Sales Charge (Load) (as a percentage of the offering price or NAV
at the time Sales Load is paid, whichever is less) |
1.00% |
None |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
|
|
|
|
|
|
|
|
|
|
| |
|
Share
Class |
|
A |
Inst. |
R-6 |
Management
Fees(1) |
0.65% |
0.65% |
0.65% |
Distribution
and/or Service (12b-1) Fees |
0.25% |
N/A |
N/A |
Other
Expenses |
0.39% |
0.18% |
0.10% |
Total
Annual Fund Operating Expenses |
1.29% |
0.83% |
0.75% |
Expense
Reimbursement(2) |
(0.19)% |
(0.06)% |
(0.08)% |
Total
Annual Fund Operating Expenses after Expense Reimbursement |
1.10% |
0.77% |
0.67% |
(1)Fees have
been restated to reflect current
fees.
(2)Principal
Global Investors, LLC (“PGI”), the investment advisor, has contractually agreed
to limit the Fund’s expenses by paying, if necessary, expenses normally payable
by the Fund (excluding interest expense, expenses related to fund investments,
acquired fund fees and expenses, and tax reclaim recovery expenses and other
extraordinary expenses) to maintain a total level of operating expenses
(expressed as a percent of average net assets on an annualized basis) not to
exceed 1.10% for Class A and 0.77% for Institutional Class shares. In addition,
for Class R-6, the expense limit will maintain “Other Expenses” (expressed as a
percent of average net assets on an annualized basis) not to exceed 0.02%
(excluding interest expense, expenses related to fund investments, acquired fund
fees and expenses, and tax reclaim recovery expenses and other extraordinary
expenses). It is expected that the expense limits will continue through the
period ending December 30,
2024; however, Principal Funds, Inc. and PGI, the parties to the
agreement, may mutually agree to terminate the expense limits prior to the end
of the period. Subject to applicable expense limits, the Fund may reimburse PGI
for expenses incurred during the current fiscal year.
Example
This Example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds.
The Example assumes that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. The calculation of costs takes into account any applicable
contractual fee waivers and/or expense reimbursements for the period noted in
the table above. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
1
year |
3
years |
5
years |
10
years |
Class
A |
$656 |
$919 |
$1,201 |
$2,005 |
Institutional
Class |
79 |
259 |
455 |
1,020 |
Class
R-6 |
68 |
232 |
409 |
923 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
Annual Fund Operating Expenses or in the Example, affect the Fund’s performance.
During
the most recent fiscal year, the Fund’s portfolio turnover rate was
11.3% of the average
value of its portfolio.
Principal Investment
Strategies
Under
normal circumstances, the Fund invests at least 80% of its net assets, plus any
borrowings for investment purposes, in equity securities of companies with
medium market capitalizations at the time of purchase. For this Fund, companies
with medium market capitalizations are those with market capitalizations within
the range of companies in the Russell MidCap®
Index (as of November 30, 2023, this was between approximately $233.1 million
and $65.3 billion). The Fund invests in real estate investment trust
(“REIT”) securities.
The
Fund invests in equity securities with value and/or growth characteristics and
constructs an investment portfolio that has a “blend” of equity securities with
these characteristics. Investing in value equity securities is an investment
strategy that emphasizes buying equity securities that appear to be undervalued.
The growth orientation selection emphasizes buying equity securities of
companies whose potential for growth of capital and earnings is expected to be
above average. The Fund does not have a policy of preferring one of these
categories over the other.
Principal
Risks
The
value of your investment in the Fund changes with the value of the Fund’s
investments. Many factors affect that value, and it is possible to lose money
by investing in the Fund. An investment in the
Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.
The principal risks of investing in the Fund are listed below in alphabetical
order and not in order of significance.
Equity
Securities Risk. A
variety of factors can negatively impact the value of equity securities held by
a fund, including a decline in the issuer’s financial condition, unfavorable
performance of the issuer’s sector or industry, or changes in response to
overall market and economic conditions. A fund’s principal market segment(s)
(such as market capitalization or style) may underperform other market segments
or the equity markets as a whole.
•Growth
Style Risk.
Growth investing entails the risk that if growth companies do not increase their
earnings at a rate expected by investors, the market price of their stock may
decline significantly, even if earnings show an absolute increase. Growth
company stocks also typically lack the dividend yield that can lessen price
declines in market downturns.
•Smaller
Companies Risk. Investments
in smaller companies may involve greater risk and price volatility than
investments in larger, more mature companies. Smaller companies may have limited
product lines, markets, or financial resources; lack the competitive strength of
larger companies; have less experienced managers; or depend on a few key
employees. Their securities often are less widely held and trade less frequently
and in lesser quantities, and their market prices often fluctuate more, than
securities of larger companies.
•Value
Style Risk. Value
investing entails the risk that value stocks may continue to be undervalued by
the market for extended periods, including the entire period during which the
stock is held by a fund, or the events that would cause the stock price to
increase may not occur as anticipated or at all. Moreover, a stock that appears
to be undervalued actually may be appropriately priced at a low level and,
therefore, would not be profitable for the
fund.
Real
Estate Investment Trusts (“REITs”) Risk. In
addition to risks associated with investing in real estate securities, REITs are
dependent upon management skills, are not diversified, and are subject to heavy
cash flow dependency, risks of default by borrowers, and self-liquidation.
Investment in REITs also involves risks similar to risks of investing in small
market capitalization companies, such as limited financial resources, less
frequent and limited volume trading, and may be subject to more abrupt or
erratic price movements than larger company securities. A REIT could fail to
qualify for tax-free pass-through of income under the Internal Revenue Code.
Fund shareholders will indirectly bear their proportionate share of the expenses
of REITs in which the fund invests.
Real
Estate Securities Risk. Investing
in real estate securities subjects the fund to the risks associated with the
real estate market (which are similar to the risks associated with direct
ownership in real estate), including declines in real estate values, loss due to
casualty or condemnation, property taxes, interest rate changes, increased
expenses, cash flow of underlying real estate assets, regulatory changes
(including zoning, land use, and rents), and environmental problems, as well as
to the risks related to the management skill and creditworthiness of the
issuer.
Redemption
and Large Transaction Risk. Ownership
of the Fund’s shares may be concentrated in one or a few large investors (such
as funds of funds, institutional investors, and asset allocation programs) that
may redeem or purchase shares in large quantities. These transactions may cause
the Fund to sell securities to meet redemptions or to invest additional cash at
times it would not otherwise do so, which may result in increased transaction
costs, increased expenses, changes to expense ratios, and adverse effects to
Fund performance. Such transactions may also accelerate the realization of
taxable income if sales of portfolio securities result in gains. Moreover,
reallocations by large shareholders among share classes of a fund may result in
changes to the expense ratios of affected classes, which may increase the
expenses paid by shareholders of the class that experienced the
redemption.
Performance
The following
information provides some indication of the risks of investing in the
Fund. Past performance (before and
after taxes) is not necessarily an indication of how the Fund will perform in
the future. You may get updated performance information at
www.PrincipalAM.com.
The
bar chart shows the investment returns of the Fund’s Class A shares for each
full calendar year of operations for 10 years (or, if shorter, the life of the
Fund), adjusted as described below. These annual returns do not reflect
sales charges on Class A shares; if they did, results would be
lower. The table shows for the last one, five, and ten calendar
year periods (or, if shorter, the life of the Fund), how the Fund’s average
annual total returns compare with those of one or more broad measures of market
performance.
Life
of Fund returns are measured from the date the Fund’s shares were first sold
(September 28, 2015).
For
periods prior to the inception date of Class A shares (December 31, 2018)
and Class R-6 shares (January 3, 2017), the
performance shown in the bar chart and table for Class A and table for Class R-6
shares is that of the Fund’s Institutional Class shares, adjusted to reflect the
fees and expenses of each class. However, where this adjustment for fees and
expenses results in performance for a newer class that is higher than the
historical performance of the Institutional Class shares, the historical
performance of the Institutional Class shares is used. These adjustments result
in performance for such periods that is no higher than the historical
performance of the Institutional Class shares, which were first sold
September 28,
2015.
Total Returns as of
December 31
|
|
|
|
|
|
|
| |
Highest
return for a quarter during the period of the bar chart
above: |
Q2
2020 |
24.61% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q1
2020 |
(28.72)% |
Year-to-date
return for Class A shares: |
Q3 2023 |
4.33% |
Average
Annual Total Returns
For
the periods ended December 31, 2022
|
|
|
|
|
|
|
|
|
|
| |
|
1 Year |
5 Years |
Life
of Fund |
Class A
Return Before Taxes |
(20.77)% |
5.72% |
9.16% |
Class A
Return After Taxes on Distributions |
(23.28)% |
2.92% |
6.87% |
Class A
Return After Taxes on Distributions and Sale of Fund
Shares |
(10.54)% |
4.42% |
7.19% |
Institutional Class Return Before
Taxes |
(15.89)% |
7.26% |
10.38% |
Class R-6
Return Before Taxes |
(15.81)% |
7.36% |
10.55% |
Russell
3000 Index (reflects no deduction for
fees, expenses, or taxes) |
(19.22)% |
8.79% |
11.84% |
Russell
MidCap Index (reflects no deduction for
fees, expenses, or taxes) |
(17.33)% |
7.10% |
10.05% |
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns
depend on an investor’s tax situation and may differ from those shown. The
after-tax returns shown are not relevant to investors who hold their Fund shares
through tax-deferred arrangements, such as 401(k) plans or individual retirement
accounts. After-tax returns are shown
for Class A shares only and would be different for the other share
classes.
Effective
December 31, 2023, the Fund changed its primary broad-based index to the Russell
3000 Index in order to meet the revised definition of “broad-based securities
market index.” The Russell MidCap Index is included as an additional index for
the Fund as it shows how the Fund’s performance compares with the returns of an
index of funds with similar investment
objectives.
Investment
Advisor and Portfolio Managers
Principal
Global Investors, LLC
•Lauren
Choi (since 2021), Associate Portfolio Manager
•Daniel
R. Coleman (since 2015), Portfolio Manager
•Theodore
Jayne (since 2015), Portfolio Manager
Purchase
and Sale of Fund Shares
|
|
|
|
|
|
|
| |
Share
Class |
Investment
Type |
Purchase
Minimum Per Fund |
A
|
Initial
Investment |
$1,000(1) |
A
|
Initial
Investment for accounts with an Automatic Investment Plan
(AIP) |
$100 |
A
|
Subsequent
Investments |
$100(1)(2) |
Institutional
and R-6 |
There
are no minimum initial or subsequent investment requirements for eligible
purchasers. |
N/A |
(1)Some
exceptions apply; see "Purchase of Fund Shares - Minimum Investments" for more
information.
(2)For
accounts with an AIP, the subsequent automatic investments must total $1,200
annually if the initial $1,000 minimum has not been met.
You
may purchase or redeem shares on any business day (normally any day when the New
York Stock Exchange is open for regular trading) through your plan,
intermediary, or Financial Professional by sending a written request to
Principal Funds at P.O. Box 219971, Kansas City, MO 64121-9971 (regular mail) or
430 W. 7th Street, Ste. 219971, Kansas City, MO 64105-1407 (overnight mail);
calling us at 1-800-222-5852; or accessing our website (www.principal.com).
Tax
Information
The
Fund’s distributions you receive are generally subject to federal income tax as
ordinary income or capital gain and may also be subject to state and local
taxes, unless you are tax-exempt or your account is tax-deferred in which case
your distributions would be taxed when withdrawn from the tax-deferred
account.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker-dealer or other financial intermediary
(such as a bank), the Fund and its related companies may pay the intermediary
for the sale of Fund shares and related services. These payments may create a
conflict of interest by influencing the broker-dealer or other intermediary and
your salesperson to recommend the Fund over another investment, or to recommend
one share class of the Fund over another share class. Ask your salesperson or
visit your financial intermediary’s website for more information.
GLOBAL MULTI-STRATEGY
FUND
Objective
The Fund seeks to achieve long-term capital appreciation with an
emphasis on positive total returns and managing volatility.
Fees and Expenses of the
Fund
This
table describes the fees and expenses that you may pay if you buy, hold, and
sell shares of the Fund. You may pay other fees, such as brokerage commissions
and other fees to financial intermediaries, which are not reflected in the
tables and examples below. You may qualify for sales charge discounts
if you and your family invest, or agree to invest in the future, at least
$100,000 in Class A shares of Principal
Funds, Inc. More
information about these and other discounts is available from your financial
intermediary and in “Choosing a Share Class and The Costs of Investing”
beginning on page 115 of the Fund’s Prospectus, Appendix B to the Prospectus
titled "Intermediary-Specific Sales Charge Waivers and Reductions," and
“Multiple Class Structure” beginning on page 4 of the Fund’s Statement of
Additional Information.
If
you purchase Institutional Class or Class R-6 shares through certain programs
offered by certain financial intermediaries, you may be required to pay a
commission and/or other forms of compensation to the broker, or to your
Financial Professional or other financial
intermediary.
Shareholder Fees
(fees paid directly from your investment)
|
|
|
|
|
|
|
|
|
|
| |
|
Share
Class |
| A |
Inst. |
R-6 |
Maximum
Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) |
3.75% |
None |
None |
Maximum
Deferred Sales Charge (Load) (as a percentage of the offering price or NAV
at the time Sales Load is paid, whichever is less) |
1.00% |
None |
None |
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
|
|
|
|
|
|
|
|
|
|
| |
|
Share
Class |
| A |
Inst. |
R-6 |
Management
Fees(1) |
1.36% |
1.36% |
1.36% |
Distribution
and/or Service (12b-1) Fees |
0.25% |
N/A |
N/A |
Other
Expenses: |
|
| |
Dividend
and Interest Expense on Short Sales |
0.23% |
0.23% |
0.23% |
Remainder
of Other Expenses |
0.30% |
0.23% |
0.12% |
Total
Other Expenses |
0.53% |
0.46% |
0.35% |
Acquired
Fund Fees and Expenses |
0.04% |
0.04% |
0.04% |
Total
Annual Fund Operating Expenses |
2.18% |
1.86% |
1.75% |
Expense
Reimbursement(2) |
N/A |
(0.16)% |
(0.10)% |
Total
Annual Fund Operating Expenses after Expense Reimbursement |
2.18% |
1.70% |
1.65% |
(1)Fees
have been restated to reflect current
fees.
(2)Principal
Global Investors, LLC (“PGI”), the investment advisor, has contractually agreed
to limit the Fund’s expenses by paying, if necessary, expenses normally payable
by the Fund (excluding interest expense, expenses related to fund investments,
acquired fund fees and expenses, and tax reclaim recovery expenses and other
extraordinary expenses) to maintain a total level of operating expenses
(expressed as a percent of average net assets on an annualized basis) not to
exceed 1.43% for Institutional Class shares. In addition, for Class R-6, the
expense limit will maintain “Other Expenses” (expressed as a percent of average
net assets on an annualized basis) not to exceed 0.02% (excluding interest
expense, expenses related to fund investments, acquired fund fees and expenses,
and tax reclaim recovery expenses and other extraordinary expenses). It is
expected that the expense limits will continue through the period ending
December 30,
2024; however, Principal Funds, Inc. and PGI, the parties to the
agreement, may mutually agree to terminate the expense limits prior to the end
of the period. Subject to applicable expense limits, the Fund may reimburse PGI
for expenses incurred during the current fiscal year.
Example
This Example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds.
The Example assumes that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. The calculation of costs takes into account any applicable
contractual fee waivers and/or expense reimbursements for the period noted in
the table above. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
1
year |
3
years |
5
years |
10
years |
Class
A |
$588 |
$1,032 |
$1,501 |
$2,794 |
Institutional
Class |
173 |
569 |
991 |
2,167 |
Class
R-6 |
168 |
541 |
940 |
2,054 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
Annual Fund Operating Expenses or in the Example, affect the Fund’s performance.
During
the most recent fiscal year, the Fund’s portfolio turnover rate was
147.0% of the average
value of its portfolio.
Principal Investment
Strategies
Principal
Global Investors, LLC (“PGI”), the Fund’s investment advisor, seeks to combine
diversified investment strategies efficiently and systematically so that the
Fund generates a positive total return with relatively low volatility and low
sensitivity or correlation to market indices. In managing the Fund, PGI
allocates the Fund’s assets among the investment strategies described below,
which are executed by PGI or one or more of the Fund’s sub-advisors. PGI has
considerable latitude in allocating the Fund’s assets. The Fund will use
strategies and sub-advisors to varying degrees and may change allocations, add
new or eliminate existing strategies and sub-advisors, and temporarily or
permanently reduce allocations from time to time such that the Fund would have
little or no assets allocated to a particular strategy or
sub-advisor.
The
Fund invests in a broad range of instruments, including, but not limited to,
equities, bonds, currencies, commodities, convertible securities, and bank
loans. Under normal market conditions, the Fund invests in securities of issuers
located throughout the world, including the U.S., invests at least 30% of its
net assets in foreign and emerging market securities, and holds investments tied
economically to at least twenty countries.
The
Fund invests in equity securities regardless of market capitalization size
(small, medium, or large) and style (growth or value). The Fund invests in
investment-grade and below-investment-grade bonds (sometimes called “high yield
bonds” or “junk bonds”), which are rated at the time of purchase Ba1 or lower by
Moody’s Investors Service, Inc. (“Moody’s”) and BB+ or lower by S&P Global
Ratings (“S&P Global”). If the bond has been rated by only one of the rating
agencies, that rating will determine the bond's rating; if the bond is rated
differently by the rating agencies, the highest rating will be used; and if the
bond has not been rated by either of the rating agencies, those selecting such
investments will determine the bond's quality. The fixed-income portion of the
Fund is not managed to a particular maturity or duration. The Fund’s strategies
may result in the active and frequent trading of the Fund’s portfolio
securities.
The
Fund invests in derivative instruments. A derivative is a financial arrangement,
the value of which is derived from, or based on, a traditional security, asset,
or market index. The strategies use different types of derivative instruments
for various purposes, including to gain exposure to securities and to attempt to
reduce risk. The Fund may invest in money market funds in order to provide
collateral for certain derivative positions and other financial instruments and
to provide asset coverage for certain derivative positions and other financial
instruments that create obligations to make future payments to third
parties.
The
Fund takes long and short positions in securities and derivative instruments.
When taking a short position, the Fund may sell an instrument that it does not
own and then borrow to meet its settlement obligations. Short positions benefit
from a decrease in price of the underlying instrument and lose value if the
price of the underlying instrument increases. Long positions profit if the value
of the instrument increases. Simultaneously engaging in long investing and short
selling reduces the net exposure to general market movements. The Fund also
takes relative value positions in an effort capitalize on price differences
between similar securities or relative value among securities of the same
company. The Fund also invests a portion of the proceeds it receives from short
sales into long positions.
Relative
Value. This
strategy uses a flexible approach to invest primarily in fixed-income securities
and instruments related to credit, currencies, and interest rates, while
employing risk-management strategies. This strategy uses a variety of techniques
to obtain market exposure, such as derivative instruments, including options,
futures, forwards, and swaps (including credit default swaps); entering into a
series of purchase and sale contracts; purchasing securities on a when-issued,
delayed delivery, or forward-commitment basis; and engaging in short sales. This
strategy may obtain investment exposure substantially through derivatives
instruments, may use such instruments in an effort to minimize volatility, and
may use equity futures for hedging purposes.
A
portion of this strategy takes long and short positions in selected emerging
market issuers when those selecting such investments identify factors (such as
macro-economic factors, country-specific factors, or credit-specific factors)
that they believe will drive substantial appreciation or depreciation of the
particular exposure. The strategy’s geographic focus is derived from economic
and political developments and the specific nature of local jurisdictions in the
emerging markets.
Equity
Long/Short. This
strategy provides long and short exposure to a diversified portfolio of U.S. and
foreign, including emerging market, equity securities. Those selecting such
investments simultaneously invest long in equities they expect to increase in
value and either short sell equities they expect to decrease in value, or hedge
equity market exposure another way (for example, by using derivatives such as
futures, options, or swaps). This strategy uses two methods of analysis:
fundamental analysis, which examines a company’s financial statements and
operations, especially sales, earnings, products, management, and competition;
and quantitative analysis, which uses mathematical models to evaluate a
company’s measurable characteristics such as revenue, earnings, margins, and
market share.
Event-Driven. This
strategy invests in securities on the basis that a specific event or catalyst
will affect future prices. This strategy attempts to capitalize on price
discrepancies and returns generated by corporate activity, such as merger
arbitrage, where the Fund holds a long/short portfolio of securities of
companies involved in mergers.
Global
Macro. This
strategy provides long and short exposure to a broad spectrum of global assets
(including equities, currencies, fixed-income securities, bonds, commodities,
and interest rates) in an effort to profit from movement in the prices of
securities that are highly sensitive to macroeconomic conditions. The managed
futures portion of this strategy uses quantitative selection models to help
predict movements in these markets. In pursuing this strategy, the Fund, either
directly or through its wholly-owned subsidiary organized under the laws of the
Cayman Islands (the “Cayman Subsidiary”), invests in commodity-linked
derivatives and in instruments such as fixed-income securities, cash and cash
equivalents, and/or U.S. government securities, either as investments or to
serve as margin or collateral for derivative positions.
Commodities
are assets that have tangible properties, such as oil, coal, natural gas,
agricultural products, industrial metals, livestock, and precious metals. In
pursuing certain commodity strategies, the Fund invests its assets in the Cayman
Subsidiary to gain exposure to the commodity markets within the limitations of
the federal tax law requirements applicable to regulated investment companies
under the Internal Revenue Code. The Fund’s investments in its Cayman Subsidiary
at any time will not exceed 25% of the Fund’s net assets.
Market
Neutral. This
strategy invests in long and short positions across different asset classes
(including equity and fixed-income securities) in an effort to neutralize market
risk exposure. The fixed-income portion seeks product types that have attractive
return characteristics with low volatility. This strategy uses arbitrage, which
is the simultaneous purchase and sale of assets in an effort to exploit price
differences of identical or similar securities on different markets or in
different forms. The fixed-income arbitrage portion seeks to exploit mispricing
of various, liquid fixed-income or interest-rate-sensitive securities and
provides long and short exposure to developed country bond and currency markets,
investment grade and high yield credit markets, and forward mortgage-backed
securities trading in the to-be-announced (“TBA”) markets. The convertible
arbitrage portion structures trades using multiple securities within a
convertible bond issuer’s capital structure. This strategy may also use
derivatives to hedge against a decline in interest rates or credit
exposure.
Principal
Risks
The
value of your investment in the Fund changes with the value of the Fund’s
investments. Many factors affect that value, and it is possible to lose money
by investing in the Fund. An investment in the
Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.
The principal risks of investing in the Fund are listed below in alphabetical
order and not in order of significance.
Arbitrage
Trading Risk. The
underlying relationships between securities in which the fund takes arbitrage
investment positions may change in an adverse manner, in which case the fund may
realize losses.
Asset
Allocation Risk. A
fund’s selection and weighting of asset classes and allocation among
sub-advisors may cause it to underperform other funds with a similar investment
objective.
Bank
Loans Risk. Changes
in economic conditions are likely to cause issuers of bank loans (also known as
senior floating rate interests) to be unable to meet their obligations. In
addition, the value of the collateral securing the loan (if any) may decline,
causing a loan to be substantially unsecured. Underlying credit agreements
governing the bank loans, reliance on market makers, priority of repayment, and
overall market volatility may harm the liquidity of
loans.
Cayman
Subsidiary Risk. The
Fund is subject to the particular risks associated with the investments of the
Fund’s wholly-owned Cayman Subsidiary, namely commodity-related investments
risk, counterparty risk, and derivatives risk. The Cayman Subsidiary is not
registered under the Investment Company Act of 1940 and is not subject to all
the investor protections of the Investment Company Act of 1940. The laws of the
Cayman Islands and/or the United States (including the IRS position on income
earned from wholly-owned subsidiaries described in past IRS private letter
rulings) may change, resulting in the inability of the Fund and/or the Cayman
Subsidiary to operate as described in this
Prospectus.
Commodity-Related
Investments Risk. The
value of commodities investments will generally be affected by overall market
movements and factors specific to a particular industry or commodity, which may
include weather, embargoes, tariffs, and economic health, political,
international, regulatory, and other developments. Exposure to the commodities
markets may subject the Fund to greater volatility than investments in
traditional securities.
Convertible
Securities Risk. Convertible
securities are securities that are convertible into common stock. Convertible
securities are subject to credit and interest rate risks associated with
fixed-income securities and to stock market risk associated with equity
securities.
Counterparty
Risk. Counterparty
risk is the risk that the counterparty to a contract or other obligation will be
unable or unwilling to honor its
obligations.
Derivatives
Risk. Derivatives
may not move in the direction anticipated by the portfolio manager. Transactions
in derivatives may increase volatility, cause the liquidation of portfolio
positions when not advantageous to do so, and result in disproportionate losses
that may be substantially greater than a fund’s initial
investment.
•Credit
Default Swaps.
Credit default swaps involve special risks in addition to those associated with
swaps generally because they are difficult to value, are highly susceptible to
liquidity and credit risk, and generally pay a return to the party that has paid
the premium only in the event of an actual default by the issuer of the
underlying obligation (as opposed to a credit downgrade or other indication of
financial difficulty). The protection “buyer” in a credit default contract may
be obligated to pay the protection “seller” an up-front payment or a periodic
stream of payments over the term of the contract, provided, generally, that no
credit event on a reference obligation has occurred. If a credit event occurs,
the seller generally must pay the buyer the “par value” (i.e., full notional
value) of the swap in exchange for an equal face amount of deliverable
obligations of the reference entity described in the swap, or the seller may be
required to deliver the related net cash amount, if the swap is cash settled.
The Fund may be either the buyer or seller in the
transaction.
•Currency
Contracts. Derivatives
related to currency contracts involve the specific risk of government action
through exchange controls that would restrict the ability of the fund to deliver
or receive currency.
•Forward
Contracts, Futures, and Swaps. Forward
contracts, futures, and swaps involve specific risks, including: the imperfect
correlation between the change in market value of the instruments held by the
fund and the price of the forward contract, future, or swap; possible lack of a
liquid secondary market for a forward contract, future, or swap and the
resulting inability to close a forward contract, future, or swap when desired;
counterparty risk; and if the fund has insufficient cash, it may have to sell
securities from its portfolio to meet daily variation margin
requirements.
•Options.
Options
involve specific risks, including: the imperfect correlation between the change
in market value of the instruments held by the Fund and the price of the
options; counterparty risk; difference in trading hours for the options markets
and the markets for the underlying securities (rate movements can take place in
the underlying markets that cannot be reflected in the options markets); and an
insufficient liquid secondary market for particular
options.
Emerging
Markets Risk. Investments
in emerging markets may have more risk than those in developed markets because
the emerging markets are less developed and more illiquid. Emerging markets can
also be subject to increased social, economic, regulatory, and political
uncertainties and can be extremely volatile. The U.S. Securities and Exchange
Commission, the U.S. Department of Justice, and other U.S. authorities may be
limited in their ability to pursue bad actors in emerging markets, including
with respect to fraud.
Equity
Securities Risk. A
variety of factors can negatively impact the value of equity securities held by
a fund, including a decline in the issuer’s financial condition, unfavorable
performance of the issuer’s sector or industry, or changes in response to
overall market and economic conditions. A fund’s principal market segment(s)
(such as market capitalization or style) may underperform other market segments
or the equity markets as a whole.
•Growth
Style Risk.
Growth investing entails the risk that if growth companies do not increase their
earnings at a rate expected by investors, the market price of their stock may
decline significantly, even if earnings show an absolute increase. Growth
company stocks also typically lack the dividend yield that can lessen price
declines in market downturns.
•Smaller
Companies Risk. Investments
in smaller companies may involve greater risk and price volatility than
investments in larger, more mature companies. Smaller companies may have limited
product lines, markets, or financial resources; lack the competitive strength of
larger companies; have less experienced managers; or depend on a few key
employees. Their securities often are less widely held and trade less frequently
and in lesser quantities, and their market prices often fluctuate more, than
securities of larger companies.
•Value
Style Risk. Value
investing entails the risk that value stocks may continue to be undervalued by
the market for extended periods, including the entire period during which the
stock is held by a fund, or the events that would cause the stock price to
increase may not occur as anticipated or at all. Moreover, a stock that appears
to be undervalued actually may be appropriately priced at a low level and,
therefore, would not be profitable for the
fund.
Event-Driven
Trading Risk. Event-driven
trading involves the risk that the special situation may not occur as
anticipated, if at all, and that the market price of a stock
declines.
Fixed-Income
Securities Risk. Fixed-income
securities are subject to interest rate, credit quality, and liquidity risks.
The market value of fixed-income securities generally declines when interest
rates rise, and increased interest rates may adversely affect the liquidity of
certain fixed-income securities. Moreover, an issuer of fixed-income securities
could default on its payment obligations due to increased interest rates or for
other reasons.
Foreign
Currency Risk. Risks
of investing in securities denominated in, or that trade in, foreign (non-U.S.)
currencies include changes in foreign exchange rates and foreign exchange
restrictions.
Foreign
Securities Risk. The
risks of foreign securities include loss of value as a result of: political or
economic instability; nationalization, expropriation, or confiscatory taxation;
settlement delays; and limited government regulation (including less stringent
reporting, accounting, and disclosure standards than are required of U.S.
companies).
Hedging
Risk. A
fund that implements a hedging strategy using derivatives and/or securities
could expose the fund to the risk that can arise when a change in the value of a
hedge does not match a change in the value of the asset it hedges. In other
words, the change in value of the hedge could move in a direction that does not
match the change in value of the underlying asset, resulting in a risk of loss
to the fund.
High
Portfolio Turnover Risk. High
portfolio turnover (more than 100%) caused by active and frequent trading of
portfolio securities may result in accelerating the realization of taxable gains
and losses, lower fund performance, and increased brokerage
costs.
High
Yield Securities Risk. High
yield fixed-income securities (commonly referred to as “junk bonds”) are subject
to greater credit quality risk than higher rated fixed-income securities and
should be considered speculative.
Investment
Company Securities Risk. A
fund that invests in another investment company (for example, another fund or an
exchange-traded fund (or ETF)) is subject to the risks associated with direct
ownership of the securities in which such investment company invests. Fund
shareholders indirectly bear their proportionate share of the expenses of each
such investment company.
Leverage
Risk. Leverage
created by borrowing or certain types of transactions or investments may impair
the fund’s liquidity, cause it to liquidate positions at an unfavorable time,
increase volatility of the fund’s net asset value, or diminish the fund’s
performance. In particular, investing the proceeds of short sales may amplify
leverage risk.
Portfolio
Duration Risk. Portfolio
duration is a measure of the expected life of a fixed-income security and its
sensitivity to changes in interest rates. The longer a fund’s average portfolio
duration, the more sensitive the fund will be to changes in interest rates,
which means funds with longer average portfolio durations may be more volatile
than those with shorter durations.
Redemption
and Large Transaction Risk. Ownership
of the Fund’s shares may be concentrated in one or a few large investors (such
as funds of funds, institutional investors, and asset allocation programs) that
may redeem or purchase shares in large quantities. These transactions may cause
the Fund to sell securities to meet redemptions or to invest additional cash at
times it would not otherwise do so, which may result in increased transaction
costs, increased expenses, changes to expense ratios, and adverse effects to
Fund performance. Such transactions may also accelerate the realization of
taxable income if sales of portfolio securities result in gains. Moreover,
reallocations by large shareholders among share classes of a fund may result in
changes to the expense ratios of affected classes, which may increase the
expenses paid by shareholders of the class that experienced the
redemption.
Securitized
Products Risk. Investments
in securitized products are subject to risks similar to traditional fixed-income
securities, such as credit, interest rate, liquidity, prepayment, extension, and
default risk, as well as additional risks associated with the nature of the
assets and the servicing of those assets. Unscheduled prepayments on securitized
products may have to be reinvested at lower rates. A reduction in prepayments
may increase the effective maturities of these securities, exposing them to the
risk of decline in market value over time (extension risk). With respect to
securities that are delivered in TBA transactions, there is a risk that the
actual securities received by the Fund may be less favorable than what was
anticipated when entering into the
transaction.
Short
Sales Risk. A
short sale involves the sale by the Fund of a security that it does not own with
the hope of purchasing the same security at a later date at a lower price. A
fund may also enter into a short derivative position through a futures contract
or swap agreement. If the price of the security or derivative has increased
during this time, then the Fund will incur a loss equal to the increase in price
from the time that the short sale was entered into plus any premiums and
interest paid to the third party. Therefore, short sales involve the risk that
losses may be exaggerated, potentially losing more money than the actual cost of
the investment. Also, there is the risk that the third party to the short sale
may fail to honor its contract terms, causing a loss to the
Fund.
U.S.
Government Securities Risk. Yields
available from U.S. government securities are generally lower than yields from
many other fixed-income securities.
U.S.
Government-Sponsored Securities Risk. Securities
issued by U.S. government-sponsored enterprises such as the Federal Home Loan
Mortgage Corporation, the Federal National Mortgage Association, and the Federal
Home Loan Banks are not issued or guaranteed by the U.S.
government.
Performance
The following
information provides some indication of the risks of investing in the
Fund. Past performance (before and
after taxes) is not necessarily an indication of how the Fund will perform in
the future. You may get updated performance information at
www.PrincipalAM.com.
The
bar chart shows the investment returns of the Fund’s Class A shares for each
full calendar year of operations for 10 years (or, if shorter, the life of the
Fund). These annual returns do not reflect
sales charges on Class A shares; if they did, results would be
lower. The table shows for the last one, five, and ten calendar
year periods (or, if shorter, the life of the Fund), how the Fund’s average
annual total returns compare with those of one or more broad measures of market
performance.
For
periods prior to the inception date of Class R-6 shares (June 12, 2017), the
performance shown in the table for Class R-6 shares is that of the Fund’s
Institutional Class shares, adjusted to reflect the fees and expenses of the
Class R-6 shares. However, where this adjustment for fees and expenses results
in performance for Class R-6 that is higher than the historical performance of
the Institutional Class shares, the historical performance of the Institutional
Class shares is used. These adjustments result in performance for such periods
that is no higher than the historical performance of the Institutional Class
shares, which were first sold on October 24, 2011.
Total Returns as of
December 31
|
|
|
|
|
|
|
| |
Highest
return for a quarter during the period of the bar chart
above: |
Q2
2020 |
7.24% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q1
2020 |
(9.50)% |
Year-to-date
return for Class A shares: |
Q3 2023 |
4.03% |
Average
Annual Total Returns
For
the periods ended December 31, 2022
|
|
|
|
|
|
|
|
|
|
| |
|
1 Year |
5
Years |
10
Years |
Class A
Return Before Taxes |
(5.94)% |
1.22% |
2.25% |
Class A
Return After Taxes on Distributions |
(9.09)% |
(0.15)% |
1.31% |
Class A
Return After Taxes on Distributions and Sale of Fund
Shares |
(2.52)% |
0.59% |
1.51% |
Institutional Class Return Before
Taxes |
(1.79)% |
2.45% |
3.04% |
Class R-6
Return Before Taxes |
(1.70)% |
2.52% |
3.07% |
MSCI ACWI
NR USD Index (reflects withholding taxes
on foreign dividends, but no deduction for fees, expenses, or other
taxes) |
(18.38)% |
5.23% |
7.98% |
HFRX Global
Hedge Fund Index (reflects no deduction for
taxes) |
(4.41)% |
1.41% |
1.76% |
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns
depend on an investor’s tax situation and may differ from those shown. The
after-tax returns shown are not relevant to investors who hold their Fund shares
through tax-deferred arrangements, such as 401(k) plans or individual retirement
accounts. After-tax returns are shown
for Class A shares only and would be different for the other share
classes.
Effective December 31, 2023, the Fund
changed its primary broad-based index to the MSCI ACWI NR USD Index in order to
meet the revised definition of “broad-based securities market index.” The HFRX
Global Hedge Fund Index is included as an additional index for the Fund as it
shows how the Fund’s performance compares with the returns of an index of funds
with similar investment objectives.
Investment
Advisor and Portfolio Managers
Principal
Global Investors, LLC
•Jessica
S. Bush (since 2014), Portfolio Manager
•Benjamin
E. Rotenberg (since 2014), Portfolio Manager
•May
Tong (since 2021), Portfolio Manager
Sub-Advisors
Gotham
Asset Management, LLC
Graham
Capital Management, L.P.
Loomis,
Sayles & Company, L.P.
Los
Angeles Capital Management LLC
Sound
Point Capital Management, LP*
Wellington
Management Company LLP
Westchester
Capital Management, LLC
*Allocation
has been decreased and is expected to further decrease over time, with no future
allocations expected.
Purchase
and Sale of Fund Shares
|
|
|
|
|
|
|
| |
Share
Class |
Investment
Type |
Purchase
Minimum Per Fund |
A
|
Initial
Investment |
$1,000(1) |
A
|
Initial
Investment for accounts with an Automatic Investment Plan
(AIP) |
$100 |
A
|
Subsequent
Investments |
$100(1)(2) |
Institutional
and R-6 |
There
are no minimum initial or subsequent investment requirements for eligible
purchasers. |
N/A |
(1)Some
exceptions apply; see "Purchase of Fund Shares - Minimum Investments" for more
information.
(2)For
accounts with an AIP, the subsequent automatic investments must total $1,200
annually if the initial $1,000 minimum has not been met.
You
may purchase or redeem shares on any business day (normally any day when the New
York Stock Exchange is open for regular trading) through your plan,
intermediary, or Financial Professional by sending a written request to
Principal Funds at P.O. Box 219971, Kansas City, MO 64121-9971 (regular mail) or
430 W. 7th Street, Ste. 219971, Kansas City, MO 64105-1407 (overnight mail);
calling us at 1-800-222-5852; or accessing our website (www.principal.com).
Tax
Information
The
Fund’s distributions you receive are generally subject to federal income tax as
ordinary income or capital gain and may also be subject to state and local
taxes, unless you are tax-exempt or your account is tax-deferred in which case
your distributions would be taxed when withdrawn from the tax-deferred
account.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker-dealer or other financial intermediary
(such as a bank), the Fund and its related companies may pay the intermediary
for the sale of Fund shares and related services. These payments may create a
conflict of interest by influencing the broker-dealer or other intermediary and
your salesperson to recommend the Fund over another investment, or to recommend
one share class of the Fund over another share class. Ask your salesperson or
visit your financial intermediary’s website for more information.
GLOBAL SUSTAINABLE
LISTED INFRASTRUCTURE FUND
Objective
The Fund seeks total return.
Fees and Expenses of the
Fund
This
table describes the fees and expenses that you may pay if you buy, hold, and
sell shares of the Fund. You may pay other fees, such as brokerage commissions
and other fees to financial intermediaries, which are not reflected in the
tables and examples below.
If
you purchase Institutional Class shares through certain programs offered by
certain financial intermediaries, you may be required to pay a commission and/or
other forms of compensation to the broker, or to your Financial Professional or
other financial intermediary.
Shareholder Fees
(fees paid directly from your investment):
None
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
|
|
|
|
| |
| Share
Class |
| Inst. |
Management
Fees |
0.75
% |
Other
Expenses |
0.63
% |
Acquired
Fund Fees and Expenses |
0.01 % |
Total
Annual Fund Operating Expenses |
1.39 % |
Expense
Reimbursement(1) |
(0.50)% |
Total
Annual Fund Operating Expenses after Expense Reimbursement |
0.89
% |
(1)Principal
Global Investors, LLC (“PGI”), the investment advisor, has contractually agreed
to limit the Fund’s expenses by paying, if necessary, expenses normally payable
by the Fund (excluding interest expense, expenses related to fund investments,
acquired fund fees and expenses, and tax reclaim recovery expenses and other
extraordinary expenses) to maintain a total level of operating expenses
(expressed as a percent of average net assets on an annualized basis) not to
exceed 0.88% for Institutional Class shares. It is expected that the expense
limit will continue through the period ending December 30,
2024; however, Principal Funds, Inc. and PGI, the parties to the
agreement, may mutually agree to terminate the expense limit prior to the end of
the period. Subject to applicable expense limits, the Fund may reimburse PGI for
expenses incurred during the current fiscal year.
Example
This Example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds.
The Example assumes that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. The calculation of costs takes into account any applicable
contractual fee waivers and/or expense reimbursements for the period noted in
the table above. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| 1
year |
3
years |
5
years |
10
years |
Institutional
Class |
$91 |
$391 |
$713 |
$1,625 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
Annual Fund Operating Expenses or in the Example, affect the Fund’s performance.
From September 22, 2022, the date operations commenced, through August 31, 2023,
the Fund’s annualized portfolio turnover rate was 46.3% of the average value of its
portfolio.
Principal Investment
Strategies
The
Fund seeks to achieve its objective by investing, under normal circumstances, at
least 80% of its net assets, plus any borrowings for investment purposes, in
securities issued by listed infrastructure companies that are subject to the
sub-advisor’s sustainable investing strategy (as explained in more detail
below). A “listed infrastructure company” is a publicly traded company engaged
in the development, operation, and management of infrastructure assets.
Infrastructure assets include but are not limited to utilities (electric, gas,
water), transportation infrastructure (airports, highways, railways, marine
ports), energy infrastructure (renewable energy generation, oil and gas pipeline
operators), and communications infrastructure (cell phone tower operators, data
centers, other providers of telecommunication
services).
The
Fund invests primarily in equity securities regardless of market capitalization
(small, medium, or large) and invests in both value and growth securities. The
Fund also invests in real estate investment trusts (“REITs”) but only those
REITs that are engaged in the development, operation, or management of
infrastructure assets. In addition, under normal circumstances, the Fund holds
investments tied economically to multiple countries and invests at least 40% of
its net assets, measured at the time of purchase, in securities of issuers
organized or located outside the United States or doing a substantial amount of
business outside the United States, including those located in emerging markets,
such as China.
The
Fund is considered non-diversified, which means it can invest a higher
percentage of assets in securities of individual issuers than a diversified
fund. The Fund also concentrates its
investments (invests more than 25% of its net assets) in securities in the
utilities industry.
The
sub-advisor initially identifies listed infrastructure companies and assesses
them against the following three metrics: overall quality, valuation, and market
perception. As described in more detail below, the overall quality metric
includes, among other things, an assessment of a company’s environmental,
social, and governance (“ESG”) practices using the sub-advisor’s proprietary
ESG-ratings framework. After it has assessed a potential investment against
these three metrics, the sub-advisor assesses the remaining companies for their
alignment with the United Nations Sustainable Development Goals (“SDGs”). The
sub-advisor’s assessments of a company’s overall quality (which includes an
assessment of a company’s ESG practices) and SDG alignment contain minimum
sustainability thresholds that a company must meet before it is considered for
portfolio inclusion. The sub-advisor applies these assessments of ESG practices
and SDG alignment to each Fund investment (other than cash and cash equivalents)
and believes that ESG factors are a significant consideration in selecting
investments for the Fund’s portfolio. The sub-advisor does, however, consider
non-ESG factors too when evaluating potential Fund investments.
The
sub-advisor’s assessment of a company’s overall quality metric consists of
assessments of several key measurements, which include, among others, a
company’s ESG practices; financial condition; profitability and projected
growth; management quality and governance structure; business strategy; market
outlook; and infrastructure business quality, which covers the strength of a
company’s regulatory relationships, the nature of its contractual and regulatory
right to operate its assets, and the predictability and longevity of its cash
flows.
The
sub-advisor measures a company’s ESG practices and potential for those practices
to improve by, among other things, maintaining a proprietary ESG-ratings
framework, supplemented by insights from third-party research providers (e.g.,
sell-side research firms and ESG rating firms), and regular engagement with
company management teams, in which ESG factors are a significant consideration
and which includes correspondence with company management specifically focused
on ESG issues. The sub-advisor does not rely exclusively on the insights from
third-party research providers; it may discount these third-party insights if
they conflict with the sub-advisor’s independent analyses and judgments. The
proprietary ratings framework seeks to benchmark companies against what the
sub-advisor believes to be the ESG practices of leading listed infrastructure
companies. It is composed of a set of metrics (identified below) that the
sub-advisor deems to be material in evaluating the ESG and sustainability
credentials of a listed infrastructure company. This framework sets out areas of
materiality by sector and sub-sector and helps to focus analyst research on
areas that are most likely to lead to controversies and opportunities for a
given listed infrastructure company. The ESG metrics include, but are not
limited to, carbon emissions; resource and water management; resiliency to
climate-related impacts; environmental business opportunities; human capital
development; health and safety; diversity and inclusion; community relations;
access and affordability; customer privacy and data security; ownership
structure; board composition; compensation and alignment; business ethics;
accounting; reporting and transparency; and controversies. These metrics are
subject to change as the sub-advisor periodically re-assesses which ESG
considerations are most material for listed infrastructure
companies.
The
sub-advisor’s valuation assessment involves the construction of discounted cash
flow-based valuation models for potential investments. The sub-advisor’s market
perception analysis seeks to identify companies whose sustainability
credentials, in the sub-advisor’s opinion, are over- or underappreciated by
other market participants.
Before
selecting a company’s security for Fund investment, the sub-advisor also
evaluates the company’s alignment with the SDGs generally but with a special
emphasis on the following goals: clean water and sanitation; affordable and
clean energy; decent work and economic growth; industry, innovation, and
infrastructure; sustainable cities and infrastructure; and climate action. This
SDG-alignment examination seeks to ensure that the company’s contributions to
social and environmental progress are in line with the sub-advisor’s
expectations for a listed infrastructure company operating in the relevant
sub-sector and country. The sub-advisor identifies individual targets and
indicators that are most applicable to each company and that may vary depending
on sub-sector and/or country of operation.
The
sub-advisor’s assessments of a company’s overall quality (which includes an
assessment of a company’s ESG practices) and SDG alignment contain minimum
sustainability thresholds that a company must meet before it is considered for
portfolio inclusion. Subject to these minimum standards, the sub-advisor may
from time to time select for investment a company that the sub-advisor has
identified as having certain areas of deficiency in its ESG practices or in its
SDG alignment relative to its global peers. Before making such an investment,
however, the sub-advisor would identify, in its reasonable belief, positive
forward-looking trends in the company’s ESG practices or SDG alignment through
direct engagement with a company’s management. The sub-advisor typically makes
this determination after it has examined a potential investment against the
metrics outlined above (overall quality (which contains ESG quality), valuation,
market perception, and SDG alignment).
Principal
Risks
The
value of your investment in the Fund changes with the value of the Fund’s
investments. Many factors affect that value, and it is possible to lose money
by investing in the Fund. An investment in the
Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.
The principal risks of investing in the Fund are listed below in alphabetical
order and not in order of significance.
Emerging
Markets Risk. Investments
in emerging markets may have more risk than those in developed markets because
the emerging markets are less developed and more illiquid. Emerging markets can
also be subject to increased social, economic, regulatory, and political
uncertainties and can be extremely volatile. The U.S. Securities and Exchange
Commission, the U.S. Department of Justice, and other U.S. authorities may be
limited in their ability to pursue bad actors in emerging markets, including
with respect to fraud.
•China
Investment Risk. The
Fund invests a significant portion of its assets in securities of issuers
located or operating in China. Investing in China involves certain heightened
risks and considerations, including, among others: frequent trading suspensions
and government interventions (including by nationalizing assets); currency
exchange rate fluctuations or blockages; limits on using brokers and on foreign
ownership; different financial reporting standards; higher dependence on exports
and international trade; political and social instability; infectious disease
outbreaks; regional and global conflicts; increased trade tariffs, embargoes,
and other trade limitations; custody and other risks associated with programs
used to access Chinese securities; and uncertainties in tax rules that could
result in unexpected tax liabilities for the Fund. Significant portions of the
Chinese securities markets may become rapidly illiquid, as Chinese issuers have
the ability to suspend the trading of their equity securities. Moreover, actions
by the U.S. government, such as delisting of certain Chinese companies from U.S.
securities exchanges or otherwise restricting their operations in the U.S., may
negatively impact the value of such securities held by the
Fund.
Energy
Sector Risk. The
market value of securities in the energy sector may decline for many reasons,
including, among others, changes in energy prices, energy supply and demand,
government regulations, and energy conservation efforts. Energy companies can be
significantly affected by the supply of, and demand for, specific products
(e.g., oil and natural gas) and services, exploration and production spending,
government subsidization and tax incentives, world events, and general economic
conditions. In addition, renewable energy companies may be more volatile than
companies operating in more established industries. Seasonal weather conditions,
extreme weather, or other natural disasters could have a disproportionate effect
on renewable energy companies versus other types of energy companies. These
factors could impact the ability of renewable energy companies to pay dividends
comparable to those paid by other types of energy
companies.
Equity
Securities Risk. A
variety of factors can negatively impact the value of equity securities held by
a fund, including a decline in the issuer’s financial condition, unfavorable
performance of the issuer’s sector or industry, or changes in response to
overall market and economic conditions. A fund’s principal market segment(s)
(such as market capitalization or style) may underperform other market segments
or the equity markets as a whole.
•Growth
Style Risk.
Growth investing entails the risk that if growth companies do not increase their
earnings at a rate expected by investors, the market price of their stock may
decline significantly, even if earnings show an absolute increase. Growth
company stocks also typically lack the dividend yield that can lessen price
declines in market downturns.
•Smaller
Companies Risk. Investments
in smaller companies may involve greater risk and price volatility than
investments in larger, more mature companies. Smaller companies may have limited
product lines, markets, or financial resources; lack the competitive strength of
larger companies; have less experienced managers; or depend on a few key
employees. Their securities often are less widely held and trade less frequently
and in lesser quantities, and their market prices often fluctuate more, than
securities of larger companies.
•Value
Style Risk. Value
investing entails the risk that value stocks may continue to be undervalued by
the market for extended periods, including the entire period during which the
stock is held by a fund, or the events that would cause the stock price to
increase may not occur as anticipated or at all. Moreover, a stock that appears
to be undervalued actually may be appropriately priced at a low level and,
therefore, would not be profitable for the
fund.
ESG
Investing Risk. The
Fund incorporates ESG investment insights into its investment strategy and will
forego certain investment opportunities because of this ESG investment strategy.
The Fund’s incorporation of ESG investment insights will affect the Fund’s
exposure to certain companies or industries. The Fund’s results may be lower
than other funds that do not consider ESG characteristics or apply an ESG
investment strategy, or that use different ESG criteria or a different
methodology to identify and/or incorporate ESG characteristics. Further,
investors may differ in their views of what constitutes positive or negative ESG
characteristics of a security. As a result, the Fund may invest in securities
that do not reflect the beliefs of a particular investor. In addition, the Fund
may not be successful in its objectives related to ESG. There is no guarantee
that these objectives will be achieved, and ESG-related assessments are at the
sub-advisor’s discretion. The sub-advisor is dependent upon certain information
and data from issuers and from third-party providers of ESG research, which may
be incomplete, inaccurate, or unavailable. As a result, there is a risk that the
sub-advisor may incorrectly assess a security or issuer. There is also a risk
that the sub-advisor may not apply the relevant ESG criteria correctly or that
the Fund could have indirect exposure to issuers that do not meet the relevant
ESG criteria used by the Fund. There may be limitations with respect to
availability of ESG data in certain sectors, as well as limited availability of
investments with positive ESG assessments in certain sectors. The advisor and/or
sub-advisor’s evaluation of ESG criteria is subjective and may change over
time.
Foreign
Currency Risk. Risks
of investing in securities denominated in, or that trade in, foreign (non-U.S.)
currencies include changes in foreign exchange rates and foreign exchange
restrictions.
Foreign
Securities Risk. The
risks of foreign securities include loss of value as a result of: political or
economic instability; nationalization, expropriation, or confiscatory taxation;
settlement delays; and limited government regulation (including less stringent
reporting, accounting, and disclosure standards than are required of U.S.
companies).
Industry
Concentration Risk. A fund that concentrates investments in a particular industry or
group of industries has greater exposure than other funds to market, economic,
and other factors affecting that industry or group of
industries.
•Utilities
Sector Risk. Companies
in the utilities sector are sensitive to changes in interest rates and other
economic conditions, government regulation, uncertainties created by
deregulation, environmental protection or energy conservation policies and
practices, the level and demand for services, and the cost and delay of
technological developments. In addition, securities of utility companies are
volatile and may underperform in a sluggish
economy.
Non-Diversification
Risk. A
non-diversified fund may invest a high percentage of its assets in the
securities of a small number of issuers and is more likely than diversified
funds to be significantly affected by a specific security’s poor
performance.
Real
Estate Investment Trusts (“REITs”) Risk. In
addition to risks associated with investing in real estate securities, REITs are
dependent upon management skills, are not diversified, and are subject to heavy
cash flow dependency, risks of default by borrowers, and self-liquidation.
Investment in REITs also involves risks similar to risks of investing in small
market capitalization companies, such as limited financial resources, less
frequent and limited volume trading, and may be subject to more abrupt or
erratic price movements than larger company securities. A REIT could fail to
qualify for tax-free pass-through of income under the Internal Revenue Code.
Fund shareholders will indirectly bear their proportionate share of the expenses
of REITs in which the fund invests.
Real
Estate Securities Risk. Investing
in real estate securities subjects the fund to the risks associated with the
real estate market (which are similar to the risks associated with direct
ownership in real estate), including declines in real estate values, loss due to
casualty or condemnation, property taxes, interest rate changes, increased
expenses, cash flow of underlying real estate assets, regulatory changes
(including zoning, land use, and rents), and environmental problems, as well as
to the risks related to the management skill and creditworthiness of the
issuer.
Redemption
and Large Transaction Risk. Ownership
of the Fund’s shares may be concentrated in one or a few large investors (such
as funds of funds, institutional investors, and asset allocation programs) that
may redeem or purchase shares in large quantities. These transactions may cause
the Fund to sell securities to meet redemptions or to invest additional cash at
times it would not otherwise do so, which may result in increased transaction
costs, increased expenses, changes to expense ratios, and adverse effects to
Fund performance. Such transactions may also accelerate the realization of
taxable income if sales of portfolio securities result in gains. Moreover,
reallocations by large shareholders among share classes of a fund may result in
changes to the expense ratios of affected classes, which may increase the
expenses paid by shareholders of the class that experienced the
redemption.
Telecommunication
Services Risk. The
telecommunications industry is subject to governmental regulation and a greater
price volatility than the overall market, and the products and services of
telecommunications companies may be subject to rapid obsolescence resulting from
changing consumer tastes, intense competition, and strong market reactions to
technological developments throughout the industry. Companies in the
telecommunications sector may encounter distressed cash flows due to the need to
commit substantial capital to meet increasing competition, particularly in
formulating new products and services using new
technology.
Transportation
Risk. Companies in the transportation industry may be adversely affected
by economic changes, increases in fuel and operating costs, labor relations, and
insurance costs. Transportation companies may also be subject to significant
government regulation and oversight, which may adversely affect their
businesses.
Performance
No performance
information is shown below because the Fund has not yet had a calendar year of
performance. The Fund’s performance is benchmarked against the
MSCI ACWI NR USD Index and the FTSE Global Core Infrastructure 50/50 NR USD
Index. Performance
information provides an indication of the risks of investing in the
Fund. Past performance is not
necessarily an indication of how the Fund will perform in the
future. You may get updated performance information by calling
1-800-222-5852.
Effective December 31, 2023, the Fund
changed its primary broad-based index to the MSCI ACWI NR USD Index in order to
meet the revised definition of “broad-based securities market index.” The FTSE
Global Core Infrastructure 50/50 NR USD Index is included as an additional index
for the Fund as it shows how the Fund’s performance compares with the returns of
an index of funds with similar investment
objectives.
Investment
Advisor
Principal
Global Investors, LLC
Sub-Advisor
and Portfolio Manager
Principal
Real Estate Investors, LLC
•Emily
Foshag (since 2022), Portfolio Manager
Purchase
and Sale of Fund Shares
For
Institutional Class shares, there are no minimum initial or subsequent
investment requirements for eligible purchasers.
You
may purchase or redeem shares on any business day (normally any day when the New
York Stock Exchange is open for regular trading) through your plan,
intermediary, or Financial Professional by sending a written request to
Principal Funds at P.O. Box 219971, Kansas City, MO 64121-9971 (regular mail) or
430 W. 7th Street, Ste. 219971, Kansas City, MO 64105-1407 (overnight mail);
calling us at 1-800-222-5852; or accessing our website
(www.principal.com).
Tax
Information
The
Fund’s distributions you receive are generally subject to federal income tax as
ordinary income or capital gain and may also be subject to state and local
taxes, unless you are tax-exempt or your account is tax-deferred in which case
your distributions would be taxed when withdrawn from the tax-deferred
account.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker-dealer or other financial intermediary
(such as a bank), the Fund and its related companies may pay the intermediary
for the sale of Fund shares and related services. These payments may create a
conflict of interest by influencing the broker-dealer or other intermediary and
your salesperson to recommend the Fund over another investment, or to recommend
one share class of the Fund over another share class. Ask your salesperson or
visit your financial intermediary’s website for more information.
INTERNATIONAL EQUITY
INDEX FUND
Objective
The
Fund seeks long-term growth of capital.
Fees and Expenses of the
Fund
This
table describes the fees and expenses that you may pay if you buy, hold, and
sell shares of the Fund. You may pay other fees, such as brokerage commissions
and other fees to financial intermediaries, which are not reflected in the
tables and examples below.
If
you purchase Institutional Class or Class R-6 shares through certain programs
offered by certain financial intermediaries, you may be required to pay a
commission and/or other forms of compensation to the broker, or to your
Financial Professional or other financial
intermediary.
Shareholder Fees
(fees paid directly from your
investment): None
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
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Share
Class |
| Inst. |
R-1 |
R-3 |
R-4 |
R-5 |
R-6 |
Management
Fees |
0.25% |
0.25% |
0.25% |
0.25% |
0.25% |
0.25% |
Distribution
and/or Service (12b-1) Fees |
N/A |
0.35% |
0.25% |
0.10% |
N/A |
N/A |
Other
Expenses |
0.23% |
0.60% |
0.39% |
0.35% |
0.33% |
0.07% |
Acquired
Fund Fees and Expenses |
0.01% |
0.01% |
0.01% |
0.01% |
0.01% |
0.01% |
Total
Annual Fund Operating Expenses |
0.49% |
1.21% |
0.90% |
0.71% |
0.59% |
0.33% |
Expense
Reimbursement(1) |
(0.16)% |
N/A |
N/A |
N/A |
N/A |
(0.02)% |
Total
Annual Fund Operating Expenses after Expense Reimbursement |
0.33% |
1.21% |
0.90% |
0.71% |
0.59% |
0.31% |
(1)Principal
Global Investors, LLC (“PGI”), the investment advisor, has contractually agreed
to limit the Fund’s expenses by paying, if necessary, expenses normally payable
by the Fund (excluding interest expense, expenses related to fund investments,
acquired fund fees and expenses, and tax reclaim recovery expenses and other
extraordinary expenses) to maintain a total level of operating expenses
(expressed as a percent of average net assets on an annualized basis) not to
exceed 0.31% for Institutional Class shares. In addition, for Class R-6, the
expense limit will maintain “Other Expenses” (expressed as a percent of average
net assets on an annualized basis) not to exceed 0.04% (excluding interest
expense, expenses related to fund investments, acquired fund fees and expenses,
and tax reclaim recovery expenses and other extraordinary expenses). It is
expected that the expense limits will continue through the period ending
December 30,
2024; however, Principal Funds, Inc. and PGI, the parties to the
agreement, may mutually agree to terminate the expense limits prior to the end
of the period. Subject to applicable expense limits, the Fund may reimburse PGI
for expenses incurred during the current fiscal year.
Example
This Example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds.
The Example assumes that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. The calculation of costs takes into account any applicable
contractual fee waivers and/or expense reimbursements for the period noted in
the table above. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
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1
year |
3
years |
5
years |
10
years |
Institutional
Class |
$34 |
$141 |
$258 |
$601 |
Class
R-1 |
123 |
384 |
665 |
1,466 |
Class
R-3 |
92 |
287 |
498 |
1,108 |
Class
R-4 |
73 |
227 |
395 |
883 |
Class
R-5 |
60 |
189 |
329 |
738 |
Class
R-6 |
32 |
104 |
183 |
416 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
Annual Fund Operating Expenses or in the Example, affect the Fund’s performance.
During
the most recent fiscal year, the Fund’s portfolio turnover rate was
37.5% of the average
value of its portfolio.
Principal Investment
Strategies
Under
normal circumstances, the Fund invests at least 80% of its net assets, plus any
borrowings for investment purposes, in securities that compose the MSCI EAFE
Index (the “Index”) at the time of purchase. The Index is a market-weighted
equity index designed to measure the equity performance of developed markets
(Europe, Australia, New Zealand, and Far East, which includes Hong Kong, Japan,
and Singapore), excluding the United States and Canada. The Index includes
securities of different market capitalizations (medium and large) and is
rebalanced quarterly. The Fund employs a passive investment approach designed to
attempt to track the performance of the Index. In seeking its objective, the
Fund typically employs a replication strategy, which involves investing in the
securities that make up the Index, in the same approximate proportions as the
Index. The Fund utilizes exchange-traded funds (“ETFs”) and derivative
strategies (including index futures) on a daily basis to gain exposure to the
Index in an effort to minimize tracking error relative to the benchmark. A
derivative is a financial arrangement, the value of which is derived from, or
based on, a traditional security, asset, or market index. The Fund will not
concentrate (invest more than 25% of its assets) its investments in a particular
industry except to the extent the Index is so concentrated. As
of November 30, 2023, the Index was not concentrated in any
industry.
Principal
Risks
The
value of your investment in the Fund changes with the value of the Fund’s
investments. Many factors affect that value, and it is possible to lose money
by investing in the Fund. An investment in the
Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.
The principal risks of investing in the Fund are listed below in alphabetical
order and not in order of significance.
Derivatives
Risk. Derivatives
may not move in the direction anticipated by the portfolio manager. Transactions
in derivatives may increase volatility, cause the liquidation of portfolio
positions when not advantageous to do so, and result in disproportionate losses
that may be substantially greater than a fund’s initial
investment.
•Futures.
Futures
contracts involve specific risks, including: the imperfect correlation between
the change in market value of the instruments held by the Fund and the price of
the futures contract; possible lack of a liquid secondary market for a futures
contract and the resulting inability to close a futures contract when desired;
counterparty risk; and if the Fund has insufficient cash, it may have to sell
securities from its portfolio to meet daily variation margin
requirements.
Equity
Securities Risk. A
variety of factors can negatively impact the value of equity securities held by
a fund, including a decline in the issuer’s financial condition, unfavorable
performance of the issuer’s sector or industry, or changes in response to
overall market and economic conditions. A fund’s principal market segment(s)
(such as market capitalization or style) may underperform other market segments
or the equity markets as a whole.
Foreign
Currency Risk. Risks
of investing in securities denominated in, or that trade in, foreign (non-U.S.)
currencies include changes in foreign exchange rates and foreign exchange
restrictions.
Foreign
Securities Risk. The
risks of foreign securities include loss of value as a result of: political or
economic instability; nationalization, expropriation, or confiscatory taxation;
settlement delays; and limited government regulation (including less stringent
reporting, accounting, and disclosure standards than are required of U.S.
companies).
Index
Fund Risk. Index
funds use a passive investment approach and generally do not attempt to manage
market volatility, use defensive strategies, or reduce the effect of any
long-term periods of poor investment performance. Therefore, the Fund may hold
securities that present risks that an investment advisor researching individual
securities might seek to avoid. An index fund has operating and other expenses
while an index does not. As a result, over time, index funds tend to
underperform the index. The correlation between fund performance and index
performance may also be affected by the type of passive investment approach used
by a fund (sampling or replication), changes in securities markets, changes in
the composition of the index, and the timing of purchases and sales of fund
shares. Errors or delays in compiling or rebalancing the Index may impact the
performance of the Fund and increase transaction
costs.
Industry
Concentration Risk. A fund that concentrates investments in a particular industry or
group of industries has greater exposure than other funds to market, economic,
and other factors affecting that industry or group of
industries.
Investment
Company Securities Risk. A
fund that invests in another investment company (for example, another fund or an
exchange-traded fund (or ETF)) is subject to the risks associated with direct
ownership of the securities in which such investment company invests. Fund
shareholders indirectly bear their proportionate share of the expenses of each
such investment company.
Redemption
and Large Transaction Risk. Ownership
of the Fund’s shares may be concentrated in one or a few large investors (such
as funds of funds, institutional investors, and asset allocation programs) that
may redeem or purchase shares in large quantities. These transactions may cause
the Fund to sell securities to meet redemptions or to invest additional cash at
times it would not otherwise do so, which may result in increased transaction
costs, increased expenses, changes to expense ratios, and adverse effects to
Fund performance. Such transactions may also accelerate the realization of
taxable income if sales of portfolio securities result in gains. Moreover,
reallocations by large shareholders among share classes of a fund may result in
changes to the expense ratios of affected classes, which may increase the
expenses paid by shareholders of the class that experienced the
redemption.
Performance
The
following information provides some indication of the risks of investing in the
Fund. Past performance (before and
after taxes) is not necessarily an indication of how the Fund will perform in
the future. You may get updated performance information at
www.PrincipalAM.com.
The bar chart
shows the investment returns of the Fund’s Institutional Class shares for each
full calendar year of operations for 10 years (or, if shorter, the life of the
Fund). The table shows for the last one, five, and ten calendar year periods
(or, if shorter, the life of the Fund), how the Fund’s average annual total
returns compare with those of one or more broad measures of market
performance.
For
periods prior to the inception date of Class R-6 shares (January 3, 2017), the
performance shown in the table for Class R-6 shares is that of the Fund’s
Institutional Class shares, adjusted to reflect the fees and expenses of Class
R-6 shares. However, where this adjustment for fees and expenses results in
performance for Class R-6 shares that is higher than the historical performance
of the Institutional Class shares, the historical performance of the
Institutional Class shares is used. These adjustments result in performance for
such periods that is no higher than the historical performance of the
Institutional Class shares, which were first sold December 30,
2009.
Total Returns as of
December 31
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Highest
return for a quarter during the period of the bar chart
above: |
Q4
2022 |
18.07% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q1
2020 |
(23.11)% |
Year-to-date
return for Institutional Class shares: |
Q3 2023 |
6.45% |
Average
Annual Total Returns
For
the periods ended December 31, 2022
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| 1 Year |
5
Years |
10
Years |
Institutional Class Return Before
Taxes |
(14.41)% |
1.46% |
4.34% |
Institutional Class Return After Taxes
on Distributions |
(14.93)% |
0.66% |
3.26% |
Institutional Class Return After Taxes
on Distributions and Sale of Fund Shares |
(8.08)% |
1.14% |
3.37% |
Class R-1
Return Before Taxes |
(15.17)% |
0.58% |
3.43% |
Class R-3
Return Before Taxes |
(14.89)% |
0.88% |
3.75% |
Class R-4
Return Before Taxes |
(14.68)% |
1.09% |
3.95% |
Class R-5
Return Before Taxes |
(14.61)% |
1.21% |
4.08% |
Class R-6
Return Before Taxes |
(14.40)% |
1.50% |
4.32% |
MSCI EAFE
Index NTR (reflects withholding taxes
on foreign dividends, but no deduction for fees, expenses, or other
taxes) |
(14.46)% |
1.54% |
4.67% |
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns
depend on an investor’s tax situation and may differ from those shown. The
after-tax returns shown are not relevant to investors who hold their Fund shares
through tax-deferred arrangements, such as 401(k) plans or individual retirement
accounts. After-tax returns are shown
for Institutional Class shares only and would be different for the other share
classes.
Investment
Advisor and Portfolio Managers
Principal
Global Investors, LLC
•Tyler
O'Donnell (since 2023), Portfolio Manager
•Aaron
J. Siebel (since 2018), Portfolio Manager
Purchase
and Sale of Fund Shares
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Share
Class |
Investment
Type |
Purchase
Minimum Per Fund |
Institutional,
R-1, R-3, R-4, R-5, and R-6 |
There
are no minimum initial or subsequent investment requirements for eligible
purchasers. |
N/A |
You
may purchase or redeem shares on any business day (normally any day when the New
York Stock Exchange is open for regular trading) through your plan,
intermediary, or Financial Professional by sending a written request to
Principal Funds at P.O. Box 219971, Kansas City, MO 64121-9971 (regular mail) or
430 W. 7th Street, Ste. 219971, Kansas City, MO 64105-1407 (overnight mail);
calling us at 1-800-222-5852; or accessing our website
(www.principal.com).
Effective
January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase
from new retirement plans, except in limited circumstances. See Purchase of Fund
Shares for more information.
Tax
Information
The
Fund’s distributions you receive are generally subject to federal income tax as
ordinary income or capital gain and may also be subject to state and local
taxes, unless you are tax-exempt or your account is tax-deferred in which case
your distributions would be taxed when withdrawn from the tax-deferred
account.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker-dealer or other financial intermediary
(such as a bank), the Fund and its related companies may pay the intermediary
for the sale of Fund shares and related services. These payments may create a
conflict of interest by influencing the broker-dealer or other intermediary and
your salesperson to recommend the Fund over another investment, or to recommend
one share class of the Fund over another share class. Ask your salesperson or
visit your financial intermediary’s website for more information.
INTERNATIONAL SMALL
COMPANY FUND
Objective
The
Fund seeks long-term growth of capital.
Fees and Expenses of the
Fund
This
table describes the fees and expenses that you may pay if you buy, hold, and
sell shares of the Fund. You may pay other fees, such as brokerage commissions
and other fees to financial intermediaries, which are not reflected in the
tables and examples below.
If you purchase Institutional Class or Class R-6 shares through
certain programs offered by certain financial intermediaries, you may be
required to pay a commission and/or other forms of compensation to the broker,
or to your Financial Professional or other financial
intermediary.
Shareholder Fees
(fees paid directly from your investment): None
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment)
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Share
Class |
| Inst. |
R-6 |
Management
Fees(1) |
1.00% |
1.00% |
Other
Expenses |
0.16% |
0.05% |
Total
Annual Fund Operating Expenses |
1.16% |
1.05% |
Expense
Reimbursement(2)
|
(0.08)% |
(0.01)% |
Total
Annual Fund Operating Expenses after Expense Reimbursement |
1.08% |
1.04% |
(1)Fees
have been restated to reflect current
fees.
(2)Principal
Global Investors, LLC (“PGI”), the investment advisor, has contractually agreed
to limit the Fund’s expenses by paying, if necessary, expenses normally payable
by the Fund (excluding interest expense, expenses related to fund investments,
acquired fund fees and expenses, and tax reclaim recovery expenses and other
extraordinary expenses) to maintain a total level of operating expenses
(expressed as a percent of average net assets on an annualized basis) not to
exceed 1.08% for Institutional Class shares. In addition, for Class R-6, the
expense limit will maintain “Other Expenses” (expressed as a percent of average
net assets on an annualized basis) not to exceed 0.04% (excluding interest
expense, expenses related to fund investments, acquired fund fees and expenses,
and tax reclaim recovery expenses and other extraordinary expenses). It is
expected that the expense limits will continue through the period ending
December 30,
2024; however, Principal Funds, Inc. and PGI, the parties to the
agreement, may mutually agree to terminate the expense limits prior to the end
of the period. Subject to applicable expense limits, the Fund may reimburse PGI
for expenses incurred during the current fiscal year.
Example
This Example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds.
The Example assumes that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. The calculation of costs takes into account any applicable
contractual fee waivers and/or expense reimbursements for the period noted in
the table above. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
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1
year |
3
years |
5
years |
10
years |
Institutional
Class |
$110 |
$361 |
$631 |
$1,402 |
Class
R-6 |
106 |
333 |
578 |
1,282 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
Annual Fund Operating Expenses or in the Example, affect the Fund’s performance.
During
the most recent fiscal year, the Fund’s portfolio turnover rate was
61.8% of the average
value of its portfolio.
Principal Investment
Strategies
Under
normal circumstances, the Fund invests at least 80% of its net assets, plus any
borrowings for investment purposes, in equity securities of companies with small
market capitalizations at the time of purchase. For
this Fund, companies with small market capitalizations are those with market
capitalizations within the range of companies in the MSCI World Ex-U.S.A. Small
Cap Index (as of November 30, 2023, this was between approximately $66.5 million
and $8.2 billion). The
Fund may invest in equity securities regardless of style (growth or value). The
Fund invests primarily in foreign equity securities. The Fund typically invests
in foreign securities of more than 10 countries but has no limitation on the
percentage of assets that is invested in each country or denominated in any
currency. Primary consideration is given to securities of corporations of
developed areas, such as Japan, Western Europe, Canada, Australia, and New
Zealand.
Principal
Risks
The
value of your investment in the Fund changes with the value of the Fund’s
investments. Many factors affect that value, and it is possible to lose money
by investing in the Fund. An investment in the
Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.
The principal risks of investing in the Fund are listed below in alphabetical
order and not in order of significance.
Equity
Securities Risk. A
variety of factors can negatively impact the value of equity securities held by
a fund, including a decline in the issuer’s financial condition, unfavorable
performance of the issuer’s sector or industry, or changes in response to
overall market and economic conditions. A fund’s principal market segment(s)
(such as market capitalization or style) may underperform other market segments
or the equity markets as a whole.
•Growth
Style Risk.
Growth investing entails the risk that if growth companies do not increase their
earnings at a rate expected by investors, the market price of their stock may
decline significantly, even if earnings show an absolute increase. Growth
company stocks also typically lack the dividend yield that can lessen price
declines in market downturns.
•Smaller
Companies Risk. Investments
in smaller companies may involve greater risk and price volatility than
investments in larger, more mature companies. Smaller companies may have limited
product lines, markets, or financial resources; lack the competitive strength of
larger companies; have less experienced managers; or depend on a few key
employees. Their securities often are less widely held and trade less frequently
and in lesser quantities, and their market prices often fluctuate more, than
securities of larger companies.
•Value
Style Risk. Value
investing entails the risk that value stocks may continue to be undervalued by
the market for extended periods, including the entire period during which the
stock is held by a fund, or the events that would cause the stock price to
increase may not occur as anticipated or at all. Moreover, a stock that appears
to be undervalued actually may be appropriately priced at a low level and,
therefore, would not be profitable for the
fund.
Foreign
Currency Risk. Risks
of investing in securities denominated in, or that trade in, foreign (non-U.S.)
currencies include changes in foreign exchange rates and foreign exchange
restrictions.
Foreign
Securities Risk. The
risks of foreign securities include loss of value as a result of: political or
economic instability; nationalization, expropriation, or confiscatory taxation;
settlement delays; and limited government regulation (including less stringent
reporting, accounting, and disclosure standards than are required of U.S.
companies).
Redemption
and Large Transaction Risk. Ownership
of the Fund’s shares may be concentrated in one or a few large investors (such
as funds of funds, institutional investors, and asset allocation programs) that
may redeem or purchase shares in large quantities. These transactions may cause
the Fund to sell securities to meet redemptions or to invest additional cash at
times it would not otherwise do so, which may result in increased transaction
costs, increased expenses, changes to expense ratios, and adverse effects to
Fund performance. Such transactions may also accelerate the realization of
taxable income if sales of portfolio securities result in gains. Moreover,
reallocations by large shareholders among share classes of a fund may result in
changes to the expense ratios of affected classes, which may increase the
expenses paid by shareholders of the class that experienced the
redemption.
Performance
The
following information provides some indication of the risks of investing in the
Fund. Past performance (before and
after taxes) is not necessarily an indication of how the Fund will perform in
the future. You may get updated performance information at
www.PrincipalAM.com.
The bar chart
shows the investment returns of the Fund’s Institutional Class shares for each
full calendar year of operations for 10 years (or, if shorter, the life of the
Fund). The table shows for the last one, five, and ten calendar year periods
(or, if shorter, the life of the Fund), how the Fund’s average annual total
returns compare with those of one or more broad measures of market
performance.
Life
of Fund returns are measured from the date the Fund’s shares were first sold
(June 11, 2014).
For
periods prior to the inception date of Institutional Class shares
(December 31,
2014) and Class R-6 shares (January 3, 2017), the
performance shown in the table for these newer classes is that of the Fund’s
Class A shares, adjusted to reflect the respective fees and expenses of each
class. However, where this adjustment for fees and expenses results in
performance for a newer class that is higher than the historical performance of
the Class A shares, the historical performance of the Class A shares is used
(without respect to sales charges, which do not apply to Institutional Class or
Class R-6 shares). These adjustments result in performance for such periods that
is no higher than the historical performance of the Class A shares, which were
first sold June 11, 2014, and liquidated on February 23,
2021.
Total Returns as of
December 31
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Highest
return for a quarter during the period of the bar chart
above: |
Q2
2020 |
21.37% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q1
2020 |
(30.37)% |
Year-to-date
return for Institutional Class shares: |
Q3 2023 |
2.89% |
Average
Annual Total Returns