PRINCIPAL FUNDS,
INC. (“PFI”)
Class A
Shares
Class C
Shares
Class J
Shares
Class P
Shares
Institutional
Class Shares
Class R-1
Shares
Class R-2
Shares
Class R-3
Shares
Class R-4
Shares
Class R-5
Shares
Class R-6
Shares
Class S
Shares
The date of this Prospectus is
___________________.
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Ticker
Symbols by Share Class |
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Fund |
A |
C |
J |
P |
Inst. |
R-1 |
R-2 |
R-3 |
R-4 |
R-5 |
R-6 |
S |
Blue Chip |
PBLAX |
PBLCX |
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PBLPX |
PBCKX |
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PGBEX |
PGBFX |
PGBGX |
Pending |
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Bond Market
Index |
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PBIJX |
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PNIIX |
PBIMX |
PBINX |
PBOIX |
PBIPX |
PBIQX |
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Capital
Securities |
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PCSFX |
Credit Opportunities
Explorer |
PCEAX |
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PCOIX |
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Diversified Real
Asset |
PRDAX |
PRDCX |
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PRDPX |
PDRDX |
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PGDRX |
PGDSX |
PGDTX |
PDARX |
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Dynamic High Yield
Explorer |
PDYAX |
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PDYIX |
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EDGE MidCap |
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PEDGX |
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Pending |
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Global
Multi-Strategy |
PMSAX |
PMSCX |
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PMSPX |
PSMIX |
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Global
Opportunities |
PGLAX |
PGOCX |
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PGXPX |
PGOIX |
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Global Opportunities Equity
Hedged |
PGOHX |
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PGHRX |
PGHIX |
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International Equity
Index |
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PIDIX |
PILIX |
PINEX |
PIIOX |
PIIPX |
PIIQX |
Pending |
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International Small
Company |
PICAX |
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PCOPX |
PISMX |
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Pending |
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Multi-Manager Equity
Long/Short |
PGMMX |
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PGMPX |
PGPIX |
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PGPMX |
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Opportunistic
Municipal |
PMOAX |
PMODX |
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PMOQX |
POMFX |
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Origin Emerging
Markets |
POEYX |
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PGPOX |
POEIX |
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POEFX |
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Preferred
Securities |
PPSAX |
PRFCX |
PPSJX |
PPSPX |
PPSIX |
PUSAX |
PPRSX |
PNARX |
PQARX |
PPARX |
Pending |
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Real Estate
Allocation |
PAEDX |
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PADDX |
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Real Estate Debt
Income |
PRDYX |
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PDIFX |
PRDIX |
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Pending |
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Small-MidCap Dividend
Income |
PMDAX |
PMDDX |
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PMDPX |
PMDIX |
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Pending |
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SystematEx
International |
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PSOMX |
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PSTMX |
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SystematEx Large
Value |
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PSLVX |
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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.
This page intentionally left
blank.
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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Credit Opportunities Explorer
Fund |
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Diversified Real Asset
Fund |
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Dynamic High Yield Explorer
Fund |
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EDGE MidCap
Fund |
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Global Multi-Strategy
Fund |
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Global Opportunities Equity
Hedged Fund |
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Global Opportunities
Fund |
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International Equity Index
Fund |
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International Small Company
Fund |
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Multi-Manager Equity
Long/Short Fund |
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Opportunistic Municipal
Fund |
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Origin Emerging Markets
Fund |
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Preferred Securities
Fund |
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Real Estate Allocation
Fund |
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Real Estate Debt Income
Fund |
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Small-MidCap Dividend Income
Fund |
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SystematEx International
Fund |
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SystematEx Large Value
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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FINANCIAL
HIGHLIGHTS |
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APPENDIX A – DESCRIPTION
OF BOND RATINGS |
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APPENDIX B – ADDITIONAL
FUND-SPECIFIC INFORMATION |
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APPENDIX C – RELATED
PERFORMANCE OF CERTAIN SUB-ADVISORS |
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ADDITIONAL
INFORMATION |
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BLUE CHIP
FUND
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Objective: |
The Fund seeks long-term
growth of capital. |
Fees and Expenses
of the Fund
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Fund. You may
qualify for sales charge discounts if you and your family invest, or agree to
invest in the future, at least $50,000 in Class A shares of Principal
Funds, Inc. More information about these and other discounts is available from
your financial professional and in “Choosing a Share Class and The Costs of
Investing” beginning on page ___ of the Fund’s prospectus and “Multiple Class
Structure” beginning on page ___ of the Fund’s Statement of Additional
Information.
Shareholder Fees
(fees paid directly from your investment)
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Share
Class |
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A |
C |
P |
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% |
None |
None |
None |
None |
None |
None |
Annual Fund
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
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Share
Class |
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A |
C |
P |
Inst. |
R-3 |
R-4 |
R-5 |
R-6 |
Management Fees |
0.69% |
0.69% |
0.69% |
0.69% |
0.69% |
0.69% |
0.69% |
0.69% |
Distribution and/or Service
(12b-1) Fees |
0.25% |
1.00% |
N/A |
N/A |
0.25% |
0.10% |
N/A |
N/A |
Other Expenses(1) |
0.45% |
0.64% |
0.72% |
0.02% |
0.33% |
0.29% |
0.27% |
176.26% |
Total Annual
Fund Operating Expenses |
1.39% |
2.33% |
1.41% |
0.71% |
1.27% |
1.08% |
0.96% |
176.95% |
Expense Reimbursement
(2)
(3) |
(0.04)% |
(0.23)% |
(0.52)% |
—% |
N/A |
N/A |
N/A |
(176.20)% |
Total Annual
Fund Operating Expenses after Expense Reimbursement |
1.35% |
2.10% |
0.89% |
0.71% |
1.27% |
1.08% |
0.96% |
0.75% |
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(1) |
Based on estimated amounts for
the current fiscal year (R-3, R-4, R-5, and R-6). |
(2) |
Principal Management
Corporation ("PMC"), the investment advisor, has contractually agreed to
limit the Fund’s expenses by paying, if necessary, expenses normally
payable by the Fund, (excluding interest expense, expenses related to fund
investments, acquired fund fees and expenses, and other extraordinary
expenses) to maintain a total level of operating expenses (expressed as a
percent of average net assets on an annualized basis) not to exceed 1.35%
for Class A, 2.10% for Class C, and 0.75% for Institutional Class shares.
In addition, for Class P, the expense limit will maintain "Other Expenses"
(expressed as a percent of average net assets on an annualized basis) not
to exceed 0.20%, (excluding interest expense, expenses related to fund
investments, acquired fund fees and expenses, and other extraordinary
expenses). It is expected that the expense limits will continue through
the period ending December 30, 2016; however, Principal Funds, Inc. and
PMC, the parties to the agreement, may mutually agree to terminate the
expense limits prior to the end of the period. |
(3) |
Principal Management
Corporation ("PMC"), the investment advisor, has contractually agreed to
limit the Fund’s expenses by paying, if necessary, expenses normally
payable by the Fund, (excluding interest expense, expenses related to fund
investments, acquired fund fees and expenses, and other extraordinary
expenses) to maintain a total level of operating expenses (expressed as a
percent of average net assets on an annualized basis) not to exceed 0.75%
for Class R-6 shares. It is expected that the expense limit will continue
through the period ending December 30, 2017; however, Principal Funds,
Inc. and PMC, the parties to the agreement, may mutually agree to
terminate the expense limit 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. 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 |
$680 |
$962 |
$1,265 |
$2,124 |
Class
C |
313 |
705 |
1,224 |
2,648 |
Class
P |
91 |
395 |
722 |
1,646 |
Institutional
Class |
73 |
227 |
395 |
883 |
Class
R-3 |
129 |
403 |
697 |
1,534 |
Class
R-4 |
110 |
343 |
595 |
1,317 |
Class
R-5 |
98 |
306 |
531 |
1,178 |
Class
R-6 |
77 |
802 |
1,178 |
1,659 |
With respect to Class C shares, you
would pay the following expenses if you did not redeem your shares (all other
classes would be the same as in the above example):
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1
year |
3
years |
5
years |
10
years |
Class
C |
$213 |
$705 |
$1,224 |
$2,648 |
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 annualized portfolio turnover rate was 26.2% 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. 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, 2015,
this range was between approximately $830.0 million and $681.5 billion). The
Fund focuses on large companies commonly known as "blue chip" companies. The
Fund invests in foreign securities. The Fund invests in growth equity
securities; growth orientation emphasizes buying equity securities of companies
whose potential for growth of capital and earnings is expected to be above
average.
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, in alphabetical order, are:
Equity Securities
Risk. The value of
equity securities could decline if the issuer’s financial condition declines or
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.
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Growth
Stock Risk. If
growth companies do not increase their earnings at a rate expected by
investors, the market price of the 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. |
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 Risk.
A fund that serves as
an underlying fund for a fund of funds is subject to certain risks. When a fund
of funds reallocates or rebalances its investments, an underlying fund may
experience relatively large redemptions or investments. These transactions may
cause the underlying fund to sell portfolio securities to meet such redemptions,
or to invest cash from such investments, at times it would not otherwise do so,
and may as a result increase transaction costs and adversely affect underlying
fund performance. Moreover, a fund of fund’s redemptions or reallocations among
share classes of an underlying 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 by calling
1-800-222-5852 or online at:
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For Classes A, C, and P -
www.principalfunds.com. |
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For Institutional Class and
Classes R-3, R-4, R-5, and R-6 - www.principal.com.
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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 each share class of the Fund
and for the last one, five, and ten calendar year periods (or, if shorter, the
life of the Fund), how the Fund’s average annual total returns compare with
those of one or more broad measures of market performance.
Life of Fund returns are measured
from the date the Fund's shares were first sold (June 14, 2012).
For periods prior to the inception
date of Classes A, C, and P shares (September 30, 2013), Classes R-3, R-4, and
R-5 shares (March 29, 2016), and Class R-6 shares (____________), the
performance shown in the bar chart for Class A shares and the table for Classes
A, C, P, R-3, R-4, R-5 and R-6 shares is based on the performance of the Fund's
Institutional Class shares, adjusted to reflect the respective fees and expenses
of each class. 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 for the newer class. 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 (Class A shares)(1)
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Highest
return for a quarter during the period of the bar chart
above: |
Q1
'13 |
10.03% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q3
'15 |
(4.58)% |
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(1)
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The year-to-date return
as of September 30, 2016
was 8.99% for Class A shares.
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Average
Annual Total Returns |
For the
periods ended 12/31/2015 |
1 Year |
Life of
Fund |
Class A
Return Before Taxes |
(0.96)% |
13.01% |
Class A
Return After Taxes on Distributions |
(1.43)% |
12.54% |
Class A
Return After Taxes on Distributions and Sale of Fund
Shares |
(0.16)% |
10.18% |
Class C
Return Before Taxes |
2.98% |
13.96% |
Class P
Return Before Taxes |
5.18% |
15.34% |
Institutional
Class Return Before Taxes |
5.37% |
15.56% |
Class R-3
Return Before Taxes |
4.78% |
14.89% |
Class R-4
Return Before Taxes |
4.98% |
15.11% |
Class R-5
Return Before Taxes |
5.11% |
15.25% |
Class R-6
Return Before Taxes |
5.23% |
15.39% |
Russell 1000 Growth Index
(reflects no deduction for fees, expenses, or taxes) |
5.67% |
16.29% |
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.
Management
Investment
Advisor:
Principal Management
Corporation
Sub-Advisor and
Portfolio Managers:
Principal Global Investors,
LLC
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K. William Nolin (since 2012),
Portfolio Manager |
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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 and
C |
Initial
Investment |
$1,000(1) |
A and
C |
Initial Investment for accounts
with an Automatic Investment Plan (AIP) |
$100 |
A and
C |
Subsequent
Investments |
$100(1)(2) |
P,
Institutional, R-3, R-4, R-5 and R-6 |
There are no minimum initial or
subsequent investment requirements for eligible
purchasers. |
N/A |
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(1) |
Some exceptions apply; see
"Purchase of Fund Shares - Minimum Investments" for more
information. |
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(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 8024, Boston, MA
02266-8024 (regular mail) or 30 Dan Road, Canton, MA 02021-2809 (overnight
mail); calling us at 1-800-222-5852; or accessing our website
(www.principalfunds.com).
Tax
Information
The Fund’s distributions you receive
are generally subject to federal income tax as ordinary income or capital gain
and may also be subject to state and local taxes, unless you are tax-exempt or
your account is tax-deferred in which case your distributions would be taxed
when withdrawn from the tax-deferred account.
Payments to
Broker-Dealers and Other Financial Intermediaries
For Class R-6 shares, the Fund and
its related companies do not pay broker-dealers or other financial
intermediaries (such as a bank, insurance company, investment adviser, etc.) for
the sale of Fund shares or related services.
For the other share classes, if you
purchase the Fund through a broker-dealer or other financial intermediary (such
as a bank, insurance company, investment adviser, etc.), the Fund and its
related companies may pay the intermediary for the sale of Fund shares and
related services. These payments may create a conflict of interest by
influencing the broker-dealer or other intermediary and your salesperson to
recommend the Fund over another investment, or to recommend one share class of
the Fund over another share class. Ask your salesperson or visit your financial
intermediary's website for more information.
BOND MARKET INDEX
FUND
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Objective: |
The Fund seeks to provide
current income. |
Fees and Expenses
of the Fund
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Fund.
Shareholder Fees
(fees paid directly from your investment)
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Share
Class |
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J |
Inst. |
R-1 |
R-2 |
R-3 |
R-4 |
R-5 |
Maximum Deferred Sales Charge
(Load) (as a percentage of the offering price or NAV at the time Sales
Load is paid, whichever is less) |
1.00% |
None |
None |
None |
None |
None |
None |
Annual Fund
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
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Share
Class |
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J |
Inst. |
R-1 |
R-2 |
R-3 |
R-4 |
R-5 |
Management Fees |
0.25% |
0.25% |
0.25% |
0.25% |
0.25% |
0.25% |
0.25% |
Distribution and/or Service
(12b-1) Fees (1) |
0.15% |
N/A |
0.35% |
0.30% |
0.25% |
0.10% |
N/A |
Other Expenses |
0.28% |
0.01% |
0.55% |
0.47% |
0.34% |
0.30% |
0.28% |
Acquired Fund Fees and
Expenses |
0.02% |
0.02% |
0.02% |
0.02% |
0.02% |
0.02% |
0.02% |
Total Annual
Fund Operating Expenses |
0.70% |
0.28% |
1.17% |
1.04% |
0.86% |
0.67% |
0.55% |
Fee Waiver and Expense
Reimbursement (2)
(3) |
(0.03)% |
(0.03)% |
(0.04)% |
(0.04)% |
(0.04)% |
(0.04)% |
(0.04)% |
Total Annual
Fund Operating Expenses after Fee Waiver and Expense
Reimbursement |
0.67% |
0.25% |
1.13% |
1.00% |
0.82% |
0.63% |
0.51% |
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(1) |
Expense information in the
table has been restated to reflect current fees. Effective December 31,
2015, Distribution and/or Service (12b-1) Fees for Class J were
reduced. |
(2) |
Principal Management
Corporation ("PMC"), the investment advisor, has contractually agreed to
limit the Fund's Management Fees through the period ending December 30,
2016. 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 PMC, the parties to the
agreement may mutually agree to terminate the fee waiver prior to the end
of the period. |
(3) |
Principal Management
Corporation ("PMC"), the investment advisor, has contractually agreed to
limit the Fund’s expenses by paying, if necessary, expenses normally
payable by the Fund, (excluding interest expense, expenses related to fund
investments, acquired fund fees and expenses, and other extraordinary
expenses) to maintain a total level of operating expenses (expressed as a
percent of average net assets on an annualized basis) not to exceed 0.78%
for Class J, 0.23% for Institutional, 1.11% for Class R-1, 0.98% for Class
R-2, 0.80% for Class R-3, 0.61% for Class R-4, and 0.49% for Class R-5
shares. It is expected that the expense limits will continue through the
period ending December 30, 2016; however, Principal Funds, Inc. and PMC,
the parties to the agreement, may mutually agree to terminate the expense
limits 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. 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 |
$168 |
$221 |
$387 |
$868 |
Institutional
Class |
26 |
87 |
154 |
353 |
Class
R-1 |
115 |
368 |
640 |
1,417 |
Class
R-2 |
102 |
327 |
570 |
1,267 |
Class
R-3 |
84 |
270 |
473 |
1,057 |
Class
R-4 |
64 |
210 |
369 |
831 |
Class
R-5 |
52 |
172 |
303 |
685 |
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 |
$68 |
$221 |
$387 |
$868 |
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 annualized portfolio turnover rate was 319.5% of the average value of its
portfolio.
Principal
Investment Strategies
Under normal circumstances, the Fund
uses a sampling approach to invest at least 80% of its net assets, plus any
borrowings for investment purposes, in investments designed to replicate the
Bloomberg Barclays U.S. Aggregate Bond Index (the "Index") at the time of
purchase. The Index is composed of investment grade, fixed rate debt issues with
maturities of one year or more, including government securities, corporate
securities, and asset-backed and mortgage-backed securities (securitized
products). Because of the practical difficulties and expense of purchasing all
of the securities in the Index, the Fund does not purchase all of the securities
in the Index. Instead, the Fund uses a sampling methodology to purchase
securities with generally the same risk and return characteristics of the Index.
Under normal circumstances, the Fund maintains an average portfolio duration
that is in line with the duration of the Index, which as of August 31, 2016 was
5.51 years. The Fund actively trades portfolio securities.
Principal
Risks
The value of your investment in the
Fund changes with the value of the Fund's investments. Many factors affect that
value, and it is possible to lose money by investing in the Fund. An investment
in the Fund is not a deposit of a bank and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. The
principal risks of investing in the Fund, in alphabetical order, are:
Fixed-Income
Securities Risk.
Fixed-income securities are subject to interest rate risk and credit quality
risk. The market value of fixed-income securities generally declines when
interest rates rise, and an issuer of fixed-income securities could default on
its payment obligations.
Index Fund
Risk. More likely than
not, an index fund will underperform the index due to cashflows and the fees and
expenses of the fund. The correlation between fund performance and index
performance may also be affected by changes in securities markets, changes in
the composition of the index, and the timing of purchases and sales of fund
shares.
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.
Portfolio
Turnover (Active Trading) Risk. A fund that has a portfolio turnover
rate over 100% is considered actively traded. Actively trading portfolio
securities may accelerate realization of taxable gains and losses, lower fund
performance and may result in high portfolio turnover rates and increased
brokerage costs.
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 Risk.
A fund that serves as
an underlying fund for a fund of funds is subject to certain risks. When a fund
of funds reallocates or rebalances its investments, an underlying fund may
experience relatively large redemptions or investments. These transactions may
cause the underlying fund to sell portfolio securities to meet such redemptions,
or to invest cash from such investments, at times it would not otherwise do so,
and may as a result increase transaction costs and adversely affect underlying
fund performance. Moreover, a fund of fund’s redemptions or reallocations among
share classes of an underlying 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 or -chartered 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. Treasury.
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 by calling
1-800-222-5852 or online at:
|
|
• |
For Class J -
www.principalfunds.com. |
|
|
• |
For Institutional Class and
Classes R-1, R-2, R-3, R-4, and R-5 -
www.principal.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 each share class of the Fund and 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 (December 30, 2009).
For periods prior to the inception
date of Class J shares (March 16, 2010), the performance shown in the table for
Class J shares is based on the performance of the Fund's Institutional Class
shares, adjusted to reflect the fees and expenses of Class J shares. These
adjustments for Class J shares result in performance for such periods that is no
higher than the historical performance of the Institutional Class shares, which
were first sold on December 30, 2009.
During 2014, the Institutional Class
experienced a significant withdrawal of monies by an affiliate. As the remaining
shareholders held relatively small positions, the total return amounts expressed
herein are greater than those that would have been experienced without the
withdrawal.
Total Returns as
of December 31 (Institutional Class shares)(1)
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q3
'11 |
3.76% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q2
'13 |
(2.45)% |
|
|
(1)
|
The year-to-date return
as of September 30, 2016 was 5.47% for Institutional Class
shares. |
|
|
|
|
|
|
|
Average
Annual Total Returns |
|
For the
periods ended 12/31/2015 |
1 Year |
5
Years |
|
Life of
Fund |
|
Institutional
Class Return Before Taxes |
0.23% |
3.09% |
(1) |
3.53% |
(1) |
Institutional
Class Return After Taxes on Distributions |
(0.63)% |
2.18% |
(1) |
2.65% |
(1) |
Institutional
Class Return After Taxes on Distributions and Sale of Fund
Shares |
0.16% |
2.00% |
(1) |
2.38% |
(1) |
Class J
Return Before Taxes |
(1.18)% |
2.30% |
(1) |
2.70% |
(1) |
Class R-1
Return Before Taxes |
(0.65)% |
1.96% |
|
2.44% |
|
Class R-2
Return Before Taxes |
(0.48)% |
2.11% |
|
2.58% |
|
Class R-3
Return Before Taxes |
(0.27)% |
2.28% |
|
2.76% |
|
Class R-4
Return Before Taxes |
(0.07)% |
2.49% |
|
2.96% |
|
Class R-5
Return Before Taxes |
(0.10)% |
2.59% |
|
3.07% |
|
Bloomberg Barclays U.S.
Aggregate Bond Index (reflects no deduction for fees, expenses, or
taxes) |
0.55% |
3.25% |
|
3.76% |
|
|
|
|
|
|
|
(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.
Management
Investment
Advisor:
Principal Management
Corporation
Sub-Advisor and
Portfolio Managers:
Mellon Capital Management
Corporation
|
|
• |
Paul Benson (since 2015),
Managing Director, Head of Fixed Income Portfolio Management |
|
|
• |
Gregg Lee (since 2010), Vice
President, Senior Portfolio Manager, Fixed
Income |
|
|
• |
Nancy G. Rogers (since 2015),
Director, Senior Portfolio Manager, Fixed
Income |
|
|
• |
Stephanie Shu (since 2015),
Director, Senior Portfolio Manager, Fixed
Income |
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-2, R-3, R-4, and R-5 |
There are no minimum initial or
subsequent investment requirements for eligible
purchasers. |
N/A |
|
|
(1) |
Some exceptions apply; see
"Purchase of Fund Shares - Minimum Investments" for more
information. |
|
|
(2) |
For accounts with an AIP, the
subsequent automatic investments must total $1,200 annually if the initial
$1,000 minimum has not been met. |
You may purchase or redeem shares on
any business day (normally any day when the New York Stock Exchange is open for
regular trading) through your plan, intermediary, or Financial Professional; by
sending a written request to Principal Funds at P.O. Box 8024, Boston, MA
02266-8024 (regular mail) or 30 Dan Road, Canton, MA 02021-2809 (overnight
mail); calling us at 1-800-222-5852; or accessing our website
(www.principalfunds.com).
Tax
Information
The Fund’s distributions you receive
are generally subject to federal income tax as ordinary income or capital gain
and may also be subject to state and local taxes, unless you are tax-exempt or
your account is tax-deferred in which case your distributions would be taxed
when withdrawn from the tax-deferred account.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase the Fund through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, or to recommend one share class of the Fund over another share
class. Ask your salesperson or visit your financial intermediary's website for
more information.
CAPITAL
SECURITIES FUND
|
|
Objective: |
The Fund seeks to provide
current income. |
Fees and Expenses
of the Fund
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Fund.
Shareholder Fees
(fees paid directly from your investment): None
Annual Fund
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
Share
Class |
|
S |
Management Fees |
0.00% |
Other Expenses |
0.11% |
Total Annual
Fund Operating Expenses |
0.11% |
Expense Reimbursement
(1) |
(0.11)% |
Total Annual
Fund Operating Expenses after Expense Reimbursement (2) |
0.00% |
|
|
|
(1) |
Principal Management
Corporation ("PMC"), the investment advisor, has agreed contractually to
limit the Fund's expenses attributable to Class S shares by paying,
expenses normally payable by the Fund, (excluding interest expense,
expenses related to fund investments, acquired fund fees and expenses, and
other extraordinary expenses) to maintain a total level of operating
expenses (expressed as a percent of average net assets on an annualized
basis) not to exceed 0.00%. It is expected that the expense limit will
continue permanently (and in any event, through December 30, 2016);
however, Principal Funds, Inc. and PMC, the parties to the agreement, may
mutually agree to terminate the expense limit. |
(2) |
The table reflects that
Principal Management Corporation ("PMC"), the investment advisor, is
absorbing all expenses of the Fund. You should be aware, however, that the
Fund is an integral part of "wrap-fee" programs, including those sponsored
by registered investment advisors and broker-dealers unaffiliated with the
Fund. Participants in these programs pay a "wrap" fee to the sponsor of
the program. You should read carefully the wrap-fee brochure provided to
you by your sponsor or your registered investment advisor. The brochure is
required to include information about the fees charged to you by the
sponsor and the fees paid to the registered investment
advisor. |
Example
This Example is intended to help you
compare the cost of investing in the Fund with the cost of investing in other
mutual funds.
The Example assumes that you invest
$10,000 in the Fund for the time periods indicated. The Example also assumes
that your investment has a 5% return each year and that the Fund’s operating
expenses remain the same. 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 annualized portfolio turnover rate was 10.2% 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 preferred securities at the time of purchase. Preferred securities
include preferred stock and various types of subordinated debt and convertible
securities, including contingent convertible securities (“CoCos”). In
particular, the Fund focuses on “capital securities,” which include securities
issued by U.S. and non-U.S. financial institutions (including, but not limited
to, banks and insurance companies) for purposes of satisfying their regulatory
capital requirements. Preferred securities generally pay fixed rate dividends
(though some are adjustable rate) and are junior to all forms of the company’s
senior debt, but may have "preference" over common stock in the payment of
dividends and the liquidation of a company's assets. All of the preferred
securities purchased by the Fund are issued by companies with senior debt rated
at the time of purchase BBB- or higher by S&P Global Ratings ("S&P
Global") or Baa3 or higher by Moody's Investors Service, Inc. ("Moody's"). The
Fund may invest up to 100% of its assets in below investment grade (sometimes
called “junk”) preferred securities which are rated at the time of purchase Ba1
or lower by Moody's and BB+ or lower by S&P Global (if the preferred
security has been rated by only one of those agencies,
that rating will determine whether
the preferred security is below investment grade; if the preferred security has
not been rated by either of those agencies, the Sub-Advisor will determine
whether the preferred security is of a quality comparable to those rated below
investment grade), provided that the issuer of such below investment grade
preferred securities has senior debt outstanding that is rated at the time of
purchase BBB- or higher by S&P Global or Baa3 or higher by Moody's. The Fund
is not managed to a particular maturity or duration.
The Fund concentrates its
investments (invests more than 25% of its net assets) in securities in the U.S.
and non-U.S. (foreign) financial services (i.e., banking, insurance and
commercial finance) industry.
During the fiscal year ended August
31, 2015, the average ratings of the Fund’s fixed-income assets, based on market
value at each month-end, were as follows (all ratings are by
Moody’s):
|
|
|
|
|
0.00% in securities
rated Aaa |
54.57% in securities rated
Baa |
0.00% in securities rated
Caa |
0.00% in securities rated
D |
0.00% in securities
rated Aa |
24.87% in securities rated
Ba |
0.00% in securities rated
Ca |
2.47% in securities not
rated |
17.20% in securities rated
A |
0.89% in securities
rated B |
0.00% in securities rated
C |
|
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, in alphabetical order,
are:
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
interest payments will be canceled by the issuer or a regulatory authority, the
risk of ranking junior to other creditors in the event of a liquidation or other
bankruptcy-related event as a result of holding subordinated debt, the risk of
the Fund’s investment becoming further subordinated as a result of conversion
from debt to equity, the risk that principal amount due can be written down to a
lesser amount, and additional liquidity risks.
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 risks associated with equity
securities.
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.
Preferred
Securities Risk. Preferred securities are securities
with a lower priority claim on assets or earnings than bonds and other debt
instruments in a company's capital structure, and therefore can be 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 the 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 by calling
1-800-222-5852 or online at www.principal.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 each
share class of the Fund and 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).
Total Returns as
of December 31 (Class S shares) (1)
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q1
'15 |
2.63% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q2
'15 |
(0.17)% |
(1)
The year-to-date return as of September 30, 2016 was 5.78% for Class S shares.
|
|
|
|
Average
Annual Total Returns |
For the
periods ended 12/31/2015 |
1 Year |
Life of
Fund |
Class S
Return Before Taxes |
3.70% |
4.14% |
Class S
Return After Taxes on Distributions |
1.44% |
1.90% |
Class S
Return After Taxes on Distributions and Sale of Fund
Shares |
2.34% |
2.24% |
BofA Merrill Lynch U.S. Capital
Securities Index (reflects no deduction for fees, expenses, or
taxes) |
0.86% |
3.54% |
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.
Management
Investment
Advisor:
Principal Management
Corporation
Sub-Advisor and
Portfolio Managers:
Spectrum Asset Management,
Inc.
|
|
• |
Fernando (“Fred”) Diaz (since
2014), Portfolio Manager |
|
|
• |
Roberto Giangregorio (since
2014), Portfolio Manager |
|
|
• |
L. Phillip Jacoby, IV (since
2014), Chief Investment Officer and Portfolio
Manager |
|
|
• |
Manu Krishnan (since 2014),
Portfolio Manager |
|
|
• |
Mark A. Lieb (since 2014),
President and Chief Executive Officer |
Purchase and Sale
of Fund Shares
Eligibility to invest in the Capital
Securities Fund is limited to certain wrap-fee program accounts. Only wrap-fee
program accounts as to which Spectrum and/or Principal Global Investors, LLC
(PGI) have an agreement with the wrap-fee program's sponsor ("Sponsor") or the
wrap account owner to provide investment advisory or sub-advisory services
(either directly or by providing a model investment portfolio created and
maintained by Spectrum and/or PGI to the Sponsor or one or more
Sponsor-designated investment managers) (Eligible Wrap Accounts) are eligible to
purchase shares of the Fund. References to Wrap Fee Adviser shall mean Spectrum
and/or PGI in their role providing such services to Eligible Wrap
Accounts.
A client agreement with the Sponsor
to open an account in the Sponsor's wrap-fee program typically may be obtained
by contacting the Sponsor or your financial advisor. Purchase and sale decisions
regarding Fund shares for your wrap-fee account ordinarily will be made by the
Wrap Fee Adviser, the Sponsor or a Sponsor-designated investment manager,
depending on the particular wrap-fee program in which your wrap-fee account
participates. If your wrap-fee account's use of the Wrap Fee Adviser's
investment style is terminated by you, the Sponsor, or the Wrap Fee Adviser,
your wrap-fee account will cease to be an Eligible Wrap Account, and you will be
required to redeem all your shares of the Capital Securities Fund. Each Eligible
Wrap Account, by purchasing shares, agrees to any such redemption.
There are no minimum initial or
subsequent investment requirements for Eligible Wrap Accounts. Eligible Wrap
Accounts may purchase or redeem shares on any business day (normally any day
when the New York Stock Exchange is open for regular trading) through its
intermediary.
Tax
Information
The Fund’s distributions you receive
are generally subject to federal income tax as ordinary income or capital gain
and may also be subject to state and local taxes, unless you are tax-exempt or
your account is tax-deferred in which case your distributions would be taxed
when withdrawn from the tax-deferred account.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase the Fund through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, or to recommend one share class of the Fund over another share
class. Ask your salesperson or visit your financial intermediary's website for
more information.
CREDIT
OPPORTUNITIES EXPLORER FUND
On September 13, 2016, the Board of
Directors of Principal Funds, Inc. approved the Plan of Liquidation (the “Plan”)
for the Credit Opportunities Explorer Fund (the "Fund"). Effective as of the
close of the New York Stock Exchange on September 1, 2016, the Fund is no longer
available for purchase from new investors. Pursuant to the Plan, the Fund will
liquidate on or about October 28, 2016. All outstanding shares will be redeemed
at net asset value, proceeds will be sent to shareholders of record, and the
Fund will discontinue its operations. In light of the anticipated liquidation,
the Fund may deviate from its stated investment objective and strategies.
|
|
Objective: |
The Fund seeks to achieve
long-term returns, comprised of income and capital appreciation, with an
emphasis on managing volatility. |
Fees and Expenses
of the Fund
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Fund. You may
qualify for sales charge discounts if you and your family invest, or agree to
invest in the future, at least $100,000 in Class A shares of Principal
Funds, Inc. More information about these and other discounts is available from
your financial professional and in “Choosing a Share Class and The Costs of
Investing” beginning on page ___ of the Fund’s prospectus and “Multiple Class
Structure” beginning on page ___ of the Fund’s Statement of Additional
Information.
Shareholder Fees
(fees paid directly from your investment)
|
|
|
|
|
Share
Class |
|
A |
Inst. |
Maximum Sales Charge (Load)
Imposed on Purchases (as a percentage of offering price) |
3.75% |
None |
Maximum Deferred Sales Charge
(Load) (as a percentage of the offering price or NAV at the time Sales
Load is paid, whichever is less) |
1.00% |
None |
Annual Fund
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
Share
Class |
|
A |
Inst. |
Management Fees |
0.60% |
0.60% |
Distribution and/or Service
(12b-1) Fees (1) |
N/A |
N/A |
Other Expenses |
0.54% |
0.46% |
Acquired Fund Fees and
Expenses |
0.01% |
0.01% |
Total Annual
Fund Operating Expenses |
1.15% |
1.07% |
Expense Reimbursement
(2) |
(0.29)% |
(0.36)% |
Total Annual
Fund Operating Expenses after Expense Reimbursement |
0.86% |
0.71% |
|
|
|
|
|
(1) |
Expense information in the
table has been restated to reflect current fees. Effective September 1,
2016, the Distribution and/or Service (12b-1) Fees for Class A were
eliminated. |
(2) |
Principal Management
Corporation ("PMC"), the investment advisor, has contractually agreed to
limit the Fund’s expenses by paying, if necessary, expenses normally
payable by the Fund, (excluding interest expense, expenses related to fund
investments, acquired fund fees and expenses, and other extraordinary
expenses) to maintain a total level of operating expenses (expressed as a
percent of average net assets on an annualized basis) not to exceed 0.85%
for Class A, and 0.70% for Institutional Class shares. It is expected that
the expense limits will continue through the period ending December 30,
2016; however, Principal Funds, Inc. and PMC, the parties to the
agreement, may mutually agree to terminate the expense limits 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. The Example also assumes
that your investment has a 5% return each year and that the Fund’s operating
expenses remain the same. 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 |
$459 |
$699 |
$957 |
$1,695 |
Institutional
Class |
73 |
305 |
555 |
1,273 |
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 10, 2014, date
operations commenced, through August 31, 2015, the Fund’s annualized portfolio
turnover rate was 406.0% 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 a diversified portfolio of credit-related instruments, represented
by bonds and derivatives. A derivative is a financial arrangement, the value of
which is derived from, or based on, a traditional security, asset, or market
index. The derivatives include futures contracts and swap agreements. The
credit-related securities in which the Fund invests include U.S. and non-U.S.
investment-grade debt securities; U.S. and non-U.S. below investment grade
securities (sometimes called “high yield bonds” or "junk bonds") which are rated
at the time of purchase Ba1 or lower by Moody's Investors Service, Inc.
("Moody's") and BB+ or lower by S&P Global Ratings ("S&P Global") (if
the bond has been rated by only one of those agencies, that rating will
determine whether the bond is below investment grade; if the bond has not been
rated by either of those agencies, the Sub-Advisor will determine whether the
bond is of a quality comparable to those rated below investment grade);
securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities; asset-backed securities or mortgage-backed securities
(securitized products); preferred securities; and foreign securities. In
addition, the Fund invests some of its assets in sovereign and corporate debt
securities of issuers in emerging market countries. Under normal circumstances,
the Fund maintains an average portfolio duration that is within 0 to 9 years.
The Fund actively trades portfolio securities.
The Fund uses derivative instruments
for hedging, managing fixed income exposure, managing its foreign currency
exposure, or mitigating volatility. Specifically, the Fund invests in futures
contracts (including Treasury, sovereign bond and volatility futures) or
interest rate swaps to manage the fixed-income exposure (including for hedging
purposes) and credit default swaps to increase or decrease, in an efficient
manner, exposure to certain sectors or individual issuers. The Fund uses
forwards to manage its foreign currency exposure.
During the fiscal year ended August
31, 2015, the average ratings of the Fund’s fixed-income assets, based on market
value at each month-end, were as follows (all ratings are by
Moody’s):
|
|
|
|
|
0.49% in securities
rated Aaa |
46.02% in securities rated
Baa |
5.19% in securities rated
Caa |
0.00% in securities rated
D |
2.02% in securities
rated Aa |
19.10% in securities rated
Ba |
0.00% in securities rated
Ca |
0.00% in securities not
rated |
12.35% in securities rated
A |
14.83% in securities rated
B |
0.00% in securities rated
C |
|
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, in alphabetical order, are:
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.
|
|
• |
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. |
Emerging Markets
Risk. Investments in
emerging market countries may have more risk than those in developed market
countries because the emerging markets are less developed and more illiquid.
Emerging market countries can also be subject to increased social, economic,
regulatory, and political uncertainties and can be extremely
volatile.
Fixed-Income
Securities Risk.
Fixed-income securities are subject to interest rate risk and credit quality
risk. The market value of fixed-income securities generally declines when
interest rates rise, and an issuer of fixed-income securities could default on
its payment obligations.
Foreign Currency
Risk. Risks of
investing in securities denominated in, or that trade in, foreign (non-U.S.)
currencies include changes in foreign exchange rates and foreign exchange
restrictions.
Foreign
Securities Risk. The
risks of foreign securities include loss of value as a result of: political or
economic instability; nationalization, expropriation or confiscatory taxation;
settlement delays; and limited government regulation (including less stringent
reporting, accounting, and disclosure standards than are required of U.S.
companies).
Hedging
Risk. A fund that
implements a hedging strategy using derivatives and/or securities could expose
the fund to the risk that can arise when a change in the value of a hedge does
not match a change in the value of the asset it hedges. In other words, the
change in value of the hedge could move in a direction that does not match the
change in value of the underlying asset, resulting in a risk of loss to the
fund.
High Yield
Securities Risk. High
yield fixed-income securities (commonly referred to as "junk bonds") are subject
to greater credit quality risk than higher rated fixed-income securities and
should be considered speculative.
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.
Portfolio
Turnover (Active Trading) Risk. A fund that has a portfolio turnover
rate over 100% is considered actively traded. Actively trading portfolio
securities may accelerate realization of taxable gains and losses, lower fund
performance and may result in high portfolio turnover rates and increased
brokerage costs.
Preferred
Securities Risk. Preferred securities are securities
with a lower priority claim on assets or earnings than bonds and other debt
instruments in a company's capital structure, and therefore can be 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 the stated maturity date.
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.
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 or -chartered 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. Treasury.
Volatility
Mitigation Risk.
Volatility mitigation strategies may increase fund transaction costs, which
could increase losses or reduce gains. These strategies may not protect
the fund from market declines and may reduce the fund’s participation in market
gains.
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 by calling
1-800-222-5852 or online at:
|
|
• |
For Class A -
www.principalfunds.com. |
|
|
• |
For Institutional Class -
www.principal.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). The table shows, for each
share class of the Fund and 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 10, 2014).
Total Returns as
of December 31 (Class A shares) (1)
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q1
'15 |
1.58% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q3
'15 |
(3.03)% |
|
|
(1)
|
The year-to-date return
as of September 30, 2016
was 6.24% for Class A shares.
|
|
|
|
|
Average
Annual Total Returns |
For the
periods ended 12/31/2015 |
1 Year |
Life of
Fund |
Class A
Return Before Taxes |
(7.12)% |
(6.51)% |
Class A
Return After Taxes on Distributions |
(8.69)% |
(8.01)% |
Class A
Return After Taxes on Distributions and Sale of Fund
Shares |
(3.99)% |
(5.58)% |
Institutional
Class Return Before Taxes |
(3.17)% |
(3.35)% |
Bloomberg Barclays Global
Aggregate Corporate USD Hedged Index (reflects no deduction for fees,
expenses, or taxes) |
(0.24)% |
1.16% |
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.
Management
Investment
Advisor:
Principal Management
Corporation
Sub-Advisor and
Portfolio Managers:
Principal Global Investors,
LLC
|
|
• |
William C. Armstrong (since
2014), Portfolio Manager |
|
|
• |
Tina Paris (since 2014),
Portfolio Manager |
|
|
• |
Darryl Trunnel (since 2014),
Portfolio Manager |
Purchase and Sale
of Fund Shares
|
|
|
|
Share
Class |
Investment
Type |
Purchase
Minimum
Per
Fund |
A |
Subsequent
Investments |
$100(1)(2) |
Institutional |
There are no minimum 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 8024, Boston, MA
02266-8024 (regular mail) or 30 Dan Road, Canton, MA 02021-2809 (overnight
mail); calling us at 1-800-222-5852; or accessing our website
(www.principalfunds.com).
Tax
Information
The Fund’s distributions you receive
are generally subject to federal income tax as ordinary income or capital gain
and may also be subject to state and local taxes, unless you are tax-exempt or
your account is tax-deferred in which case your distributions would be taxed
when withdrawn from the tax-deferred account.
For federal income tax purposes, the
liquidation of the Fund will be treated as a redemption of Fund shares and may
cause shareholders to recognize capital gain or loss and pay taxes if the
liquidated shares are held in a taxable account. You should consult with your
own tax advisor about the particular tax consequences to you of the Fund’s
liquidation.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase the Fund through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, or to recommend one share class of the Fund over another share
class. Ask your salesperson or visit your financial intermediary's website for
more information.
DIVERSIFIED REAL
ASSET FUND
|
|
Objective: |
The Fund seeks a long-term
total return in excess of inflation. |
Fees and Expenses
of the Fund
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Fund. You may
qualify for sales charge discounts if you and your family invest, or agree to
invest in the future, at least $100,000 in Class A shares of Principal
Funds, Inc. More information about these and other discounts is available from
your financial professional and in “Choosing a Share Class and The Costs of
Investing” beginning on page ___ of the Fund’s prospectus and “Multiple Class
Structure” beginning on page ___ of the Fund’s Statement of Additional
Information.
Shareholder Fees
(fees paid directly from your investment)
|
|
|
|
|
|
|
|
|
|
|
Share
Class |
|
A |
C |
P |
Inst. |
R-3 |
R-4 |
R-5 |
R-6 |
Maximum Sales Charge (Load)
Imposed on Purchases (as a percentage of offering price) |
3.75% |
None |
None |
None |
None |
None |
None |
None |
Maximum Deferred Sales Charge
(Load) (as a percentage of the offering price or NAV at the time Sales
Load is paid, whichever is less) |
1.00% |
1.00% |
None |
None |
None |
None |
None |
None |
Annual Fund
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
|
|
|
|
|
|
Share
Class |
|
A |
C |
P |
Inst. |
R-3 |
R-4 |
R-5 |
R-6 |
Management Fees |
0.81% |
0.81% |
0.81% |
0.81% |
0.81% |
0.81% |
0.81% |
0.81% |
Distribution and/or Service
(12b-1) Fees |
0.25% |
1.00% |
N/A |
N/A |
0.25% |
0.10% |
N/A |
N/A |
Other Expenses(1) |
0.19% |
0.23% |
0.25% |
0.06% |
0.33% |
0.29% |
0.27% |
24.77% |
Acquired Fund Fees and
Expenses |
0.01% |
0.01% |
0.01% |
0.01% |
0.01% |
0.01% |
0.01% |
0.01% |
Total Annual
Fund Operating Expenses |
1.26% |
2.05% |
1.07% |
0.88% |
1.40% |
1.21% |
1.09% |
25.59% |
Expense Reimbursement
(2) |
—% |
(0.04)% |
(0.05)% |
—% |
N/A |
N/A |
N/A |
(24.70)% |
Total Annual
Fund Operating Expenses after Expense Reimbursement |
1.26% |
2.01% |
1.02% |
0.88% |
1.40% |
1.21% |
1.09% |
0.89% |
|
|
|
|
|
|
(1) |
Based on estimated amounts for
the current fiscal year (R-3, R-4, and R-5). |
(2) |
Principal Management
Corporation ("PMC"), the investment advisor, has contractually agreed to
limit the Fund’s expenses by paying, if necessary, expenses normally
payable by the Fund, (excluding interest expense, expenses related to fund
investments, acquired fund fees and expenses, and other extraordinary
expenses) to maintain a total level of operating expenses (expressed as a
percent of average net assets on an annualized basis) not to exceed 1.25%
for Class A, 2.00% for Class C, 0.88% for Institutional Class, and 0.88%
for R-6 shares. In addition, for Class P, the expense limit will maintain
"Other Expenses" (expressed as a percent of average net assets on an
annualized basis) not to exceed 0.20%, (excluding interest expense,
expenses related to fund investments, acquired fund fees and expenses, and
other extraordinary expenses). It is expected that the expense limits will
continue through the period ending December 30, 2016; however, Principal
Funds, Inc. and PMC, the parties to the agreement, may mutually agree to
terminate the expense limits 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. 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 |
$499 |
$760 |
$1,041 |
$1,841 |
Class
C |
304 |
639 |
1,100 |
2,376 |
Class
P |
104 |
335 |
585 |
1,301 |
Institutional
Class |
90 |
281 |
488 |
1,084 |
Class
R-3 |
143 |
443 |
766 |
1,680 |
Class
R-4 |
123 |
384 |
665 |
1,466 |
Class
R-5 |
111 |
347 |
601 |
1,329 |
Class
R-6 |
91 |
4,379 |
7,082 |
10,240 |
With respect to Class C shares, you
would pay the following expenses if you did not redeem your shares (all other
classes would be the same as in the above example):
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
Class
C |
$204 |
$639 |
$1,100 |
$2,376 |
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 annualized portfolio turnover rate was 66.4% 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 seeks to achieve its investment objective by allocating its assets among
general investment categories related to real assets and real asset companies
(which include tangible assets and investments that are expected to perform well
in periods of high inflation) such as the following: inflation-indexed bonds,
securities of real estate companies, commodity-linked derivatives and commodity
index-linked notes, U.S. treasury and agency notes and bonds, foreign currency,
securities of natural resource companies, master limited partnerships (MLPs),
publicly-listed infrastructure companies, floating rate debt, securities of U.S.
and non-U.S. agriculture companies, and securities of U.S. and non-U.S. timber
companies. The Fund purchases 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.
In managing the Fund, Principal
Management Corporation ("PMC"), the Fund’s investment advisor, determines the
Fund's strategic asset allocation among the general investment categories
described below, which are executed by multiple sub-advisors. The allocations
will vary from time to time, and the Fund may add additional investment
categories. The Fund concentrates its investments (invests more than 25% of its
net assets) in securities in the real estate and energy/natural resources
industries. Except for the foregoing concentration policy, the Fund retains
considerable latitude in allocating its assets. The Fund may invest in equity
securities regardless of market capitalization size and style (growth or value).
The fixed income portion of the Fund is not managed to a particular maturity or
duration.
A portion of the Fund's assets is
invested in inflation-indexed bonds issued by the U.S. and non-U.S. governments,
their agencies or instrumentalities and 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.
A portion of the Fund's assets is
invested in a combination of commodity index-linked notes and fixed-income
securities. Commodities are assets that have tangible properties, such as oil,
coal, natural gas, agricultural products, industrial metals, livestock and
precious metals. In order to gain exposure to the commodities markets without
investing directly in physical commodities, the Fund invests in commodity
index-linked notes. Commodity index-linked notes are derivative debt instruments
with principal and/or coupon payments linked to the performance of commodity
indices. These notes are sometimes referred to as "structured notes" because the
terms of these notes may be structured by the issuer and the purchaser of the
note. The value of these notes will rise or fall in response to changes in the
underlying commodity index and will be subject to credit and interest rate risks
that typically affect debt securities. The fixed income securities are primarily
short-term U.S. Treasury and Agency notes and bonds.
A portion of the Fund's assets is
invested in the real estate industry. The Fund invests in equity securities of
global companies principally engaged in the real estate industry ("real estate
companies"). A real estate company has at least 50% of its assets, income or
profits derived from products or services related to the real estate industry.
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.
A portion of the Fund's assets is
invested in securities of companies that primarily own, explore, mine, process
or otherwise develop natural resources, or supply goods and services to such
companies. Natural resources generally include precious metals, such as gold,
silver and platinum, ferrous and nonferrous metals, such as iron, aluminum and
copper, strategic metals such as uranium and titanium, hydrocarbons such as
coal, oil and natural gas, timberland, undeveloped real property and
agricultural commodities.
A portion of the Fund's assets is
invested in MLPs. Generally, MLPs are engaged in the transportation, storage,
processing, refining, marketing, production, or mining of natural resources. The
Fund invests primarily in the mid-stream category of MLPs, which is generally
comprised of pipelines used to gather, process, transport, and distribute
natural gas, crude oil, and refined petroleum products.
A portion of the Fund’s assets is
invested in domestic and foreign publicly-listed infrastructure companies.
Publicly-listed infrastructure equity securities trade on an exchange and
include, but are not limited to, companies involved in the ownership and/or
operations of infrastructure assets within the transportation, communications,
water, electricity transmission and distribution, and oil and gas storage,
processing and transportation industries.
A portion of the Fund’s assets is
invested in below-investment-grade (sometimes called “junk”) or comparable
unrated floating rate debt (also known as bank loans, syndicated loans,
leveraged loans or senior floating rate interests). Floating rate debt has a
variable coupon that resets periodically, with interest payments determined by a
representative interest rate index (e.g. LIBOR or the federal funds rate) plus a
fixed spread. As a result, the coupon payments vary, or “float” with prevailing
market interest rates.
A portion of the Fund's assets is
invested in securities of global agricultural companies. These include companies
contributing to and/or profiting from the agricultural sector, especially those
active in production, processing and supply chain services, as well as the
production of farming inputs such as machinery, agricultural chemicals and
seeds.
A portion of the Fund’s assets is
invested in securities of global timber companies. These include companies
active in the financing, planting, and management of forests and wooded areas
and/or in the processing, production and distribution of wood for construction
and other services and products derived from wood.
A portion of the Fund’s assets is
invested in currency forward contracts and options for the purpose of hedging
risk and providing total return. This portion of the Fund invests in currencies
of economically and politically stable industrialized nations, and approximately
20 of the most liquid emerging market currencies. To help preserve purchasing
power, when domestic inflation increases, the Fund seeks to invest in currencies
in countries where inflation remains low and stable.
A portion of the Fund’s assets is
invested in a wholly-owned subsidiary of the Fund organized under the laws of
the Cayman Islands (the “Cayman Subsidiary”). The Fund invests in the Cayman
Subsidiary to gain exposure to the commodity markets within the limitations of
the federal tax law requirements applicable to regulated investment companies
(“RICs”) under the Internal Revenue Code (the “Code”). The Cayman Subsidiary
invests in commodity-linked derivatives, including commodity-linked swaps,
commodity futures contracts and/or options on commodities, as well as
instruments such as fixed income securities, cash and cash equivalents and/or
U.S. government securities, either as investments or to serve as margin or
collateral for the Cayman Subsidiary's derivatives positions.
During the fiscal year ended August
31, 2015, the average ratings of the Fund’s fixed-income assets, based on market
value at each month-end, were as follows (all ratings are by
Moody’s):
|
|
|
|
|
50.13% in securities rated
Aaa |
2.28% in securities
rated Baa |
1.80% in securities rated
Caa |
0.00% in securities
rated D |
0.44% in securities
rated Aa |
17.35% in securities rated
Ba |
0.00% in securities rated
Ca |
12.69% in securities not
rated |
1.34% in securities
rated A |
13.97% in securities rated
B |
0.00% in securities rated
C |
|
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, in alphabetical order,
are:
Agriculture
Sector Risk.
Agriculture-related investments are subject to risks from a number of economic
forces, including forces affecting the agricultural, commodity, energy and
financial markets, as well as government policies and regulations affecting the
agricultural sector and related industries. In particular, agricultural
production and trade flows are significantly affected by government policies and
regulations. Companies involved in agriculture are also particularly
sensitive to changing weather conditions and other natural
disasters.
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 may decline, causing a
loan to be substantially unsecured. Underlying credit agreements governing the
bank loans, reliance on market makers, priority of repayment and overall market
volatility may harm the liquidity of loans.
Cayman Subsidiary
Risk. A fund is subject
to the particular risks associated with the investments of the Fund’s
wholly-owned Cayman Subsidiary, namely Commodity-Related Investments Risk,
Counterparty Risk and Derivatives Risk. The Cayman Subsidiary is not registered
under the Investment Company Act and is not subject to all the investor
protections of the Investment Company Act. The laws of the Cayman Islands and/or
the United States (including the IRS position on income earned from wholly-owned
subsidiaries described in past IRS private letter rulings) may change, resulting
in the inability of the fund and/or the Cayman Subsidiary to operate as
described in this Prospectus.
Commodity-Related
Investments Risk. The
value of commodities investments will generally be affected by overall market
movements and factors specific to a particular industry or commodity, which may
include weather, embargoes, tariffs, and economic health, political,
international regulatory and other developments. Exposure to the commodities
markets may subject the fund to greater volatility than investments in
traditional securities.
Counterparty
Risk. Counterparty risk
is the risk that the counterparty to a contract or other obligation will be
unable or unwilling to honor its obligations.
Derivatives
Risk. Derivatives may
not move in the direction anticipated by the portfolio manager. Transactions in
derivatives may increase volatility, cause the liquidation of portfolio
positions when not advantageous to do so and result in disproportionate losses
that may be substantially greater than a fund's initial investment.
|
|
• |
Commodity
Index-Linked Notes. Commodity index-linked notes
expose the fund to movements in commodity prices. They are also subject to
credit, counterparty, and interest rate risk. Commodity index-linked notes
are often leveraged. At the maturity of the note, the fund may receive
more or less principal than it originally invested. The fund may also
receive interest payments on the note that are less than the stated coupon
interest payments. |
|
|
• |
Currency
Contracts. Derivatives related to
currency contracts involve the specific risk of government action through
exchange controls that would restrict the ability of the fund to deliver
or receive currency. |
|
|
• |
Forward
Contracts, Futures and Swaps. Forward contracts, futures,
and swaps involve specific risks, including: the imperfect correlation
between the change in market value of the instruments held by the fund and
the price of the forward contract, future or swap; possible lack of a
liquid secondary market for a forward contract, future or swap and the
resulting inability to close a forward contract, future or swap when
desired; counterparty risk; and if the fund has insufficient cash, it may
have to sell securities from its portfolio to meet daily variation margin
requirements. |
|
|
• |
Options.
Options involve
specific risks, including: imperfect correlation between the change in
market value of the instruments held by the fund and the price of the
options, counterparty risk, difference in trading hours for the options
markets and the markets for the underlying securities (rate movements can
take place in the underlying markets that cannot be reflected in the
options markets), and an insufficient liquid secondary market for
particular options. |
Equity Securities
Risk. The value of
equity securities could decline if the issuer’s financial condition declines or
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
Stock Risk. If
growth companies do not increase their earnings at a rate expected by
investors, the market price of the 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. |
|
|
• |
Small and
Medium Market Capitalization Companies Risk . Investments in small and
medium sized companies may involve greater risk and price volatility than
investments in larger, more mature companies.
|
|
|
•
|
Value Stock
Risk. Value
stocks may continue to be undervalued by the market for extended periods,
including the entire period during which the stock is held by the fund, or
the events that the portfolio manager believed would cause the stock price
to increase may not occur as anticipated or at all. Moreover, a stock
judged 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 risk and credit quality
risk. The market value of fixed-income securities generally declines when
interest rates rise, and an issuer of fixed-income securities could default on
its payment obligations.
Foreign Currency
Risk. Risks of
investing in securities denominated in, or that trade in, foreign (non-U.S.)
currencies include changes in foreign exchange rates and foreign exchange
restrictions.
Foreign
Securities Risk. The
risks of foreign securities include loss of value as a result of: political or
economic instability; nationalization, expropriation or confiscatory taxation;
settlement delays; and limited government regulation (including less stringent
reporting, accounting, and disclosure standards than are required of U.S.
companies).
High Yield
Securities Risk. High
yield fixed-income securities (commonly referred to as "junk bonds") are subject
to greater credit quality risk than higher rated fixed-income securities and
should be considered speculative.
Industry
Concentration Risk. A
fund that concentrates investments in a particular industry or group of
industries has greater exposure than other funds to market, economic and other
factors affecting that industry or group of industries.
|
|
• |
Energy/Natural
Resources. A fund
concentrating in energy/natural resource companies
may be affected
by numerous factors, including events occurring in nature, inflationary
pressures, international politics, the success of exploration projects,
commodity prices, energy conservation, taxes and other government
regulations. In addition, interest rates and general economic conditions
may affect the demand for energy/natural resources. For example, events
occurring in nature (such as earthquakes or fires in prime energy/natural
resource areas) and political events (such as coups, military
confrontations or acts of terrorism) can affect overall supply of
energy/natural resources and the value of companies involved in
energy/natural resources. |
|
|
• |
Real
Estate. A fund
concentrating in the real estate industry is subject to the risks
associated with direct ownership of real estate, securities of companies
in the real estate industry, and/or real estate investment
trusts. |
Leverage
Risk. Leverage created
by borrowing or certain types of transactions or investments may impair the
fund's liquidity, cause it to liquidate positions at an unfavorable time,
increase volatility of the fund's net asset value, or diminish the fund's
performance.
Master Limited
Partnership ("MLP") Risk. MLPs are publicly-traded limited
partnership interests or units. An MLP that invests in a particular industry
(e.g., oil and gas) will be harmed by detrimental economic events within that
industry. As partnerships, MLPs may be subject to less regulation (and less
protection for investors) under state laws than corporations. In addition, MLPs
may be subject to state taxation in certain jurisdictions, which may reduce the
amount of income an MLP pays to its investors.
Portfolio
Duration Risk.
Portfolio duration is a measure of the expected life of a fixed-income security
and its sensitivity to changes in interest rates. The longer a fund's average
portfolio duration, the more sensitive the fund will be to changes in interest
rates.
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 Risk.
A fund that serves as
an underlying fund for a fund of funds is subject to certain risks. When a fund
of funds reallocates or rebalances its investments, an underlying fund may
experience relatively large redemptions or investments. These transactions may
cause the underlying fund to sell portfolio securities to meet such redemptions,
or to invest cash from such investments, at times it would not otherwise do so,
and may as a result increase transaction costs and adversely affect underlying
fund performance. Moreover, a fund of fund’s redemptions or reallocations among
share classes of an underlying fund may result in changes to the expense ratios
of affected classes, which may increase the expenses paid by shareholders of the
class that experienced the redemption.
U.S. Government
Securities Risk. Yields
available from U.S. government securities are generally lower than yields from
many other fixed-income securities.
Performance
The following information provides
some indication of the risks of investing in the Fund. Past performance (before
and after taxes) is not necessarily an indication of how the Fund will perform
in the future. You may get updated performance information by calling
1-800-222-5852 or online at:
|
|
• |
For Classes A, C, and P -
www.principalfunds.com. |
|
|
• |
For Institutional Class and
Classes R-3, R-4, R-5, and R-6 - www.principal.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 each share class of the Fund and for the last one, five,
and ten calendar year periods (or, if shorter, the life of the Fund), how the
Fund’s average annual total returns compare with those of one or more broad
measures of market performance.
Life of Fund returns are measured
from the date the Fund's shares were first sold (March 16, 2010).
For periods prior to the inception
date of Class P shares (September 27, 2010), Class R-6 shares (December 31,
2014), and Classes R-3, R-4, and R-5 shares (March 29, 2016), the performance
shown in the table for Classes P, R-3, R-4, R-5 and R-6 shares is based on the
performance of the Fund's Institutional Class shares, adjusted to reflect the
respective fees and expenses of each class. 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
March 16, 2010.
Total Returns as
of December 31 (Class A shares)(1)
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q4
'11 |
7.04% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q3
'15 |
(10.42)% |
|
|
(1)
|
The year-to-date return
as of September 30, 2016 was 6.48% for Class A shares.
|
|
|
|
|
|
Average
Annual Total Returns |
For the
periods ended 12/31/2015 |
1
Year |
5
Years |
Life of
Fund |
Class A
Return Before Taxes |
(15.93)% |
(0.60)% |
1.97% |
Class A
Return After Taxes on Distributions |
(16.04)% |
(1.09)% |
1.50% |
Class A
Return After Taxes on Distributions and Sale of Fund
Shares |
(8.94)% |
(0.47)% |
1.50% |
Class C
Return Before Taxes |
(14.18)% |
(0.58)% |
1.89% |
Class P
Return Before Taxes |
(12.47)% |
0.40% |
2.90% |
Institutional
Class Return Before Taxes |
(12.40)% |
0.54% |
3.04% |
Class R-3
Return Before Taxes |
(12.86)% |
0.02% |
2.51% |
Class R-4
Return Before Taxes |
(12.69)% |
0.21% |
2.70% |
Class R-5
Return Before Taxes |
(12.58)% |
0.33% |
2.82% |
Class R-6
Return Before Taxes |
(12.36)% |
0.54% |
3.03% |
Diversified Real Asset
Strategic Index (reflects no deduction for fees, expenses, or
taxes) |
(11.75)% |
(1.29)% |
0.63% |
Bloomberg Barclays U.S.
Treasury TIPS Index (reflects no deduction for fees, expenses, or
taxes) |
(1.44)% |
2.55% |
3.09% |
S&P Global Infrastructure
Index (reflects no deduction for fees, expenses, or taxes) |
(12.17)% |
4.20% |
4.55% |
S&P Global Natural
Resources Index (reflects no deduction for fees, expenses, or
taxes) |
(24.50)% |
(9.15)% |
(6.05)% |
Bloomberg Commodity Index
(reflects no deduction for fees, expenses, or taxes) |
(24.66)% |
(13.47)% |
(8.61)% |
FTSE EPRA/NAREIT Developed
Markets Index (reflects no deduction for fees, expenses, or
taxes) |
(0.79)% |
7.17% |
8.88% |
After-tax returns are calculated
using the historical highest individual federal marginal income tax rates and do
not reflect the impact of state and local taxes. Actual after-tax returns depend
on an investor’s tax situation and may differ from those shown. The after-tax
returns shown are not relevant to investors who hold their Fund shares through
tax-deferred arrangements, such as 401(k) plans or individual retirement
accounts. After-tax returns are shown for Class A shares only and would be
different for the other share classes.
Performance of a blended index shows
how the Fund’s performance compares to a blend of indices with similar
investment objectives. Performance of the components of the blended index are
also shown. The weightings of the Diversified Real Asset Blended Index are as
follows: 35% Bloomberg Barclays U.S. Treasury TIPS Index, 20% S&P Global
Infrastructure Index, 20% S&P Global Natural Resources Index, 15% Bloomberg
Commodity Index, and 10% FTSE EPRA/NAREIT Developed Markets Index. The blended
index returns reflect the allocation described in the preceding sentence. The
name of the blended index changed effective December 31, 2016, but the
components and weightings did not change.
Management
Investment
Advisor and Portfolio Managers:
Principal Management
Corporation
|
|
• |
Jake S. Anonson (since 2014),
Portfolio Manager |
|
|
• |
Jessica S. Bush (since 2014),
Portfolio Manager |
|
|
• |
Marcus W. Dummer (since 2014),
Portfolio Manager |
|
|
• |
Kelly A. Grossman (since
2010), Portfolio Manager |
|
|
• |
Benjamin E. Rotenberg (since
2014), Portfolio Manager |
Sub-Advisors:
BlackRock Financial Management,
Inc.
Brookfield Investment Management
Inc.
Credit Suisse Asset Management,
LLC
Fischer Francis Trees & Watts,
Inc.
Macquarie Capital Investment
Management LLC
Pictet Asset Management
SA
Principal Real Estate Investors, LLC
Symphony Asset Management LLC
Tortoise Capital Advisors,
L.L.C.
Purchase and Sale
of Fund Shares
|
|
|
|
Share
Class |
Investment
Type |
Purchase
Minimum
Per
Fund |
A and
C |
Initial
Investment |
$1,000(1) |
A and
C |
Initial Investment for accounts
with an Automatic Investment Plan (AIP) |
$100 |
A and
C |
Subsequent
Investments |
$100(1)(2) |
P,
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 8024, Boston, MA
02266-8024 (regular mail) or 30 Dan Road, Canton, MA 02021-2809 (overnight
mail); calling us at 1-800-222-5852; or accessing our website
(www.principalfunds.com).
Tax
Information
The Fund’s distributions you receive
are generally subject to federal income tax as ordinary income or capital gain
and may also be subject to state and local taxes, unless you are tax-exempt or
your account is tax-deferred in which case your distributions would be taxed
when withdrawn from the tax-deferred account.
Payments to
Broker-Dealers and Other Financial Intermediaries
For Class R-6 shares, the Fund and
its related companies do not pay broker-dealers or other financial
intermediaries (such as a bank, insurance company, investment adviser, etc.) for
the sale of Fund shares or related services.
For the other share classes, if you
purchase the Fund through a broker-dealer or other financial intermediary (such
as a bank, insurance company, investment adviser, etc.), the Fund and its
related companies may pay the intermediary for the sale of Fund shares and
related services. These payments may create a conflict of interest by
influencing the broker-dealer or other intermediary and your salesperson to
recommend the Fund over another investment, or to recommend one share class of
the Fund over another share class. Ask your salesperson or visit your financial
intermediary's website for more information.
DYNAMIC HIGH
YIELD EXPLORER FUND
|
|
Objective: |
The Fund seeks to provide a
high level of current income with an emphasis on managing
volatility. |
Fees and Expenses
of the Fund
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Fund. You may
qualify for sales charge discounts if you and your family invest, or agree to
invest in the future, at least $100,000 in Class A shares of Principal
Funds, Inc. More information about these and other discounts is available from
your financial professional and in “Choosing a Share Class and The Costs of
Investing” beginning on page ___ of the Fund’s prospectus and “Multiple Class
Structure” beginning on page ___ of the Fund’s Statement of Additional
Information.
Shareholder Fees
(fees paid directly from your investment)
|
|
|
|
|
Share
Class |
|
A |
Inst. |
Maximum Sales Charge (Load)
Imposed on Purchases (as a percentage of offering price) |
3.75% |
None |
Maximum Deferred Sales Charge
(Load) (as a percentage of the offering price or NAV at the time Sales
Load is paid, whichever is less) |
1.00% |
None |
Annual Fund
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
Share
Class |
|
A |
Inst. |
Management Fees |
0.65% |
0.65% |
Distribution and/or Service
(12b-1) Fees |
0.25% |
N/A |
Other Expenses |
0.79% |
0.69% |
Acquired Fund Fees and
Expenses |
0.03% |
0.03% |
Total Annual
Fund Operating Expenses |
1.72% |
1.37% |
Expense Reimbursement
(1) |
(0.59)% |
(0.59)% |
Total Annual
Fund Operating Expenses after Expense Reimbursement |
1.13% |
0.78% |
|
|
|
(1) |
Principal Management
Corporation ("PMC"), the investment advisor, has contractually agreed to
limit the Fund’s expenses by paying, if necessary, expenses normally
payable by the Fund, (excluding interest expense, expenses related to fund
investments, acquired fund fees and expenses, and other extraordinary
expenses) to maintain a total level of operating expenses (expressed as a
percent of average net assets on an annualized basis) not to exceed 1.10%
for Class A and 0.75% for Institutional Class shares. It is expected that
the expense limits will continue through the period ending December 30,
2016; however, Principal Funds, Inc. and PMC, the parties to the
agreement, may mutually agree to terminate the expense limits 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. The Example also assumes
that your investment has a 5% return each year and that the Fund’s operating
expenses remain the same. 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 |
$486 |
$841 |
$1,220 |
$2,282 |
Institutional
Class |
80 |
376 |
694 |
1,595 |
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 10, 2014, date
operations commenced, through August 31, 2015, the Fund’s annualized
portfolio turnover rate was 94.0% 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 U.S. and non-U.S. below investment grade securities (sometimes
called “high yield” or "junk") 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 security has been rated by only one of
those agencies, that rating will determine whether the security is below
investment grade; if the security has not been rated by either of those
agencies, the Sub-Advisor will determine whether the security is of a quality
comparable to those rated below investment grade). The Fund has a flexible
investment strategy and invests in bank loans (also known as senior floating
rate interests) and bonds. The Fund also invests in U.S. and non-U.S. investment
grade corporate bonds. In addition, the Fund also invests some of its assets in
corporate debt securities of issuers in emerging market countries. Under normal
circumstances, the Fund maintains an average portfolio duration that is within 0
to 5 years. The Fund actively trades portfolio securities. From time to time,
the Fund borrows to purchase securities prior to the settlement of bank loan
sales transactions.
The Fund uses derivative instruments
for hedging, managing fixed income exposure, managing foreign currency exposure,
and/or mitigating volatility. A derivative is a financial arrangement, the value
of which is derived from, or based on, a traditional security, asset, or market
index. Specifically, the Fund invests in futures contracts (including Treasury,
sovereign bond and volatility futures) and/or interest rate swaps to manage the
fixed-income exposure (including for hedging purposes) and credit default swaps
to increase or decrease, in an efficient manner, exposure to certain sectors or
individual issuers. The Fund uses forwards to manage its foreign currency
exposure.
During the fiscal year ended August
31, 2015, the average ratings of the Fund’s fixed-income assets, based on market
value at each month-end, were as follows (all ratings are by
Moody’s):
|
|
|
|
|
0.00% in securities
rated Aaa |
9.04% in securities
rated Baa |
14.53% in securities rated
Caa |
0.08% in securities
rated D |
0.00% in securities
rated Aa |
33.28% in securities rated
Ba |
0.00% in securities
rated Ca |
0.52% in securities
not rated |
0.00% in securities
rated A |
42.55% in securities rated
B |
0.00% in securities
rated C |
|
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, in alphabetical order, are:
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 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.
Borrowing
Risk. Borrowing can
increase fund expenses due to interest payments to lenders and related expenses.
Such borrowing also might reduce the fund’s return if the yield on the
investments purchased is less than the borrowing costs.
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.
|
|
• |
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. |
Emerging Markets
Risk. Investments in
emerging market countries may have more risk than those in developed market
countries because the emerging markets are less developed and more illiquid.
Emerging market countries can also be subject to increased social, economic,
regulatory, and political uncertainties and can be extremely
volatile.
Fixed-Income
Securities Risk.
Fixed-income securities are subject to interest rate risk and credit quality
risk. The market value of fixed-income securities generally declines when
interest rates rise, and an issuer of fixed-income securities could default on
its payment obligations.
Foreign Currency
Risk. Risks of
investing in securities denominated in, or that trade in, foreign (non-U.S.)
currencies include changes in foreign exchange rates and foreign exchange
restrictions.
Foreign
Securities Risk. The
risks of foreign securities include loss of value as a result of: political or
economic instability; nationalization, expropriation or confiscatory taxation;
settlement delays; and limited government regulation (including less stringent
reporting, accounting, and disclosure standards than are required of U.S.
companies).
Hedging
Risk. A fund that
implements a hedging strategy using derivatives and/or securities could expose
the fund to the risk that can arise when a change in the value of a hedge does
not match a change in the value of the asset it hedges. In other words, the
change in value of the hedge could move in a direction that does not match the
change in value of the underlying asset, resulting in a risk of loss to the
fund.
High Yield
Securities Risk. High
yield fixed-income securities (commonly referred to as "junk bonds") are subject
to greater credit quality risk than higher rated fixed-income securities and
should be considered speculative.
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.
Portfolio
Turnover (Active Trading) Risk. A fund that has a portfolio turnover
rate over 100% is considered actively traded. Actively trading portfolio
securities may accelerate realization of taxable gains and losses, lower fund
performance and may result in high portfolio turnover rates and increased
brokerage costs.
Volatility
Mitigation Risk.
Volatility mitigation strategies may increase fund transaction costs, which
could increase losses or reduce gains. These strategies may not protect
the fund from market declines and may reduce the fund’s participation in market
gains.
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 by calling
1-800-222-5852 or online at:
|
|
• |
For Class A -
www.principalfunds.com. |
|
|
• |
For Institutional Class -
www.principal.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). The table shows, for each
share class of the Fund and 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 10, 2014).
Total Returns as
of December 31 (Class A shares) (1)
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q1
'15 |
2.86% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q4
'15 |
(3.74)% |
|
|
(1)
|
The year-to-date return
as of September 30, 2016
was 9.34% for Class A shares.
|
|
|
|
|
Average
Annual Total Returns |
For the
periods ended 12/31/2015 |
1 Year |
Life of
Fund |
Class A
Return Before Taxes |
(7.38)% |
(8.11)% |
Class A
Return After Taxes on Distributions |
(9.29)% |
(9.94)% |
Class A
Return After Taxes on Distributions and Sale of Fund
Shares |
(4.09)% |
(6.91)% |
Institutional
Class Return Before Taxes |
(3.51)% |
(5.06)% |
Bloomberg Barclays High Yield
2% Issuer Constrained Index (reflects no deduction for fees, expenses, or
taxes) |
(4.43)% |
(5.05)% |
S&P/LSTA Leveraged Loan 100
Index (reflects no deduction for fees, expenses, or taxes) |
(2.75)% |
(3.02)% |
Dynamic High Yield Explorer
Blended Index (reflects no deduction for fees, expenses, or
taxes) |
(3.58)% |
(4.03)% |
After-tax returns are calculated
using the historical highest individual federal marginal income tax rates and do
not reflect the impact of state and local taxes. Actual after-tax returns depend
on an investor’s tax situation and may differ from those shown. The after-tax
returns shown are not relevant to investors who hold their Fund shares through
tax-deferred arrangements, such as 401(k) plans or individual retirement
accounts. After-tax returns are shown for Class A shares only and would be
different for the other share classes.
Performance of a blended index shows
how the Fund’s performance compares to a blend of indices with similar
investment objectives. Performance of the components of the blended index are
also shown. The weightings of the Dynamic High Yield Explorer Blended Index are
as follows: 50% Bloomberg Barclays High Yield 2% Issuer Constrained Index and
50% S&P/LSTA Leveraged Loan 100 Index. The blended index returns reflect the
allocation described in the preceding sentence.
Management
Investment
Advisor:
Principal Management
Corporation
Sub-Advisor and
Portfolio Managers:
Principal Global Investors,
LLC
|
|
• |
Mark P. Denkinger (since
2014), Portfolio Manager |
|
|
• |
Jason Hahn (since 2014),
Portfolio Manager |
|
|
• |
Josh Rank (since 2014),
Portfolio Manager |
|
|
• |
Darrin E. Smith (since 2014),
Portfolio Manager |
Purchase and Sale
of Fund Shares
|
|
|
|
Share
Class |
Investment
Type |
Purchase
Minimum
Per
Fund |
A |
Initial
Investment |
$1,000(1) |
A |
Initial Investment for accounts
with an Automatic Investment Plan (AIP) |
$100 |
A |
Subsequent
Investments |
$100(1)(2) |
Institutional |
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 8024, Boston, MA
02266-8024 (regular mail) or 30 Dan Road, Canton, MA 02021-2809 (overnight
mail); calling us at 1-800-222-5852; or accessing our website
(www.principalfunds.com).
Tax
Information
The Fund’s distributions you receive
are generally subject to federal income tax as ordinary income or capital gain
and may also be subject to state and local taxes, unless you are tax-exempt or
your account is tax-deferred in which case your distributions would be taxed
when withdrawn from the tax-deferred account.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase the Fund through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, or to recommend one share class of the Fund over another share
class. Ask your salesperson or visit your financial intermediary's website for
more information.
EDGE MIDCAP
FUND
|
|
Objective: |
The Fund seeks long-term
growth of capital. |
Fees and Expenses
of the Fund
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Fund.
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. |
R-6 |
Management Fees |
0.75% |
0.75% |
Distribution and/or Service
(12b-1) Fees |
N/A |
N/A |
Other Expenses (1) |
0.05% |
176.28% |
Total Annual
Fund Operating Expenses |
0.80% |
177.03% |
Expense Reimbursement
(2)
(3) |
—% |
(176.18)% |
Total Annual
Fund Operating Expenses after Expense Reimbursement |
0.80% |
0.85% |
|
|
|
|
|
(1) |
Based on estimated amounts for
the current fiscal year. |
(2) |
Principal Management
Corporation ("PMC"), the investment advisor, has contractually agreed to
limit the Fund’s expenses by paying, if necessary, expenses normally
payable by the Fund, (excluding interest expense, expenses related to fund
investments, acquired fund fees and expenses, and other extraordinary
expenses) to maintain a total level of operating expenses (expressed as a
percent of average net assets on an annualized basis) not to exceed 0.90%
for Institutional Class shares. It is expected that the expense limit will
continue through the period ending December 30, 2016; however, Principal
Funds, Inc. and PMC, the parties to the agreement, may mutually agree to
terminate the expense limit prior to the end of the
period. |
(3) |
Principal Management
Corporation ("PMC"), the investment advisor, has contractually agreed to
limit the Fund’s expenses by paying, if necessary, expenses normally
payable by the Fund, (excluding interest expense, expenses related to fund
investments, acquired fund fees and expenses, and other extraordinary
expenses) to maintain a total level of operating expenses (expressed as a
percent of average net assets on an annualized basis) not to exceed 0.85%
for Class R-6 shares. It is expected that the expense limit will continue
through the period ending December 30, 2017; however, Principal Funds,
Inc. and PMC, the parties to the agreement, may mutually agree to
terminate the expense limit 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. The Example also assumes
that your investment has a 5% return each year and that the Fund’s operating
expenses remain the same. 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 |
$82 |
$255 |
$444 |
$990 |
Class
R-6 |
87 |
808 |
1,182 |
1,664 |
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. This is a new Fund and does
not yet have a portfolio turnover rate to disclose.
Principal
Investment Strategies
Under normal circumstances, the Fund
invests at least 80% of its net assets, plus any borrowings for investment
purposes, in equity securities of companies with medium market capitalizations
at the time of purchase. For this Fund, companies with medium market
capitalizations are those with market capitalizations within the range of
companies comprising the Russell Midcap ®
Index (as of November 30,
2015, this range was between approximately $453.0 million and $31.6 billion).
The Fund invests in real estate investment trust ("REIT") securities. The Fund
invests in foreign 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, in alphabetical order,
are:
Equity Securities
Risk. The value of
equity securities could decline if the issuer’s financial condition declines or
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
Stock Risk. If
growth companies do not increase their earnings at a rate expected by
investors, the market price of the 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. |
|
|
• |
Small and
Medium Market Capitalization Companies Risk . Investments in small and
medium sized companies may involve greater risk and price volatility than
investments in larger, more mature companies.
|
|
|
•
|
Value Stock
Risk. Value
stocks may continue to be undervalued by the market for extended periods,
including the entire period during which the stock is held by the fund, or
the events that the portfolio manager believed would cause the stock price
to increase may not occur as anticipated or at all. Moreover, a stock
judged to be undervalued actually may be appropriately priced at a low
level and therefore would not be profitable for the fund.
|
Foreign Currency
Risk. Risks of
investing in securities denominated in, or that trade in, foreign (non-U.S.)
currencies include changes in foreign exchange rates and foreign exchange
restrictions.
Foreign
Securities Risk. The
risks of foreign securities include loss of value as a result of: political or
economic instability; nationalization, expropriation or confiscatory taxation;
settlement delays; and limited government regulation (including less stringent
reporting, accounting, and disclosure standards than are required of U.S.
companies).
Real Estate
Investment Trusts (“REITs”) Risk. In addition to risks associated with
investing in real estate securities, REITs are dependent upon management skills,
are not diversified, and are subject to heavy cash flow dependency, risks of
default by borrowers, and self-liquidation. Investment in REITs also involves
risks similar to risks of investing in small market capitalization companies,
such as limited financial resources, less frequent and limited volume trading,
and may be subject to more abrupt or erratic price movements than larger company
securities. A REIT could fail to qualify for tax-free pass-through of income
under the Internal Revenue Code. Fund shareholders will indirectly bear their
proportionate share of the expenses of REITs in which the fund invests.
Real Estate
Securities Risk. Investing in real estate securities
subjects the fund to the risks associated with the real estate market (which are
similar to the risks associated with direct ownership in real estate), including
declines in real estate values, loss due to casualty or condemnation, property
taxes, interest rate changes, increased expenses, cash flow of underlying real
estate assets, regulatory changes (including zoning, land use and rents), and
environmental problems, as well as to the risks related to the management skill
and creditworthiness of the issuer.
Redemption Risk.
A fund that serves as
an underlying fund for a fund of funds is subject to certain risks. When a fund
of funds reallocates or rebalances its investments, an underlying fund may
experience relatively large redemptions or investments. These transactions may
cause the underlying fund to sell portfolio securities to meet such redemptions,
or to invest cash from such investments, at times it would not otherwise do so,
and may as a result increase transaction costs and adversely affect underlying
fund performance. Moreover, a fund of fund’s redemptions or reallocations among
share classes of an underlying fund may result in changes to the expense ratios
of affected classes, which may increase the expenses paid by shareholders of the
class that experienced the redemption.
Performance
No performance information is shown
because the Fund has not yet had a calendar year of performance. The Fund's
performance is benchmarked against the Russell Midcap® Index. Performance
information provides an 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 by
calling 1-800-222-5852 or online at:
|
|
• |
For Institutional Class and
Class R-6 - www.principal.com. |
Management
Investment
Advisor:
Principal Management
Corporation
Sub-Advisor and
Portfolio Manager:
Edge Asset Management, Inc.
|
|
• |
Daniel R. Coleman (since
2015), Head of Equities, Portfolio
Manager |
|
|
• |
Theodore Jayne (since 2015),
Portfolio Manager |
Purchase and Sale
of Fund Shares
|
|
|
|
Share
Class |
Investment
Type |
Purchase
Minimum
Per
Fund |
Institutional
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 8024, Boston, MA
02266-8024 (regular mail) or 30 Dan Road, Canton, MA 02021-2809 (overnight
mail); calling us at 1-800-222-5852; or accessing our website
(www.principalfunds.com).
Tax
Information
The Fund’s distributions you receive
are generally subject to federal income tax as ordinary income or capital gain
and may also be subject to state and local taxes, unless you are tax-exempt or
your account is tax-deferred in which case your distributions would be taxed
when withdrawn from the tax-deferred account.
Payments to
Broker-Dealers and Other Financial Intermediaries
For Class R-6 shares, the Fund and
its related companies do not pay broker-dealers or other financial
intermediaries (such as a bank, insurance company, investment adviser, etc.) for
the sale of Fund shares or related services.
For Institutional Class shares, if
you purchase the Fund through a broker-dealer or other financial intermediary
(such as a bank, insurance company, investment adviser, etc.), the Fund and its
related companies may pay the intermediary for the sale of Fund shares and
related services. These payments may create a conflict of interest by
influencing the broker-dealer or other intermediary and your salesperson to
recommend the Fund over another investment, or to recommend one share class of
the Fund over another share class. Ask your salesperson or visit your financial
intermediary's website for more information.
GLOBAL
MULTI-STRATEGY FUND
|
|
Objective: |
The Fund seeks to achieve
long-term capital appreciation with an emphasis on positive total returns
and managing volatility. |
Fees and Expenses
of the Fund
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Fund. You may
qualify for sales charge discounts if you and your family invest, or agree to
invest in the future, at least $100,000 in Class A shares of Principal
Funds, Inc. More information about these and other discounts is available from
your financial professional and in “Choosing a Share Class and The Costs of
Investing” beginning on page ___ of the Fund’s prospectus and “Multiple Class
Structure” beginning on page ___ of the Fund’s Statement of Additional
Information.
Shareholder Fees
(fees paid directly from your investment)
|
|
|
|
|
|
|
Share
Class |
|
A |
C |
P |
Inst. |
Maximum Sales Charge (Load)
Imposed on Purchases (as a percentage of offering price) |
3.75% |
None |
None |
None |
Maximum Deferred Sales Charge
(Load) (as a percentage of the offering price or NAV at the time Sales
Load is paid, whichever is less) |
1.00% |
1.00% |
None |
None |
Annual Fund
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
|
|
Share
Class |
|
A |
C |
P |
Inst. |
Management Fees |
1.57% |
1.57% |
1.57% |
1.57% |
Distribution and/or Service
(12b-1) Fees |
0.25% |
1.00% |
N/A |
N/A |
Other Expenses: |
|
|
|
|
Dividend and
Interest Expense on Short Sales |
0.43% |
0.43% |
0.43% |
0.43% |
Reverse
Repurchase Agreement Interest Expense |
0.01% |
0.01% |
0.01% |
0.01% |
Remainder of
Other Expenses |
0.13% |
0.20% |
0.15% |
0.06% |
Total Other
Expenses |
0.57% |
0.64% |
0.59% |
0.50% |
Acquired Fund Fees and
Expenses |
0.04% |
0.04% |
0.04% |
0.04% |
Total Annual
Fund Operating Expenses |
2.43% |
3.25% |
2.20% |
2.11% |
Expense
Reimbursement(1) |
—% |
(0.02)% |
—% |
—% |
Total Annual
Fund Operating Expenses after Expense Reimbursement |
2.43% |
3.23% |
2.20% |
2.11% |
|
|
|
(1) |
Principal Management
Corporation ("PMC"), the investment advisor, has contractually agreed to
limit the Fund’s expenses by paying, if necessary, expenses normally
payable by the Fund, (excluding interest expense, expenses related to fund
investments, acquired fund fees and expenses, and other extraordinary
expenses) to maintain a total level of operating expenses (expressed as a
percent of average net assets on an annualized basis) not to exceed 2.00%
for Class A, 2.75% for Class C, and 1.65% for Institutional Class shares.
In addition, for Class P, the expense limit will maintain "Other Expenses"
(expressed as a percent of average net assets on an annualized basis) not
to exceed 0.20%, (excluding interest expense, expenses related to fund
investments, acquired fund fees and expenses, and other extraordinary
expenses). It is expected that the expense limits will continue through
the period ending December 30, 2016; however, Principal Funds, Inc. and
PMC, the parties to the agreement, may mutually agree to terminate the
expense limits 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. 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 |
$612 |
$1,104 |
$1,622 |
$3,038 |
Class
C |
426 |
999 |
1,696 |
3,548 |
Class
P |
223 |
688 |
1,180 |
2,534 |
Institutional
Class |
214 |
661 |
1,134 |
2,441 |
With respect to Class C shares, you
would pay the following expenses if you did not redeem your shares (all other
classes would be the same as in the above example):
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
Class
C |
$326 |
$999 |
$1,696 |
$3,548 |
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 annualized portfolio turnover rate was 142.5% of the average value of its
portfolio.
Principal
Investment Strategies
Principal Management Corporation
("PMC"), the Fund's investment adviser, allocates the Fund's assets among one or
more of the investment strategies described below, which are executed by one or
more of the Fund's sub-advisors. In making these allocations, PMC seeks to
combine the strategies of the sub-advisors efficiently and systematically so
that the Fund generates, through a diversified set of investment strategies, a
positive total return with relatively low volatility and low sensitivity or
correlation to market indices. By allocating the Fund’s assets among a variety
of investment strategies, which will vary from time-to-time, the Fund seeks to
lessen risk and reduce volatility. PMC may also direct a sub-advisor to reduce
or omit its investment in certain assets or asset classes in an effort to
achieve its desired combination of the Fund's strategies.
In pursuing its strategies, the Fund
invests in a broad range of instruments including, but not limited to, equities,
bonds, currencies, commodities, convertible securities and derivatives such as
futures, options, swaps (including, for example, credit default, interest rate,
and currency swaps) and forwards. 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 intends to engage in derivative transactions to gain
exposure to a variety of securities or attempt to reduce risk. The Fund may
invest in money market funds to support its derivative positions in such
investments. The Fund actively trades portfolio securities.
Some of the strategies take long
and/or short positions. When taking a short position, the Fund may sell an
instrument that it does not own and then borrow to meet its settlement
obligations. The Fund may take short positions in securities and in derivative
instruments such as futures, forwards or swaps. A short position will benefit
from a decrease in price of the underlying instrument and will lose value if the
price of the underlying instrument increases. Long positions will profit if the
value of the instrument increases. Simultaneously engaging in long investing and
short selling reduces the net exposure of the overall portfolio to general
market movements. Relative value positions may be taken as well in the various
strategies. Relative value strategies capitalize on price differences between
similar securities or relative value among securities of the same
company.
The Fund may invest in equity
securities regardless of market capitalization size and style (growth or value).
Some of the Fund's strategies involve investing in foreign securities. The Fund
typically invests in foreign securities of at least 10 countries and at least
30% of its net assets in foreign securities.
The Fund may use all or some of the
following strategies to varying degrees, depending on market conditions, and may
add additional strategies. Principal may allocate 0% to 100% of the Fund’s
assets to any of these strategies at any time; however, the Fund's investments
in its Cayman Subsidiary at any time will not exceed 25% of the Fund's net
assets.
Commodities.
Commodities are assets
that have tangible properties, such as oil, coal, natural gas, agricultural
products, industrial metals, livestock and precious metals. This strategy
involves investing a portion of the Fund’s assets in a wholly-owned subsidiary
of the Fund organized under the laws of the Cayman Islands (the “Cayman
Subsidiary”). The Fund invests in the Cayman Subsidiary to gain exposure to the
commodity markets within the limitations of the federal tax law requirements
applicable to regulated investment companies (“RICs”) under the Internal Revenue
Code (the “Code”). The Cayman Subsidiary invests in commodity-linked
derivatives, including commodity-linked swaps, commodity futures contracts
and/or options on commodities, as well as instruments such as fixed income
securities, cash and cash equivalents and/or U.S. government securities, either
as investments or to serve as margin or collateral for the Cayman Subsidiary's
derivatives positions.
Credit Long/Short
and Distressed Credit. This strategy utilizes a flexible
investment approach that allocates investments across a global range of
investment opportunities related to credit, currencies and interest rates, while
employing risk management strategies. This strategy invests in fixed income
securities and instruments and may invest in both investment-grade securities
and below investment grade bonds (sometimes called “high yield bonds” or "junk
bonds") which are rated at the time of purchase Ba1 or lower by Moody's
Investors Service, Inc. ("Moody's") and BB+ or lower by S&P Global Ratings
("S&P Global") (if the bond has been rated by only one of those agencies,
that rating will determine whether the bond is below investment grade; if the
bond has not been rated by either of those agencies, the Sub-Advisor will
determine whether the bond is of a quality comparable to those rated below
investment grade). This strategy may also invest in the following securities:
securities denominated in foreign currencies and in U.S. dollar denominated
securities of foreign issuers, preferred securities, convertible securities,
Rule 144A securities, mortgage or asset-backed securities (securitized
products), floating rate debt (including bank loans), distressed investments,
emerging markets, equities and derivative instruments, such as options, futures
contracts, forwards or swap agreements. This strategy may utilize derivative
instruments in an effort to minimize volatility. Also, at times, this strategy
expects to gain its investment exposure substantially through the use of
derivatives. The notional value of this strategy’s long and short investment
exposures may at times each reach 100% of the assets invested in this strategy
(excluding instruments used primarily for duration, yield curve, and interest
rate management and short-term investments), although these exposures may be
higher or lower at any given time. This strategy may purchase or sell securities
on a when-issued, delayed delivery or forward commitment basis and may engage in
short sales. The strategy may, without limitation, seek to obtain market
exposure to the securities in which it primarily invests by entering into a
series of purchase and sale contracts or by using other investment techniques
(such as buy backs or dollar rolls).
Emerging Market
Long/Short Credit. The
emerging markets credit opportunities strategy is designed to benefit from
opportunities in emerging market, liquid, high grade, high yield, stressed,
distressed and other corporate or sovereign credits. This strategy takes long
and short exposure to selected emerging market issuers when factors have been
identified which the Fund believes will drive substantial appreciation or
depreciation of the particular exposure. The geographical focus of the
investment strategy is derived from the dynamics of economic and political
developments as well as the specific nature of local jurisdictions in the
emerging markets. These securities may be either U.S. or non-U.S. dollar
denominated.
Equity
Long/Short. This
strategy provides long and short exposure to a diversified portfolio of U.S. and
non-U.S. equities which involves simultaneously investing in equities (i.e.,
investing long) the sub-advisor expects to increase in value (securities the
sub-advisor believes are undervalued) and either selling equities (i.e., short
sales or short selling) the sub-advisor expects to decrease in value (securities
the sub-advisor believes are overvalued) or hedging equity market exposure in
another way (i.e., by using derivatives such as futures or options). Long/short
equity expresses industry views by emphasizing certain industries and it also
seeks to exploit pricing inefficiencies between related equity securities. An
example of exploiting pricing inefficiencies between related equity securities
is building a portfolio containing long positions in the strongest companies of
several industries and taking short positions in companies showing signs of
weakness in the corresponding industries. This strategy has available two
methods of analysis: fundamental analysis, a method of security analysis that
involves examining a company's financial statements and operations, especially
sales, earnings, products, management and competition and quantitative analysis,
a method of security analysis that involves use of mathematical models to
examine a company's measurable characteristics such as revenue, earnings,
margins and market share.
Equity Market
Neutral. This strategy
seeks to profit by exploiting pricing inefficiencies between related equity
securities and neutralizing exposure to market risk by maintaining long and
short positions. Equity market neutral is not expected to have industry
overweights.
Dedicated Short
Bias. The dedicated
short bias strategy seeks to profit by shorting stocks that have negative market
sentiment and neutralizing exposure to market risk by maintaining long and short
positions.
Global Macro.
Global macro strategies
seek to profit from movement in the prices of securities that are highly
sensitive to macroeconomic conditions, across a broad spectrum of assets. This
strategy provides long and short exposure to developed country equities,
currencies, bonds, commodities, and interest rates.
Emerging
Markets. This strategy
seeks to profit from investing in equities, bonds, and currencies of issuers in
emerging markets. This strategy provides long and short exposure to emerging
country equity, debt, and currency markets, and long and short exposure to a
basket of liquid equity securities traded on emerging and developed market
exchanges.
Convertible
Arbitrage. Convertible
arbitrage strategies seek to profit from the complexity of the pricing of
convertible bonds (which contain elements of both a fixed income security and an
equity option) by structuring trades using multiple securities within the
capital structure of a convertible bond issuer. The Fund may purchase the
convertible bond of a given issuer and simultaneously sell short the common
stock of that same issuer to take advantage of a mispricing of either security.
This strategy takes positions in various global convertible debt and preferred
securities and an offsetting position in various global equities directly linked
to the convertible securities. In implementing this strategy, the Fund may use
derivatives to hedge against a decline in interest rates or credit exposure.
Managed
Futures. This strategy
seeks to profit from the design and implementation of quantitative selection
models to help predict upcoming movements in any combination of fixed income,
currency, commodity, or equity markets. This strategy provides long and short
exposure to: commodities; developed country equities, bonds, and currency
markets; and emerging country equity and currency markets.
Event
Driven. Event driven
strategies seek to profit from investing in the securities of companies based
not on a value or growth investment style but rather 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. In merger arbitrage, the Fund will employ a
diversified, disciplined strategy to attempt to capture the returns from holding
a long/short portfolio of stocks of companies involved in mergers.
Fixed Income
Arbitrage. Fixed income
arbitrage seeks to profit from exploiting mispricing of various, liquid fixed
income or interest rate sensitive securities. This strategy provides long and
short exposure to developed country bond and currency markets, long and short
exposure to investment grade credit markets and long and short exposure to
forward mortgage-backed securities trading in the to be announced (“TBA”)
market.
Market Neutral
Fixed Income. This
strategy is implemented by investing in a diverse and large number of individual
assets which are considered to be attractive and well-researched and which, in
many market conditions, are expected to exhibit low correlations. The target
result is a portfolio of both long and short positions across many different
product types that has attractive return characteristics with low volatility and
that exhibits low correlation to fixed income and equity markets.
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, in alphabetical order, are:
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 may decline, causing a
loan to be substantially unsecured. Underlying credit agreements governing the
bank loans, reliance on market makers, priority of repayment and overall market
volatility may harm the liquidity of loans.
Cayman Subsidiary
Risk. A fund is subject
to the particular risks associated with the investments of the Fund’s
wholly-owned Cayman Subsidiary, namely Commodity-Related Investments Risk,
Counterparty Risk and Derivatives Risk. The Cayman Subsidiary is not registered
under the Investment Company Act and is not subject to all the investor
protections of the Investment Company Act. The laws of the Cayman Islands and/or
the United States (including the IRS position on income earned from wholly-owned
subsidiaries described in past IRS private letter rulings) may change, resulting
in the inability of the fund and/or the Cayman Subsidiary to operate as
described in this Prospectus.
Commodity-Related
Investments Risk. The
value of commodities investments will generally be affected by overall market
movements and factors specific to a particular industry or commodity, which may
include weather, embargoes, tariffs, and economic health, political,
international regulatory and other developments. Exposure to the commodities
markets may subject the fund to greater volatility than investments in
traditional securities.
Counterparty
Risk. Counterparty risk
is the risk that the counterparty to a contract or other obligation will be
unable or unwilling to honor its obligations.
Convertible
Securities Risk.
Convertible securities are bonds, notes, debentures, preferred stock or other
securities which are convertible into common stock. Convertible securities are
subject to the credit and interest rate risks associated with fixed income
securities and to the stock market risk associated with equity securities.
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.
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|
• |
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. |
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|
• |
Options.
Options involve
specific risks, including: imperfect correlation between the change in
market value of the instruments held by the fund and the price of the
options, counterparty risk, difference in trading hours for the options
markets and the markets for the underlying securities (rate movements can
take place in the underlying markets that cannot be reflected in the
options markets), and an insufficient liquid secondary market for
particular options. |
Distressed
Investments Risk. A
fund’s investment in instruments involving loans, loan participations, bonds,
notes, non-performing and sub-performing mortgage loans, many of which are not
publicly traded, may involve a substantial degree of risk for the following
reasons. These instruments may become illiquid and the prices of such
instruments may be extremely volatile. Valuing such instruments may be difficult
and a fund may lose all of its investment, or it may be required to accept cash
or securities with a value less than the fund’s original investment. Issuers of
distressed securities are typically in a weak financial condition and may
default, in which case the fund may lose its entire investment.
Emerging Markets
Risk. Investments in
emerging market countries may have more risk than those in developed market
countries because the emerging markets are less developed and more illiquid.
Emerging market countries can also be subject to increased social, economic,
regulatory, and political uncertainties and can be extremely
volatile.
Equity Securities
Risk. The value of
equity securities could decline if the issuer’s financial condition declines or
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.
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• |
Growth
Stock Risk. If
growth companies do not increase their earnings at a rate expected by
investors, the market price of the 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. |
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|
• |
Small and
Medium Market Capitalization Companies Risk . Investments in small and
medium sized companies may involve greater risk and price volatility than
investments in larger, more mature companies.
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|
|
•
|
Value Stock
Risk. Value
stocks may continue to be undervalued by the market for extended periods,
including the entire period during which the stock is held by the fund, or
the events that the portfolio manager believed would cause the stock price
to increase may not occur as anticipated or at all. Moreover, a stock
judged 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 risk and credit quality
risk. The market value of fixed-income securities generally declines when
interest rates rise, and an issuer of fixed-income securities could default on
its payment obligations.
Foreign Currency
Risk. Risks of
investing in securities denominated in, or that trade in, foreign (non-U.S.)
currencies include changes in foreign exchange rates and foreign exchange
restrictions.
Foreign
Securities Risk. The
risks of foreign securities include loss of value as a result of: political or
economic instability; nationalization, expropriation or confiscatory taxation;
settlement delays; and limited government regulation (including less stringent
reporting, accounting, and disclosure standards than are required of U.S.
companies).
Hedging
Risk. A fund that
implements a hedging strategy using derivatives and/or securities could expose
the fund to the risk that can arise when a change in the value of a hedge does
not match a change in the value of the asset it hedges. In other words, the
change in value of the hedge could move in a direction that does not match the
change in value of the underlying asset, resulting in a risk of loss to the
fund.
High Yield
Securities Risk. High
yield fixed-income securities (commonly referred to as "junk bonds") are subject
to greater credit quality risk than higher rated fixed-income securities and
should be considered speculative.
Investment
Company Risk. A fund
that invests in another investment company (for example, another fund or an
exchange-traded fund (“ETF”)) is subject to the risks associated with direct
ownership of the securities in which such investment company invests. Fund
shareholders indirectly bear their proportionate share of the expenses of each
such investment company.
Leverage
Risk. Leverage created
by borrowing or certain types of transactions or investments may impair the
fund's liquidity, cause it to liquidate positions at an unfavorable time,
increase volatility of the fund's net asset value, or diminish the fund's
performance.
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.
Portfolio
Turnover (Active Trading) Risk. A fund that has a portfolio turnover
rate over 100% is considered actively traded. Actively trading portfolio
securities may accelerate realization of taxable gains and losses, lower fund
performance and may result in high portfolio turnover rates and increased
brokerage costs.
Preferred
Securities Risk. Preferred securities are securities
with a lower priority claim on assets or earnings than bonds and other debt
instruments in a company's capital structure, and therefore can be 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 the stated maturity date.
Redemption Risk.
A fund that serves as
an underlying fund for a fund of funds is subject to certain risks. When a fund
of funds reallocates or rebalances its investments, an underlying fund may
experience relatively large redemptions or investments. These transactions may
cause the underlying fund to sell portfolio securities to meet such redemptions,
or to invest cash from such investments, at times it would not otherwise do so,
and may as a result increase transaction costs and adversely affect underlying
fund performance. Moreover, a fund of fund’s redemptions or reallocations among
share classes of an underlying 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).
Short Sale
Risk. A short sale
involves the sale by the fund of a security that it does not own with the hope
of purchasing the same security at a later date at a lower price. A fund may
also enter into a short derivative position through a futures contract or swap
agreement. If the price of the security or derivative has increased during this
time, then the fund will incur a loss equal to the increase in price from the
time that the short sale was entered into plus any premiums and interest paid to
the third party. Therefore, short sales involve the risk that losses may be
exaggerated, potentially losing more money than the actual cost of the
investment. Also, there is the risk that the third party to the short sale may
fail to honor its contract terms, causing a loss to the fund.
U.S. Government
Securities Risk. Yields
available from U.S. government securities are generally lower than yields from
many other fixed-income securities.
U.S.
Government-Sponsored Securities Risk. Securities issued by U.S.
government-sponsored or -chartered 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. Treasury.
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 by calling
1-800-222-5852 or online at:
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|
• |
For Classes A, C, and P -
www.principalfunds.com. |
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|
• |
For Institutional Class -
www.principal.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 each share class of the Fund and for the last one, five,
and ten calendar year periods (or, if shorter, the life of the Fund), how the
Fund’s average annual total returns compare with those of one or more broad
measures of market performance.
Life of Fund returns are measured
from the date the Fund's shares were first sold (October 24, 2011).
For periods prior to the inception
date of Class C shares (June 14, 2012), the performance shown in the table
for Class C shares is based on the performance of the Fund's Institutional Class
shares, adjusted to reflect the fees and expenses of Class C shares. These
adjustments for Class C shares 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 (Class A shares)(1)
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q1
'12 |
2.81% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q3
'15 |
(1.99)% |
|
|
(1)
|
The year-to-date return
as of September 30, 2016 was 2.57% for Class A shares.
|
|
|
|
|
Average
Annual Total Returns |
For the
periods ended 12/31/2015 |
1 Year |
Life of
Fund |
Class A
Return Before Taxes |
(4.70)% |
2.00% |
Class A
Return After Taxes on Distributions |
(5.31)% |
1.58% |
Class A
Return After Taxes on Distributions and Sale of Fund
Shares |
(2.17)% |
1.51% |
Class C
Return Before Taxes |
(2.71)% |
2.20% |
Class P
Return Before Taxes |
(0.80)% |
3.15% |
Institutional
Class Return Before Taxes |
(0.64)% |
3.29% |
HFRI (Hedge Fund Research Inc.)
Fund-of-Funds Composite Index (reflects no deduction for fees, expenses,
or taxes) |
(0.27)% |
3.85% |
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.
Management
Investment
Advisor and Portfolio Managers:
Principal Management
Corporation
|
|
• |
Jake S. Anonson (since 2014),
Portfolio Manager |
|
|
• |
Jessica S. Bush (since 2014),
Portfolio Manager |
|
|
• |
Marcus W. Dummer (since 2014),
Portfolio Manager |
|
|
• |
Kelly A. Grossman (since
2010), Portfolio Manager |
|
|
• |
Benjamin E. Rotenberg (since
2014), Portfolio Manager |
Sub-Advisors:
AQR Capital Management,
LLC
Ascend Capital, LLC
Cliffwater LLC
CNH Partners, LLC
Finisterre Capital LLP
Graham Capital Management,
L.P.
KLS Diversified Asset Management
LP
Loomis, Sayles & Company,
L.P.
Los Angeles Capital Management and
Equity Research, Inc.
Sound Point Capital Management,
LP
Wellington Management Company
LLP
York Registered Holdings,
L.P.
Purchase and Sale
of Fund Shares
|
|
|
|
Share
Class |
Investment
Type |
Purchase
Minimum
Per
Fund |
A and
C |
Initial
Investment |
$1,000(1) |
A and
C |
Initial Investment for accounts
with an Automatic Investment Plan (AIP) |
$100 |
A and
C |
Subsequent
Investments |
$100(1)(2) |
P and
Institutional |
There are no minimum initial or
subsequent investment requirements for eligible
purchasers. |
N/A |
|
|
(1) |
Some exceptions apply; see
"Purchase of Fund Shares - Minimum Investments" for more
information. |
|
|
(2) |
For accounts with an AIP, the
subsequent automatic investments must total $1,200 annually if the initial
$1,000 minimum has not been met. |
You may purchase or redeem shares on
any business day (normally any day when the New York Stock Exchange is open for
regular trading) through your plan, intermediary, or Financial Professional; by
sending a written request to Principal Funds at P.O. Box 8024, Boston, MA
02266-8024 (regular mail) or 30 Dan Road, Canton, MA 02021-2809 (overnight
mail); calling us at 1-800-222-5852; or accessing our website
(www.principalfunds.com).
Tax
Information
The Fund’s distributions you receive
are generally subject to federal income tax as ordinary income or capital gain
and may also be subject to state and local taxes, unless you are tax-exempt or
your account is tax-deferred in which case your distributions would be taxed
when withdrawn from the tax-deferred account.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase the Fund through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, or to recommend one share class of the Fund over another share
class. Ask your salesperson or visit your financial intermediary's website for
more information.
GLOBAL
OPPORTUNITIES EQUITY HEDGED FUND
Objective: The Fund seeks long-term growth of
capital with lower volatility than the global equity markets.
Fees and Expenses
of the Fund
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Fund. You may
qualify for sales charge discounts if you and your family invest, or agree to
invest in the future, at least $50,000 in Class A shares of Principal
Funds, Inc. More information about these and other discounts is available from
your financial professional and in “Choosing a Share Class and The Costs of
Investing” beginning on page ___ of the Fund’s prospectus and “Multiple Class
Structure” beginning on page ___ of the Fund’s Statement of Additional
Information.
Shareholder Fees
(fees paid directly from your investment)
|
|
|
|
|
|
Share
Class |
|
A |
P |
Inst. |
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 |
P |
Inst. |
Management Fees |
1.10% |
1.10% |
1.10% |
Distribution and/or Service
(12b-1) Fees |
0.25% |
N/A |
N/A |
Other Expenses (1) |
0.81% |
0.59% |
0.41% |
Total Annual
Fund Operating Expenses |
2.16% |
1.69% |
1.51% |
Expense Reimbursement
(2) |
(0.61)% |
(0.39)% |
(0.26)% |
Total Annual
Fund Operating Expenses after Expense Reimbursement |
1.55% |
1.30% |
1.25% |
|
|
|
(1) |
Based on estimated amounts for
the current fiscal year. |
(2) |
Principal Management
Corporation ("PMC"), the investment advisor, has contractually agreed to
limit the Fund’s expenses by paying, if necessary, expenses normally
payable by the Fund, (excluding interest expense, expenses related to fund
investments, acquired fund fees and expenses, and other extraordinary
expenses) to maintain a total level of operating expenses (expressed as a
percent of average net assets on an annualized basis) not to exceed 1.55%
for Class A and 1.25% for Institutional Class shares. In addition, for
Class P, the expense limit will maintain "Other Expenses" (expressed as a
percent of average net assets on an annualized basis) not to exceed 0.20%,
(excluding interest expense, expenses related to fund investments,
acquired fund fees and expenses, and other extraordinary expenses). It is
expected that the expense limits will continue through the period ending
December 30, 2016; however, Principal Funds, Inc. and PMC, the parties to
the agreement, may mutually agree to terminate the expense limits 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. The Example also assumes
that your investment has a 5% return each year and that the Fund’s operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
|
|
|
|
|
1
year |
3
years |
Class
A |
$699 |
$1,133 |
Class P
|
132 |
495 |
Institutional
Class |
127 |
452 |
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. This is a new fund and does
not yet have a portfolio turnover rate to disclose.
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 and derivatives on equity securities, at the time
of purchase. The Fund invests in foreign, including emerging market, securities,
of at least three countries and at least 30% of its net assets in foreign
securities. The Fund also invests in U.S. securities. The Fund has a flexible
investment strategy and may invest in equity securities regardless of market
capitalization (small, medium, or large) and style (growth or value). The Fund
invests in value equity securities, an investment strategy that emphasizes
buying equity securities that appear to be undervalued. The Fund also invests in
growth equity securities, an investment strategy that emphasizes buying equity
securities of companies whose potential for growth of capital and earnings is
expected to be above average. The Fund actively trades portfolio
securities.
The Fund uses a hedging strategy
intended to reduce equity market volatility by investing in derivatives on
equity securities. A derivative is a financial arrangement, the value of which
is derived from, or based on, a traditional security, asset, or market index.
Specifically, the Fund uses short positions in equity index futures contracts
and options to reduce overall equity market exposure. The Fund also uses
currency forwards contracts to hedge currency exposures. The Fund’s net exposure
(the value of the Fund’s aggregate long positions minus its short positions)
will vary over time; however, it will maintain more long exposure in equity
securities than short derivatives positions.
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, in alphabetical order,
are:
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.
|
|
• |
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 and Futures. Forward contracts and futures
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 or future; possible lack of a liquid secondary
market for a forward contract or future and the resulting inability to
close a forward contract or future when desired; counterparty risk; and if
the fund has insufficient cash, it may have to sell securities from its
portfolio to meet daily variation margin
requirements. |
|
|
• |
Options.
Options involve
specific risks, including: imperfect correlation between the change in
market value of the instruments held by the fund and the price of the
options, counterparty risk, difference in trading hours for the options
markets and the markets for the underlying securities (rate movements can
take place in the underlying markets that cannot be reflected in the
options markets), and an insufficient liquid secondary market for
particular options. |
Emerging Markets
Risk. Investments in
emerging market countries may have more risk than those in developed market
countries because the emerging markets are less developed and more illiquid.
Emerging market countries can also be subject to increased social, economic,
regulatory, and political uncertainties and can be extremely
volatile.
Equity Securities
Risk. The value of
equity securities could decline if the issuer’s financial condition declines or
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
Stock Risk. If
growth companies do not increase their earnings at a rate expected by
investors, the market price of the 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. |
|
|
• |
Small and
Medium Market Capitalization Companies. Investments in small and
medium sized companies may involve greater risk and price volatility than
investments in larger, more mature companies.
|
|
|
• |
Value Stock
Risk. Value
stocks may continue to be undervalued by the market for extended periods,
including the entire period during which the stock is held by the fund, or
the events that the portfolio manager believed would cause the stock price
to increase may not occur as anticipated or at all. Moreover, a stock
judged 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).
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.
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
Turnover (Active Trading) Risk. A fund that has a portfolio
turnover rate over 100% is considered actively traded. Actively trading
portfolio securities may accelerate realization of taxable gains and losses,
lower fund performance and may result in high portfolio turnover rates and
increased brokerage costs.
Short Sale
Risk. A short sale
involves the sale by the fund of a security that it does not own with the hope
of purchasing the same security at a later date at a lower price. A fund may
also enter into a short derivative position through a futures contract or swap
agreement. If the price of the security or derivative has increased during this
time, then the fund will incur a loss equal to the increase in price from the
time that the short sale was entered into plus any premiums and interest paid to
the third party. Therefore, short sales involve the risk that losses may be
exaggerated, potentially losing more money than the actual cost of the
investment. Also, there is the risk that the third party to the short sale may
fail to honor its contract terms, causing a loss to the fund.
Volatility
Mitigation Risk.
Volatility mitigation strategies may increase fund transaction costs, which
could increase losses or reduce gains. These strategies may not protect
the fund from market declines and may reduce the fund’s participation in market
gains.
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 one-month LIBOR rate. Performance
information provides an 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 by
calling 1-800-222-5852 or online at:
|
|
• |
For Classes A and P -
www.principalfunds.com. |
|
|
• |
For Institutional Class -
www.principal.com. |
Management
Investment
Advisor:
Principal Management
Corporation
Sub-Advisor and
Portfolio Managers:
Principal Global Investors, LLC
|
|
• |
Christopher Ibach (since
2015), Portfolio Manager |
|
|
• |
Xiaoxi Li (since 2015),
Portfolio Manager |
|
|
• |
Mustafa Sagun (since 2015),
Chief Investment Officer & 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) |
P and
Institutional |
There are no minimum initial or
subsequent investment requirements for eligible
purchasers. |
N/A |
|
|
(1) |
Some exceptions apply; see
"Purchase of Fund Shares - Minimum Investments" for more
information. |
|
|
(2) |
For accounts with an AIP, the
subsequent automatic investments must total $1,200 annually if the initial
$1,000 minimum has not been met. |
You may purchase or redeem shares on
any business day (normally any day when the New York Stock Exchange is open for
regular trading) through your plan, intermediary, or Financial Professional; by
sending a written request to Principal Funds at P.O. Box 8024, Boston, MA
02266-8024 (regular mail) or 30 Dan Road, Canton, MA 02021-2809 (overnight
mail); calling us at 1-800-222-5852; or accessing our website
(www.principalfunds.com).
Tax
Information
The Fund’s distributions you receive
are generally subject to federal income tax as ordinary income or capital gain
and may also be subject to state and local taxes, unless you are tax-exempt or
your account is tax-deferred in which case your distributions would be taxed
when withdrawn from the tax-deferred account.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase the Fund through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, or to recommend one share class of the Fund over another share
class. Ask your salesperson or visit your financial intermediary's website for
more information.
GLOBAL
OPPORTUNITIES FUND
|
|
Objective: |
The Fund seeks long-term
growth of capital. |
Fees and Expenses
of the Fund
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Fund. You may
qualify for sales charge discounts if you and your family invest, or agree to
invest in the future, at least $50,000 in Class A shares of Principal
Funds, Inc. More information about these and other discounts is available from
your financial professional and in “Choosing a Share Class and The Costs of
Investing” beginning on page ___ of the Fund’s prospectus and “Multiple Class
Structure” beginning on page ___ of the Fund’s Statement of Additional
Information.
Shareholder Fees
(fees paid directly from your investment)
|
|
|
|
|
|
|
Share
Class |
|
A |
C |
P |
Inst. |
Maximum Sales Charge (Load)
Imposed on Purchases (as a percentage of offering price) |
5.50% |
None |
None |
None |
Maximum Deferred Sales Charge
(Load) (as a percentage of the offering price or NAV at the time Sales
Load is paid, whichever is less) |
1.00% |
1.00% |
None |
None |
Annual Fund
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
|
|
Share
Class |
|
A |
C |
P |
Inst. |
Management Fees |
0.83% |
0.83% |
0.83% |
0.83% |
Distribution and/or Service
(12b-1) Fees |
0.25% |
1.00% |
N/A |
N/A |
Other Expenses |
1.08% |
1.68% |
2.72% |
0.01% |
Total Annual
Fund Operating Expenses |
2.16% |
3.51% |
3.55% |
0.84% |
Expense Reimbursement
(1) |
(0.66)% |
(1.26)% |
(2.52)% |
N/A |
Total Annual
Fund Operating Expenses after Expense Reimbursement |
1.50% |
2.25% |
1.03% |
0.84% |
|
|
|
(1) |
Principal Management
Corporation ("PMC"), the investment advisor, has contractually agreed to
limit the Fund’s expenses by paying, if necessary, expenses normally
payable by the Fund, (excluding interest expense, expenses related to fund
investments, acquired fund fees and expenses, and other extraordinary
expenses) to maintain a total level of operating expenses (expressed as a
percent of average net assets on an annualized basis) not to exceed 1.50%
for Class A and 2.25% for Class C shares. In addition, for Class P, the
expense limit will maintain "Other Expenses" (expressed as a percent of
average net assets on an annualized basis) not to exceed 0.20%, (excluding
interest expense, expenses related to fund investments, acquired fund fees
and expenses, and other extraordinary expenses). It is expected that the
expense limits will continue through the period ending December 30, 2016;
however, Principal Funds, Inc. and PMC, the parties to the agreement, may
mutually agree to terminate the expense limits 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. 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 |
$694 |
$1,129 |
$1,588 |
$2,857 |
Class
C |
328 |
960 |
1,714 |
3,700 |
Class
P |
105 |
854 |
1,625 |
3,652 |
Institutional
Class |
86 |
268 |
466 |
1,037 |
With respect to Class C shares, you
would pay the following expenses if you did not redeem your shares (all other
classes would be the same as in the above example):
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
Class
C |
$228 |
$960 |
$1,714 |
$3,700 |
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 annualized portfolio turnover rate was 138.7% of the average value of its
portfolio.
Principal
Investment Strategies
Under normal market circumstances,
the Fund invests in equity securities, and the Fund invests in foreign,
including emerging market, securities of at least three countries and at least
30% of its net assets in foreign securities. The Fund also invests in U.S.
securities. The Fund has a flexible investment strategy and may invest in equity
securities regardless of market capitalization (small, medium, or large) and
style (growth or value). The Fund invests in value equity securities, an
investment strategy that emphasizes buying equity securities that appear to be
undervalued. The Fund also invests in growth equity securities, an investment
strategy that emphasizes buying equity securities of companies whose potential
for growth of capital and earnings is expected to be above average. The Fund
actively trades portfolio securities.
Principal
Risks
The value of your investment in the
Fund changes with the value of the Fund's investments. Many factors affect that
value, and it is possible to lose money by investing in the Fund. An investment
in the Fund is not a deposit of a bank and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. The
principal risks of investing in the Fund, in alphabetical order, are:
Emerging Markets
Risk. Investments in
emerging market countries may have more risk than those in developed market
countries because the emerging markets are less developed and more illiquid.
Emerging market countries can also be subject to increased social, economic,
regulatory, and political uncertainties and can be extremely
volatile.
Equity Securities
Risk. The value of
equity securities could decline if the issuer’s financial condition declines or
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
Stock Risk. If
growth companies do not increase their earnings at a rate expected by
investors, the market price of the 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. |
|
|
• |
Small and
Medium Market Capitalization Companies. Investments in small and
medium sized companies may involve greater risk and price volatility than
investments in larger, more mature companies.
|
|
|
• |
Value Stock
Risk. Value
stocks may continue to be undervalued by the market for extended periods,
including the entire period during which the stock is held by the fund, or
the events that the portfolio manager believed would cause the stock price
to increase may not occur as anticipated or at all. Moreover, a stock
judged 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).
Portfolio
Turnover (Active Trading) Risk. A fund that has a portfolio turnover
rate over 100% is considered actively traded. Actively trading portfolio
securities may accelerate realization of taxable gains and losses, lower fund
performance and may result in high portfolio turnover rates and increased
brokerage costs.
Redemption Risk.
A fund that serves as
an underlying fund for a fund of funds is subject to certain risks. When a fund
of funds reallocates or rebalances its investments, an underlying fund may
experience relatively large redemptions or investments. These transactions may
cause the underlying fund to sell portfolio securities to meet such redemptions,
or to invest cash from such investments, at times it would not otherwise do so,
and may as a result increase transaction costs and adversely affect underlying
fund performance. Moreover, a fund of fund’s redemptions or reallocations among
share classes of an underlying 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 by calling
1-800-222-5852 or online at:
|
|
• |
For Classes A, C, and P -
www.principalfunds.com. |
|
|
• |
For Institutional Class -
www.principal.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 each share class of the Fund
and 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 (December 28, 2012).
For periods prior to the inception
date of Classes A, C and P shares (September 30, 2013), the performance shown in
the bar chart for Class A shares and the table for Classes A, C and P shares is
based on the performance of the Fund's Institutional Class shares, adjusted to
reflect the respective fees and expenses of each class. 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 December 28, 2012.
Total Returns as
of December 31 (Class A shares)(1)
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q4
'13 |
9.11% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q3
'15 |
(6.80)% |
|
|
(1)
|
The year-to-date return
as of September 30, 2016 was 0.61% for Class A shares.
|
|
|
|
|
Average
Annual Total Returns |
For the
periods ended 12/31/2015 |
1 Year |
Life of
Fund |
Class A
Return Before Taxes |
(5.35)% |
6.83% |
Class A
Return After Taxes on Distributions |
(5.72)% |
5.46% |
Class A
Return After Taxes on Distributions and Sale of Fund
Shares |
(2.71)% |
4.93% |
Class C
Return Before Taxes |
(1.49)% |
8.05% |
Class P
Return Before Taxes |
0.67% |
9.37% |
Institutional
Class Return Before Taxes |
0.83% |
9.61% |
MSCI All Country World Index
(ACWI) (reflects no deduction for fees, expenses, or
taxes) |
(2.36)% |
7.95% |
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.
Management
Investment
Advisor:
Principal Management
Corporation
Sub-Advisor and
Portfolio Managers:
Principal Global Investors, LLC
|
|
• |
Christopher Ibach (since
2012), Portfolio Manager |
|
|
• |
Xiaoxi Li (since 2012),
Portfolio Manager |
|
|
• |
Mustafa Sagun (since 2012),
Chief Investment Officer & Portfolio
Manager |
Purchase and Sale
of Fund Shares
|
|
|
|
Share
Class |
Investment
Type |
Purchase
Minimum
Per
Fund |
A and
C |
Initial
Investment |
$1,000(1) |
A and
C |
Initial Investment for accounts
with an Automatic Investment Plan (AIP) |
$100 |
A and
C |
Subsequent
Investments |
$100(1)(2) |
P and
Institutional |
There are no minimum initial or
subsequent investment requirements for eligible
purchasers. |
N/A |
|
|
(1) |
Some exceptions apply; see
"Purchase of Fund Shares - Minimum Investments" for more
information. |
|
|
(2) |
For accounts with an AIP, the
subsequent automatic investments must total $1,200 annually if the initial
$1,000 minimum has not been met. |
You may purchase or redeem shares on
any business day (normally any day when the New York Stock Exchange is open for
regular trading) through your plan, intermediary, or Financial Professional; by
sending a written request to Principal Funds at P.O. Box 8024, Boston, MA
02266-8024 (regular mail) or 30 Dan Road, Canton, MA 02021-2809 (overnight
mail); calling us at 1-800-222-5852; or accessing our website
(www.principalfunds.com).
Tax
Information
The Fund’s distributions you receive
are generally subject to federal income tax as ordinary income or capital gain
and may also be subject to state and local taxes, unless you are tax-exempt or
your account is tax-deferred in which case your distributions would be taxed
when withdrawn from the tax-deferred account.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase the Fund through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, or to recommend one share class of the Fund over another share
class. Ask your salesperson or visit your financial intermediary's website for
more information.
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 and hold shares of the Fund.
Shareholder Fees
(fees paid directly from your investment): None
Annual Fund
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
|
|
|
|
|
Share
Class |
|
Inst. |
R-1 |
R-2 |
R-3 |
R-4 |
R-5 |
R-6 |
Management Fees |
0.25% |
0.25% |
0.25% |
0.25% |
0.25% |
0.25% |
0.25% |
Distribution and/or Service
(12b-1) Fees |
N/A |
0.35% |
0.30% |
0.25% |
0.10% |
N/A |
N/A |
Other Expenses (1) |
0.07% |
0.59% |
0.51% |
0.38% |
0.34% |
0.32% |
176.31% |
Acquired Fund Fees and
Expenses |
0.01% |
0.01% |
0.01% |
0.01% |
0.01% |
0.01% |
0.01% |
Total Annual
Fund Operating Expenses |
0.33% |
1.20% |
1.07% |
0.89% |
0.70% |
0.58% |
176.57% |
Expense Reimbursement
(2)
(3) |
—% |
N/A |
N/A |
N/A |
N/A |
N/A |
(176.16)% |
Total Annual
Fund Operating Expenses after Expense Reimbursement |
0.33% |
1.20% |
1.07% |
0.89% |
0.70% |
0.58% |
0.41% |
|
|
|
|
|
|
|
|
|
(1) |
Based on estimated amounts for
the current fiscal year (R-6). |
(2) |
Principal Management
Corporation ("PMC"), the investment advisor, has contractually agreed to
limit the Fund’s expenses by paying, if necessary, expenses normally
payable by the Fund, (excluding interest expense, expenses related to fund
investments, acquired fund fees and expenses, and other extraordinary
expenses) to maintain a total level of operating expenses (expressed as a
percent of average net assets on an annualized basis) not to exceed 0.35%
for Institutional Class shares. It is expected that the expense limit will
continue through the period ending December 30, 2016; however, Principal
Funds, Inc. and PMC, the parties to the agreement, may mutually agree to
terminate the expense limit prior to the end of the
period. |
(3) |
Principal Management
Corporation ("PMC"), the investment advisor, has contractually agreed to
limit the Fund’s expenses by paying, if necessary, expenses normally
payable by the Fund, (excluding interest expense, expenses related to fund
investments, acquired fund fees and expenses, and other extraordinary
expenses) to maintain a total level of operating expenses (expressed as a
percent of average net assets on an annualized basis) not to exceed 0.40%
for Class R-6 shares. It is expected that the expense limit will continue
through the period ending December 30, 2017; however, Principal Funds,
Inc. and PMC, the parties to the agreement, may mutually agree to
terminate the expense limit 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. The Example also assumes
that your investment has a 5% return each year and that the Fund’s operating
expenses remain the same. 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 |
$34 |
$106 |
$185 |
$418 |
Class
R-1 |
122 |
381 |
660 |
1,455 |
Class
R-2 |
109 |
340 |
590 |
1,306 |
Class
R-3 |
91 |
284 |
493 |
1,096 |
Class
R-4 |
72 |
224 |
390 |
871 |
Class
R-5 |
59 |
186 |
324 |
726 |
Class
R-6 |
42 |
788 |
1,171 |
1,647 |
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 annualized portfolio turnover rate was 35.6% of the average value of its
portfolio.
Principal
Investment Strategies
Under normal circumstances, the Fund
invests at least 80% of its net assets, plus any borrowings for investment
purposes, in securities that compose the MSCI EAFE NR Index (the "Index") at the
time of purchase. The Index is a weighted equity index designed to measure the
equity performance of developed markets (Europe, Australia, New Zealand, and Far
East), excluding the United States and Canada. The Index includes growth and
value stock. The Fund employs a passive investment approach designed to attempt
to track the performance of 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.
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, in alphabetical order, are:
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 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
future; possible lack of a liquid secondary market for a future and the
resulting inability to close a future 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. The value of
equity securities could decline if the issuer’s financial condition declines or
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
Stock Risk. If
growth companies do not increase their earnings at a rate expected by
investors, the market price of the 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. |
|
|
•
|
Value Stock
Risk. Value
stocks may continue to be undervalued by the market for extended periods,
including the entire period during which the stock is held by the fund, or
the events that the portfolio manager believed would cause the stock price
to increase may not occur as anticipated or at all. Moreover, a stock
judged 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).
Index Fund
Risk. More likely than
not, an index fund will underperform the index due to cashflows and the fees and
expenses of the fund. The correlation between fund performance and index
performance may also be affected by changes in securities markets, changes in
the composition of the index and the timing of purchases and sales of fund
shares.
Investment
Company Risk. A fund
that invests in another investment company (for example, another fund or an
exchange-traded fund (“ETF”)) is subject to the risks associated with direct
ownership of the securities in which such investment company invests. Fund
shareholders indirectly bear their proportionate share of the expenses of each
such investment company.
Redemption Risk.
A fund that serves as
an underlying fund for a fund of funds is subject to certain risks. When a fund
of funds reallocates or rebalances its investments, an underlying fund may
experience relatively large redemptions or investments. These transactions may
cause the underlying fund to sell portfolio securities to meet such redemptions,
or to invest cash from such investments, at times it would not otherwise do so,
and may as a result increase transaction costs and adversely affect underlying
fund performance. Moreover, a fund of fund’s redemptions or reallocations among
share classes of an underlying 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 by calling
1-800-222-5852 or online at www.principal.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 each share class of the Fund and 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 (December 30, 2009).
For periods prior to the inception
date of Class R-6 shares (____________), the performance shown in the table for
Class R-6 shares is based on the performance of the Fund's Institutional Class
shares, adjusted to reflect the fees and expenses Class R-6 shares. 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 for Class R-6 shares 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 (Institutional Class shares)(1)
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q3
'10 |
17.39% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q3
'11 |
(20.25)% |
|
|
(1)
|
The year-to-date return
as of September 30, 2016 was 2.41% for Institutional Class
shares. |
|
|
|
|
|
Average
Annual Total Returns |
For the
periods ended 12/31/2015 |
1 Year |
5
Years |
Life of
Fund |
Institutional
Class Return Before Taxes |
(1.00)% |
3.16% |
3.67% |
Institutional
Class Return After Taxes on Distributions |
(1.74)% |
1.99% |
2.64% |
Institutional
Class Return After Taxes on Distributions and Sale of Fund
Shares |
0.22% |
2.62% |
3.02% |
Class R-1
Return Before Taxes |
(1.76)% |
2.27% |
2.77% |
Class R-2
Return Before Taxes |
(1.70)% |
2.37% |
2.88% |
Class R-3
Return Before Taxes |
(1.47)% |
2.61% |
3.10% |
Class R-4
Return Before Taxes |
(1.38)% |
2.76% |
3.28% |
Class R-5
Return Before Taxes |
(1.17)% |
2.90% |
3.40% |
Class R-6
Return Before Taxes |
(1.08)% |
3.10% |
3.60% |
MSCI EAFE NR Index (reflects no
deduction for fees, expenses, or taxes) |
(0.81)% |
3.60% |
4.37% |
After-tax returns are calculated
using the historical highest individual federal marginal income tax rates and do
not reflect the impact of state and local taxes. Actual after-tax returns depend
on an investor’s tax situation and may differ from those shown. The after-tax
returns shown are not relevant to investors who hold their Fund shares through
tax-deferred arrangements, such as 401(k) plans or individual retirement
accounts. After-tax returns are shown for Institutional Class shares only and
would be different for the other classes.
Management
Investment
Advisor:
Principal Management
Corporation
Sub-Advisor and
Portfolio Manager:
Principal Global Investors,
LLC
|
|
• |
Thomas L. Kruchten (since
2011), Research Analyst and Portfolio
Manager |
|
|
• |
Jeffrey A. Schwarte (since
2016), Portfolio Manager |
Purchase and Sale
of Fund Shares
There are no minimum initial or
subsequent investment requirements for an eligible purchaser. 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 8024, Boston, MA 02266-8024 (regular mail) or 30 Dan
Road, Canton, MA 02021-2809 (overnight mail); calling us at 1-800-222-5852; or
accessing our website (www.principalfunds.com).
Tax
Information
The Fund’s distributions you receive
are generally subject to federal income tax as ordinary income or capital gain
and may also be subject to state and local taxes, unless you are tax-exempt or
your account is tax-deferred in which case your distributions would be taxed
when withdrawn from the tax-deferred account.
Payments to
Broker-Dealers and Other Financial Intermediaries
For Class R-6 shares, the Fund and
its related companies do not pay broker-dealers or other financial
intermediaries (such as a bank, insurance company, investment adviser, etc.) for
the sale of Fund shares or related services.
For the other classes, if you
purchase the Fund through a broker-dealer or other financial intermediary (such
as a bank, insurance company, investment adviser, etc.), the Fund and its
related companies may pay the intermediary for the sale of Fund shares and
related services. These payments may create a conflict of interest by
influencing the broker-dealer or other intermediary and your salesperson to
recommend the Fund over another investment, or to recommend one share class of
the Fund over another share class. Ask your salesperson or visit your financial
intermediary's website for more information.
INTERNATIONAL
SMALL COMPANY FUND
|
|
Objective: |
The Fund seeks long-term
growth of capital. |
Fees and Expenses
of the Fund
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Fund. You may
qualify for sales charge discounts if you and your family invest, or agree to
invest in the future, at least $50,000 in Class A shares of Principal
Funds, Inc. More information about these and other discounts is available from
your financial professional and in “Choosing a Share Class and The Costs of
Investing” beginning on page ___ of the Fund’s prospectus and “Multiple Class
Structure” beginning on page ___ of the Fund’s Statement of Additional
Information.
Shareholder Fees
(fees paid directly from your investment)
|
|
|
|
|
|
|
Share
Class |
|
A |
P |
Inst. |
R-6 |
Maximum Sales Charge (Load)
Imposed on Purchases (as a percentage of offering price) |
5.50% |
None |
None |
None |
Maximum Deferred Sales Charge
(Load) (as a percentage of the offering price or NAV at the time Sales
Load is paid, whichever is less) |
1.00% |
None |
None |
None |
Annual Fund
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
|
|
Share
Class |
|
A |
P |
Inst. |
R-6 |
Management Fees |
1.05% |
1.05% |
1.05% |
1.05% |
Distribution and/or Service
(12b-1) Fees |
0.25% |
N/A |
N/A |
N/A |
Other Expenses (1) |
1.40% |
1.30% |
3.09% |
177.05% |
Total Annual
Fund Operating Expenses |
2.70% |
2.35% |
4.14% |
178.10% |
Expense Reimbursement
(2)
(3) |
(1.10)% |
(1.10)% |
(2.94)% |
(176.90)% |
Total Annual
Fund Operating Expenses after Expense Reimbursement |
1.60% |
1.25% |
1.20% |
1.20% |
|
|
|
|
|
|
|
|
|
(1) |
Based on estimated amounts for
the current fiscal year (R-6). |
(2) |
Principal Management
Corporation ("PMC"), the investment advisor, has contractually agreed to
limit the Fund’s expenses by paying, if necessary, expenses normally
payable by the Fund, (excluding interest expense, expenses related to fund
investments, acquired fund fees and expenses, and other extraordinary
expenses) to maintain a total level of operating expenses (expressed as a
percent of average net assets on an annualized basis) not to exceed 1.60%
for Class A and 1.20% for Institutional Class shares. In addition, for
Class P, the expense limit will maintain "Other Expenses" (expressed as a
percent of average net assets on an annualized basis) not to exceed 0.20%
(excluding interest expense, expenses related to fund investments,
acquired fund fees and expenses, and other extraordinary expenses). It is
expected that the expense limits will continue through the period ending
December 30, 2016; however, Principal Funds, Inc. and PMC, the parties to
the agreement, may mutually agree to terminate the expense limits prior to
the end of the period. |
(3) |
Principal Management
Corporation ("PMC"), the investment advisor, has contractually agreed to
limit the Fund’s expenses by paying, if necessary, expenses normally
payable by the Fund, (excluding interest expense, expenses related to fund
investments, acquired fund fees and expenses, and other extraordinary
expenses) to maintain a total level of operating expenses (expressed as a
percent of average net assets on an annualized basis) not to exceed 1.20%
for Class R-6 shares. It is expected that the expense limit will continue
through the period ending December 30, 2017; however, Principal Funds,
Inc. and PMC, the parties to the agreement, may mutually agree to
terminate the expense limit 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. The Example also assumes
that your investment has a 5% return each year and that the Fund’s operating
expenses remain the same. 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 |
$704 |
$1,244 |
$1,809 |
$3,339 |
Class
P |
127 |
628 |
1,155 |
2,602 |
Institutional
Class |
122 |
989 |
1,871 |
4,143 |
Class
R-6 |
122 |
791 |
1,149 |
1,644 |
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 annualized portfolio turnover rate was 62.8% 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 comprising
the MSCI World ex-USA Small Cap Index (as of November 30, 2015, this range was
between approximately $10.8 million and $7.9 billion). The Fund may invest in
equity securities regardless of style (growth or value). The Fund invests
primarily in foreign equity securities. The Fund has no limitation on the
percentage of assets that is invested in any one country or denominated in any
one currency, but the Fund typically invests in foreign securities of more than
10 countries. 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, in alphabetical order, are:
Equity Securities
Risk. The value of
equity securities could decline if the issuer’s financial condition declines or
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
Stock Risk. If
growth companies do not increase their earnings at a rate expected by
investors, the market price of the 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. |
|
|
• |
Small and
Medium Market Capitalization Companies Risk . Investments in small and
medium sized companies may involve greater risk and price volatility than
investments in larger, more mature companies.
|
|
|
•
|
Value Stock
Risk. Value
stocks may continue to be undervalued by the market for extended periods,
including the entire period during which the stock is held by the fund, or
the events that the portfolio manager believed would cause the stock price
to increase may not occur as anticipated or at all. Moreover, a stock
judged 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 Risk.
A fund that serves as
an underlying fund for a fund of funds is subject to certain risks. When a fund
of funds reallocates or rebalances its investments, an underlying fund may
experience relatively large redemptions or investments. These transactions may
cause the underlying fund to sell portfolio securities to meet such redemptions,
or to invest cash from such investments, at times it would not otherwise do so,
and may as a result increase transaction costs and adversely affect underlying
fund performance. Moreover, a fund of fund’s redemptions or reallocations among
share classes of an underlying 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 by calling
1-800-222-5852 or online at:
|
|
• |
For Classes A and P -
www.principalfunds.com. |
|
|
• |
For Institutional Class and
Class R-6 - www.principal.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). The table shows, for each
share class of the Fund and 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
(____________), the performance shown in the table for Institutional Class and
Class R-6 shares is based on the performance of the Fund's Class A shares,
adjusted to reflect the respective fees and expenses of each class. 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 for the newer class (without respect
to sales charges, which do not apply to Institutional Class or Class R-6
shares). These adjustments for these newer classes result in performance for
such periods that is no higher than the historical performance of the Class A
shares, which were first sold June 11, 2014.
Total Returns as
of December 31 (Class A shares) (1)
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q4
'15 |
5.07% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q3
'15 |
(6.44)% |
|
|
(1)
|
The year-to-date return
as of September 30, 2016 was 5.28% for Class A shares.
|
|
|
|
|
Average
Annual Total Returns |
For the
periods ended 12/31/2015 |
1 Year |
Life of
Fund |
Class A
Return Before Taxes |
1.78% |
(4.66)% |
Class A
Return After Taxes on Distributions |
1.58% |
(4.81)% |
Class A
Return After Taxes on Distributions and Sale of Fund
Shares |
1.35% |
(3.44)% |
Class P
Return Before Taxes |
8.04% |
(0.82)% |
Institutional
Class Return Before Taxes |
8.17% |
(1.05)% |
Class R-6
Return Before Taxes |
7.73% |
(1.31)% |
MSCI World ex USA Small Cap
Index (reflects no deduction for fees, expenses, or taxes) |
5.46% |
(3.53)% |
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.
Management
Investment
Advisor:
Principal Management
Corporation
Sub-Advisor and
Portfolio Managers:
Principal Global Investors,
LLC
|
|
• |
Tiffany N. Lavastida (since
2014), Portfolio Manager |
|
|
• |
Brian W. Pattinson (since
2014), Portfolio Manager |
Purchase and Sale
of Fund Shares
|
|
|
|
Share
Class |
Investment
Type |
Purchase
Minimum
Per
Fund |
A |
Initial
Investment |
$1,000(1) |
A |
Initial Investment for accounts
with an Automatic Investment Plan (AIP) |
$100 |
A |
Subsequent
Investments |
$100(1)(2) |
P,
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 8024, Boston, MA
02266-8024 (regular mail) or 30 Dan Road, Canton, MA 02021-2809 (overnight
mail); calling us at 1-800-222-5852; or accessing our website
(www.principalfunds.com).
Tax
Information
The Fund’s distributions you receive
are generally subject to federal income tax as ordinary income or capital gain
and may also be subject to state and local taxes, unless you are tax-exempt or
your account is tax-deferred in which case your distributions would be taxed
when withdrawn from the tax-deferred account.
Payments to
Broker-Dealers and Other Financial Intermediaries
For Class R-6 shares, the Fund and
its related companies do not pay broker-dealers or other financial
intermediaries (such as a bank, insurance company, investment adviser, etc.) for
the sale of Fund shares or related services.
For the other share classes, if you
purchase the Fund through a broker-dealer or other financial intermediary (such
as a bank, insurance company, investment adviser, etc.), the Fund and its
related companies may pay the intermediary for the sale of Fund shares and
related services. These payments may create a conflict of interest by
influencing the broker-dealer or other intermediary and your salesperson to
recommend the Fund over another investment, or to recommend one share class of
the Fund over another share class. Ask your salesperson or visit your financial
intermediary's website for more information.
MULTI-MANAGER
EQUITY LONG/SHORT FUND
|
|
Objective:
|
The Fund seeks long-term
growth of capital with lower volatility than the global equity
markets. |
Fees and Expenses
of the Fund
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Fund. You may
qualify for sales charge discounts if you and your family invest, or agree to
invest in the future, at least $50,000 in Class A shares of Principal
Funds, Inc. More information about these and other discounts is available from
your financial professional and in “Choosing a Share Class and The Costs of
Investing” beginning on page ___ of the Fund’s prospectus and “Multiple Class
Structure” beginning on page ___ of the Fund’s Statement of Additional
Information.
Shareholder Fees
(fees paid directly from your investment)
|
|
|
|
|
|
|
Share
Class |
|
|
A |
P |
Inst. |
R-6 |
Maximum Sales Charge (Load)
Imposed on Purchases (as a percentage of offering price) |
5.50% |
None |
None |
None |
Maximum Deferred Sales Charge
(Load) (as a percentage of the offering price or NAV at the time Sales
Load is paid, whichever is less) |
1.00% |
None |
None |
None |
Annual Fund
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
|
|
Share
Class |
|
|
A |
P |
Inst. |
R-6 |
Management Fees |
1.57% |
1.57% |
1.57% |
1.57% |
Distribution and/or Service
(12b-1) Fees |
0.25% |
N/A |
N/A |
N/A |
Other Expenses: |
|
|
|
|
Dividend and
Interest Expense on Short Sales (1) |
0.74% |
0.74% |
0.74% |
0.74% |
Remainder of
Other Expenses (1) |
0.52% |
0.34% |
0.34% |
0.30% |
Total Other
Expenses |
1.26% |
1.08% |
1.08% |
1.04% |
Total Annual
Fund Operating Expenses |
3.08% |
2.65% |
2.65% |
2.61% |
Expense Reimbursement
(2) |
(0.32)% |
(0.14)% |
(0.24)% |
(0.27)% |
Total Annual
Fund Operating Expenses after Expense Reimbursement |
2.76% |
2.51% |
2.41% |
2.34% |
|
|
|
(1) |
Based on estimated amounts for
the current fiscal year. |
(2) |
Principal Management
Corporation ("PMC"), the investment advisor, has contractually agreed to
limit the Fund’s expenses by paying, if necessary, expenses normally
payable by the Fund, (excluding interest expense, expenses related to fund
investments, acquired fund fees and expenses, and other extraordinary
expenses) to maintain a total level of operating expenses (expressed as a
percent of average net assets on an annualized basis) not to exceed 2.02%
for Class A, 1.67% for Institutional Class, and 1.60% for Class R-6
shares. In addition, for Class P, the expense limit will maintain "Other
Expenses" (expressed as a percent of average net assets on an annualized
basis) not to exceed 0.20%, (excluding interest expense, expenses related
to fund investments, acquired fund fees and expenses, and other
extraordinary expenses). It is expected that the expense limits will
continue through the period ending December 30, 2017; however, Principal
Funds, Inc. and PMC, the parties to the agreement, may mutually agree to
terminate the expense limits 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. The Example also assumes
that your investment has a 5% return each year and that the Fund’s operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
|
|
|
|
|
|
|
1
year |
3
years |
Class
A |
$814 |
$1,395 |
Class
P |
254 |
|
798 |
|
Institutional
Class |
244 |
|
781 |
|
Class
R-6 |
237 |
|
763 |
|
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. This is a new fund and does
not yet have a portfolio turnover rate to disclose.
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 and derivatives on equity securities, at the time
of purchase. The Fund invests in exchange-traded funds. The Fund uses derivative
instruments, including swaps, futures and options, to gain exposure to a variety
of securities or mitigate volatility and forwards to manage its foreign currency
exposure. The Fund uses hedging techniques to attempt to reduce the risk of
investment positions. The Fund actively trades portfolio securities.
The Fund has a flexible investment
strategy and invests in U.S. and foreign, including emerging market, securities.
Although the Fund focuses on securities of mid- to large-capitalization
companies, it may invest in equity securities regardless of market
capitalization size and style (growth or value). The Fund invests in value
equity securities, an investment strategy that emphasizes buying equity
securities that appear to be undervalued. The Fund also invests in growth equity
securities, an investment strategy that emphasizes buying equity securities of
companies whose potential for growth of capital and earnings is expected to be
above average.
The Fund takes long and short
positions in equity securities, exchange-traded funds, 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. A short
position will benefit from a decrease in price of the underlying instrument and
loses value if the price of the underlying instrument increases. The Fund also
invests a portion of the proceeds it receives from short sales into long
positions. Long positions profit if the price of the instrument increases.
Simultaneously engaging in long investing and short selling seeks to reduce the
net exposure of the overall portfolio to general market movements. The Fund will
take relative value positions, which seek to capitalize on price differences
between similar securities or relative value among securities of the same
company.
Principal Management Corporation
(“PMC"), the Fund’s investment advisor, strategically allocates the Fund's
assets among the investment strategies described below, which are executed by
one or more of the Fund’s sub-advisors. In making these allocations, which will
vary from time-to-time, PMC seeks to combine the strategies of the sub-advisors
to deliver long-term growth of capital with lower volatility than the global
equity markets. The Fund retains considerable latitude in allocating its
investments. To achieve its desired combination of the Fund's strategies and
depending on market conditions, PMC may allocate 0% to 100% of the Fund’s assets
to any of these strategies at any time, may add additional strategies, and may
direct a sub-advisor to reduce or omit investments in certain assets or asset
classes.
European Low Net.
A portion of the Fund's
assets is invested in equity securities of mid- to large-capitalization
companies, primarily in Western Europe, targeting companies with improving
fundamentals which could lead to an acceleration of revenue, margin expansion
and corporate earnings. This is a Western European-focused equity long/short
strategy managed on an opportunistic basis based on the Sub-Advisor’s evaluation
of intrinsic value and with lower exposure (i.e., a smaller percentage
difference between the long and short exposures).
European
Macro/Fundamental. A
portion of the Fund’s assets is invested in long positions in securities of mid-
to large-capitalization companies, primarily in Western Europe, and depending
upon the market environment, in short positions in individual securities and
region, country, and sector indices primarily through the use of index futures.
This is a Western European-focused equity long/short strategy that utilizes
top-down macro-economic views to support a bottom-up security selection
process.
Global Thematic.
A portion of the Fund’s
assets is invested in both long and short positions in global equity securities
and derivatives on equity securities. This portion of the Fund invests in both
U.S. and foreign issuers, including issuers in emerging markets. For this
strategy, the sub-advisor employs top-down analysis (focusing on broader
industry, sector and regional developments) and bottom-up analysis (focusing on
the fundamental analysis of individual issuers) in its investment process.
Systematic
Quality/Value. A
portion of the Fund’s assets is invested in long and short equity positions in
large capitalization companies in the U.S., primarily in stocks within the
S&P 500 Index. For this strategy, the sub-advisor seeks to purchase
securities it believes to be undervalued and short positions it believes to be
overvalued, based on the sub-advisor's analysis of the issuer’s financial
reports and market valuation. The sub-advisor uses a systematic framework to
create a diversified portfolio.
Time
Arbitrage. A portion of
the Fund’s assets is primarily invested in long positions in securities of mid-
to large-capitalization companies that the sub-advisor believes are
attractively-valued, growth-oriented companies and in short positions that
include, among other things, sector and market hedges and large, liquid
single-name positions (meaning positions that are specific to one company). The
sub-advisor identifies longer-term investment opportunities intended to be held
for multiple years, while other long positions and short positions are intended
to be maintained for shorter time periods. The strategy is primarily
U.S.-focused with smaller exposures in Asia and Europe.
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, in alphabetical order, are:
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.
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.
|
|
•
|
Currency
Contracts. Derivatives related to
currency contracts involve the specific risk of government action through
exchange controls that would restrict the ability of the fund to deliver
or receive currency. |
|
|
•
|
Forward
Contracts, Futures and Swaps. Forward contracts, futures,
and swaps involve specific risks, including: the imperfect correlation
between the change in market value of the instruments held by the fund and
the price of the forward contract, future or swap; possible lack of a
liquid secondary market for a forward contract, future or swap and the
resulting inability to close a forward contract, future or swap when
desired; counterparty risk; and if the fund has insufficient cash, it may
have to sell securities from its portfolio to meet daily variation margin
requirements. |
|
|
• |
Options.
Options involve
specific risks, including: imperfect correlation between the change in
market value of the instruments held by the fund and the price of the
options, counterparty risk, difference in trading hours for the options
markets and the markets for the underlying securities (rate movements can
take place in the underlying markets that cannot be reflected in the
options markets), and an insufficient liquid secondary market for
particular options. |
Emerging Markets
Risk. Investments in
emerging market countries may have more risk than those in developed market
countries because the emerging markets are less developed and more illiquid.
Emerging market countries can also be subject to increased social, economic,
regulatory, and political uncertainties and can be extremely volatile.
Equity Securities
Risk. The value of
equity securities could decline if the issuer’s financial condition declines or
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
Stock Risk . If
growth companies do not increase their earnings at a rate expected by
investors, the market price of the 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. |
|
|
•
|
Small and
Medium Market Capitalization Companies. Investments in small and
medium sized companies may involve greater risk and price volatility than
investments in larger, more mature companies.
|
|
|
•
|
Value Stock
Risk. Value
stocks may continue to be undervalued by the market for extended periods,
including the entire period during which the stock is held by the fund, or
the events that the portfolio manager believed would cause the stock price
to increase may not occur as anticipated or at all. Moreover, a stock
judged to be undervalued actually may be appropriately priced at a low
level and therefore would not be profitable for the fund.
|
European Focus
Risk. A fund that
focuses its investments in securities of European companies may be particularly
susceptible to economic, political, regulatory or other events or conditions
affecting issuers and countries in Europe. Currency devaluations could occur or
could continue to occur. Debt problems of the private or public sectors in a
single European Union (EU) country can pose significant economic risks to the EU
as a whole. Additionally, the United Kingdom's vote to leave the EU, commonly
known as “Brexit,” may have significant political and financial consequences for
European markets and the broader global economy, including greater market
volatility and illiquidity, currency fluctuations, and deterioration in economic
activity. As a result, the fund’s performance may be more volatile than the
performance of a more geographically diversified 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).
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.
Investment
Company Risk. A fund
that invests in another investment company (for example, another fund or an
exchange-traded fund (“ETF”)) is subject to the risks associated with direct
ownership of the securities in which such investment company invests. Fund
shareholders indirectly bear their proportionate share of the expenses of each
such investment company.
Leverage
Risk . Leverage created
by borrowing or certain types of transactions or investment 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
Turnover (Active Trading) Risk. A fund that has a portfolio turnover
rate over 100% is considered actively traded. Actively trading portfolio
securities may accelerate realization of taxable gains and losses, lower fund
performance and may result in high portfolio turnover rates and increased
brokerage costs.
Short Sale
Risk . A short sale
involves the sale by the fund of a security that it does not own with the hope
of purchasing the same security at a later date at a lower price. A fund may
also enter into a short derivative position through a futures contract or swap
agreement. If the price of the security or derivative has increased during this
time, then the fund will incur a loss equal to the increase in price from the
time that the short sale was entered into plus any premiums and interest paid to
the third party. Therefore, short sales involve the risk that losses may be
exaggerated, potentially losing more money than the actual cost of the
investment. Also, there is the risk that the third party to the short sale may
fail to honor its contract terms, causing a loss to the fund.
By investing the proceeds received
from selling securities short, a fund could be deemed to be employing a form of
leverage, which creates special risks. The use of leverage may increase a fund’s
exposure to long securities positions and make any change in the fund’s NAV
greater than it would be without the use of leverage. This could result in
increased volatility of returns. There is no guarantee that any leveraging
strategy a fund employs will be successful during any period in which it is
employed.
Volatility
Mitigation Risk.
Volatility mitigation strategies may increase fund transaction costs, which
could increase losses or reduce gains. These strategies may not protect
the fund from market declines and may reduce the fund’s participation in market
gains.
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 HFRX Equity Hedge Index.
Performance information provides an 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 by calling 1-800-222-5852 or online at:
|
|
• |
For Classes A and P -
www.principalfunds.com. |
|
|
• |
For Institutional Class and
Class R-6 - www.principal.com. |
Management
Investment
Advisor and Portfolio Managers:
Principal Management
Corporation
|
|
• |
Jake S. Anonson (since 2016),
Portfolio Manager |
|
|
• |
Jessica S. Bush (since 2016),
Portfolio Manager |
|
|
• |
Marcus W. Dummer (since 2016),
Portfolio Manager |
|
|
• |
Benjamin E. Rotenberg (since
2016), Portfolio Manager |
Sub-Advisors:
Columbus Circle Investors
Gotham Asset Management, LLC
Passport Capital, LLC
Sirios Capital Management,
L.P.
Three Bridges Capital, LP
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) |
P,
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 8024, Boston, MA
02266-8024 (regular mail) or 30 Dan Road, Canton, MA 02021-2809 (overnight
mail); calling us at 1-800-222-5852; or accessing our website
(www.principalfunds.com).
Tax
Information
The Fund’s distributions you receive
are generally subject to federal income tax as ordinary income or capital gain
and may also be subject to state and local taxes, unless you are tax-exempt or
your account is tax-deferred in which case your distributions would be taxed
when withdrawn from the tax-deferred account.
Payments to
Broker-Dealers and Other Financial Intermediaries
For Class R-6 shares, the Fund and
its related companies do not pay broker-dealers or other financial
intermediaries (such as a bank, insurance company, investment adviser, etc.) for
the sale of Fund shares or related services.
For the other share classes, if you
purchase the Fund through a broker-dealer or other financial intermediary (such
as a bank, insurance company, investment adviser, etc.), the Fund and its
related companies may pay the intermediary for the sale of Fund shares and
related services. These payments may create a conflict of interest by
influencing the broker-dealer or other intermediary and your salesperson to
recommend the Fund over another investment, or to recommend one share class of
the Fund over another share class. Ask your salesperson or visit your financial
intermediary's website for more information.
OPPORTUNISTIC
MUNICIPAL FUND
|
|
Objective: |
The Fund seeks to provide a
high level of income that is exempt from federal income tax while
protecting investors’ capital. |
Fees and Expenses
of the Fund
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Fund. You may
qualify for sales charge discounts if you and your family invest, or agree to
invest in the future, at least $100,000 in Class A shares of Principal
Funds, Inc. More information about these and other discounts is available from
your financial professional and in “Choosing a Share Class and The Costs of
Investing” beginning on page ___ of the Fund’s prospectus and “Multiple Class
Structure” beginning on page ___ of the Fund’s Statement of Additional
Information.
Shareholder Fees
(fees paid directly from your investment)
|
|
|
|
|
|
|
Share
Class |
|
A |
C |
P |
Inst. |
Maximum Sales Charge (Load)
Imposed on Purchases (as a percentage of offering price) |
3.75% |
None |
None |
None |
Maximum Deferred Sales Charge
(Load) (as a percentage of the offering price or NAV at the time Sales
Load is paid, whichever is less) |
1.00% |
1.00% |
None |
None |
Annual
Fund Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
|
|
Share
Class |
|
A |
C |
P |
Inst. |
Management Fees |
0.50% |
0.50% |
0.50% |
0.50% |
Distribution and/or Service
(12b-1) Fees |
0.25% |
1.00% |
N/A |
N/A |
Other Expenses: |
|
|
|
|
Interest
Expenses |
0.06% |
0.06% |
0.06% |
0.06% |
Remainder of
Other Expenses (1) |
0.29% |
0.40% |
0.49% |
0.26% |
Total Other Expenses
|
0.35% |
0.46% |
0.55% |
0.32% |
Acquired Fund Fees and
Expenses |
0.01% |
0.01% |
0.01% |
0.01% |
Total Annual
Fund Operating Expenses |
1.11% |
1.97% |
1.06% |
0.83% |
Expense Reimbursement
(2) |
(0.14)% |
(0.25)% |
(0.29)% |
(0.11)% |
Total Annual
Fund Operating Expenses after Expense Reimbursement |
0.97% |
1.72% |
0.77% |
0.72% |
|
|
|
(1) |
Based on estimated amounts for
the current fiscal year (Institutional Class). |
(2) |
Principal Management
Corporation ("PMC"), the investment advisor, has contractually agreed to
limit the Fund’s expenses by paying, if necessary, expenses normally
payable by the Fund, (excluding interest expense, expenses related to fund
investments, acquired fund fees and expenses, and other extraordinary
expenses) to maintain a total level of operating expenses (expressed as a
percent of average net assets on an annualized basis) not to exceed 0.90%
for Class A,1.65% for Class C, and 0.65% for Institutional Class shares.
In addition, for Class P, the expense limit will maintain "Other Expenses"
(expressed as a percent of average net assets on an annualized basis) not
to exceed 0.20%, (excluding interest expense, expenses related to fund
investments, acquired fund fees and expenses, and other extraordinary
expenses). It is expected that the expense limits will continue through
the period ending December 30, 2016; however, Principal Funds, Inc. and
PMC, the parties to the agreement, may mutually agree to terminate the
expense limits 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. 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 |
$470 |
$701 |
$951 |
$1,664 |
Class
C |
275 |
594 |
1,039 |
2,276 |
Class
P |
79 |
308 |
557 |
1,268 |
Institutional
Class |
74 |
254 |
450 |
1,015 |
With respect to Class C shares, you
would pay the following expenses if you did not redeem your shares (all other
classes would be the same as in the above example):
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
Class
C |
$175 |
$594 |
$1,039 |
$2,276 |
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 annualized portfolio turnover rate was 54.9% of the average value of its
portfolio.
Principal
Investment Strategies
Under normal circumstances, the Fund
invests at least 80% of its net assets, plus any borrowings for investment
purposes, in municipal obligations (securities issued by or on behalf of state
or local governments and other public authorities). Twenty-five percent or more
of these may be from California. Municipal obligations pay interest that is
exempt from federal income tax. The Fund has a flexible investment strategy and
invests in obligations of any duration and credit quality, including below
investment grade bonds (sometimes called “high yield bonds” or "junk bonds")
which are rated at the time of purchase Ba1 or lower by Moody's Investors
Service, Inc. ("Moody's") and BB+ or lower by S&P Global Ratings ("S&P
Global") (if the bond has been rated by only one of those agencies, that rating
will determine whether the bond is below investment grade; if the bond has not
been rated by either of those agencies, the Sub-Advisor will determine whether
the bond is of a quality comparable to those rated below investment grade). The
Fund is not managed to a particular maturity or duration.
The Fund invests in other debt
obligations, including (but not limited to) taxable municipal obligations, U.S.
Treasury securities, obligations of the U.S. Government, its agencies and
instrumentalities (“Agency Securities”) and exchange-traded funds (ETFs) to gain
exposure to the municipal market.
The Fund uses derivative
instruments. 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 invests in futures contracts to hedge against changes in interest rates or
as a substitute for the purchase of portfolio securities. The Fund also invests
in inverse floating rate instruments, which are generally more volatile than
other types of municipal obligations and may involve leverage, to enhance
investment income.
During the fiscal year ended August
31, 2015, the average ratings of the Fund’s fixed-income assets, based on market
value at each month-end, were as follows (all ratings are by
Moody’s):
|
|
|
|
|
0.00% in securities
rated Aaa |
13.95% in securities rated
Baa |
0.00% in securities rated
Caa |
0.00% in
securities rated D |
16.99% in securities rated
Aa |
15.61% in securities rated
Ba |
0.00% in securities rated
Ca |
29.36% in securities not
rated |
13.69% in securities rated
A |
10.40% in securities rated
B |
0.00% in securities rated
C |
|
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, in alphabetical order, are:
Counterparty
Risk. Counterparty risk
is the risk that the counterparty to a contract or other obligation will be
unable or unwilling to honor its obligations.
Derivatives
Risk. Derivatives may
not move in the direction anticipated by the portfolio manager. Transactions in
derivatives may increase volatility, cause the liquidation of portfolio
positions when not advantageous to do so and result in disproportionate losses
that may be substantially greater than a fund's initial investment.
|
|
• |
Futures.
Futures 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
future; possible lack of a liquid secondary market for a future and the
resulting inability to close a future when desired; counterparty risk; and
if the fund has insufficient cash, it may have to sell securities from its
portfolio to meet daily variation margin requirements. |
Fixed-Income
Securities Risk.
Fixed-income securities are subject to interest rate risk and credit quality
risk. The market value of fixed-income securities generally declines when
interest rates rise, and an issuer of fixed-income securities could default on
its payment obligations.
Geographic
Concentration Risk. A
fund that invests significant portions of its assets in municipal obligations
and bonds in particular geographic areas (a particular state, such as
California, or a particular country or region) has greater exposure than other
funds to economic conditions and developments in those areas.
Hedging
Risk. A fund that
implements a hedging strategy using derivatives and/or securities could expose
the fund to the risk that can arise when a change in the value of a hedge does
not match a change in the value of the asset it hedges. In other words, the
change in value of the hedge could move in a direction that does not match the
change in value of the underlying asset, resulting in a risk of loss to the
fund.
High Yield
Securities Risk. High
yield fixed-income securities (commonly referred to as "junk bonds") are subject
to greater credit quality risk than higher rated fixed-income securities and
should be considered speculative.
Inverse Floating
Rate Investments Risk.
Inverse floating rate investments are extremely sensitive to changes in interest
rates and in some cases their market value may be extremely
volatile.
Investment
Company Risk. A fund
that invests in another investment company (for example, another fund or an
exchange-traded fund (“ETF”)) is subject to the risks associated with direct
ownership of the securities in which such investment company invests. Fund
shareholders indirectly bear their proportionate share of the expenses of each
such investment company.
Leverage
Risk. Leverage created
by borrowing or certain types of transactions or investments may impair the
fund's liquidity, cause it to liquidate positions at an unfavorable time,
increase volatility of the fund's net asset value, or diminish the fund's
performance.
Municipal
Obligations Risk.
Principal and interest payments on municipal securities may not be guaranteed by
the issuing body and may be payable only from a particular source. That source
may not perform as expected and payment obligations may not be made or made on
time.
Portfolio
Duration Risk. Portfolio duration is a measure of
the expected life of a fixed-income security and its sensitivity to changes in
interest rates. The longer a fund's average portfolio duration, the more
sensitive the fund will be to changes in interest rates.
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 or -chartered 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. Treasury.
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 by calling
1-800-222-5852 or online at:
|
|
• |
For Classes A, C, and P -
www.principalfunds.com. |
|
|
• |
For Institutional Class -
www.principal.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 each share class of the Fund and for the last one, five,
and ten calendar year periods (or, if shorter, the life of the Fund), how the
Fund’s average annual total returns compare with those of one or more broad
measures of market performance.
Life of Fund returns are measured
from the date the Fund's shares were first sold (June 14, 2012).
For periods prior to the inception
date of Institutional Class shares (March 10, 2015) and Class P shares
(December 30, 2013), the performance shown in the table for Institutional
Class and Class P shares is based on the performance of the Fund's Class A
shares, adjusted to reflect the respective fees and expenses of each class.
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 for the newer class
(without respect to sales charges, which do not apply to Institutional Class or
Class P). These adjustments for these newer classes result in performance for
such periods that is no higher than the historical performance of the Class A
shares, which were first sold June 14, 2012.
Total Returns as
of December 31 (Class A shares)(1)
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q1
'14 |
6.17% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q2
'13 |
(6.51)% |
(1)
The year-to-date return as of September 30, 2016 was 6.72% for Class A shares.
|
|
|
|
Average
Annual Total Returns |
For the
periods ended 12/31/2015 |
1 Year |
Life of
Fund |
Class A
Return Before Taxes |
2.31% |
4.52% |
Class A
Return After Taxes on Distributions |
2.31% |
4.49% |
Class A
Return After Taxes on Distributions and Sale of Fund
Shares |
2.93% |
4.39% |
Class C
Return Before Taxes |
4.40% |
4.85% |
Class P
Return Before Taxes |
6.63% |
5.75% |
Institutional
Class Return Before Taxes |
6.42% |
5.65% |
Bloomberg Barclays Municipal
Bond Index (reflects no deduction for fees, expenses, or
taxes) |
3.30% |
3.58% |
After-tax returns are calculated
using the historical highest individual federal marginal income tax rates and do
not reflect the impact of state and local taxes. Actual after-tax returns depend
on an investor’s tax situation and may differ from those shown. The after-tax
returns shown are not relevant to investors who hold their Fund shares through
tax-deferred arrangements, such as 401(k) plans or individual retirement
accounts. After-tax returns are shown for Class A shares only and would be
different for the other share classes.
Management
Investment
Advisor:
Principal Management
Corporation
Sub-Advisor and
Portfolio Managers:
Principal Global Investors,
LLC
|
|
• |
James Noble (since 2012),
Portfolio Manager |
|
|
• |
James Welch (since 2014),
Portfolio Manager |
Purchase and Sale
of Fund Shares
|
|
|
|
Share
Class |
Investment
Type |
Purchase
Minimum
Per
Fund |
A and
C |
Initial
Investment |
$1,000(1) |
A and
C |
Initial Investment for accounts
with an Automatic Investment Plan (AIP) |
$100 |
A and
C |
Subsequent
Investments |
$100(1)(2) |
P and
Institutional |
There are no minimum initial or
subsequent investment requirements for eligible
purchasers. |
N/A |
|
|
(1) |
Some exceptions apply; see
"Purchase of Fund Shares - Minimum Investments" for more
information. |
|
|
(2) |
For accounts with an AIP, the
subsequent automatic investments must total $1,200 annually if the initial
$1,000 minimum has not been met. |
You may purchase or redeem shares on
any business day (normally any day when the New York Stock Exchange is open for
regular trading) through your plan, intermediary, or Financial Professional; by
sending a written request to Principal Funds at P.O. Box 8024, Boston, MA
02266-8024 (regular mail) or 30 Dan Road, Canton, MA 02021-2809 (overnight
mail); calling us at 1-800-222-5852; or accessing our website
(www.principalfunds.com).
Tax
Information
While the Fund intends to distribute
income that is exempt from regular federal and possibly some state income taxes,
a portion of the Fund’s distributions may be subject to federal income taxes or
to the federal alternative minimum tax. A portion of the Fund’s distributions
likely will be subject to state income taxes depending on the state’s
rules.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase the Fund through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, or to recommend one share class of the Fund over another share
class. Ask your salesperson or visit your financial intermediary’s website for
more information.
ORIGIN EMERGING
MARKETS FUND
|
|
Objective: |
The Fund seeks long-term
growth of capital. |
Fees and Expenses
of the Fund
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Fund. You may
qualify for sales charge discounts if you and your family invest, or agree to
invest in the future, at least $50,000 in Class A shares of Principal
Funds, Inc. More information about these and other discounts is available from
your financial professional and in “Choosing a Share Class and The Costs of
Investing” beginning on page ___ of the Fund’s prospectus and “Multiple Class
Structure” beginning on page ___ of the Fund’s Statement of Additional
Information.
Shareholder Fees
(fees paid directly from your investment)
|
|
|
|
|
|
|
Share
Class |
|
A |
P |
Inst. |
R-6 |
Maximum Sales Charge (Load)
Imposed on Purchases (as a percentage of offering price) |
5.50% |
None |
None |
None |
Maximum Deferred Sales Charge
(Load) (as a percentage of the offering price or NAV at the time Sales
Load is paid, whichever is less) |
1.00% |
None |
None |
None |
Annual
Fund Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
|
|
Share
Class |
|
A |
P |
Inst. |
R-6 |
Management Fees |
1.20% |
1.20% |
1.20% |
1.20% |
Distribution and/or Service
(12b-1) Fees |
0.25% |
N/A |
N/A |
N/A |
Other Expenses (1) |
7.51% |
0.19% |
0.11% |
7.74% |
Total Annual
Fund Operating Expenses |
8.96% |
1.39% |
1.31% |
8.94% |
Expense Reimbursement
(2)(3) |
(7.21)% |
—% |
(0.06)% |
(7.68)% |
Total Annual
Fund Operating Expenses after Expense Reimbursement |
1.75% |
1.39% |
1.25% |
1.26% |
|
|
|
|
|
|
(1) |
Based on estimated amounts from
the current fiscal year (Class P). |
(2) |
Principal Management
Corporation ("PMC"), the investment advisor, has contractually agreed to
limit the Fund’s expenses by paying, if necessary, expenses normally
payable by the Fund, (excluding interest expense, expenses related to fund
investments, acquired fund fees and expenses, and other extraordinary
expenses) to maintain a total level of operating expenses (expressed as a
percent of average net assets on an annualized basis) not to exceed 1.75%
for Class A,1.25% for Institutional Class, and 1.26% for Class R-6 shares.
It is expected that the expense limits will continue through the period
ending December 30, 2016; however, Principal Funds, Inc. and PMC, the
parties to the agreement, may mutually agree to terminate the expense
limits prior to the end of the period. |
(3) |
Principal Management
Corporation ("PMC"), the investment advisor, has contractually agreed to
limit the Fund's expenses by paying, if necessary, expenses normally
payable by the Fund, (excluding interest expense, expenses related to fund
investments, acquired fund fees and expenses, and other extraordinary
expenses) to maintain "Other Expenses" (expressed as a percent of average
net assets on an annualized basis) not to exceed 0.20% for Class P shares.
It is expected that the expense limit will continue through the period
ending December 30, 2017; however, Principal Funds, Inc. and PMC, the
parties to the agreement, may mutually agree to terminate the expense
limit 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. The Example also assumes
that your investment has a 5% return each year and that the Fund’s operating
expenses remain the same. 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 |
$718 |
$2,398 |
$3,947 |
$7,315 |
Class
P |
142 |
440 |
761 |
1,669 |
Institutional
Class |
127 |
409 |
712 |
1,574 |
Class
R-6 |
128 |
1,911 |
3,556 |
7,133 |
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 January 23, 2015, date
operations commenced, through August 31, 2015, the Fund’s annualized portfolio
turnover rate was 86.6% of the average value of its
portfolio.
Principal
Investment Strategies
Under normal circumstances, the Fund
invests at least 80% of its net assets, plus any borrowings for investment
purposes, in equity securities of emerging market companies at the time of
purchase. Emerging market companies are:
|
|
• |
companies with their principal
place of business or principal office in emerging market countries
or |
|
|
• |
companies whose principal
securities trading market is an emerging market
country. |
"Emerging market country" means any
country which is considered to be an emerging country by the international
financial community (including the MSCI Emerging Markets Index or Bloomberg
Barclays Emerging Markets USD Aggregate Bond Index). The Fund invests in equity
securities of small, medium, and large market capitalization companies and in
growth and value stocks. The fund actively trades portfolio securities.
Principal
Risks
The value of your investment in the
Fund changes with the value of the Fund's investments. Many factors affect that
value, and it is possible to lose money by investing in the Fund. An investment
in the Fund is not a deposit of a bank and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. The
principal risks of investing in the Fund, in alphabetical order,
are:
Emerging Markets
Risk. Investments in
emerging market countries may have more risk than those in developed market
countries because the emerging markets are less developed and more illiquid.
Emerging market countries can also be subject to increased social, economic,
regulatory, and political uncertainties and can be extremely
volatile.
Equity Securities
Risk. The value of
equity securities could decline if the issuer’s financial condition declines or
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
Stock Risk. If
growth companies do not increase their earnings at a rate expected by
investors, the market price of the 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. |
|
|
• |
Small and
Medium Market Capitalization Companies Risk . Investments in small and
medium sized companies may involve greater risk and price volatility than
investments in larger, more mature companies.
|
|
|
•
|
Value Stock
Risk. Value
stocks may continue to be undervalued by the market for extended periods,
including the entire period during which the stock is held by the fund, or
the events that the portfolio manager believed would cause the stock price
to increase may not occur as anticipated or at all. Moreover, a stock
judged 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).
Portfolio
Turnover (Active Trading) Risk. A fund that has a portfolio turnover
rate over 100% is considered actively traded. Actively trading portfolio
securities may accelerate realization of taxable gains and losses, lower fund
performance and may result in high portfolio turnover rates and increased
brokerage costs.
Redemption Risk.
A fund that serves as
an underlying fund for a fund of funds is subject to certain risks. When a fund
of funds reallocates or rebalances its investments, an underlying fund may
experience relatively large redemptions or investments. These transactions may
cause the underlying fund to sell portfolio securities to meet such redemptions,
or to invest cash from such investments, at times it would not otherwise do so,
and may as a result increase transaction costs and adversely affect underlying
fund performance. Moreover, a fund of fund’s redemptions or reallocations among
share classes of an underlying fund may result in changes to the expense ratios
of affected classes, which may increase the expenses paid by shareholders of the
class that experienced the redemption.
Performance
No performance information is shown
below because the Fund has not yet had a calendar year of performance. The
Fund's performance is benchmarked against the MSCI Emerging Markets NR Index.
Performance information provides an 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 by calling 1-800-222-5852 or online at:
|
|
• |
For Classes A and P -
www.principalfunds.com. |
|
|
• |
For Institutional Class and
Class R-6 - www.principal.com. |
Management
Investment
Advisor:
Principal Management
Corporation
Sub-Advisor and
Portfolio Managers:
Origin Asset Management LLP
|
|
• |
John Birkhold (since 2015),
Partner |
|
|
• |
Chris Carter (since 2015),
Partner |
|
|
• |
Nigel Dutson (since 2015),
Partner |
|
|
• |
Tarlock Randhawa (since 2015),
Partner |
Purchase and Sale
of Fund Shares
|
|
|
|
Share
Class |
Investment
Type |
Purchase
Minimum
Per
Fund |
A |
Initial
Investment |
$1,000(1) |
A |
Initial Investment for accounts
with an Automatic Investment Plan (AIP) |
$100 |
A |
Subsequent
Investments |
$100(1)(2) |
P,
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 8024, Boston, MA
02266-8024 (regular mail) or 30 Dan Road, Canton, MA 02021-2809 (overnight
mail); calling us at 1-800-222-5852; or accessing our website
(www.principalfunds.com).
Tax
Information
The Fund’s distributions you receive
are generally subject to federal income tax as ordinary income or capital gain
and may also be subject to state and local taxes, unless you are tax-exempt or
your account is tax-deferred in which case your distributions would be taxed
when withdrawn from the tax-deferred account.
Payments to
Broker-Dealers and Other Financial Intermediaries
For Class R-6 shares, the Fund and
its related companies do not pay broker-dealers or other financial
intermediaries (such as a bank, insurance company, investment adviser, etc.) for
the sale of Fund shares or related services.
For the other share classes, if you
purchase the Fund through a broker-dealer or other financial intermediary (such
as a bank, insurance company, investment adviser, etc.), the Fund and its
related companies may pay the intermediary for the sale of Fund shares and
related services. These payments may create a conflict of interest by
influencing the broker-dealer or other intermediary and your salesperson to
recommend the Fund over another investment, or to recommend one share class of
the Fund over another share class. Ask your salesperson or visit your financial
intermediary's website for more information.
PREFERRED
SECURITIES FUND
|
|
Objective: |
The Fund seeks to provide
current income. |
Fees and Expenses
of the Fund
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Fund. You may
qualify for sales charge discounts if you and your family invest, or agree to
invest in the future, at least $100,000 in Class A shares of Principal
Funds, Inc. More information about these and other discounts is available from
your financial professional and in “Choosing a Share Class and The Costs of
Investing” beginning on page ___ of the Fund’s prospectus and “Multiple Class
Structure” beginning on page ___ of the Fund’s Statement of Additional
Information.
Shareholder Fees
(fees paid directly from your investment)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
Class |
|
A |
C |
J |
P |
Inst. |
R-1 |
R-2 |
R-3 |
R-4 |
R-5 |
R-6 |
Maximum Sales Charge (Load)
Imposed on Purchases (as a percentage of offering price) |
3.75% |
None |
None |
None |
None |
None |
None |
None |
None |
None |
None |
Maximum Deferred Sales Charge
(Load) (as a percentage of the offering price or NAV at the time Sales
Load is paid, whichever is less) |
1.00% |
1.00% |
1.00% |
None |
None |
None |
None |
None |
None |
None |
None |
Annual Fund
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
Class |
|
A |
C |
J |
P |
Inst. |
R-1 |
R-2 |
R-3 |
R-4 |
R-5 |
R-6 |
Management Fees |
0.70% |
0.70% |
0.70% |
0.70% |
0.70% |
0.70% |
0.70% |
0.70% |
0.70% |
0.70% |
0.70% |
Distribution and/or Service
(12b-1) Fees (1) |
0.25% |
1.00% |
0.15% |
N/A |
N/A |
0.35% |
0.30% |
0.25% |
0.10% |
N/A |
N/A |
Other Expenses (2) |
0.12% |
0.12% |
0.21% |
0.13% |
0.06% |
0.53% |
0.45% |
0.32% |
0.28% |
0.26% |
176.25% |
Total Annual
Fund Operating Expenses |
1.07% |
1.82% |
1.06% |
0.83% |
0.76% |
1.58% |
1.45% |
1.27% |
1.08% |
0.96% |
176.95% |
Expense Reimbursement
(3)
(4) |
N/A |
N/A |
N/A |
—% |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
(176.10)% |
Total Annual
Fund Operating Expenses after Expense Reimbursement |
1.07% |
1.82% |
1.06% |
0.83% |
0.76% |
1.58% |
1.45% |
1.27% |
1.08% |
0.96% |
0.85% |
|
|
|
(1) |
Expense information in the
table has been restated to reflect current fees. Effective December 31,
2015, Distribution and/or Service (12b-1) Fees for Class J were
reduced. |
(2) |
Based on estimated amounts for
the current fiscal year (R-6). |
(3) |
Principal Management
Corporation ("PMC"), the investment advisor, has contractually agreed to
limit the Fund’s expenses by paying, if necessary, expenses normally
payable by the Fund, (excluding interest expense, expenses related to fund
investments, acquired fund fees and expenses, and other extraordinary
expenses) to maintain "Other Expenses" (expressed as a percent of average
net assets on an annualized basis) not to exceed 0.20% for Class P shares.
It is expected that the expense limit will continue through the period
ending December 30, 2016; however, Principal Funds, Inc. and PMC, the
parties to the agreement, may mutually agree to terminate the expense
limit prior to the end of the period. |
(4) |
Principal Management
Corporation ("PMC"), the investment advisor, has contractually agreed to
limit the Fund’s expenses by paying, if necessary, expenses normally
payable by the Fund, (excluding interest expense, expenses related to fund
investments, acquired fund fees and expenses, and other extraordinary
expenses) to maintain a total level of operating expenses (expressed as a
percent of average net assets on an annualized basis) not to exceed 0.85%
for Class R-6 shares. It is expected that the expense limit will continue
through the period ending December 30, 2017; however, Principal Funds,
Inc. and PMC, the parties to the agreement, may mutually agree to
terminate the expense limit 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. 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 |
$480 |
$703 |
$943 |
$1,632 |
Class
C |
285 |
573 |
985 |
2,137 |
Class
J |
208 |
337 |
585 |
1,294 |
Class
P |
85 |
265 |
460 |
1,025 |
Institutional
Class |
78 |
243 |
422 |
942 |
Class
R-1 |
161 |
499 |
860 |
1,878 |
Class
R-2 |
148 |
459 |
792 |
1,735 |
Class
R-3 |
129 |
403 |
697 |
1,534 |
Class
R-4 |
110 |
343 |
595 |
1,317 |
Class
R-5 |
98 |
306 |
531 |
1,178 |
Class
R-6 |
87 |
812 |
1,187 |
1,668 |
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):
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
Class
C |
$185 |
$573 |
$985 |
$2,137 |
Class
J |
108 |
337 |
585 |
1,294 |
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 annualized portfolio turnover rate was 16.9% of the average value of its
portfolio.
Principal
Investment Strategies
Under normal circumstances, the Fund
invests at least 80% of its net assets, plus any borrowings for investment
purposes, in preferred securities at the time of purchase. Preferred securities
include preferred stock and various types of subordinated debt and convertible
securities, including contingent convertible securities (“CoCos”). Preferred
securities generally pay fixed rate dividends (though some are adjustable rate)
and are junior to all forms of the company’s senior debt, but may have
"preference" over common stock in the payment of dividends and the liquidation
of a company's assets. Most of the securities purchased by the Fund are
preferred securities of companies rated at the time of purchase BBB- or higher
by S&P Global Ratings ("S&P Global") or Baa3 or higher by Moody's
Investors Service, Inc. ("Moody's") or, if unrated, of comparable quality in the
opinion of the Sub-Advisor. The Fund also invests up to 25% of its assets in
below investment grade preferred securities and bonds (sometimes called “high
yield bonds” or "junk bonds") which are rated at the time of purchase Ba1 or
lower by Moody's and BB+ or lower by S&P Global (if the bond has been rated
by only one of those agencies, that rating will determine whether the bond is
below investment grade; if the bond has not been rated by either of those
agencies, the Sub-Advisor will determine whether the bond is of a quality
comparable to those rated below investment grade).
The Fund concentrates its
investments (invests more than 25% of its net assets) in securities in the U.S.
and non-U.S. financial services (i.e., banking, insurance and commercial
finance,) industry. The Fund also regularly invests in the real estate
investment trust ("REIT") and utility industries.
The Fund uses 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.
Specifically, the Fund employs active volatility mitigation strategies that buy
long and short vertical put option spreads and vertical call option spreads on
U.S. Treasury bond futures. Vertical spreads are the simultaneous purchase and
sale of two options of the same type with the same expiration date but two
different strike prices. The strike price is the fixed price at which the owner
of the option can buy (in the case of a call), or sell (in the case of a put),
the underlying security. This strategy seeks to produce gains regardless of the
directional movement of U.S. Treasuries, credit spreads and interest rates while
mitigating volatility.
During the fiscal year ended August
31, 2015, the average ratings of the Fund’s fixed-income assets, based on market
value at each month-end, were as follows (all ratings are by
Moody’s):
|
|
|
|
|
0.00% in securities
rated Aaa |
65.72% in securities rated
Baa |
0.00% in securities rated
Caa |
0.00% in securities rated
D |
0.28% in securities
rated Aa |
18.58% in securities rated
Ba |
0.00% in securities rated
Ca |
0.09% in securities not
rated |
12.41% in securities rated
A |
2.92% in securities
rated B |
0.00% in securities rated
C |
|
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, in alphabetical order, are:
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
interest payments will be canceled by the issuer or a regulatory authority, the
risk of ranking junior to other creditors in the event of a liquidation or other
bankruptcy-related event as a result of holding subordinated debt, the risk of
the Fund’s investment becoming further subordinated as a result of conversion
from debt to equity, the risk that principal amount due can be written down to a
lesser amount, and additional liquidity risks.
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 risks associated with equity
securities.
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 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
future; possible lack of a liquid secondary market for a future and the
resulting inability to close a forward 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. |
|
|
• |
Options.
Options involve
specific risks, including: imperfect correlation between the change in
market value of the instruments held by the fund and the price of the
options, counterparty risk, difference in trading hours for the options
markets and the markets for the underlying securities (rate movements can
take place in the underlying markets that cannot be reflected in the
options markets), and an insufficient liquid secondary market for
particular options. |
Foreign
Securities Risk. The
risks of foreign securities include loss of value as a result of: political or
economic instability; nationalization, expropriation or confiscatory taxation;
settlement delays; and limited government regulation (including less stringent
reporting, accounting, and disclosure standards than are required of U.S.
companies).
Hedging
Risk. A fund that
implements a hedging strategy using derivatives and/or securities could expose
the fund to the risk that can arise when a change in the value of a hedge does
not match a change in the value of the asset it hedges. In other words, the
change in value of the hedge could move in a direction that does not match the
change in value of the underlying asset, resulting in a risk of loss to the
fund.
High Yield
Securities Risk. High
yield fixed-income securities (commonly referred to as "junk bonds") are subject
to greater credit quality risk than higher rated fixed-income securities and
should be considered speculative.
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.
Preferred
Securities Risk. Preferred securities are securities
with a lower priority claim on assets or earnings than bonds and other debt
instruments in a company's capital structure, and therefore can be 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 the stated maturity date.
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 Risk.
A fund that serves as
an underlying fund for a fund of funds is subject to certain risks. When a fund
of funds reallocates or rebalances its investments, an underlying fund may
experience relatively large redemptions or investments. These transactions may
cause the underlying fund to sell portfolio securities to meet such redemptions,
or to invest cash from such investments, at times it would not otherwise do so,
and may as a result increase transaction costs and adversely affect underlying
fund performance. Moreover, a fund of fund’s redemptions or reallocations among
share classes of an underlying 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.
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.
Volatility
Mitigation Risk.
Volatility mitigation strategies may increase fund transaction costs, which
could increase losses or reduce gains. These strategies may not protect
the fund from market declines and may reduce the fund’s participation in market
gains.
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 by calling
1-800-222-5852 or online at:
|
|
• |
For Classes A, C, J, and P -
www.principalfunds.com. |
|
|
• |
For Institutional Class and
Classes R-1, R-2, R-3, R-4, R-5 and R-6 - www.principal.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 each share class of the Fund and 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 C shares (January 16, 2007), Class P shares
(September 27, 2010), and Class R-6 shares (___________), the performance
shown in the table for Classes C, P and R-6 shares is based on the performance
of the Fund's Institutional Class shares, adjusted to reflect the respective
fees and expenses of each class. 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 May 1,
2002.
Total Returns as
of December 31 (Class A shares)(1)
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q2
'09 |
38.89% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q3
'08 |
(20.97)% |
|
|
(1)
|
The year-to-date return
as of September 30, 2016 was 4.83% for Class A shares.
|
|
|
|
|
|
Average
Annual Total Returns |
For the
periods ended 12/31/2015 |
1 Year |
5 Years |
10
Years |
Class A
Return Before Taxes |
0.76% |
6.45% |
5.82% |
Class A
Return After Taxes on Distributions |
(1.07)% |
4.26% |
3.70% |
Class A
Return After Taxes on Distributions and Sale of Fund
Shares |
1.03% |
4.31% |
3.79% |
Class C
Return Before Taxes |
2.83% |
6.48% |
5.42% |
Class J
Return Before Taxes |
3.58% |
7.10% |
5.90% |
Class P
Return Before Taxes |
4.87% |
7.54% |
6.39% |
Institutional
Class Return Before Taxes |
5.04% |
7.62% |
6.54% |
Class R-1
Return Before Taxes |
4.12% |
6.72% |
5.63% |
Class R-2
Return Before Taxes |
4.26% |
6.87% |
5.77% |
Class R-3
Return Before Taxes |
4.33% |
7.04% |
5.96% |
Class R-4
Return Before Taxes |
4.54% |
7.22% |
6.14% |
Class R-5
Return Before Taxes |
4.75% |
7.40% |
6.29% |
Class R-6
Return Before Taxes |
4.94% |
7.51% |
6.43% |
BofA Merrill Lynch Fixed Rate
Preferred Securities Index (reflects no deduction for fees, expenses, or
taxes) |
7.58% |
7.19% |
3.30% |
BofA Merrill Lynch U.S. Capital
Securities Index (reflects no deduction for fees, expenses, or
taxes) |
0.86% |
7.02% |
5.24% |
Preferreds Blended Index
(reflects no deduction for fees, expenses, or taxes) |
4.18% |
7.32% |
4.12% |
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.
Performance of a blended index shows
how the Fund's performance compares to a blend of indices with similar
investment objectives. Performance of the components of the blended index are
also shown. The weightings for the Preferreds Blended Index are as follows: 50%
BofA Merrill Lynch Fixed Rate Preferred Securities Index and 50% BofA Merrill
Lynch U.S. Capital Securities Index. The custom or blended index returns reflect
the allocation in effect for the time period(s) for which fund returns are
disclosed. Previous weightings or allocations of the custom or blended index are
not restated.
Management
Investment
Advisor:
Principal Management
Corporation
Sub-Advisor and
Portfolio Managers:
Spectrum Asset Management, Inc.
|
|
• |
Fernando (“Fred”) Diaz (since
2010), Portfolio Manager |
|
|
• |
Roberto Giangregorio (since
2010), Portfolio Manager |
|
|
• |
L. Phillip Jacoby, IV (since
2002), Chief Investment Officer and Portfolio
Manager |
|
|
• |
Manu Krishnan (since 2010),
Portfolio Manager |
|
|
• |
Mark A. Lieb (since 2009),
President and Chief Executive Officer |
|
|
• |
Kevin Nugent (since 2014),
Vice President and Portfolio Manager |
Purchase and Sale
of Fund Shares
|
|
|
|
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) |
P,
Institutional, R-1, R-2, R-3, R-4, R-5 and R-6 |
There are no minimum initial or
subsequent investment requirements for eligible
purchasers. |
N/A |
|
|
(1) |
Some exceptions apply; see
"Purchase of Fund Shares - Minimum Investments" for more
information. |
|
|
(2) |
For accounts with an AIP, the
subsequent automatic investments must total $1,200 annually if the initial
$1,000 minimum has not been met. |
You may purchase or redeem shares on
any business day (normally any day when the New York Stock Exchange is open for
regular trading) through your plan, intermediary, or Financial Professional; by
sending a written request to Principal Funds at P.O. Box 8024, Boston, MA
02266-8024 (regular mail) or 30 Dan Road, Canton, MA 02021-2809 (overnight
mail); calling us at 1-800-222-5852; or accessing our website
(www.principalfunds.com).
Tax
Information
The Fund’s distributions you receive
are generally subject to federal income tax as ordinary income or capital gain
and may also be subject to state and local taxes, unless you are tax-exempt or
your account is tax-deferred in which case your distributions would be taxed
when withdrawn from the tax-deferred account.
Payments to
Broker-Dealers and Other Financial Intermediaries
For Class R-6 shares, the Fund and
its related companies do not pay broker-dealers or other financial
intermediaries (such as a bank, insurance company, investment adviser, etc.) for
the sale of Fund shares or related services.
For the other share classes, if you
purchase the Fund through a broker-dealer or other financial intermediary (such
as a bank, insurance company, investment adviser, etc.), the Fund and its
related companies may pay the intermediary for the sale of Fund shares and
related services. These payments may create a conflict of interest by
influencing the broker-dealer or other intermediary and your salesperson to
recommend the Fund over another investment, or to recommend one share class of
the Fund over another share class. Ask your salesperson or visit your financial
intermediary's website for more information.
REAL ESTATE
ALLOCATION FUND
|
|
Objective: |
The Fund seeks to provide
total return with income. |
Fees and Expenses
of the Fund
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Fund. You may
qualify for sales charge discounts if you and your family invest, or agree to
invest in the future, at least $50,000 in Class A shares of Principal
Funds, Inc. More information about these and other discounts is available from
your financial professional and in “Choosing a Share Class and The Costs of
Investing” beginning on page ___ of the Fund’s prospectus and “Multiple Class
Structure” beginning on page ___ of the Fund’s Statement of Additional
Information.
Shareholder Fees
(fees paid directly from your investment)
|
|
|
|
|
Share
Class |
|
A |
Inst. |
Maximum Sales Charge (Load)
Imposed on Purchases (as a percentage of offering price) |
5.50% |
None |
Maximum Deferred Sales Charge
(Load) (as a percentage of the offering price or NAV at the time Sales
Load is paid, whichever is less) |
1.00% |
None |
Annual
Fund Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
Share
Class |
|
A |
Inst. |
Management Fees |
0.00% |
0.00% |
Distribution and/or Service
(12b-1) Fees |
0.25% |
N/A |
Other Expenses |
31.13% |
338.94% |
Acquired Fund Fees and
Expenses |
0.77% |
0.77% |
Total Annual
Fund Operating Expenses |
32.15% |
339.71% |
Expense Reimbursement
(1) |
(30.88)% |
(338.79)% |
Total Annual
Fund Operating Expenses after Expense Reimbursement |
1.27% |
0.92% |
|
|
|
(1) |
Principal Management
Corporation ("PMC"), the investment advisor, has contractually agreed to
limit the Fund’s expenses by paying, if necessary, expenses normally
payable by the Fund, (excluding interest expense, expenses related to fund
investments, acquired fund fees and expenses, and other extraordinary
expenses) to maintain a total level of operating expenses (expressed as a
percent of average net assets on an annualized basis) not to exceed 0.50%
for Class A and 0.15% for Institutional Class shares. It is expected that
the expense limits will continue through the period ending December 30,
2016; however, Principal Funds, Inc. and PMC, the parties to the
agreement, may mutually agree to terminate the expense limits 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. The Example also assumes
that your investment has a 5% return each year and that the Fund’s operating
expenses remain the same. 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 |
$672 |
$5,380 |
$7,879 |
$10,124 |
Institutional
Class (1) |
94 |
32,175 |
208,904 |
(15,387,190) |
|
|
|
|
|
|
|
(1) |
As of August 31, 2015, the
Institutional Class of Real Estate Allocation Fund had approximately
$10,000 in net assets; therefore the example calculation renders unusual
cost examples for years other than those during which the expense
reimbursement is in place. |
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 December 31, 2014, date
operations commenced, through August 31, 2015, the Fund’s annualized portfolio
turnover rate was 33.5% 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 mutual funds that invest in the real estate industry at the time of
purchase. The Fund operates as a fund of funds and currently invests in the
following underlying funds of Principal Funds, Inc.: Global Real Estate
Securities Fund and Real Estate Debt Income Fund. The underlying funds invest in
equity and debt real estate securities of U.S. and non-U.S. issuers and are both
concentrated in the real estate industry; therefore, the Real Estate Allocation
Fund is considered concentrated in the real estate industry as well. A real
estate company has at least 50% of its assets, income or profits derived from
products or services related to the real estate industry. Real estate companies
include real estate investment trusts ("REITs") and companies with substantial
real estate holdings such as paper, lumber, hotel and entertainment companies as
well as those whose products and services relate to the real estate industry
include building supply manufacturers, mortgage lenders and mortgage servicing
companies.
The Fund allocates its investments
between the underlying funds, 25% to 75% in each underlying fund, based on
qualitative and quantitative analysis. The Fund, without shareholder approval,
may add, remove or substitute underlying funds when it deems appropriate.
Principal
Risks
The diversification of the Fund is
designed to moderate overall price volatility. However, the Fund is subject to
the particular risks of the underlying funds in the proportions in which the
Fund invests in them, and its share prices will fluctuate as the prices of
underlying fund shares rise or fall with changing market conditions. If you sell
your shares when their value is less than the price you paid, you will lose
money. The Fund operates as a fund of funds and thus bears both its own expenses
and, indirectly, its proportionate share of the expenses of the underlying funds
in which it invests. 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.
Funds of Funds
Risk
Fund shareholders bear indirectly
their proportionate share of the expenses of other investment companies in which
the Fund invests ("underlying funds"). The Fund's selection and weighting of
asset classes and allocation of investments in underlying funds may cause it to
underperform other funds with a similar investment objective. The Fund's
performance and risks correspond directly to the performance and risks of the
underlying funds in which it invests, proportionately in accordance with the
weightings of such investments, and there is no assurance that the underlying
funds will achieve their investment objectives. Management of the Fund entails
potential conflicts of interest: the Fund invests in affiliated underlying
funds; and the Advisor and its affiliates may earn different fees from different
underlying funds and may have an incentive to allocate more Fund assets to
underlying funds from which they receive higher fees.
Principal Risks
due to the Fund's Investments in Underlying Funds
Equity Securities
Risk. The value of
equity securities could decline if the issuer’s financial condition declines or
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
Stock Risk. If
growth companies do not increase their earnings at a rate expected by
investors, the market price of the 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. |
|
|
• |
Small and
Medium Market Capitalization Companies Risk . Investments in small and
medium sized companies may involve greater risk and price volatility than
investments in larger, more mature companies.
|
|
|
•
|
Value Stock
Risk. Value
stocks may continue to be undervalued by the market for extended periods,
including the entire period during which the stock is held by the fund, or
the events that the portfolio manager believed would cause the stock price
to increase may not occur as anticipated or at all. Moreover, a stock
judged 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 risk and credit quality
risk. The market value of fixed-income securities generally declines when
interest rates rise, and an issuer of fixed-income securities could default on
its payment obligations.
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.
|
|
•
|
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.
|
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.
Preferred
Securities Risk. Preferred securities are securities
with a lower priority claim on assets or earnings than bonds and other debt
instruments in a company's capital structure, and therefore can be 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 the stated maturity date.
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 Risk.
A fund that serves as
an underlying fund for a fund of funds is subject to certain risks. When a fund
of funds reallocates or rebalances its investments, an underlying fund may
experience relatively large redemptions or investments. These transactions may
cause the underlying fund to sell portfolio securities to meet such redemptions,
or to invest cash from such investments, at times it would not otherwise do so,
and may as a result increase transaction costs and adversely affect underlying
fund performance. Moreover, a fund of fund’s redemptions or reallocations among
share classes of an underlying 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).
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 by calling
1-800-222-5852 or online at:
|
|
• |
For Class A -
www.principalfunds.com. |
|
|
• |
For Institutional Class -
www.principal.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). The table shows, for each
share class of the Fund and 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 (December 31, 2014).
Total Returns as
of December 31 (Class A shares) (1)
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q1
'15 |
2.43% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q2
'15 |
(4.31)% |
|
|
(1)
|
The year-to-date return
as of September 30, 2016 was 6.55% for Class A shares.
|
|
|
|
|
Average
Annual Total Returns |
For the
periods ended 12/31/2015 |
1 Year |
Life of
Fund |
Class A
Return Before Taxes |
(5.67)% |
(5.67)% |
Class A
Return After Taxes on Distributions |
(6.63)% |
(6.63)% |
Class A
Return After Taxes on Distributions and Sale of Fund
Shares |
(3.18)% |
(3.18)% |
Institutional
Class Return Before Taxes |
0.11% |
0.11% |
Bloomberg Barclays CMBS ERISA
Eligible Index (reflects no deduction for fees, expenses, or
taxes) |
0.97% |
0.97% |
FTSE EPRA/NAREIT Developed
Index (reflects no deduction for fees, expenses, or taxes) |
(0.79)% |
(0.79)% |
Real Estate Allocation Blended
Index (reflects no deduction for fees, expenses, or taxes) |
0.22% |
0.22% |
After-tax returns are calculated
using the historical highest individual federal marginal income tax rates and do
not reflect the impact of state and local taxes. Actual after-tax returns depend
on an investor’s tax situation and may differ from those shown. The after-tax
returns shown are not relevant to investors who hold their Fund shares through
tax-deferred arrangements, such as 401(k) plans or individual retirement
accounts. After-tax returns are shown for Class A shares only and would be
different for the other share classes.
Performance of a blended index shows
how the Fund's performance compares to a blend of indices with similar
investment objectives. Performance of the components of the blended index are
also shown. The weightings for the Real Estate Allocation Blended Index are as
follows: 50% Bloomberg Barclays CMBS ERISA Eligible Index and 50% FTSE
EPRA/NAREIT Developed Index. The custom or blended index returns reflect the
allocation in effect for the time period(s) for which fund returns are
disclosed. Previous weightings or allocations of the custom or blended index are
not restated.
Management
Investment
Advisor:
Principal Management
Corporation
Sub-Advisor and
Portfolio Managers:
Principal Real Estate Investors,
LLC
|
|
• |
Indraneel ("Indy") Karlekar
(since 2014), Portfolio Manager |
|
|
• |
Marc Peterson (since 2014),
Portfolio Manager |
|
|
• |
Kelly D. Rush (since 2014),
Portfolio Manager |
Purchase and Sale
of Fund Shares
|
|
|
|
Share
Class |
Investment
Type |
Purchase
Minimum
Per
Fund |
A |
Initial
Investment |
$1,000(1) |
A |
Initial Investment for accounts
with an Automatic Investment Plan (AIP) |
$100 |
A |
Subsequent
Investments |
$100(1)(2) |
Institutional |
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 8024, Boston, MA
02266-8024 (regular mail) or 30 Dan Road, Canton, MA 02021-2809 (overnight
mail); calling us at 1-800-222-5852; or accessing our website
(www.principalfunds.com).
Tax
Information
The Fund’s distributions you receive
are generally subject to federal income tax as ordinary income or capital gain
and may also be subject to state and local taxes, unless you are tax-exempt or
your account is tax-deferred in which case your distributions would be taxed
when withdrawn from the tax-deferred account.
Payments to
Broker-Dealers and Other Financial Intermediaries
If you purchase the Fund through a
broker-dealer or other financial intermediary (such as a bank, insurance
company, investment adviser, etc.), the Fund and its related companies may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment, or to recommend one share class of the Fund over another share
class. Ask your salesperson or visit your financial intermediary's website for
more information.
REAL ESTATE DEBT
INCOME FUND
|
|
Objective: |
The Fund seeks to provide
current income. |
Fees and Expenses
of the Fund
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Fund. You may
qualify for sales charge discounts if you and your family invest, or agree to
invest in the future, at least $100,000 in Class A shares of Principal
Funds, Inc. More information about these and other discounts is available from
your financial professional and in “Choosing a Share Class and The Costs of
Investing” beginning on page ___ of the Fund’s prospectus and “Multiple Class
Structure” beginning on page ___ of the Fund’s Statement of Additional
Information.
Shareholder Fees
(fees paid directly from your investment)
|
|
|
|
|
|
|
Share
Class |
|
A |
P |
Inst. |
R-6 |
Maximum Sales Charge (Load)
Imposed on Purchases (as a percentage of offering price) |
3.75% |
None |
None |
None |
Maximum Deferred Sales Charge
(Load) (as a percentage of the offering price or NAV at the time Sales
Load is paid, whichever is less) |
1.00% |
None |
None |
None |
Annual
Fund Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
|
|
Share
Class |
|
A |
P |
Inst. |
R-6 |
Management Fees |
0.55% |
0.55% |
0.55% |
0.55% |
Distribution and/or Service
(12b-1) Fees |
0.25% |
N/A |
N/A |
N/A |
Other Expenses (1) |
0.34% |
0.34% |
0.29% |
176.36% |
Total Annual
Fund Operating Expenses |
1.14% |
0.89% |
0.84% |
176.91% |
Expense Reimbursement
(2)
(3) |
(0.14)% |
(0.14)% |
(0.14)% |
(176.21)% |
Total Annual
Fund Operating Expenses after Expense Reimbursement |
1.00% |
0.75% |
0.70% |
0.70% |
|
|
|
|
|
(1) |
Based on estimated amounts for
the current fiscal year (Class P and Class R-6). |
(2) |
Principal Management
Corporation ("PMC"), the investment advisor, has contractually agreed to
limit the Fund’s expenses by paying, if necessary, expenses normally
payable by the Fund, (excluding interest expense, expenses related to fund
investments, acquired fund fees and expenses, and other extraordinary
expenses) to maintain a total level of operating expenses (expressed as a
percent of average net assets on an annualized basis) not to exceed 1.00%
for Class A and 0.70% for Institutional Class shares. In addition, for
Class P, the expense limit will maintain "Other Expenses" (expressed as a
percent of average net assets on an annualized basis) not to exceed 0.20%,
(excluding interest expense, expenses related to fund investments,
acquired fund fees and expenses, and other extraordinary expenses). It is
expected that the expense limits will continue through the period ending
December 30, 2016; however, Principal Funds, Inc. and PMC, the parties to
the agreement, may mutually agree to terminate the expense limits prior to
the end of the period. |
(3) |
Principal Management
Corporation ("PMC"), the investment advisor, has contractually agreed to
limit the Fund’s expenses by paying, if necessary, expenses normally
payable by the Fund, (excluding interest expense, expenses related to fund
investments, acquired fund fees and expenses, and other extraordinary
expenses) to maintain a total level of operating expenses (expressed as a
percent of average net assets on an annualized basis) not to exceed 0.70%
for Class R-6 shares. It is expected that the expense limit will continue
through the period ending December 30, 2017; however, Principal Funds,
Inc. and PMC, the parties to the agreement, may mutually agree to
terminate the expense limit 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. The Example also assumes
that your investment has a 5% return each year and that the Fund’s operating
expenses remain the same. 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 |
$473 |
$710 |
$966 |
$1,697 |
Class
P |
77 |
270 |
479 |
1,083 |
Institutional
Class |
72 |
254 |
452 |
1,024 |
Class
R-6 |
72 |
799 |
1,176 |
1,657 |
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 December 31, 2014, date
operations commenced, through August 31, 2015, the Fund’s annualized portfolio
turnover rate was 42.2% 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 debt securities of U.S. companies principally engaged in the real
estate industry at the time of purchase. A real estate company has at least 50%
of its assets, income or profits derived from products or services related to
the real estate industry. Real estate companies include real estate investment
trusts ("REITs") and companies with substantial real estate holdings such as
paper, lumber, hotel and entertainment companies as well as those whose products
and services relate to the real estate industry include building supply
manufacturers, mortgage lenders and mortgage servicing companies. Of those real
estate industry investments, the Fund will invest primarily in securitized
products, including commercial mortgage-backed securities (“CMBS”), which are
bonds that are secured by first mortgages on commercial real estate. The Fund
will also invest in debt and preferred securities issued by REITs. REITs are
pooled investment vehicles that invest in income producing real estate, real
estate related loans, or other types of real estate interests. REITs are
corporations or business trusts that are permitted to eliminate corporate level
federal income taxes by meeting certain requirements of the Internal Revenue
Code. The Fund is not managed to a particular maturity or duration.
The Fund concentrates its
investments (invest more than 25% of its net assets) in securities in the real
estate industry.
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. As a result, changes
in the value of a single investment could cause greater fluctuations in the
Fund's share price than would occur in a more diversified fund.
During the fiscal year ended August
31, 2015, the average ratings of the Fund’s fixed-income assets, based on market
value at each month-end, were as follows (all ratings are by
Moody’s):
|
|
|
|
|
34.97% in securities rated
Aaa |
20.63% in securities rated
Baa |
2.32% in securities
rated Caa |
0.00% in securities
rated D |
2.00% in securities
rated Aa |
4.69% in securities
rated Ba |
0.00% in securities
rated Ca |
15.11% in securities not
rated |
9.02% in securities
rated A |
11.26% in securities rated
B |
0.00% in securities
rated C |
|
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, in alphabetical order,
are:
Fixed-Income
Securities Risk.
Fixed-income securities are subject to interest rate risk and credit quality
risk. The market value of fixed-income securities generally declines when
interest rates rise, and an issuer of fixed-income securities could default on
its payment obligations.
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.
|
|
•
|
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.
|
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.
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.
Preferred
Securities Risk. Preferred securities are securities
with a lower priority claim on assets or earnings than bonds and other debt
instruments in a company's capital structure, and therefore can be 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 the stated maturity date.
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 Risk.
A fund that serves as
an underlying fund for a fund of funds is subject to certain risks. When a fund
of funds reallocates or rebalances its investments, an underlying fund may
experience relatively large redemptions or investments. These transactions may
cause the underlying fund to sell portfolio securities to meet such redemptions,
or to invest cash from such investments, at times it would not otherwise do so,
and may as a result increase transaction costs and adversely affect underlying
fund performance. Moreover, a fund of fund’s redemptions or reallocations among
share classes of an underlying 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).
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 by calling
1-800-222-5852 or online at:
|
|
• |
For Classes A and P -
www.principalfunds.com. |
|
|
• |
For Institutional Class and
Class R-6 - www.principal.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). The table shows, for each
share class of the Fund and 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 (December 31, 2014).
For periods prior to the inception
date of Class P shares (June 15, 2015) and Class R-6 shares (___________),
the performance shown in the table for Classes P and R-6 shares is based on the
performance of the Fund's Institutional Class shares, adjusted to reflect the
respective fees and expenses of each class. 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
December 31, 2014.
Total Returns as
of December 31 (Class A shares) (1)
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q1
'15 |
0.73% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q4
'15 |
(1.29)% |
|
|
(1)
|
The year-to-date return
as of September 30, 2016 was 5.85% for Class A shares. During
2016, the Class experienced a significant withdrawal of monies by an
affiliate. As the remaining shareholders held relatively small positions,
the total return amounts expressed herein are greater than those that
would have been experienced without the withdrawal.
|
|
|
|
|
Average
Annual Total Returns |
For the
periods ended 12/31/2015 |
1 Year |
Life of
Fund |
Class A
Return Before Taxes |
(4.79)% |
(4.79)% |
Class A
Return After Taxes on Distributions |
(6.15)% |
(6.15)% |
Class A
Return After Taxes on Distributions and Sale of Fund
Shares |
(2.70)% |
(2.70)% |
Class P
Return Before Taxes |
(0.96)% |
(0.96)% |
Institutional
Class Return Before Taxes |
(0.81)% |
(0.81)% |
Class R-6
Return Before Taxes |
(0.92)% |
(0.92)% |
Bloomberg Barclays CMBS ERISA
Eligible Index (reflects no deduction for fees, expenses, or
taxes) |
0.97% |
0.97% |
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.
Management
Investment
Advisor:
Principal Management
Corporation
Sub-Advisor and
Portfolio Managers:
Principal Real Estate Investors,
LLC
|
|
• |
Scott M. Carson (since 2014),
Portfolio Manager |
|
|
• |
Marc Peterson (since 2014),
Portfolio Manager |
Purchase and Sale
of Fund Shares
|
|
|
|
Share
Class |
Investment
Type |
Purchase
Minimum
Per
Fund |
A |
Initial
Investment |
$1,000(1) |
A |
Initial Investment for accounts
with an Automatic Investment Plan (AIP) |
$100 |
A |
Subsequent
Investments |
$100(1)(2) |
P,
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 8024, Boston, MA
02266-8024 (regular mail) or 30 Dan Road, Canton, MA 02021-2809 (overnight
mail); calling us at 1-800-222-5852; or accessing our website
(www.principalfunds.com).
Tax
Information
The Fund’s distributions you receive
are generally subject to federal income tax as ordinary income or capital gain
and may also be subject to state and local taxes, unless you are tax-exempt or
your account is tax-deferred in which case your distributions would be taxed
when withdrawn from the tax-deferred account.
Payments to
Broker-Dealers and Other Financial Intermediaries
For Class R-6 shares, the Fund and
its related companies do not pay broker-dealers or other financial
intermediaries (such as a bank, insurance company, investment adviser, etc.) for
the sale of Fund shares or related services.
For the other share classes, if you
purchase the Fund through a broker-dealer or other financial intermediary (such
as a bank, insurance company, investment adviser, etc.), the Fund and its
related companies may pay the intermediary for the sale of Fund shares and
related services. These payments may create a conflict of interest by
influencing the broker-dealer or other intermediary and your salesperson to
recommend the Fund over another investment, or to recommend one share class of
the Fund over another share class. Ask your salesperson or visit your financial
intermediary's website for more information.
SMALL-MIDCAP
DIVIDEND INCOME FUND
|
|
Objective: |
The Fund seeks to provide
current income and long-term growth of income and
capital. |
Fees and Expenses
of the Fund
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Fund. You may
qualify for sales charge discounts if you and your family invest, or agree to
invest in the future, at least $50,000 in Class A shares of Principal
Funds, Inc. More information about these and other discounts is available from
your financial professional and in “Choosing a Share Class and The Costs of
Investing” beginning on page ___ of the Fund’s prospectus and “Multiple Class
Structure” beginning on page ___ of the Fund’s Statement of Additional
Information.
Shareholder Fees
(fees paid directly from your investment)
|
|
|
|
|
|
|
|
Share
Class |
|
A |
C |
P |
Inst. |
R-6 |
Maximum Sales Charge (Load)
Imposed on Purchases (as a percentage of offering price) |
5.50% |
None |
None |
None |
None |
Maximum Deferred Sales Charge
(Load) (as a percentage of the offering price or NAV at the time Sales
Load is paid, whichever is less) |
1.00% |
1.00% |
None |
None |
None |
Annual Fund
Operating Expenses
(expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
|
|
|
Share
Class |
|
A |
C |
P |
Inst. |
R-6 |
Management Fees |
0.78% |
0.78% |
0.78% |
0.78% |
0.78% |
Distribution and/or Service
(12b-1) Fees |
0.25% |
1.00% |
N/A |
N/A |
N/A |
Other Expenses (1) |
0.15% |
0.19% |
0.12% |
0.10% |
176.26% |
Acquired Fund Fees and
Expenses |
0.42% |
0.42% |
0.42% |
0.42% |
0.42% |
Total Annual
Fund Operating Expenses |
1.60% |
2.39% |
1.32% |
1.30% |
177.46% |
Expense Reimbursement
(2)
(3) |
N/A |
—% |
—% |
—% |
(176.16)% |
Total Annual
Fund Operating Expenses after Expense Reimbursement |
1.60% |
2.39% |
1.32% |
1.30% |
1.30% |
|
|
|
|
|
|
|
(1) |
Based on estimated amounts for
the current fiscal year (R-6). |
(2) |
Principal Management
Corporation ("PMC"), the investment advisor, has contractually agreed to
limit the Fund’s expenses by paying, if necessary, expenses normally
payable by the Fund, (excluding interest expense, expenses related to fund
investments, acquired fund fees and expenses, and other extraordinary
expenses) to maintain a total level of operating expenses (expressed as a
percent of average net assets on an annualized basis) not to exceed 2.15%
for Class C, and 0.88% for Institutional Class shares. In addition, for
Class P, the expense limit will maintain "Other Expenses" (expressed as a
percent of average net assets on an annualized basis) not to exceed 0.20%,
(excluding interest expense, expenses related to fund investments,
acquired fund fees and expenses, and other extraordinary expenses). It is
expected that the expense limits will continue through the period ending
December 30, 2016; however, Principal Funds, Inc. and PMC, the parties to
the agreement, may mutually agree to terminate the expense limits prior to
the end of the period. |
(3) |
Principal Management
Corporation ("PMC"), the investment advisor, has contractually agreed to
limit the Fund’s expenses by paying, if necessary, expenses normally
payable by the Fund, (excluding interest expense, expenses related to fund
investments, acquired fund fees and expenses, and other extraordinary
expenses) to maintain a total level of operating expenses (expressed as a
percent of average net assets on an annualized basis) not to exceed 0.88%
for Class R-6 shares. It is expected that the expense limit will continue
through the period ending December 30, 2017; however, Principal Funds,
Inc. and PMC, the parties to the agreement, may mutually agree to
terminate the expense limit 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. 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 |
$704 |
$1,027 |
$1,373 |
$2,346 |
Class
C |
342 |
745 |
1,275 |
2,726 |
Class
P |
134 |
418 |
723 |
1,590 |
Institutional
Class |
132 |
412 |
713 |
1,568 |
Class
R-6 |
132 |
830 |
1,197 |
1,683 |
With respect to Class C shares, you
would pay the following expenses if you did not redeem your shares (all other
classes would be the same as in the above example):
|
|
|
|
|
|
|
1
year |
3
years |
5
years |
10
years |
Class
C |
$242 |
$745 |
$1,275 |
$2,726 |
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 annualized portfolio turnover rate was 29.3% 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 dividend-paying equity securities of companies with small to medium
market capitalizations at the time of purchase. For this Fund, companies with
small to medium market capitalizations are those with market capitalizations
similar to companies in the Russell 2500 Value Index (as of November 30, 2015,
the range of the index was between approximately $27.0 million and $13.2
billion). The Fund invests in value equity securities, an investment strategy
that emphasizes buying equity securities that appear to be undervalued. The Fund
invests in the securities of foreign issuers, real estate investment trusts,
preferred securities, convertible securities, master limited partnerships, and
royalty trusts.
Principal
Risks
The value of your investment in the
Fund changes with the value of the Fund's investments. Many factors affect that
value, and it is possible to lose money by investing in the Fund. An investment
in the Fund is not a deposit of a bank and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. The
principal risks of investing in the Fund, in alphabetical order,
are:
Convertible
Securities Risk.
Convertible securities are bonds, notes, debentures, preferred stock or other
securities which are convertible into common stock. Convertible securities are
subject to both the credit and interest rate risks associated with fixed income
securities and to the stock market risk associated with equity securities.
Equity Securities
Risk. The value of
equity securities could decline if the issuer’s financial condition declines or
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.
|
|
• |
Small and
Medium Market Capitalization Companies . Investments in small and
medium sized companies may involve greater risk and price volatility than
investments in larger, more mature companies.
|
|
|
•
|
Value Stock
Risk. Value
stocks may continue to be undervalued by the market for extended periods,
including the entire period during which the stock is held by the fund, or
the events that the portfolio manager believed would cause the stock price
to increase may not occur as anticipated or at all. Moreover, a stock
judged 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).
Master Limited
Partnership ("MLP") Risk. MLPs are publicly-traded limited
partnership interests or units. An MLP that invests in a particular industry
(e.g., oil and gas) will be harmed by detrimental economic events within that
industry. As partnerships, MLPs may be subject to less regulation (and less
protection for investors) under state laws than corporations. In addition, MLPs
may be subject to state taxation in certain jurisdictions, which may reduce the
amount of income an MLP pays to its investors.
Preferred
Securities Risk. Preferred securities are securities
with a lower priority claim on assets or earnings than bonds and other debt
instruments in a company's capital structure, and therefore can be 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 the stated maturity date.
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 Risk.
A fund that serves as
an underlying fund for a fund of funds is subject to certain risks. When a fund
of funds reallocates or rebalances its investments, an underlying fund may
experience relatively large redemptions or investments. These transactions may
cause the underlying fund to sell portfolio securities to meet such redemptions,
or to invest cash from such investments, at times it would not otherwise do so,
and may as a result increase transaction costs and adversely affect underlying
fund performance. Moreover, a fund of fund’s redemptions or reallocations among
share classes of an underlying 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.
Royalty Trust
Risk. Royalty trust
revenues and cash flows could be adversely affected by a sustained decline in
demand for natural resource and related products resulting from a recession or
other adverse economic conditions, an increase in the market price of the
underlying commodity, higher taxes or other regulatory actions that increase
costs, a shift in consumer demand, or other conditions. Rising interest rates
could adversely affect the performance, and limit the capital appreciation, of
royalty trusts because of the increased availability of alternative investments
at more competitive yields. Fund shareholders will indirectly bear their
proportionate share of the royalty trusts' expenses.
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 by calling
1-800-222-5852 or online at:
|
|
• |
For Classes A, C, and P -
www.principalfunds.com. |
|
|
• |
For Institutional Class and
Class R-6 - www.principal.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 each share class of the Fund and for the last one, five,
and ten calendar year periods (or, if shorter, the life of the Fund), how the
Fund’s average annual total returns compare with those of one or more broad
measures of market performance.
Life of Fund returns are measured
from the date the Fund's shares were first sold (June 6, 2011).
For periods prior to the inception
date of Class C shares (June 14, 2012) and Class R-6 shares (_______), the
performance shown in the table for Classes C and R-6 shares is based on the
performance of the Fund's Institutional Class shares, adjusted to reflect the
respective fees and expenses of each class. 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 for the newer class. 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 on June 6, 2011.
During 2011, the Fund processed a
significant (relative to Class P) "As-Of" transaction that resulted in a gain to
the remaining shareholders of Class P. "As-of" transaction processing occurs
when a fund transaction is processed after its receipt date but "as of" the date
required by SEC rule. In accordance with the Fund's shareholder processing
policies, this benefit inures all shareholders of Class P. Had such a gain not
been recognized, the total return amounts expressed herein would have been
smaller.
Total Returns as
of December 31 (Class A shares)(1)
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q1
'13 |
12.32% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q3
'15 |
(8.49)% |
|
|
(1)
|
The year-to-date return
as of September 30, 2016 was 18.79% for Class A shares
|
|
|
|
|
|
Average
Annual Total Returns |
|
For the
periods ended 12/31/2015 |
1 Year |
Life of
Fund |
|
Class A
Return Before Taxes |
(8.91)% |
8.39% |
|
Class A
Return After Taxes on Distributions |
(9.92)% |
7.29% |
|
Class A
Return After Taxes on Distributions and Sale of Fund
Shares |
(4.35)% |
6.44% |
|
Class C
Return Before Taxes |
(5.27)% |
8.83% |
|
Class P
Return Before Taxes |
(3.28)% |
10.30% |
(1) |
Institutional
Class Return Before Taxes |
(3.26)% |
10.22% |
|
Class R-6
Return Before Taxes |
(3.29)% |
10.12% |
|
Russell 2500 Value Index
(reflects no deduction for fees, expenses, or taxes) |
(5.49)% |
9.45% |
|
(1) During 2011, the Fund processed
a significant (relative to Class P) "As-Of" transaction that resulted in a
gain to the remaining shareholders of Class P. "As-of" transaction
processing occurs when a fund transaction is processed after its receipt
date but "as of" the date required by SEC rule. In accordance with the
Fund's shareholder processing policies, this benefit inures all
shareholders of Class P. Had such a gain not been recognized, the total
return amounts expressed herein would have been smaller. |
|
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.
Management
Investment
Advisor:
Principal Management
Corporation
Sub-Advisor and
Portfolio Managers:
Edge Asset Management, Inc.
|
|
• |
Daniel R. Coleman (since
2011), Head of Equities, Portfolio
Manager |
|
|
• |
David W. Simpson (since 2011),
Portfolio Manager |
Purchase and Sale
of Fund Shares
|
|
|
|
Share
Class |
Investment
Type |
Purchase
Minimum
Per
Fund |
A and
C |
Initial
Investment |
$1,000(1) |
A and
C |
Initial Investment for accounts
with an Automatic Investment Plan (AIP) |
$100 |
A and
C |
Subsequent
Investments |
$100(1)(2) |
P,
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 8024, Boston, MA
02266-8024 (regular mail) or 30 Dan Road, Canton, MA 02021-2809 (overnight
mail); calling us at 1-800-222-5852; or accessing our website
(www.principalfunds.com).
Tax
Information
The Fund’s distributions you receive
are generally subject to federal income tax as ordinary income or capital gain
and may also be subject to state and local taxes, unless you are tax-exempt or
your account is tax-deferred in which case your distributions would be taxed
when withdrawn from the tax-deferred account.
Payments to
Broker-Dealers and Other Financial Intermediaries
For Class R-6 shares, the Fund and
its related companies do not pay broker-dealers or other financial
intermediaries (such as a bank, insurance company, investment adviser, etc.) for
the sale of Fund shares or related services.
For the other share classes, if you
purchase the Fund through a broker-dealer or other financial intermediary (such
as a bank, insurance company, investment adviser, etc.), the Fund and its
related companies may pay the intermediary for the sale of Fund shares and
related services. These payments may create a conflict of interest by
influencing the broker-dealer or other intermediary and your salesperson to
recommend the Fund over another investment, or to recommend one share class of
the Fund over another share class. Ask your salesperson or visit your financial
intermediary's website for more information.
SYSTEMATEX
INTERNATIONAL FUND
Objective: The Fund seeks long-term growth of
capital.
Fees and Expenses
of the Fund
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Fund.
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. |
R-6 |
Management Fees |
0.60% |
0.60% |
Distribution and/or Service
(12b-1) Fees |
N/A |
N/A |
Other Expenses (1) |
0.44% |
0.40% |
Total Annual
Fund Operating Expenses |
1.04% |
1.00% |
Expense Reimbursement
(2) |
(0.29)% |
(0.38)% |
Total Annual
Fund Operating Expenses after Expense Reimbursement |
0.75% |
0.62% |
(1) |
Based on estimated amounts for
the current fiscal year. |
(2) |
Principal Management
Corporation ("PMC"), the investment advisor, has contractually agreed to
limit the Fund’s expenses by paying, if necessary, expenses normally
payable by the Fund, (excluding interest expense, expenses related to fund
investments, acquired fund fees and expenses, and other extraordinary
expenses) to maintain a total level of operating expenses (expressed as a
percent of average net assets on an annualized basis) not to exceed 0.75%
for Institutional Class and 0.62% for R-6 shares. It is expected that the
expense limits will continue through the period ending December 30, 2016;
however, Principal Funds, Inc. and PMC, the parties to the agreement, may
mutually agree to terminate the expense limits 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. The Example assumes that
your investment has a 5% return each year and that the Fund’s operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
|
|
|
|
|
1
year |
3
years |
Institutional
Class |
$77 |
$302 |
Class
R-6 |
63 |
281 |
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. This is a new fund and does
not yet have a portfolio turnover rate to disclose.
Principal
Investment Strategies
The Fund invests primarily in
foreign equity securities. The Fund has no limitation on the percentage of
assets invested in any one country or denominated in any one currency, but the
Fund typically invests in foreign securities of at least 3 countries and at
least 40% of its net assets in foreign securities. The Fund invests in equity
securities of small, medium, and large market capitalization companies and in
growth and value stocks. The Fund actively trades portfolio securities. In an
attempt to match or exceed the performance of the Fund's benchmark index, the
Fund uses a systematic approach to purchase certain equity securities in the
index and to exclude or adjust the weight of certain equity securities relative
to the index.
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, in alphabetical order,
are:
Equity Securities
Risk. The value of
equity securities could decline if the issuer’s financial condition declines or
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
Stock Risk. If
growth companies do not increase their earnings at a rate expected by
investors, the market price of the 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. |
|
|
• |
Small and
Medium Market Capitalization Companies Risk . Investments in small and
medium sized companies may involve greater risk and price volatility than
investments in larger, more mature companies.
|
|
|
•
|
Value Stock
Risk. Value
stocks may continue to be undervalued by the market for extended periods,
including the entire period during which the stock is held by the fund, or
the events that the portfolio manager believed would cause the stock price
to increase may not occur as anticipated or at all. Moreover, a stock
judged 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).
Portfolio
Turnover (Active Trading) Risk. A fund that has a portfolio turnover
rate over 100% is considered actively traded. Actively trading portfolio
securities may accelerate realization of taxable gains and losses, lower fund
performance and may result in high portfolio turnover rates and increased
brokerage costs.
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 EAFE NR Index. Performance
information provides an 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 by
calling 1-800-222-5852 or online at www.principal.com.
Management
Investment
Advisor:
Principal Management
Corporation
Sub-Advisor and
Portfolio Managers:
Principal Global Investors,
LLC
|
|
• |
Mark R. Nebelung (since 2015),
Portfolio Manager |
|
|
• |
Jeffrey A. Schwarte (since
2015), Portfolio Manager |
Purchase and Sale
of Fund Shares
|
|
|
|
Share
Class |
Investment
Type |
Purchase
Minimum Per Fund |
Institutional
and R-6 |
There are no minimum initial or
subsequent investment requirements for eligible purchases. |
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 8024, Boston, MA
02266-8024 (regular mail) or 30 Dan Road, Canton, MA 02021-2809 (overnight
mail); calling us at 1-800-222-5852; or accessing our website
(www.principalfunds.com).
Tax
Information
The Fund’s distributions you receive
are generally subject to federal income tax as ordinary income or capital gain
and may also be subject to state and local taxes, unless you are tax-exempt or
your account is tax-deferred in which case your distributions would be taxed
when withdrawn from the tax-deferred account.
Payments to
Broker-Dealers and Other Financial Intermediaries
For Class R-6 shares, the Fund and
its related companies do not pay broker-dealers or other financial
intermediaries (such as a bank, insurance company, investment adviser, etc.) for
the sale of Fund shares or related services.
For the other share classes, if you
purchase the Fund through a broker-dealer or other financial intermediary (such
as a bank, insurance company, investment adviser, etc.), the Fund and its
related companies may pay the intermediary for the sale of Fund shares and
related services. These payments may create a conflict of interest by
influencing the broker-dealer or other intermediary and your salesperson to
recommend the Fund over another investment, or to recommend one share class of
the Fund over another share class. Ask your salesperson or visit your financial
intermediary's website for more information.
SYSTEMATEX LARGE
VALUE FUND
Objective: The Fund seeks long-term growth of
capital.
Fees and Expenses
of the Fund
This table describes the fees and
expenses that you may pay if you buy and hold shares of the Fund.
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 |
|
R-6 |
Management Fees |
0.40% |
Distribution and/or Service
(12b-1) Fees |
N/A |
Other Expenses (1) |
0.21% |
Total Annual
Fund Operating Expenses |
0.61% |
Expense Reimbursement
(2) |
(0.19)% |
Total Annual
Fund Operating Expenses after Expense Reimbursement |
0.42% |
(1) |
Based on estimated amounts for
the current fiscal year. |
(2) |
Principal Management
Corporation ("PMC"), the investment advisor, has contractually agreed to
limit the Fund’s expenses by paying, if necessary, expenses normally
payable by the Fund, (excluding interest expense, expenses related to fund
investments, acquired fund fees and expenses, and other extraordinary
expenses) to maintain a total level of operating expenses (expressed as a
percent of average net assets on an annualized basis) not to exceed 0.42%
for R-6 shares. It is expected that the expense limit will continue
through the period ending December 30, 2016; however, Principal Funds,
Inc. and PMC, the parties to the agreement, may mutually agree to
terminate the expense limit 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. The Example assumes that
your investment has a 5% return each year and that the Fund’s operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
|
|
|
|
|
1
year |
3
years |
Class
R-6 |
$43 |
$176 |
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. This is a new fund and does
not yet have a portfolio turnover rate to disclose.
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. For this Fund, companies with large market capitalizations
are those with market capitalizations within the range of companies comprising
the Russell 1000®
Value Index
(which as of November 30, 2015 ranged between approximately $453.0 million and
$439.7 billion). The Fund invests in value equity securities, an investment
strategy that emphasizes buying equity securities that appear to be undervalued.
The Fund actively trades portfolio securities. In an attempt to match or exceed
the performance of the Fund's benchmark index, the Fund uses a systematic
approach to purchase certain equity securities in the index and to exclude or
adjust the weight of certain equity securities relative to the index.
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, in alphabetical order,
are:
Equity Securities
Risk. The value of
equity securities could decline if the issuer’s financial condition declines or
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.
|
|
•
|
Value Stock
Risk. Value
stocks may continue to be undervalued by the market for extended periods,
including the entire period during which the stock is held by the fund, or
the events that the portfolio manager believed would cause the stock price
to increase may not occur as anticipated or at all. Moreover, a stock
judged to be undervalued actually may be appropriately priced at a low
level and therefore would not be profitable for the fund.
|
Portfolio
Turnover (Active Trading) Risk. A fund that has a portfolio turnover
rate over 100% is considered actively traded. Actively trading portfolio
securities may accelerate realization of taxable gains and losses, lower fund
performance and may result in high portfolio turnover rates and increased
brokerage costs.
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 Russell 1000 Value Index.
Performance information provides an 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 by calling 1-800-222-5852 or online at
www.principal.com.
Management
Investment
Advisor:
Principal Management
Corporation
Sub-Advisor and
Portfolio Managers:
Principal Global Investors,
LLC
|
|
• |
Mark R. Nebelung (since 2015),
Portfolio Manager |
|
|
• |
Jeffrey A. Schwarte (since
2015), Portfolio Manager |
Purchase and Sale
of Fund Shares
|
|
|
|
Share
Class |
Investment
Type |
Purchase
Minimum Per Fund |
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 8024, Boston, MA
02266-8024 (regular mail) or 30 Dan Road, Canton, MA 02021-2809 (overnight
mail); calling us at 1-800-222-5852; or accessing our website
(www.principalfunds.com).
Tax
Information
The Fund’s distributions you receive
are generally subject to federal income tax as ordinary income or capital gain
and may also be subject to state and local taxes, unless you are tax-exempt or
your account is tax-deferred in which case your distributions would be taxed
when withdrawn from the tax-deferred account.
Payments to
Broker-Dealers and Other Financial Intermediaries
For Class R-6 shares, the Fund and
its related companies do not pay broker-dealers or other financial
intermediaries (such as a bank, insurance company, investment adviser, etc.) for
the sale of Fund shares or related services.
For the other share classes, if you
purchase the Fund through a broker-dealer or other financial intermediary (such
as a bank, insurance company, investment adviser, etc.), the Fund and its
related companies may pay the intermediary for the sale of Fund shares and
related services. These payments may create a conflict of interest by
influencing the broker-dealer or other intermediary and your salesperson to
recommend the Fund over another investment, or to recommend one share class of
the Fund over another share class. Ask your salesperson or visit your financial
intermediary's website for more information.
ADDITIONAL
INFORMATION ABOUT INVESTMENT STRATEGIES AND RISKS
Each Fund’s investment objective is
described in the summary section for each Fund. The summary section also
describes each Fund’s principal investment strategies, including the types of
securities in which each Fund invests, and the principal risks of investing in
each Fund. The principal investment strategies are not the only investment
strategies available to each Fund, but they are the ones each Fund primarily
uses to achieve its investment objective.
Except for Fundamental Restrictions
described in the Fund's Statement of Additional Information ("SAI"), the Board
of Directors may change any Fund's objective or investment strategies without a
shareholder vote if it determines such a change is in the best interests of the
Fund. If there is a material change to a Fund's investment objective or
investment strategies, you should consider whether the Fund remains an
appropriate investment for you. There is no guarantee that each Fund will meet
its objective.
Each Fund is designed to be a
portion of an investor's portfolio. No Fund is intended to be a complete
investment program. Investors should consider the risks of a Fund before making
an investment; it is possible to lose money by investing in a Fund.
Liquidity
Risk
A fund is exposed to liquidity risk
when trading volume, lack of a market maker, or legal restrictions impair its
ability to sell particular securities or close derivative positions at an
advantageous price. Funds with principal investment strategies that involve
securities of companies with smaller market capitalizations, foreign securities,
derivatives, high yield bonds and bank loans or securities with substantial
market and/or credit risk tend to have the greatest exposure to liquidity
risk.
Active
Management
The performance of a fund that is
actively managed will reflect in part the ability of those managing the
investments of the fund to make investment decisions that are suited to
achieving the fund's investment objective. Actively-managed funds may invest
differently from the benchmark against which the Fund's performance is compared.
When making decisions about whether to buy or sell equity securities,
considerations may include, among other things, a company’s strength in
fundamentals, its potential for earnings growth over time, its ability to
navigate certain macroeconomic environments, the current price of its securities
relative to their perceived worth and relative to others in its industry, and
analysis from computer models. When making decisions about whether to buy or
sell fixed-income investments, considerations may include, among other things,
the strength of certain sectors of the fixed-income market relative to others,
interest rates, the macroeconomic backdrop, the balance between supply and
demand for certain asset classes, the credit quality of individual issuers, the
fundamental strengths of corporate issuers, and other general market
conditions.
An active fund's investment
performance depends upon the successful allocation of the fund's assets among
asset
classes, geographical regions,
industry sectors, and specific issuers and investments. There is no guarantee
that
these allocation techniques and
decisions will produce the desired results. It is possible to lose money on
an
investment in a fund as a result of
these allocation decisions. If a fund's investment strategies do not perform
as
expected, the fund could
underperform other funds with similar investment objectives or lose money.
Moreover,
buying and selling securities to
adjust the fund’s asset allocation may increase portfolio turnover and
generate
transaction costs.
Passive
Management (Index Funds)
Index funds use a passive, or
indexing, investment approach. Pure index funds do not attempt to manage market
volatility, use defensive strategies or reduce the effect of any long-term
periods of poor stock or bond performance. Some index funds attempt to fully
replicate their relevant target index by investing primarily in the securities
held by the index in approximately the same proportion of the weightings in the
index. However, because of the difficulty of executing some relatively small
securities trades, other index funds may use a "sampling" approach and may not
be invested in the less heavily weighted securities held by the index. Some
index funds may invest in index futures and/or exchange-traded funds on a daily
basis to gain exposure to the index in an effort to minimize tracking error
relative to the benchmark.
It is unlikely that an index fund's
performance will perfectly correlate with the performance of the fund's relevant
index. An index fund's ability to match the performance of its index may be
affected by many factors, such as fund expenses, the timing of cash flows into
and out of the fund, changes in securities markets, and changes in the
composition of the index.
Market Volatility
and Securities Issuers
The value of a fund's portfolio
securities may decrease in response to overall stock or bond market movements.
Markets tend to move in cycles, with periods of rising prices and periods of
falling prices. Stocks tend to go up and down in value more than bonds. If a
fund's investments are concentrated in certain sectors, its performance could be
worse than the overall market. The value of an individual security or particular
type of security can be more volatile than the market as a whole and can perform
differently from the value of the market as a whole. The value of a security may
decline for reasons directly related to the issuer, such as management
performance, financial leverage, and reduced demand for the issuer’s goods or
services. It is possible to lose money when investing in a fund.
Temporary
Defensive Measures
From time to time, as part of its
investment strategy, a Fund may invest without limit in cash and cash
equivalents for temporary defensive purposes in response to adverse market,
economic, or political conditions. For this purpose, cash equivalents include:
bank notes, bank certificates of deposit, bankers' acceptances, repurchase
agreements, commercial paper, and commercial paper master notes, which are
floating rate debt instruments without a fixed maturity. In addition, a Fund may
purchase U.S. government securities, preferred stocks, and debt securities,
whether or not convertible into or carrying rights for common stock. There is no
limit on the extent to which a fund may take temporary defensive measures. In
taking such measures, a Fund may lose the benefit of upswings and may limit its
ability to meet, or fail to achieve, its investment objective.
Strategy and Risk
Table
The following table lists each Fund
and identifies whether the strategies and risks discussed in this section
(listed in alphabetical order) are principal, non-principal (meaning they are
relevant to a Fund but to a lesser degree than those designated as principal),
or not applicable for each Fund. The risks described below for each fund that
operates as a fund of funds (as identified in the table) include risks at both
the fund of funds level and underlying funds level. Each fund is also subject to
the risks of any underlying funds in which it invests.
The SAI contains additional
information about investment strategies and their related risks.
|
|
|
|
|
|
|
INVESTMENT
STRATEGIES
AND
RISKS |
BLUE
CHIP |
BOND
MARKET
INDEX |
CAPITAL
SECURITIES |
CREDIT
OPPORTUNITIES EXPLORER |
DIVERSIFIED
REAL
ASSET |
Arbitrage
Trading |
Not Applicable |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Bank Loans (also known as
Senior Floating Rate interests) |
Not Applicable |
Not Applicable |
Not Applicable |
Non-Principal |
Principal |
Cayman
Subsidiary |
Not Applicable |
Not Applicable |
Not Applicable |
Not Applicable |
Principal |
Commodity-Related
Investments |
Not Applicable |
Not Applicable |
Not Applicable |
Not Applicable |
Principal |
Contingent Convertible
Securities |
Not Applicable |
Not Applicable |
Principal |
Not Applicable |
Not
Applicable |
Convertible
Securities |
Non-Principal |
Not Applicable |
Principal |
Non-Principal |
Non-Principal |
Counterparty
Risk |
Non-Principal |
Non-Principal |
Not Applicable |
Principal |
Principal |
Derivatives |
Non-Principal |
Non-Principal |
Not Applicable |
Principal |
Principal |
Emerging
Markets |
Not Applicable |
Non-Principal |
Non-Principal |
Principal |
Non-Principal |
Equity
Securities |
Principal |
Not Applicable |
Non-Principal |
Not Applicable |
Principal |
|
Principal |
Not Applicable |
Non-Principal |
Not Applicable |
Principal |
• Small and Medium
Capitalization Companies |
Non-Principal |
Not Applicable |
Non-Principal |
Not Applicable |
Principal |
|
Non-Principal |
Not Applicable |
Non-Principal |
Not Applicable |
Principal |
Fixed Income
Securities |
Non-Principal |
Principal |
Non-Principal |
Principal |
Principal |
Foreign
Currency |
Principal |
Non-Principal |
Non-Principal |
Principal |
Principal |
Foreign
Securities |
Principal |
Non-Principal |
Principal |
Principal |
Principal |
Fund of Funds |
Not Applicable |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Geographic Concentration
(Municipal Obligations) |
Not Applicable |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Hedging |
Not Applicable |
Not Applicable |
Not Applicable |
Principal |
Non-Principal |
High Yield
Securities |
Not Applicable |
Not Applicable |
Principal |
Principal |
Principal |
Industry
Concentration |
Not Applicable |
Non-Principal(1) |
Principal |
Not Applicable |
Principal |
Inverse Floating Rate
Investments |
Not Applicable |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Investment Company
Securities |
Non-Principal |
Not Applicable |
Not Applicable |
Non-Principal |
Non-Principal |
Leverage |
Non-Principal |
Non-Principal |
Not Applicable |
Principal |
Principal |
Master Limited Partnerships
("MLPs") |
Non-Principal |
Not Applicable |
Not Applicable |
Not Applicable |
Principal |
Municipal Obligations and
AMT-Subject Bonds |
Not Applicable |
Non-Principal |
Not Applicable |
Non-Principal |
Not
Applicable |
Portfolio
Duration |
Not Applicable |
Principal |
Principal |
Principal |
Principal |
Portfolio Turnover (Active
Trading) |
Non-Principal |
Principal |
Non-Principal |
Principal |
Non-Principal |
Preferred
Securities |
Non-Principal |
Not Applicable |
Principal |
Principal |
Non-Principal |
Real Estate Investment Trusts
("REITs") |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Principal |
Real Estate
Securities |
Non-Principal |
Principal |
Non-Principal |
Principal |
Principal |
Redemption Risk |
Principal |
Principal |
Not Applicable |
Not Applicable |
Principal |
Royalty Trusts |
Non-Principal |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Securitized
Products |
Not Applicable |
Principal |
Non-Principal |
Principal |
Non-Principal |
Short Sales |
Not Applicable |
Not Applicable |
Not Applicable |
Non-Principal |
Not
Applicable |
U.S. Government and U.S.
Government Sponsored Securities |
Not Applicable |
Principal |
Not Applicable |
Principal |
Principal |
Volatility
Mitigation |
Not Applicable |
Not Applicable |
Not Applicable |
Principal |
Not
Applicable |
(1)
An
Index Fund may concentrate its investments in a particular industry only to the
extent that the relevant index is so concentrated.
|
|
|
|
|
|
|
INVESTMENT
STRATEGIES
AND
RISKS |
DYNAMIC HIGH
YIELD EXPLORER |
EDGE
MIDCAP |
GLOBAL
MULTI-STRATEGY |
GLOBAL
OPPORTUNITIES |
GLOBAL
OPPORTUNITIES EQUITY HEDGED |
Arbitrage
Trading |
Not Applicable |
Not Applicable |
Principal |
Not Applicable |
Not
Applicable |
Bank Loans (also known as
Senior Floating Rate interests) |
Principal |
Not Applicable |
Principal |
Not Applicable |
Not
Applicable |
Cayman
Subsidiary |
Not Applicable |
Not Applicable |
Principal |
Not Applicable |
Not
Applicable |
Commodity-Related
Investments |
Not Applicable |
Not Applicable |
Principal |
Non-Principal |
Non-Principal |
Contingent Convertible
Securities |
Not Applicable |
Not Applicable |
Non-Principal |
Not Applicable |
Not
Applicable |
Convertible
Securities |
Non-Principal |
Non-Principal |
Principal |
Non-Principal |
Non-Principal |
Counterparty
Risk |
Principal |
Not Applicable |
Principal |
Non-Principal |
Principal |
Derivatives |
Principal |
Not Applicable |
Principal |
Non-Principal |
Principal |
Emerging
Markets |
Principal |
Not Applicable |
Principal |
Principal |
Principal |
Equity
Securities |
Non-Principal |
Principal |
Principal |
Principal |
Principal |
|
Non-Principal |
Principal |
Principal |
Principal |
Principal |
• Small and Medium
Capitalization Companies |
Non-Principal |
Principal |
Principal |
Principal |
Principal |
|
Non-Principal |
Principal |
Principal |
Principal |
Principal |
Fixed Income
Securities |
Principal |
Non-Principal |
Principal |
Not Applicable |
Not
Applicable |
Foreign
Currency |
Principal |
Principal |
Principal |
Principal |
Principal |
Foreign
Securities |
Principal |
Principal |
Principal |
Principal |
Principal |
Fund of Funds |
Not Applicable |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Geographic Concentration
(Municipal Obligations) |
Not Applicable |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Hedging |
Principal |
Not Applicable |
Principal |
Non-Principal |
Principal |
High Yield
Securities |
Principal |
Not Applicable |
Principal |
Not Applicable |
Not
Applicable |
Industry
Concentration |
Not Applicable |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Inverse Floating Rate
Investments |
Not Applicable |
Not Applicable |
Non-Principal |
Not Applicable |
Not
Applicable |
Investment Company
Securities |
Non-Principal |
Non-Principal |
Principal |
Not Applicable |
Non-Principal |
Leverage |
Principal |
Not Applicable |
Principal |
Non-Principal |
Principal |
Master Limited Partnerships
("MLPs") |
Not Applicable |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Municipal Obligations and
AMT-Subject Bonds |
Not Applicable |
Not Applicable |
Non-Principal |
Not Applicable |
Not
Applicable |
Portfolio
Duration |
Principal |
Not Applicable |
Principal |
Not Applicable |
Not
Applicable |
Portfolio Turnover (Active
Trading) |
Principal |
Non-Principal |
Principal |
Principal |
Principal |
Preferred
Securities |
Non-Principal |
Non-Principal |
Principal |
Not Applicable |
Not
Applicable |
Real Estate Investment Trusts
("REITs") |
Not Applicable |
Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Real Estate
Securities |
Not Applicable |
Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Redemption Risk |
Not Applicable |
Principal |
Principal |
Principal |
Not
Applicable |
Royalty Trusts |
Not Applicable |
Non-Principal |
Non-Principal |
Non-Principal |
Not
Applicable |
Securitized
Products |
Not Applicable |
Not Applicable |
Principal |
Not Applicable |
Not
Applicable |
Short Sales |
Non-Principal |
Not Applicable |
Principal |
Not Applicable |
Principal |
U.S. Government and U.S.
Government Sponsored Securities |
Non-Principal |
Not Applicable |
Principal |
Not Applicable |
Not
Applicable |
Volatility
Mitigation |
Principal |
Not Applicable |
Not Applicable |
Non-Principal |
Principal |
|
|
|
|
|
|
|
INVESTMENT
STRATEGIES AND RISKS |
INTERNATIONAL
EQUITY INDEX |
INTERNATIONAL
SMALL COMPANY |
MULTI-MANAGER
EQUITY LONG/SHORT |
OPPORTUNISTIC
MUNICIPAL |
ORIGIN
EMERGING MARKETS |
Arbitrage
Trading |
Not Applicable |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Bank Loans (also known as
Senior Floating Rate interests) |
Not Applicable |
Not Applicable |
Non-Principal |
Non-Principal |
Not
Applicable |
Cayman
Subsidiary |
Not Applicable |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Commodity-Related
Investments |
Not Applicable |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Contingent Convertible
Securities |
Not Applicable |
Not Applicable |
Non-Principal |
Not Applicable |
Not
Applicable |
Convertible
Securities |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Not
Applicable |
Counterparty
Risk |
Non-Principal |
Non-Principal |
Principal |
Principal |
Not
Applicable |
Derivatives |
Principal |
Non-Principal |
Principal |
Principal |
Not
Applicable |
Emerging
Markets |
Non-Principal |
Non-Principal |
Principal |
Not Applicable |
Principal |
Equity
Securities |
Principal |
Principal |
Principal |
Not Applicable |
Principal |
|
Principal |
Principal |
Principal |
Not Applicable |
Principal |
• Small and Medium
Capitalization Companies |
Non-Principal |
Principal |
Principal |
Not Applicable |
Principal |
|
Principal |
Principal |
Principal |
Not Applicable |
Principal |
Fixed Income
Securities |
Not Applicable |
Non-Principal |
Non-Principal |
Principal |
Not
Applicable |
Foreign
Currency |
Principal |
Principal |
Principal |
Not Applicable |
Principal |
Foreign
Securities |
Principal |
Principal |
Principal |
Not Applicable |
Principal |
Fund of Funds |
Not Applicable |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Geographic Concentration
(Municipal Obligations) |
Not Applicable |
Not Applicable |
Not Applicable |
Principal |
Not
Applicable |
Hedging |
Not Applicable |
Non-Principal |
Principal |
Principal |
Not
Applicable |
High Yield
Securities |
Not Applicable |
Not Applicable |
Non-Principal |
Principal |
Not
Applicable |
Industry
Concentration |
Non-Principal(1) |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Inverse Floating Rate
Investments |
Not Applicable |
Not Applicable |
Not Applicable |
Principal |
Not
Applicable |
Investment Company
Securities |
Principal |
Non-Principal |
Principal |
Principal |
Not
Applicable |
Leverage |
Not Applicable |
Non-Principal |
Principal |
Principal |
Not
Applicable |
Master Limited Partnerships
("MLPs") |
Not Applicable |
Not Applicable |
Non-Principal |
Not Applicable |
Not
Applicable |
Municipal Obligations and
AMT-Subject Bonds |
Not Applicable |
Not Applicable |
Not Applicable |
Principal |
Not
Applicable |
Portfolio
Duration |
Not Applicable |
Not Applicable |
Not Applicable |
Principal |
Not
Applicable |
Portfolio Turnover (Active
Trading) |
Non-Principal |
Non-Principal |
Principal |
Non-Principal |
Principal |
Preferred
Securities |
Not Applicable |
Non-Principal |
Non-Principal |
Not Applicable |
Not
Applicable |
Real Estate Investment Trusts
("REITs") |
Non-Principal |
Non-Principal |
Non-Principal |
Not Applicable |
Not
Applicable |
Real Estate
Securities |
Non-Principal |
Non-Principal |
Non-Principal |
Not Applicable |
Not
Applicable |
Redemption Risk |
Principal |
Principal |
Non-Principal |
Not Applicable |
Principal |
Royalty Trusts |
Not Applicable |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Securitized
Products |
Not Applicable |
Not Applicable |
Non-Principal |
Not Applicable |
Not
Applicable |
Short Sales |
Not Applicable |
Not Applicable |
Principal |
Not Applicable |
Not
Applicable |
U.S. Government and U.S.
Government Sponsored Securities |
Not Applicable |
Not Applicable |
Not Applicable |
Principal |
Not
Applicable |
Volatility
Mitigation |
Not Applicable |
Not Applicable |
Principal |
Not Applicable |
Not
Applicable |
(1)
An
Index Fund may concentrate its investments in a particular industry only to the
extent that the relevant index is so concentrated.
|
|
|
|
|
|
|
INVESTMENT
STRATEGIES
AND
RISKS |
PREFERRED
SECURITIES |
REAL ESTATE
ALLOCATION |
REAL ESTATE
DEBT INCOME |
SMALL-MIDCAP
DIVIDEND INCOME |
SYSTEMATEX
INTERNATIONAL |
Arbitrage
Trading |
Not Applicable |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Bank Loans (also known as
Senior Floating Rate interests) |
Not Applicable |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Cayman
Subsidiary |
Not Applicable |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Commodity-Related
Investments |
Not Applicable |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Contingent Convertible
Securities |
Principal |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Convertible
Securities |
Principal |
Non-Principal |
Not Applicable |
Principal |
Non-Principal |
Counterparty
Risk |
Not Applicable |
Non-Principal |
Non-Principal |
Not Applicable |
Non-Principal |
Derivatives |
Principal |
Non-Principal |
Non-Principal |
Not Applicable |
Non-Principal |
Emerging
Markets |
Non-Principal |
Non-Principal |
Not Applicable |
Non-Principal |
Not Applicable
|
Equity
Securities |
Non-Principal |
Principal |
Not Applicable |
Principal |
Principal |
|
Non-Principal |
Principal |
Not Applicable |
Non-Principal |
Principal |
• Small and Medium
Capitalization Companies |
Non-Principal |
Principal |
Not Applicable |
Principal |
Principal |
|
Non-Principal |
Principal |
Not Applicable |
Principal |
Principal |
Fixed Income
Securities |
Non-Principal |
Principal |
Principal |
Non-Principal |
Not
Applicable |
Foreign
Currency |
Non-Principal |
Principal |
Non-Principal |
Principal |
Principal |
Foreign
Securities |
Principal |
Principal |
Non-Principal |
Principal |
Principal |
Fund of Funds |
Not Applicable |
Principal |
Not Applicable |
Not Applicable |
Not
Applicable |
Geographic Concentration
(Municipal Obligations) |
Not Applicable |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Hedging |
Principal |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
High Yield
Securities |
Principal |
Non-Principal |
Non-Principal |
Not Applicable |
Not
Applicable |
Industry
Concentration |
Principal |
Principal |
Principal |
Not Applicable |
Not
Applicable |
Inverse Floating Rate
Investments |
Not Applicable |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Investment Company
Securities |
Not Applicable |
Non-Principal |
Not Applicable |
Non-Principal |
Non-Principal |
Leverage |
Non-Principal |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Master Limited Partnerships
("MLPs") |
Not Applicable |
Not Applicable |
Not Applicable |
Principal |
Non-Principal |
Municipal Obligations and
AMT-Subject Bonds |
Not Applicable |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Portfolio
Duration |
Principal |
Principal |
Principal |
Not Applicable |
Not
Applicable |
Portfolio Turnover (Active
Trading) |
Non-Principal |
Non-Principal |
Non-Principal |
Non-Principal |
Principal |
Preferred
Securities |
Principal |
Principal |
Principal |
Principal |
Non-Principal |
Real Estate Investment Trusts
("REITs") |
Principal |
Principal |
Principal |
Principal |
Non-Principal |
Real Estate
Securities |
Principal |
Principal |
Principal |
Principal |
Non-Principal |
Redemption Risk |
Principal |
Principal |
Principal |
Principal |
Not
Applicable |
Royalty Trusts |
Not Applicable |
Not Applicable |
Not Applicable |
Principal |
Not
Applicable |
Securitized
Products |
Non-Principal |
Principal |
Principal |
Not Applicable |
Not
Applicable |
Short Sales |
Not Applicable |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
U.S. Government and U.S.
Government Sponsored Securities |
Non-Principal |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
Volatility
Mitigation |
Principal |
Not Applicable |
Not Applicable |
Not Applicable |
Not
Applicable |
|
|
|
INVESTMENT
STRATEGIES
AND
RISKS |
SYSTEMATEX
LARGE VALUE |
Arbitrage
Trading |
Not
Applicable |
Bank Loans (also known as
Senior Floating Rate interests) |
Not
Applicable |
Cayman
Subsidiary |
Not
Applicable |
Commodity-Related
Investments |
Not
Applicable |
Contingent Convertible
Securities |
Not
Applicable |
Convertible
Securities |
Non-Principal |
Counterparty
Risk |
Non-Principal |
Derivatives |
Non-Principal |
Emerging
Markets |
Not
Applicable |
Equity
Securities |
Principal |
|
Non-Principal |
• Small and Medium
Capitalization Companies |
Non-Principal |
|
Principal |
Fixed Income
Securities |
Not
Applicable |
Foreign
Currency |
Not
Applicable |
Foreign
Securities |
Non-Principal |
Fund of Funds |
Not
Applicable |
Geographic Concentration
(Municipal Obligations) |
Not
Applicable |
Hedging |
Not
Applicable |
High Yield
Securities |
Not
Applicable |
Industry
Concentration |
Not
Applicable |
Inverse Floating Rate
Investments |
Not
Applicable |
Investment Company
Securities |
Non-Principal |
Leverage |
Not
Applicable |
Master Limited Partnerships
("MLPs") |
Non-Principal |
Municipal Obligations and
AMT-Subject Bonds |
Not
Applicable |
Portfolio
Duration |
Not
Applicable |
Portfolio Turnover (Active
Trading) |
Principal |
Preferred
Securities |
Non-Principal |
Real Estate Investment Trusts
("REITs") |
Non-Principal |
Real Estate
Securities |
Non-Principal |
Redemption Risk |
Not
Applicable |
Royalty Trusts |
Not
Applicable |
Securitized
Products |
Not
Applicable |
Short Sales |
Not
Applicable |
U.S. Government and U.S.
Government Sponsored Securities |
Not
Applicable |
Volatility
Mitigation |
Not
Applicable |
Arbitrage
Trading
A fund employing arbitrage
strategies has the risk that anticipated opportunities do not play out as
planned, resulting in potentially reduced returns or losses to the fund as it
unwinds failed trades. For example, with respect to the convertible arbitrage
strategy, an issuer may default or may be unable to make interest and dividend
payments when due; with respect to the merger arbitrage strategy, the merger
deal may terminate before closing, thereby imposing losses to the
fund.
Bank Loans (also
known as Senior Floating Rate Interests)
Bank loans typically hold the most
senior position in the capital structure of a business entity (the "Borrower"),
are secured by specific collateral, and have a claim on the Borrower's assets
and/or stock that is senior to that held by the Borrower's unsecured
subordinated debtholders and stockholders. The proceeds of bank loans primarily
are used to finance leveraged buyouts, recapitalizations, mergers, acquisitions,
stock repurchases, dividends, and, to a lesser extent, to finance internal
growth and for other corporate purposes. Bank loans are typically structured and
administered by a financial institution that acts as the agent of the lenders
participating in the bank loan. Most bank loans that will be purchased by a fund
are rated below-investment-grade (sometimes called “junk”) or will be comparable
if unrated, which means they are more likely to default than investment-grade
loans. A default could lead to non-payment of income which would result in a
reduction of income to the fund, and there can be no assurance that the
liquidation of any collateral would satisfy the Borrower's obligation in the
event of non-payment of scheduled interest or principal payments, or that such
collateral could be readily liquidated. Most bank loans are not traded on any
national securities exchange. Bank loans generally have less liquidity than
investment-grade bonds and there may be less public information available about
them. Bank loan interests may not be considered “securities,” and purchasers
therefore may not be entitled to rely on the anti-fraud protections of the
federal securities laws.
The primary and secondary market for
bank loans may be subject to irregular trading activity, wide bid/ask spreads
and extended trade settlement periods, which may cause a fund to be unable to
realize full value and thus cause a material decline in a fund's net asset
value. Because transactions in bank loans may be subject to extended settlement
periods, a fund may not receive proceeds from the sale of a bank loan for a
period of time after the sale. As a result, sale proceeds may not be available
to make additional investments or to meet a fund’s redemption obligations for a
period of time after the sale of the bank loans, which could lead to a fund
having to sell other investments, borrow to meet obligations, or borrow to
remain fully invested while awaiting settlement.
Bank loans pay interest at rates
which are periodically reset by reference to a base lending rate plus a spread.
These base lending rates are generally the prime rate offered by a designated
U.S. bank or the London InterBank Offered Rate (LIBOR) or the prime rate offered
by one or more major U.S. banks.
Bank loans generally are subject to
mandatory and/or optional prepayment. Because of these prepayment conditions and
because there may be significant economic incentives for the borrower to repay,
prepayments may occur.
Cayman
Subsidiary
The Diversified Real Asset Fund and
the Global Multi-Strategy Fund may each invest up to 25% of its total assets in
its respective wholly-owned subsidiary organized under the laws of the Cayman
Islands (a “Cayman Subsidiary”). The Cayman Subsidiaries are not registered as
investment companies under the Investment Company Act of 1940, as amended (the
"1940 Act"), and are not subject to all the investor protections of the 1940
Act. However, a fund investing in a Cayman Subsidiary wholly owns and controls
such Cayman Subsidiary, and the Funds and Cayman Subsidiaries are managed by
PMC. Moreover, the Funds’ Board of Directors have oversight responsibility for
the Funds' investment activities, including investments in a Cayman Subsidiary,
and over a fund’s role as sole shareholder of a Cayman Subsidiary. Each Cayman
Subsidiary is overseen by its own board of directors consisting of three
directors. The directors for each Cayman Subsidiary are Nora M. Everett and
Michael J. Beer (both interested directors of the Fund) and Tracy Bollin (Chief
Financial Officer of the Fund). The Diversified Real Asset Fund and the Global
Multi-Strategy Fund are the sole shareholders of their respective Cayman
Subsidiary, and shares of the Cayman Subsidiaries will not be sold or offered to
other investors.
Each Cayman Subsidiary has entered
into a separate management agreement with PMC whereby PMC provides advisory and
accounting agency services to the Cayman Subsidiary. Further, PMC, on behalf of
the Cayman Subsidiary owned by the Diversified Real Asset Fund, has entered into
a subadvisory agreement with Credit Suisse (a current sub-advisor of the
Diversified Real Asset Fund). PMC, on behalf of the Cayman Subsidiary owned by
the Global Multi-Strategy Fund, has entered into a subadvisory agreement with
AQR (a current sub-advisor of the Global Multi-Strategy Fund).
A Fund that invests in a Cayman
Subsidiary is indirectly exposed to the particular risks associated with the
Cayman Subsidiary’s investments. The Cayman Subsidiaries invest in
commodity-linked derivatives, including commodity-linked swaps, commodity
futures contracts and options on commodities. Each Cayman Subsidiary may invest
in other instruments, including fixed income securities, cash and cash
equivalents and U.S. government securities, either as investments or to serve as
margin or collateral for the Cayman Subsidiary's derivatives positions. To the
extent that a Fund invests in its respective subsidiary, it will be subject to
the particular risks associated with the Cayman Subsidiary’s investments.
The principal purpose of investing
in a Cayman Subsidiary is to allow a fund to gain exposure to the commodity
markets within the limitations of the federal tax law requirements applicable to
regulated investment companies (“RICs”) under the Internal Revenue Code (the
“Code”). To qualify as a RIC, a fund must meet certain requirements regarding
the source of its income, the diversification of its assets and the distribution
of its income. If a fund fails to qualify as a RIC, it could be subject to
federal income tax on its net income at regular corporate rates (without
reduction for distributions to shareholders). When distributed, that income
would also be taxable to shareholders as an ordinary dividend to the extent
attributable to a fund’s earnings and profits. Shareholders of that fund would
therefore be subject to diminished returns. Although certain regulated
investment companies have received private letter rulings from the IRS
confirming that income derived from its Cayman Subsidiary will constitute
qualifying income to the fund for RIC purposes, the IRS no longer issues private
letter rulings to that effect, and is reportedly reexamining its position with
respect to structures of this kind. The funds have not obtained such a private
letter ruling.
Moreover, the Cayman Islands
currently does not impose any income, corporate or capital gains tax, or
withholding tax, on the Cayman Subsidiaries. If the laws of the Cayman Islands
were changed and a Cayman Subsidiary was required to pay Cayman Islands taxes,
this may impact a fund’s returns based upon the percentage of assets allocated
to commodities at that time.
The IRS recently issued proposed
regulations which if finalized would clarify that Cayman Subsidiary’s earnings
will only be treated as qualifying income if there is a corresponding
distribution to the Fund. The inability of a Cayman Subsidiary to make
distributions corresponding to its earnings could impact the Fund’s ability to
qualify as a RIC.
Changes in the laws of the United
States and/or the Cayman Islands, particularly with respect to tax laws, could
result in the inability of the Funds and/or the Cayman Subsidiaries to operate
as described in this prospectus and could negatively affect the Funds and their
shareholders.
Commodity-Related
Investments
Commodities are assets that have
tangible properties, such as oil, coal, natural gas, agricultural products,
industrial metals, livestock, and precious metals. The value of commodities
investments will generally be affected by overall market movements and factors
specific to a particular industry or commodity, which may include weather,
embargoes, tariffs, and health, political, international, and regulatory
developments. Economic and other events (whether real or perceived) can reduce
the demand for commodities, which may reduce market prices and cause the value
of fund shares to fall. The frequency and magnitude of such changes cannot be
predicted. Exposure to commodities and commodities markets may subject a fund to
greater volatility than investments in traditional securities. No active trading
market may exist for certain commodities investments, which may impair the
ability of a fund to sell or to realize the full value of such investments in
the event of the need to liquidate such investments. In addition, adverse market
conditions may impair the liquidity of actively traded commodities investments.
Certain types of commodities instruments (such as commodity swaps) are subject
to the risk that the counterparty to the instrument will not perform or will be
unable to perform in accordance with the terms of the instrument.
Contingent
Convertible Securities ("CoCos")
Contingent convertible securities
(“CoCos”) are hybrid debt securities that are a form of preferred securities.
Cocos are intended to either convert into equity or have their principal written
down upon the occurrence of certain “triggers.” The triggers are generally
linked to regulatory capital thresholds or regulatory actions calling into
question the issuing banking institution’s continued viability as a
going-concern. CoCos’ unique equity conversion or principal write-down features
are tailored to the issuing banking institution and its regulatory requirements.
Some additional risks associated with CoCos include, but are not limited to, the
following:
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The occurrence of a conversion
event is inherently unpredictable and depends on many factors, some of
which will be outside the issuer’s control. Because of the uncertainty
regarding whether a conversion event will occur, it may be difficult to
predict when, if at all, a CoCo will be converted to equity, and a fund
may suffer losses as a result. |
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• |
CoCos may have no stated
maturity and fully discretionary coupons. This means coupon (i.e.,
interest) payments can be canceled at the banking institution’s discretion
or at the request of the relevant regulatory authority in order to help
the bank absorb losses, without causing a default.
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• |
CoCos are usually issued in
the form of subordinated debt instruments to provide the appropriate
regulatory capital treatment. If an issuer liquidates, dissolves or
winds-up before a conversion to equity has occurred, the rights and claims
of the holders of the CoCos (such as a fund) against the issuer generally
rank junior to the claims of holders of unsubordinated obligations of the
issuer. In addition, if the CoCos are converted into the issuer’s
underlying equity securities after a conversion event (i.e., a “trigger”),
each holder will be further subordinated.
|
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• |
The value of CoCos is
unpredictable and is influenced by many factors including, without
limitation: the creditworthiness of the issuer and/or fluctuations in such
issuer’s applicable capital ratios; supply and demand for CoCos; general
market conditions and available liquidity; and economic, financial and
political events that affect the issuer, its particular market or the
financial markets in general. |
Convertible
Securities
Convertible securities are usually
fixed-income securities that a fund has the right to exchange for equity
securities at a specified conversion price. Convertible securities could also
include corporate bonds, notes, or preferred stocks of U.S. or foreign issuers.
Convertible securities allow a fund to realize additional returns if the market
price of the equity securities exceeds the conversion price. For example, a fund
may hold fixed-income securities that are convertible into shares of common
stock at a conversion price of $10 per share. If the market value of the shares
of common stock reached $12, the fund could realize an additional $2 per share
by converting its fixed-income securities.
Convertible securities have lower
yields than comparable fixed-income securities. In addition, at the time a
convertible security is issued the conversion price exceeds the market value of
the underlying equity securities. Thus, convertible securities may provide lower
returns than non-convertible fixed-income securities or equity securities
depending upon changes in the price of the underlying equity securities.
However, convertible securities permit a fund to realize some of the potential
appreciation of the underlying equity securities with less risk of losing its
initial investment.
Depending on the features of the
convertible security, a fund will treat a convertible security as a fixed-income
security, equity security, or preferred security for purposes of investment
policies and limitations because of the unique characteristics of convertible
securities. Funds that invest in convertible securities may invest in
convertible securities that are below investment grade. Many convertible
securities are relatively illiquid.
Counterparty
Risk
Counterparty risk is the risk that
the counterparty to a contract or other obligation will be unable or unwilling
to honor its obligations. If a counterparty fails to meet its contractual
obligations, goes bankrupt, or otherwise experiences a business interruption, a
fund could miss investment opportunities or otherwise hold investments it would
prefer to sell, resulting in losses for the fund. In addition, a fund may suffer
losses if a counterparty fails to comply with applicable laws or other
requirements. Counterparty risk is pronounced during unusually adverse market
conditions and is particularly acute in environments in which financial services
firms are exposed to systemic risks.
Derivatives
Generally, a derivative is a
financial arrangement, the value of which is derived from, or based on, a
traditional security, asset, or market index. A fund may invest in certain
derivative strategies to earn income, manage or adjust the risk profile of the
fund, replace more direct investments, or obtain exposure to certain markets. A
fund may enter into forward commitment agreements, which call for the fund to
purchase or sell a security on a future date at a fixed price. A fund may also
enter into contracts to sell its investments either on demand or at a specific
interval.
The risks associated with derivative
investments include:
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• |
increased volatility of a
fund; |
|
|
• |
the inability of those
managing investments of the fund to predict correctly the direction of
securities prices, interest rates, currency exchange rates, asset values,
and other economic factors; |
|
|
• |
losses caused by unanticipated
market movements, which may be substantially greater than a fund's initial
investment and are potentially unlimited; |
|
|
• |
the possibility that there may
be no liquid secondary market, which may make it difficult or impossible
to close out a position when desired; |
|
|
• |
the possibility that the
counterparty may fail to perform its obligations;
and |
|
|
• |
the inability to close out
certain hedged positions to avoid adverse tax
consequences. |
There are many different types of
derivatives and many different ways to use them.
|
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• |
Commodity Index-Linked Notes
are derivative debt instruments issued by U.S. and foreign banks,
brokerage firms, insurance companies and other corporations with principal
and/or coupon payments linked to the performance of commodity indices.
These notes expose a fund to movements in commodity prices. They are also
subject to credit, counterparty, and interest rate risk. Commodity
index-linked notes are often leveraged, increasing the volatility of each
note's market value relative to changes in the underlying commodity index.
At the maturity of the note, a fund may receive more or less principal
than it originally invested. A fund may also receive interest payments on
the note that are less than the stated coupon interest payments.
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• |
Credit Default Swap Agreements
may be entered into by a fund as a "buyer" or "seller" of credit
protection. Credit default swap agreements involve special risks because
they may be difficult to value, are highly susceptible to liquidity and
credit risk, and generally pay a return to the party that has paid the
premium only in the event of an actual default by the issuer of the
underlying obligation (as opposed to a credit downgrade or other
indication of financial difficulty). Credit default swaps can increase
credit risk because a fund has exposure to both the issuer of the
referenced obligation and the counterparty to the credit default
swap. |
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Foreign Currency Contracts
(such as foreign currency options and foreign currency forward and swap
agreements) may be used by funds to increase exposure to a foreign
currency or to shift exposure to foreign currency fluctuations from one
country to another. A forward currency contract involves a privately
negotiated obligation to purchase or sell a specific currency at a future
date at a price set in the contract. For currency contracts, there is also
a risk of government action through exchange controls that would restrict
the ability of a fund to deliver or receive currency.
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• |
Forwards, futures contracts
and options thereon (including commodities futures); options (including
put or call options); and swap agreements and over-the-counter swap
agreements (e.g., interest rate swaps, total return swaps and credit
default swaps) may be used by funds for hedging purposes in an effort to
protect a fund from loss due to changing interest rates, securities
prices, asset values, currency exchange rates, and other market
conditions; non-hedging purposes to seek to increase the fund’s income or
otherwise enhance return; and as a low-cost method of gaining exposure to
a particular market without investing directly in those securities or
assets. These derivative investments are subject to special risk
considerations, particularly the imperfect correlation between the change
in market value of the instruments held by a fund and the price of the
derivative instrument. If a fund has insufficient cash, it may have to
sell securities from its portfolio to meet daily variation margin
requirements, even when it may be disadvantageous to do so. Options and
Swap Agreements also involve counterparty risk. With respect to options,
there may be difference in trading hours for the options markets and the
markets for the underlying securities (rate movements can take place in
the underlying markets that cannot be reflected in the options markets)
and an insufficient liquid secondary market for particular options.
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• |
Index/structured securities.
Certain derivative securities are described more accurately as
index/structured securities, which are derivative securities whose value
or performance is linked to other equity securities (such as depositary
receipts), currencies, interest rates, indices, or other financial
indicators (reference indices). |
Emerging
Markets
Principal Management Corporation
(“PMC”) defines emerging market securities as those issued by:
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• |
companies with their principal
place of business or principal office in emerging market countries
or |
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• |
companies whose principal
securities trading market is an emerging market
country. |
Usually, the term “emerging market
country” (also called a "developing country") means any country that is
considered to be an emerging country by the international financial community
(including the MSCI Emerging Markets Index or Bloomberg Barclays Emerging
Markets USD Aggregate Bond Index). These countries generally exclude the U.S.,
Canada, Japan, Australia, New Zealand, and most nations located in Western
Europe.
Investments in companies of emerging
market countries are subject to higher risks than investments in companies in
more developed countries. These risks include:
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• |
increased social, political,
and economic instability; |
|
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• |
a smaller market for these
securities and low or nonexistent trading volume that results in a lack of
liquidity and greater price volatility; |
|
|
• |
lack of publicly available
information, including reports of payments of dividends or interest on
outstanding securities; |
|
|
• |
foreign government policies
that may restrict opportunities, including restrictions on investment in
issuers or industries deemed sensitive to national
interests; |
|
|
• |
relatively new capital market
structure or market-oriented economy; |
|
|
• |
the possibility that recent
favorable economic developments may be slowed or reversed by unanticipated
political or social events in these
countries; |
|
|
• |
restrictions that may make it
difficult or impossible for a fund to vote proxies, exercise shareholder
rights, pursue legal remedies, and obtain judgments in foreign courts;
and |
|
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• |
possible losses through the
holding of securities in domestic and foreign custodial banks and
depositories. |
In addition, many developing
countries have experienced substantial and, in some periods, extremely high
rates of inflation for many years. Inflation and rapid fluctuations in inflation
rates have had and may continue to have negative effects on the economies,
currencies, interest rates, and securities markets of those
countries.
Repatriation of investment income,
capital, and proceeds of sales by foreign investors may require governmental
registration and/or approval in some developing countries. A fund could be
adversely affected by delays in or a refusal to grant any required governmental
registration or approval for repatriation.
Further, the economies of developing
countries generally are heavily dependent upon international trade and,
accordingly, have been and may continue to be adversely affected by trade
barriers, exchange controls, managed adjustments in relative currency values and
other protectionist measures imposed or negotiated by the countries with which
they trade.
Equity
Securities
Equity securities include common
stocks, convertible securities, depositary receipts, rights (an offering of
common stock to investors who currently own shares which entitle them to buy
subsequent issues at a discount from the offering price), and warrants (the
right to purchase securities from the issuer at a specified price, normally
higher than the current market price). Common stocks, the most familiar type,
represent an equity (ownership) interest in a corporation. The value of a
company's stock may fall as a result of factors directly relating to that
company, such as decisions made by its management or lower demand for the
company's products or services. A stock's value may also fall because of factors
affecting not just the company, but also companies in the same industry or in a
number of different industries, such as increases in production costs. The value
of a company's stock may also be affected by changes in financial markets that
are relatively unrelated to the company or its industry, such as changes in
interest rates or currency exchange rates. In addition, a company's stock
generally pays dividends only after the company invests in its own business and
makes required payments to holders of its bonds and other debt. For this reason,
the value of a company's stock will usually react more strongly than its bonds
and other debt to actual or perceived changes in the company's financial
condition or prospects.
Some funds focus their investments
on certain market capitalization ranges. Market capitalization is defined as
total current market value of a company's outstanding equity securities. The
market capitalization of companies in a fund’s portfolios and their related
indexes will change over time, and a fund will not automatically sell a security
just because it falls outside of the market capitalization range of its
index(es).
Growth
Stock
The prices of growth stocks may be
based largely on expectations of future earnings, and their prices can decline
rapidly and significantly in reaction to negative news about such factors as
earnings, revenues, the economy, political developments, or other news. Growth
stocks may underperform value stocks and stocks in other broad style categories
(and the stock market as a whole) over any period of time and may shift in and
out of favor with investors generally, sometimes rapidly, depending on changes
in market, economic, and other factors. As a result, a fund that holds
substantial investments in growth stocks may underperform other funds that
invest more broadly or favor different investment styles. Because growth
companies typically reinvest their earnings, growth stocks typically do not pay
dividends at levels associated with other types of stocks, if at all.
Small
and Medium Market Capitalization Companies
Funds may invest in securities of
companies with small- or medium-sized market capitalizations. Investments in
companies with smaller market capitalizations may involve greater risks and
price volatility (wide, rapid fluctuations) than investments in larger, more
mature companies. Small company stocks may decline in price as large company
stocks rise, or rise in price while larger company stocks decline. The net asset
value of a fund that invests a substantial portion of its assets in small
company stocks may therefore be more volatile than the shares of a fund that
invests solely in larger company stocks. Small companies may be less significant
within their industries and may be at a competitive disadvantage relative to
their larger competitors. Smaller companies may be less mature than larger
companies. At this earlier stage of development, the companies may have limited
product lines, reduced market liquidity for their shares, limited financial
resources, or less depth in management than larger or more established
companies. While smaller companies may be subject to these additional risks,
they may also realize more substantial growth than larger or more established
companies.
Unseasoned issuers are companies
with a record of less than three years continuous operation, including the
operation of predecessors and parents. Many unseasoned issuers also may be small
companies and involve the risks and price volatility associated with smaller
companies. Unseasoned issuers by their nature have only a limited operating
history that can be used for evaluating the company's growth prospects. As a
result, these securities may place a greater emphasis on current or planned
product lines and the reputation and experience of the company's management and
less emphasis on fundamental valuation factors than would be the case for more
mature growth companies.
Value
Stock
Value stocks present the risk that
they may decline in price or never reach their expected full market value
because the market fails to recognize the stock's intrinsic worth. Value stocks
may underperform growth stocks and stocks in other broad style categories (and
the stock market as a whole) over any period of time and may shift in and out of
favor with investors generally, sometimes rapidly, depending on changes in
market, economic, and other factors. As a result, a fund that holds substantial
investments in value stocks may underperform other funds that invest more
broadly or favor different investment styles.
Fixed-Income
Securities
Fixed-income securities include
bonds and other debt instruments that are used by issuers to borrow money from
investors (examples include corporate bonds, convertible securities,
mortgage-backed securities, U.S. government securities and asset-backed
securities). The issuer of a fixed-income security generally pays the investor a
fixed, variable, or floating rate of interest. The amount borrowed must be
repaid at maturity. Some debt securities, such as zero coupon bonds, do not pay
current interest, but are sold at a discount from their face values.
Fixed-income securities are
sensitive to changes in interest rates. In general, fixed-income security prices
rise when interest rates fall and fall when interest rates rise. If interest
rates fall, issuers of callable bonds may call (repay) securities with high
interest rates before their maturity dates; this is known as call risk. In this
case, a fund would likely reinvest the proceeds from these securities at lower
interest rates, resulting in a decline in the fund's income. Floating rate
securities generally are less sensitive to interest rate changes but may decline
in value if their interest rates do not rise as much, or as quickly, as interest
rates in general. Conversely, floating rate securities will not generally
increase in value if interest rates decline.
Fixed-income securities are also
affected by the credit quality of the issuer. Investment-grade debt securities
are medium and high quality securities. Some bonds, such as lower grade or
"junk" bonds, may have speculative characteristics and may be particularly
sensitive to economic conditions and the financial condition of the issuers.
Credit risk refers to the possibility that the issuer of the security will not
be able to make principal and interest payments when due.
Funds may invest in fixed-income
securities of companies with small- or medium-sized market capitalizations.
Investments in companies with smaller market capitalizations may involve greater
risks, price volatility (wide, rapid fluctuations), and less liquidity than
investments in larger, more mature companies.
Foreign
Currency
Certain of a fund’s investments will
be denominated in foreign currencies or traded in securities markets in which
settlements are made in foreign currencies. Any income on such investments is
generally paid to a fund in foreign currencies. In addition, funds may engage in
foreign currency transactions for both hedging and investment purposes, as well
as to increase exposure to a foreign currency or to shift exposure to foreign
currency fluctuations from one country to another.
The value of foreign currencies
relative to the U.S. dollar varies continually, causing changes in the dollar
value of a fund’s portfolio investments (even if the local market price of the
investments is unchanged) and changes in the dollar value of a fund’s income
available for distribution to its shareholders. The effect of changes in the
dollar value of a foreign currency on the dollar value of a fund’s assets and on
the net investment income available for distribution may be favorable or
unfavorable. Transactions in non-U.S. currencies are also subject to many of the
risks of investing in foreign (non-U.S.) securities; for example, changes in
foreign economies and political climates are more likely to affect a fund that
has foreign currency exposure than a fund that invests exclusively in U.S.
companies and currency. There also may be less government supervision of foreign
markets, resulting in non-uniform accounting practices and less publicly
available information. Transactions in foreign currencies, foreign currency
denominated debt and certain foreign currency options, futures contracts and
forward contracts (and similar instruments) may give rise to ordinary income or
loss to the extent such income or loss results from fluctuations in the value of
the foreign currency concerned.
A fund may incur costs in connection
with conversions between various currencies. In addition, a fund may be required
to liquidate portfolio assets, or may incur increased currency conversion costs,
to compensate for a decline in the dollar value of a foreign currency occurring
between the time when a fund declares and pays a dividend, or between the time
when a fund accrues and pays an operating expense in U.S. dollars. To protect
against a change in the foreign currency exchange rate between the date on which
a fund contracts to purchase or sell a security and the settlement date for the
purchase or sale, to gain exposure to one or more foreign currencies or to “lock
in” the equivalent of a dividend or interest payment in another currency, a fund
might purchase or sell a foreign currency on a spot ( i.e ., cash) basis at the prevailing
spot rate.
Currency hedging involves some of
the same general risks and considerations as other transactions with similar
instruments (i.e., derivative instruments) and hedging. Currency transactions
are also subject to additional risks. Because currency control is of great
importance to the issuing governments and influences economic planning and
policy, purchases and sales of currency and related instruments can be adversely
affected by government exchange controls, limitations or restrictions on
repatriation of currency, and manipulations or exchange restrictions imposed by
governments. These forms of governmental actions can result in losses to a fund
if it is unable to deliver or receive currency or monies in settlement of
obligations. They could also cause hedges the fund has entered into to be
rendered useless, resulting in full currency exposure as well as incurring
transaction costs. Settlement of a currency forward contract for the purchase of
most currencies must occur at a bank based in the issuing nation. The ability to
establish and close out positions on trading options on currency futures
contracts is subject to the maintenance of a liquid market that may not always
be available.
Foreign
Securities
Principal defines foreign securities
as those issued by:
|
|
• |
companies with their principal
place of business or principal office outside the U.S.
or |
|
|
• |
companies whose principal
securities trading market is outside the
U.S. |
Foreign companies may not be subject
to the same uniform accounting, auditing, and financial reporting practices as
are required of U.S. companies. In addition, there may be less publicly
available information about a foreign company than about a U.S. company.
Securities of many foreign companies are less liquid and more volatile than
securities of comparable U.S. companies. Commissions on foreign securities
exchanges may be generally higher than those on U.S. exchanges.
Foreign markets also have different
clearance and settlement procedures than those in U.S. markets. In certain
markets, there have been times when settlements have been unable to keep pace
with the volume of securities transactions, making it difficult to conduct these
transactions. Delays in settlement could result in temporary periods when a
portion of fund assets is not invested and earning no return. If a fund is
unable to make intended security purchases due to settlement problems, the fund
may miss attractive investment opportunities. In addition, a fund may incur a
loss as a result of a decline in the value of its portfolio if it is unable to
sell a security.
With respect to certain foreign
countries, there is the possibility of nationalization, expropriation or
confiscatory taxation, political or social instability, or diplomatic
developments that could affect a fund's investments in those countries. In
addition, a fund may also suffer losses due to differing accounting practices
and treatments. Investments in foreign securities are subject to laws of the
foreign country that may limit the amount and types of foreign investments.
Changes of governments or of economic or monetary policies, in the U.S. or
abroad, changes in dealings between nations, currency convertibility or exchange
rates could result in investment losses for a fund.
Foreign securities are often traded
with less frequency and volume, and therefore may have greater price volatility
than is the case with many U.S. securities. Brokerage commissions, custodial
services, and other costs relating to investment in foreign countries are
generally more expensive than in the U.S. Though the fund intends to acquire the
securities of foreign issuers where there are public trading markets, economic
or political turmoil in a country in which a fund has a significant portion of
its assets or deterioration of the relationship between the U.S. and a foreign
country may reduce the liquidity of a fund's portfolio. The fund may have
difficulty meeting a large number of redemption requests. Furthermore, there may
be difficulties in obtaining or enforcing judgments against foreign
issuers.
A fund may invest in a foreign
company by purchasing depositary receipts. Depositary receipts are certificates
of ownership of shares in a foreign-based issuer held by a bank or other
financial institution. They are alternatives to purchasing the underlying
security but are subject to the foreign securities risks to which they
relate.
If a fund’s portfolio is
over-weighted in a certain geographic region, any negative development affecting
that region will have a greater impact on the fund than a fund that is not
over-weighted in that region.
Fund of
Funds
The performance and risks of a fund
of funds directly correspond to the performance and risks of the underlying
funds in which the fund invests.
As of August 31, 2015, the Real
Estate Allocation Fund's assets were allocated among the underlying funds as
identified in the following table.
|
|
|
|
Underlying
Fund |
Real Estate
Allocation Fund |
Global Real Estate Securities
Fund |
55.41 |
% |
Real Estate Debt Income
Fund |
44.59 |
|
Total |
100.00 |
% |
A fund of funds indirectly bears its
pro-rata share of the expenses of the underlying funds in which it invests, as
well as directly incurring expenses. Therefore, investment in a fund of funds is
more costly than investing directly in shares of the underlying funds.
Generally, if an underlying fund offers multiple classes of shares for
investment by funds of funds, the Funds will purchase shares of the class with
the lowest expense ratio (expressed as a percent of average net assets on an
annualized basis) at the time of purchase.
Funds of funds can be subject to
payment in kind liquidity risk: If an underlying fund pays a redemption request
by the fund wholly or partly by a distribution-in-kind of portfolio securities
rather than in cash, the fund may hold such portfolio securities until those
managing the investments of the fund determine that it is appropriate to dispose
of them.
Management of funds of funds entails
potential conflicts of interest: a fund of fund may invest in affiliated
underlying funds; and those who manage the fund's investments and their
affiliates may earn different fees from different underlying funds and may have
an incentive to allocate more fund of fund assets to underlying funds from which
they receive higher fees.
Geographic
Concentration
Greater risks may arise from the
geographic concentration (a particular state, such as California, or a
particular country or region) of investments in municipal obligations and
tax-exempt bonds. In addition to factors affecting the state or regional economy
and the current and past financial condition of municipal issuers, certain
constitutional amendments, legislative measures, executive orders,
administrative regulations, court decisions, and voter initiatives could result
in adverse consequences affecting municipal obligations and tax-exempt bonds.
See the SAI for a more detailed description of these risks.
Hedging
Hedging is a strategy that can be
used to limit or offset investment risk. The success of a fund’s hedging
strategy will be subject to the ability of those managing the fund's investments
to correctly assess the degree of correlation between the performance of the
instruments used in the hedging strategy and the performance of the investments
in the portfolio being hedged. Since the characteristics of many securities
change as markets change or time passes, the success of a fund’s hedging
strategy will also be subject to the ability of those managing the fund's
investments to continually recalculate, readjust, and execute hedges in an
efficient and timely manner. For a variety of reasons, those managing the fund's
investments may not seek to establish a perfect correlation between such hedging
instruments and the portfolio holdings being hedged. Such imperfect correlation
may prevent a fund from achieving the intended hedge or expose a fund to risk of
loss. In addition, it is not possible to hedge fully or perfectly against any
risk, and hedging entails its own costs.
High Yield
Securities
Below investment grade bonds, which
are rated at the time of purchase Ba1 or lower by Moody's Investors Service,
Inc. ("Moody's") and BB+ or lower by S&P Global Ratings ("S&P Global")
(if the bond has been rated by only one of those agencies, that rating will
determine if the bond is below investment grade; if the bond has not been rated
by either of those agencies, those managing investments of the fund will
determine whether the bond is of a quality comparable to those rated below
investment grade), are sometimes referred to as high yield or "junk bonds" and
are considered speculative. Such securities could be in default at time of
purchase. The Real Estate Allocation Fund may invest in underlying funds that
may invest in such securities.
Investment in high yield bonds
involves special risks in addition to the risks associated with investment in
highly rated debt securities. High yield bonds may be regarded as predominantly
speculative with respect to the issuer's continuing ability to meet principal
and interest payments. Moreover, under certain circumstances, such securities
may be less liquid than higher rated debt securities.
Analysis of the creditworthiness of
issuers of high yield securities may be more complex than for issuers of higher
quality debt securities. The ability of a fund to achieve its investment
objective may, to the extent of its investment in high yield bonds, be more
dependent on such credit analysis than would be the case if the fund were
investing in higher quality bonds.
High yield bonds may be more
susceptible to real or perceived adverse economic and competitive industry
conditions than higher-grade bonds. The prices of high yield bonds have been
found to be less sensitive to interest rate changes than more highly rated
investments, but more sensitive to adverse economic downturns or individual
corporate developments. If the issuer of high yield bonds defaults, a fund may
incur additional expenses to seek recovery. To the extent that such high yield
issuers undergo a corporate restructuring, such high yield securities may become
exchanged for or converted into reorganized equity of the underlying issuer.
High yield bonds oftentimes include complex legal covenants that impose various
degrees of restriction on the issuer’s ability to take certain actions, such as
distribute cash to equity holders, incur additional indebtedness, and dispose of
assets. To the extent that a bond indenture or loan agreement does not contain
sufficiently protective covenants or otherwise permits the issuer to take
certain actions to the detriment of the holder of the fixed-income security, the
underlying value of such fixed-income security may decline.
The secondary market on which high
yield bonds are traded may be less liquid than the market for higher-grade
bonds. Less liquidity in the secondary trading market could adversely affect the
price at which a fund could sell a high yield bond and could adversely affect
and cause large fluctuations in the daily price of the fund's shares. Adverse
publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the value and liquidity of high yield bonds, especially
in a thinly traded market.
The use of credit ratings for
evaluating high yield bonds also involves certain risks. For example, credit
ratings evaluate the safety of principal and interest payments, not the market
value risk of high yield bonds. Also, credit rating agencies may fail to change
credit ratings in a timely manner to reflect subsequent events. If a credit
rating agency changes the rating of a portfolio security held by a fund, the
fund may retain the security if those managing the investments of the fund think
it is in the best interest of shareholders.
Industry
Concentration
A fund that concentrates its
investments (invests more than 25% of its net assets) in a particular industry
(or group of industries) is more exposed to the overall condition of the
particular industry than a fund that invests in a wider variety of industries. A
particular industry could be affected by economic, business, supply-and-demand,
political, or regulatory factors. Companies within the same industry could react
similarly to such factors. As a result, a fund’s concentration in a particular
industry would increase the possibility that the fund’s performance will be
affected by such factors.
Inverse Floating
Rate Investments
Inverse floating rate investments
are variable rate debt instruments that pay interest at rates that move in the
opposite direction of prevailing interest rates. Inverse floating rate
investments tend to underperform the market for fixed rate bonds in a rising
interest rate environment. Inverse floating rate investments have varying
degrees of liquidity. Inverse floating rate investments in which the funds may
invest may include derivative instruments, such as residual interest bonds or
tender option bonds. Such instruments are typically created by a special purpose
trust that holds long-term fixed rate bonds and sells two classes of beneficial
interests: short-term floating rate interests, which are sold to third party
investors, and the inverse floating residual interests, which are purchased by
the funds. The funds generally invest in inverse floating rate investments that
include embedded leverage, thus exposing the funds to greater risks and
increased costs. The market value of a "leveraged" inverse floating rate
investment generally will fluctuate in response to changes in market rates of
interest to a greater extent than the value of an unleveraged investment. A fund
making such an investment will segregate on its books liquid securities having a
value equal to the market value of the bonds underlying the “leveraged” inverse
floating rate investment.
Investment
Company Securities
Securities of other investment
companies, including shares of closed-end investment companies, unit investment
trusts, various exchange-traded funds ("ETFs"), and other open-end investment
companies, represent interests in professionally managed portfolios that may
invest in a variety of instruments. Certain types of investment companies, such
as closed-end investment companies, issue a fixed number of shares that trade on
a stock exchange or over-the-counter at a premium or a discount to their net
asset value. Others are continuously offered at net asset value, but may also be
traded in the secondary market. ETFs are often structured to perform in a
similar fashion to a broad-based securities index. Investing in ETFs involves
generally the same risks as investing directly in the underlying instruments.
Investing in ETFs involves the risk that they will not perform in exactly the
same fashion, or in response to the same factors, as the index or underlying
instruments. Shares of ETFs may trade at prices other than NAV.
A fund that invests in another
investment company is subject to the risks associated with direct ownership of
the securities in which such investment company invests. Fund shareholders
indirectly bear their proportionate share of the expenses of each such
investment company, including its advisory and administrative fees. The Fund
would also continue to pay its own advisory fees and other expenses.
Consequently, the Fund and its shareholders would, in effect, absorb two levels
of fees with respect to investments in other investment companies.
A fund may invest in affiliated
underlying funds, and those who manage such fund's investments and their
affiliates may earn different fees from different underlying funds and may have
an incentive to allocate more fund assets to underlying funds from which they
receive higher fees.
Leverage
If a fund makes investments in
futures contracts, forward contracts, swaps and other derivative instruments,
these instruments provide the economic effect of financial leverage by creating
additional investment exposure, as well as the potential for greater loss. If a
fund uses leverage through activities such as borrowing, entering into short
sales, purchasing securities on margin or on a “when-issued” basis or purchasing
derivative instruments in an effort to increase its returns, the fund has the
risk of magnified capital losses that occur when losses affect an asset base,
enlarged by borrowings or the creation of liabilities, that exceeds the net
assets of the fund. The net asset value of a fund employing leverage will be
more volatile and sensitive to market movements. Leverage may involve the
creation of a liability that requires the fund to pay interest. Leveraging may
cause a fund to liquidate portfolio positions to satisfy its obligations or to
meet segregation requirements when it may not be advantageous to do so. To the
extent that a fund is not able to close out a leveraged position because of
market illiquidity, a fund’s liquidity may be impaired to the extent that it has
a substantial portion of liquid assets segregated or earmarked to cover
obligations.
Master Limited
Partnerships ("MLPs")
A master limited partnership ("MLP")
that invests in a particular industry (e.g., oil and gas) will be harmed by
detrimental economic events within that industry. For example, the business of
certain MLPs is affected by supply and demand for energy commodities because
such MLPs derive revenue and income based upon the volume of the underlying
commodity produced, transported, processed, distributed, and/or marketed. Many
MLPs are also subject to various federal, state and local environmental laws and
health and safety laws as well as laws and regulations specific to their
particular activities.
MLPs tend to pay relatively higher
distributions than other types of companies. The amount of cash that an MLP can
distribute to its partners will depend on the amount of cash it generates from
operations, which will vary from quarter to quarter depending on factors
affecting the market generally and on factors affecting the particular business
lines of the MLP. Available cash will also depend on the MLP's level of
operating costs (including incentive distributions to the general partner),
level of capital expenditures, debt service requirements, acquisition costs (if
any), fluctuations in working capital needs and other factors.
Certain benefits derived from
investment in MLPs depend largely on the MLPs being treated as partnerships for
federal income tax purposes. As a partnership, an MLP has no federal income tax
liability at the entity level. MLPs taxed as partnerships file a partnership tax
return for U.S. federal, state and local income tax purposes and communicate the
Fund’s allocable share of the MLP’s income, gains, losses, deductions and
expenses via a “Schedule K-1.” Each year, the Fund will send you an annual tax
statement (Form 1099) to assist you in completing your tax returns. If an MLP
subsequently amends its partnership tax return and sends an amended Schedule K-1
to the Fund, in some circumstances the Fund may need to send you a corrected
Form 1099, which could require you to amend your tax returns.
If, as a result of a change in
current law or a change in an MLP's business, an MLP was treated as a
corporation for federal income tax purposes, the MLP would be obligated to pay
federal income tax on its income at the corporate tax rate. If an MLP was
classified as a corporation for federal income tax purposes, the amount of cash
available for distribution would be reduced and the distributions received might
be taxed entirely as dividend income.
To the extent a distribution
received by a fund from an MLP is treated as a return of capital, the fund's
adjusted tax basis in the interests of the MLP will be reduced, which may
increase the fund's tax liability upon the sale of the interests in the MLP or
upon subsequent distributions in respect of such interests.
Municipal
Obligations and AMT-Subject Bonds
The term “municipal obligations”
generally is understood to include debt obligations issued by municipalities to
obtain funds for various public purposes. The two principal classifications of
municipal bonds are "general obligation" and "revenue" bonds. General obligation
bonds are secured by the issuer's pledge of its full faith and credit, with
either limited or unlimited taxing power for the payment of principal and
interest. Revenue bonds are not supported by the issuer's full taxing authority;
generally, they are payable only from the revenues of a particular facility, a
class of facilities, or the proceeds of another specific revenue
source.
AMT-subject bonds are municipal
obligations issued to finance certain "private activities," such as bonds used
to finance airports, housing projects, student loan programs, and water and
sewer projects. Interest on AMT-subject bonds is an item of tax preference for
purposes of the federal individual alternative minimum tax ("AMT") and will also
give rise to corporate alternative minimum taxes. See "Tax Considerations" for a
discussion of the tax consequences of investing in the fund.
Current federal income tax laws
limit the types and volume of bonds qualifying for the federal income tax
exemption of interest, which may have an effect upon the ability of the fund to
purchase sufficient amounts of tax-exempt securities.
Portfolio
Duration
Average duration is a mathematical
calculation of the average life of a bond (or bonds in a bond fund) that serves
as a useful measure of its price risk. Duration is an estimate of how much the
value of the bonds held by a fund will fluctuate in response to a change in
interest rates. For example, if a fund has an average duration of 4 years and
interest rates rise by 1%, the value of the bonds held by the fund will decline
by approximately 4%, and if the interest rates decline by 1%, the value of the
bonds held by the fund will increase by approximately 4%. Longer term bonds and
zero coupon bonds are generally more sensitive to interest rate changes.
Duration, which measures price sensitivity to interest rate changes, is not
necessarily equal to average maturity.
Portfolio
Turnover (Active Trading)
"Portfolio Turnover" is the term
used in the industry for measuring the amount of trading that occurs in a fund's
portfolio during the year. For example, a 100% turnover rate means that on
average every security in the portfolio has been replaced once during the year.
Funds with high turnover rates (more than 100%) are considered actively-traded
and often have higher transaction costs (which are paid by the fund), may result
in higher taxes when fund shares are held in a taxable account, and may lower
the fund's performance. High portfolio turnover can result in a lower capital
gain distribution due to higher transaction costs added to the basis of the
assets or can result in lower ordinary income distributions to shareholders when
the transaction costs cannot be added to the basis of assets. Both events
reduce fund performance.
Please consider all the factors when
you compare the turnover rates of different funds. You should also be aware that
the "total return" line in the Financial Highlights section reflects portfolio
turnover costs.
Preferred
Securities
Preferred securities include
preferred stock and various types of subordinated debt and convertible
securities, including contingent convertible securities ("CoCos"). Preferred
securities generally pay fixed rate dividends (though some are adjustable rate)
and are junior to all forms of the company's senior debt, but may have
"preference" over common stock in the payment of dividends and the liquidation
of a company's assets. Preference means that a company must pay on its preferred
securities before paying on its common stock, and the claims of preferred
securities holders are typically ahead of common stockholders' claims on assets
in a corporate liquidation. Holders of preferred securities usually have no
right to vote for corporate directors or on other matters. The market value of
preferred securities is sensitive to changes in interest rates as they are
typically fixed income securities; the fixed-income payments are expected to be
the primary source of long-term investment return. While some preferred
securities are issued with a final maturity date, others are perpetual in
nature. In certain instances, a final maturity date may be extended and/or the
final payment of principal may be deferred at the issuer’s option for a
specified time without triggering an event of default for the issuer. In
addition, an issuer of preferred securities may have the right to redeem the
securities before their stated maturity date. For instance, for certain types of
preferred securities, a redemption may be triggered by a change in federal
income tax or securities laws. As with call provisions, a redemption by the
issuer may reduce the return of the security held by the fund. Preferred
securities may be subject to provisions that allow an issuer, under certain
circumstances to skip (indefinitely) or defer (possibly up to 10 years)
distributions. If a fund owns a preferred security that is deferring its
distribution, the fund may be required to report income for tax purposes while
it is not receiving any income.
Preferred securities are typically
issued by corporations, generally in the form of interest or dividend bearing
instruments, or by an affiliated business trust of a corporation, generally in
the form of beneficial interests in subordinated debentures or similarly
structured securities. The preferred securities market is generally divided into
the $25 par “retail” and the $1,000 par “institutional” segments. The $25 par
segment includes securities that are listed on the New York Stock Exchange
(exchange traded), which trade and are quoted with accrued dividend or interest
income, and which are often callable at par value five years after their
original issuance date. The institutional segment includes $1,000 par value
securities that are not exchange-listed (over the counter), which trade and are
quoted on a “clean” price, i.e., without accrued dividend or interest income,
and which often have a minimum of 10 years of call protection from the date of
their original issuance. Preferred securities can also be issued by real estate
investment trusts and involve risks similar to those associated with investing
in real estate investment trust companies.
Real Estate
Investment Trusts ("REITs")
Real estate investment trust
securities ("REITs") involve certain unique risks in addition to the risks
associated with investing in the real estate industry in general (such as
possible declines in the value of real estate, lack of availability of mortgage
funds, or extended vacancies of property). REITs are characterized as: equity
REITs, which primarily own property and generate revenue from rental income;
mortgage REITs, which invest in real estate mortgages; and hybrid REITs, which
combine the characteristics of both equity and mortgage REITs. Equity REITs may
be affected by changes in the value of the underlying property owned by the
REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, are not diversified, and
are subject to heavy cash flow dependency, risks of default by borrowers, and
self-liquidation. A fund that invests in a REIT is subject to the REIT’s
expenses, including management fees, and will remain subject to the fund's
advisory fees with respect to the assets so invested. REITs are also subject to
the possibilities of failing to qualify for the special tax treatment accorded
REITs under the Code, and failing to maintain their exemptions from registration
under the 1940 Act.
Investment in REITs also involves
risks similar to those associated with investing in small market capitalization
companies. REITs may have limited financial resources, may trade less frequently
and in a limited volume, and may be subject to more abrupt or erratic price
movements than larger company securities.
Real Estate
Securities
Investing in securities of companies
in the real estate industry subjects a fund to the special risks associated with
the real estate market and the real estate industry in general. Generally,
companies in the real estate industry are considered to be those that have
principal activity involving the development, ownership, construction,
management or sale of real estate; have significant real estate holdings, such
as hospitality companies, healthcare facilities, supermarkets, mining, lumber
and/or paper companies; and/or provide products or services related to the real
estate industry, such as financial institutions that make and/or service
mortgage loans and manufacturers or distributors of building supplies.
Securities of companies in the real estate industry are sensitive to factors
such as loss to casualty or condemnation, changes in real estate values,
property taxes, interest rates, cash flow of underlying real estate assets,
occupancy rates, government regulations affecting zoning, land use and rents,
and the management skill and creditworthiness of the issuer. Companies in the
real estate industry may also be subject to liabilities under environmental and
hazardous waste laws.
Redemption
Risk
An underlying fund to a fund of
funds may experience relatively large redemptions or purchases as the fund of
funds periodically reallocates or rebalances its assets. These transactions may
accelerate the realization of taxable income if sales of portfolio securities
result in gains and could increase transaction costs. In addition, when a fund
of funds reallocates or redeems significant assets away from an underlying fund,
the loss of assets to the underlying fund could result in increased expense
ratios for that fund. Moreover, a fund of fund’s redemptions or reallocations
among share classes of an underlying 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.
PMC is the advisor to the Principal
LifeTime Funds, Principal LifeTime Hybrid Funds, Real Estate Allocation Fund,
SAM Portfolios, PVC Diversified Balanced Account, PVC Diversified Balanced
Managed Volatility Account, PVC Diversified Growth Account, PVC Diversified
Growth Managed Volatility Account, PVC Diversified Income Account, PVC
Multi-Asset Income Account and each of the underlying funds. Principal Global
Investors, LLC ("PGI") is Sub-Advisor to the Principal LifeTime Funds and the
PVC Multi-Asset Income Account, Principal Real Estate Investors, LLC,
("Principal-REI") is sub-advisor to the Real Estate Allocation Fund, and Edge
Asset Management, Inc. ("Edge") is the Sub-Advisor to the SAM Portfolios. PGI,
Principal-REI or Edge also serves as Sub-Advisor to some or all of the
underlying funds. PMC, PGI, Principal-REI and Edge are committed to minimizing
the potential impact of underlying fund risk on underlying funds to the extent
consistent with pursuing the investment objectives of the fund of funds that it
manages. Each may face conflicts of interest in fulfilling its responsibilities
to all such funds.
As of August 31, 2015, PFI Principal
LifeTime Funds, PFI Principal LifeTime Hybrid Funds, PFI Real Estate Allocation
Fund, PFI SAM Portfolios, PVC Diversified Balanced Account, PVC Diversified
Balanced Managed Volatility Account, PVC Diversified Growth Account, PVC
Diversified Growth Managed Volatility Account, PVC Diversified Income Account,
PVC Principal LifeTime Accounts, PVC Multi-Asset Income Account, and PVC SAM
Portfolios owned the following percentages, in the aggregate, of the outstanding
shares of the underlying funds listed below:
|
|
|
Fund |
Total
Percentage
of
Outstanding
Shares
Owned |
|
|
Blue Chip Fund |
96.50% |
Bond Market Index
Fund |
89.70% |
Diversified Real Asset
Fund |
30.52% |
Global Multi-Strategy
Fund |
57.15% |
Global Opportunities
Fund |
99.03% |
International Equity Index
Fund |
52.85% |
International Small Company
Fund |
2.59% |
Origin Emerging Markets
Fund |
64.61% |
Preferred Securities
Fund |
1.03% |
Real Estate Debt Income
Fund |
0.33% |
Small-MidCap Dividend Income
Fund |
30.43% |
Royalty
Trusts
A royalty trust generally acquires
an interest in natural resource or chemical companies and distributes the income
it receives to its investors. A sustained decline in demand for natural resource
and related products could adversely affect royalty trust revenues and cash
flows. Such a decline could result from a recession or other adverse economic
conditions, an increase in the market price of the underlying commodity, higher
taxes or other regulatory actions that increase costs, or a shift in consumer
demand. Rising interest rates could harm the performance and limit the capital
appreciation of royalty trusts because of the increased availability of
alternative investments at more competitive yields. Fund shareholders will
indirectly bear their proportionate share of the royalty trusts'
expenses.
Securitized
Products
Securitized products are fixed
income instruments that represent interests in underlying pools of collateral or
assets. The value of the securitized product is derived from the performance,
value, and cash flows of the underlying asset(s). The fund’s investments in
securitized products are subject to risks similar to traditional fixed income
securities, such as credit, interest rate, liquidity, prepayment, extension, and
default risk, as well as additional risks associated with the nature of the
assets and the servicing of those assets. Prepayment risk may make it difficult
to calculate the average life of a fund’s investment in securitized products.
Securitized products are generally issued as pass-through certificates, which
represent the right to receive principal and interest payments collected on the
underlying pool of assets, which are passed through to the security holder.
Therefore, repayment depends on the cash flows generated by the underlying pool
of assets. The securities may be rated as investment-grade or
below-investment-grade.
|
|
• |
Mortgage-backed
securities (“MBS”) represent an interest in a pool of underlying mortgage
loans secured by real property. MBS are sensitive to changes in interest
rates, but may respond to these changes differently from other fixed
income securities due to the possibility of prepayment of the underlying
mortgage loans. If interest rates fall and the underlying loans are
prepaid faster than expected, the fund may have to reinvest the prepaid
principal in lower yielding securities, thus reducing the fund’s income.
Conversely, rising interest rates tend to discourage refinancings and the
underlying loans may be prepaid more slowly than expected, reducing a
fund’s potential to reinvest the principal in higher yielding securities
and extending the duration of the underlying loans. In addition, when
market conditions result in an increase in default rates on the underlying
loans and the foreclosure values of the underlying real estate is less
than the outstanding amount due on the underlying loan, collection of the
full amount of accrued interest and principal on these investments may be
doubtful. The risk of such defaults is generally higher in the case of
underlying mortgage pools that include sub-prime mortgages (mortgages
granted to borrowers whose credit histories would not support conventional
mortgages). |
|
|
• |
Commercial
mortgage-backed securities (“CMBS”) represent an interest in a pool of
underlying commercial mortgage loans secured by real property such as
retail, office, hotel, multi-family, and industrial properties. Certain
CMBS are issued in several classes with different levels of yield and
credit protection, and the CMBS class in which a fund invests usually
influences the interest rate, credit, and prepayment
risks. |
|
|
• |
Asset-backed
securities (“ABS”) are backed by non-mortgage assets such as company
receivables, truck and auto loans, student loans, leases and credit card
receivables. ABS entail credit risk. They also may present a risk that, in
the event of default, the liquidation value of the underlying assets may
be inadequate to pay any unpaid interest or principal.
|
Short
Sales
A fund enters into a short sale by
selling a security it has borrowed (typically from a broker or other
institution) with the hope of purchasing the same security at a later date at a
lower price. A fund may also take a short position in a derivative instrument,
such as a future, forward or swap. If the market price of the security or
derivatives increases, the fund will suffer a (potentially unlimited) loss when
it replaces the security or derivative at the higher price. In certain cases,
purchasing a security to cover a short position can itself cause the price of
the security to rise further, thereby exacerbating the loss. In addition, a fund
may not always be able to borrow the security at a particular time or at an
acceptable price. Before a fund replaces a borrowed security, it is required to
designate on its books cash or liquid assets as collateral to cover the fund’s
short position, marking the collateral to market daily. This obligation limits a
fund’s investment flexibility, as well as its ability to meet redemption
requests or other current obligations. A short position in a derivative
instrument involves the risk of a theoretically unlimited increase in the value
of the underlying instrument. Short sales also involve transaction and other
costs that will reduce potential fund gains and increase potential fund losses.
Certain funds may also invest the
proceeds received from short selling securities, which creates additional
leverage. Using such leverage allows the fund to use the proceeds to purchase
additional securities, thereby increasing its exposure to assets, such that its
total assets may be greater than its capital. Leverage also magnifies the
volatility of changes in the value of the fund’s portfolio. The effect of the
use of leverage by the fund in a market that moves adversely to its investments
could result in substantial losses to the fund, which would be greater than if
the fund were not leveraged. Because a short position loses value as the
security’s price increases, the loss on a short sale is theoretically
unlimited.
The short sale proceeds utilized by
a fund to leverage investments are collateralized by all or a portion of such
fund’s portfolio. Accordingly, a fund may pledge securities in order to effect
short sales, utilize short sale proceeds or otherwise obtain leverage for
investment or other purposes. Should the securities pledged to brokers to secure
the fund’s margin accounts decline in value, the fund could be subject to a
“margin call”, pursuant to which the fund must either deposit additional funds
or securities with the broker or suffer mandatory liquidation of all or a
portion of the pledged securities to compensate for the decline in value. The
banks and dealers that provide leverage to the fund have discretion to change
the fund’s margin requirements at any time. Changes by counterparties in the
foregoing may result in large margin calls, loss of leverage and forced
liquidations of positions at disadvantageous prices. The utilization of short
sale proceeds for leverage will cause the fund to be subject to higher
transaction fees and other costs.
U.S. Government
and U.S. Government-Sponsored Securities
U.S. Government securities, such as
Treasury bills, notes and bonds and mortgage-backed securities guaranteed by the
Government National Mortgage Association (Ginnie Mae), are supported by the full
faith and credit of the United States; others are supported by the right of the
issuer to borrow from the U.S. Treasury; others are supported by the
discretionary authority of the U.S. Government to purchase the agency's
obligations; and still others are supported only by the credit of the issuing
agency, instrumentality, or enterprise.
Although U.S. Government-sponsored
enterprises such as the Federal Home Loan Mortgage Corporation (Freddie Mac) and
the Federal National Mortgage Association (Fannie Mae) may be chartered or
sponsored by Congress, they are not funded by Congressional appropriations, and
their securities are not issued by the U.S. Treasury nor supported by the full
faith and credit of the U.S. Government.
There is no assurance that the U.S.
Government would provide financial support to its agencies and instrumentalities
if not required to do so. In addition, certain governmental entities have been
subject to regulatory scrutiny regarding their accounting policies and practices
and other concerns that may result in legislation, changes in regulatory
oversight and/or other consequences that could adversely affect the credit
quality, availability, or investment character of securities issued by these
entities. The value and liquidity of U.S. Government securities may be affected
adversely by changes in the ratings of those securities.
Volatility
Mitigation
Volatility mitigation strategies may
increase fund transaction costs, which could increase losses or reduce
gains. These strategies may not protect the fund from market declines and
may reduce the fund’s participation in market gains.
PORTFOLIO
HOLDINGS INFORMATION
A description of the Fund's policies
and procedures with respect to disclosure of the Fund's portfolio securities is
available in the Fund's Statement of Additional Information.
MANAGEMENT OF THE
FUNDS
The
Manager
Principal Management Corporation
(“PMC”) serves as the manager for the Fund. Through the Management Agreement
with the Fund, PMC provides investment advisory services and certain corporate
administrative services for the Fund. For some of the Funds, some of these
services are provided by PMC doing business as "Principal Portfolio
Strategies".
PMC is an indirect subsidiary of
Principal Financial Group, Inc. and has managed mutual funds since 1969. PMC's
address is 655 9th Street, Des Moines, IA 50392.
PMC may provide investment advisory
services, on a temporary basis, for a portion of the Diversified Real Asset Fund
by managing one or more portfolios that seek to track the performance of an
index related to a particular sector or asset class. Portfolios that are based
on an equity index will typically utilize a “replication” method to purchase all
the securities in the index, in the approximate proportions as the index.
Portfolios that are based on a fixed income index will typically utilize a
“sampling” method to purchase a subset of securities in the index that seeks to
construct a portfolio of securities with similar risk, return, and other
characteristics as the index.
PMC provides these investment
advisory services through a portfolio manager who functions as a co-employee of
PMC and Principal Global Investors, LLC ("PGI") under an investment service
agreement. Through the agreement, the portfolio manager has access to PGI's
equity management processes, systems, staff, proprietary quantitative model,
portfolio construction disciplines, experienced portfolio management, and
quantitative research staff. This portfolio manager also has access to PGI's
trading staff and trade execution capabilities along with PGI's order management
system, pre- and post-trade compliance system, portfolio accounting system and
performance attribution and risk management system.
Cash Management
Program
For each Fund, PMC may invest excess
cash in money market funds, lend it to other Funds pursuant the Funds' interfund
lending facility, or invest it in overnight repurchase agreements through the
Funds’ joint trade account.
In addition, the following Fund has
adopted a special cash management program, which is executed by PMC: Origin
Emerging Markets. Pursuant to this program, each listed Fund may invest its
excess cash in stock index futures contracts reflecting the Fund's market
capitalization to gain exposure to the market. Stock index futures provide
returns similar to those of common stocks. PMC believes that, over the long
term, this strategy will enhance the investment performance of the Funds.
The
Sub-Advisors
PMC has signed contracts with
various Sub-Advisors. Under the sub-advisory agreements, the Sub-Advisor agrees
to assume the obligations of PMC to provide investment advisory services to the
portion of the assets of a specific Fund allocated to it by PMC. For these
services, PMC pays the Sub-Advisor a fee (except for the Capital Securities and
Real Estate Allocation Funds).
PMC or the Sub-Advisor provides the
Directors of the Fund with a recommended investment program. The program must be
consistent with the Fund’s investment objective and policies. Within the scope
of the approved investment program, the Sub-Advisor advises the Fund on its
investment policy and determines which securities are bought or sold, and in
what amounts.
The Diversified Real Asset and
Global Multi-Strategy Funds, which are part of the Principal Portfolio
Strategies SM
, have multiple Sub-Advisors,
and a team at PMC identified in each Fund summary determines the portion of
those Funds’ assets that each Sub-Advisor will manage and may reallocate Fund
assets among the Sub-Advisors from time-to-time. This team shares authority and
responsibility for day-to-day portfolio management, with no limitation on the
authority of one portfolio manager in relation to another. The decision to
reallocate Fund assets between the Sub-Advisors may be based on a variety of
factors, including but not limited to: the investment capacity of each
Sub-Advisor, portfolio diversification, volume of net cash flows, fund
liquidity, investment performance, investment strategies, changes in each
Sub-Advisor's firm or investment professionals, or changes in the number of
Sub-Advisors. Ordinarily, reallocations of Fund assets among Sub-Advisors occur
as a Sub-Advisor liquidates assets in the normal course of portfolio management
or with net new cash flows; however, at times existing Fund assets may be
reallocated among Sub-Advisors.
Jake S. Anonson
initially joined
Principal ®
in 1998 and re-joined
Principal ®
in 2012 after working at Miles
Capital from 2010-2012. Mr. Anonson is responsible for the asset allocation and
manager selection for the Principal Portfolio Strategies SM
. Mr. Anonson earned a
bachelor’s degree in Finance and Economics from the University of Northern Iowa
and an M.B.A. from Iowa State University. He has earned the right to use the
Chartered Financial Analyst designation.
Jessica S. Bush
joined Principal
®
in 2006. Ms. Bush is
responsible for the asset allocation and manager selection for the Principal
Portfolio Strategies SM
. Ms. Bush earned a bachelor’s
degree in Business Administration from the University of Michigan. She has
earned the right to use the Chartered Financial Analyst designation.
Marcus W. Dummer
joined Principal
®
in 2003. Mr. Dummer is
responsible for the asset allocation and manager selection for the Principal
Portfolio Strategies SM
. Mr. Dummer earned a
bachelor’s degree in Finance and an M.B.A. from the University of Utah. He
has earned the right to use the Chartered Alternative Investment Analyst
designation.
Kelly A. Grossman
joined Principal
®
in 1991. Ms. Grossman is
responsible for the asset allocation and manager selection for the Principal
Portfolio Strategies SM
. Ms. Grossman earned a
bachelor’s degree in Mathematics and Computer Science from the University of
Northern Iowa. Ms. Grossman is a Fellow of the Society of Actuaries and a
member of the American Academy of Actuaries.
Benjamin E.
Rotenberg joined
Principal ®
in 2014. Prior to that, he was
employed at Cliffwater LLC from 2007-2014. Mr. Rotenberg is responsible for the
asset allocation and manager selection for the Principal Portfolio
Strategies SM
. Mr. Rotenberg earned a
bachelor’s degree in International Relations and Russian from Pomona College. He
has earned the right to use the Chartered Financial Analyst and the Chartered
Alternative Investment Analyst designations.
The Fund summaries identified the
portfolio managers and the funds they manage. Additional information about the
portfolio managers follows. The SAI provides additional information about each
portfolio manager’s compensation, other accounts managed by the portfolio
manager, and the portfolio manager’s ownership of securities in the
Fund.
|
|
Sub-Advisor: |
AQR Capital
Management, LLC (“AQR”), Two Greenwich Plaza,
Greenwich, CT 06830, formed in 1998, is an investment management firm that
employs a disciplined multi-asset, global research
process. |
AQR is one of the sub-advisors for
the Global Multi-Strategy Fund and may use any of the Fund’s investment
strategies, including investments in commodity instruments through the Fund’s
Cayman Subsidiary.
|
|
Sub-Advisor:
|
Ascend
Capital, LLC (“Ascend”), 4 Orinda Way, Suite 200-C,
Orinda, California 94563, has been an SEC-registered investment advisor
since 2006. |
Ascend is one of the sub-advisors
for the Global Multi-Strategy Fund and will primarily use the equity long/short
strategy; however, it may also use any of the Fund’s other investment strategies
from time to time.
|
|
Sub-Advisor: |
BlackRock
Financial Management, Inc. (“BlackRock”), 55 East 52nd Street, New
York, New York 10055, is a registered investment adviser organized in
1994. BlackRock and its affiliates manage investment company and other
portfolio assets. |
BlackRock is the sub-advisor for the
inflation-indexed bonds portion of the Diversified Real Asset Fund.
|
|
Sub-Advisor: |
Brookfield
Investment Management Inc. (“Brookfield”), Brookfield Place, 250 Vesey
Street, 15th Floor, New York, NY 10281, is a registered investment manager
that focuses on the listed equity and debt of publicly traded real
assets. |
Brookfield is the sub-advisor for
the global infrastructure portion of the Diversified Real Asset
Fund.
|
|
Sub-Advisor:
|
Cliffwater
LLC (“Cliffwater”), 4640 Admiralty Way, 11th
Floor, Marina del Rey, CA 90292, is a registered investment adviser and
advises clients on their investments in alternative assets including hedge
funds, private equity, real estate and real assets, as well as traditional
strategies. |
Cliffwater is a sub-advisor and
consultant for the Global Multi-Strategy Fund. In that role, Cliffwater
evaluates strategies and sub-advisors for the Global Multi-Strategy Fund,
including on-going monitoring and reporting to PMC on the Global Multi-Strategy
Fund as well as its sub-advisors. Cliffwater identifies alternative asset
investment opportunities for potential investment. Finally, Cliffwater provides
on-going recommendations to PMC for rebalancing among the sub-advisors.
|
|
Sub-Advisor: |
CNH
Partners, LLC (“CNH”), Two Greenwich Plaza,
Greenwich, CT 06830, is a merger arbitrage, convertible arbitrage and
diversified arbitrage research affiliate of
AQR. |
CNH is one of the sub-advisors for
the Global Multi-Strategy Fund and may use any of the Fund’s investment
strategies, including investments in commodity instruments through the Fund’s
Cayman Subsidiary.
|
|
Sub-Advisor:
|
Columbus
Circle Investors (“CCI”) , Metro Center, One Station
Place, Stamford, CT 06902, founded in 1975, manages growth-oriented
portfolios in Large Cap, Mid Cap, SMID, and Small Cap categories for
domestic equities. CCI specializes in the management of discretionary
accounts for a variety of organizations. CCI also offers advisory services
for mutual funds and high net worth individuals.
|
CCI is the sub-advisor for the
European low net portion of the Multi-Manager Equity Long/Short Fund.
|
|
Sub-Advisor:
|
Credit
Suisse Asset Management, LLC (“Credit Suisse”) , One Madison Avenue, New
York, NY, 10010, is the New York-based Registered Investment Adviser of
Credit Suisse Asset Management (CSAM). CSAM, which is part of the
International Wealth Management Division of Credit Suisse Group AG, is a
global asset manager with a focus on Alternative Investments and select
Traditional Investments. |
Credit Suisse, as one of the
sub-advisors for the Diversified Real Asset Fund, invests in commodity
index-linked notes and (indirectly through a Cayman subsidiary) commodity
derivatives.
|
|
Sub-Advisor: |
Edge Asset
Management, Inc. (“Edge”), 601 Union Street,
Suite 2200, Seattle, WA 98101-1377, has been in the business of
investment management since 1944. |
Edge is the sub-advisor for the EDGE
MidCap Fund and Small-MidCap Dividend Income Fund.
The portfolio managers operate as a
team, sharing authority, with no limitation on the authority of one portfolio
manager in relation to another.
Daniel R.
Coleman has been with
Edge since 2001 and has held various investment management roles on the equity
team, including Portfolio Manager and some senior management roles. He earned a
bachelor's degree in Finance from the University of Washington and an M.B.A.
from New York University.
Theodore Jayne
has been a Portfolio
Manager with Edge since 2015. Prior to joining Edge, he was a Managing Director
and Portfolio Manager at Wellington Management Company LLP from 1998 to 2014. He
earned a bachelor’s degree in Anthropology from Harvard University. Mr. Jayne
has earned the right to use the Chartered Financial Analyst
designation.
David W.
Simpson has been with
Edge since 2003. He earned a bachelor's degree from the University of Illinois
and an M.B.A. in Finance from the University of Wisconsin. Mr. Simpson has
earned the right to use the Chartered Financial Analyst
designation.
|
|
Sub-Advisor: |
Finisterre
Capital LLP (“Finisterre”), 10 New Burlington Street,
London, England W1S 3BE, manages emerging market assets for a variety of
investors. |
Finisterre is one of the
sub-advisors for the Global Multi-Strategy Fund and will primarily use the
emerging market long/short credit strategy; however, it may also use any of the
Fund's other investment strategies from time to time.
|
|
Sub-Advisor: |
Fischer
Francis Trees & Watts, Inc. (“FFTW”), 200 Park Avenue,
11th Floor, New York, NY 10166,
was founded in 1972 and became a U.S. registered investment advisor with
the Securities and Exchange Commission in
1975. |
FFTW is the sub-advisor for the
currency investment portion of the Diversified Real Asset Fund.
|
|
Sub-Advisor:
|
Gotham
Asset Management, LLC (“Gotham”), 535 Madison Avenue, 30th
Floor, New York, NY 10022, is a registered investment adviser that manages
long/short and long-only investment strategies.
|
Gotham is the sub-advisor for the
systematic quality/value portion of the Multi-Manager Equity Long/Short
Fund.
|
|
Sub-Advisor: |
Graham
Capital Management, L.P. (“Graham”), 40 Highland Avenue,
Rowayton, Connecticut, 06853, founded in 1994, is an investment management
firm that focuses on global macro-oriented
strategies. |
Graham is one of the sub-advisors
for the Global Multi-Strategy Fund and will primarily use the global macro
strategy; however, it may also use any of the Fund’s other investment strategies
from time to time.
|
|
Sub-Advisor: |
KLS
Diversified Asset Management LP (“KLS”), 452 Fifth Avenue,
22nd Floor, New York, NY
10018,
has been an
SEC-registered investment advisor since
2011. |
KLS is the sub-advisor for the
market-neutral portion of the Global Multi-Strategy Fund.
|
|
Sub-Advisor: |
Loomis,
Sayles & Company, L.P. (“Loomis Sayles”), One Financial Center, Boston,
Massachusetts 02111, is an investment advisory firm that was founded in
1926. |
Loomis Sayles is one of the
sub-advisors for the Global Multi-Strategy Fund and will primarily use the
credit long/short and distressed credit strategy; however, it may also use any
of the Fund’s other investment strategies from time to time.
|
|
Sub-Advisor: |
Los Angeles
Capital Management and Equity Research, Inc. ("Los Angeles
Capital"), 11150
Santa Monica Boulevard, Suite 200, Los Angeles, CA 90025, founded in 2002,
is a registered investment adviser offering risk-controlled, active equity
management services to a broad range of institutional
investors. |
Los Angeles Capital is one of the
sub-advisors for the Global Multi-Strategy Fund and will primarily use the
equity long/short strategy; however, it may also use any of the Fund’s other
investment strategies from time to time.
|
|
Sub-Advisor: |
Macquarie
Capital Investment Management LLC (“Macquarie”), 125 West 55th Street, New York, NY 10019,
founded in 2004, is a registered investment advisor that is dedicated to
the management of infrastructure securities
accounts. |
Macquarie is a sub-advisor for the
global infrastructure portion of the Diversified Real Asset Fund.
|
|
Sub-Advisor: |
Mellon
Capital Management Corporation (“Mellon Capital”), 50 Fremont Street,
Suite 3900, San Francisco, CA 94105, specializes in providing
domestic and global asset allocation strategies, traditional and enhanced
indexing, active equity and fixed income strategies, alternative
investments, currency strategies, active commodities, and overlay
strategies. |
Mellon Capital is the sub-advisor
for the Bond Market Index Fund.
The day-to-day portfolio management
is shared by multiple portfolio managers who work as a team. Gregg Lee is the
lead portfolio manager.
Paul
Benson joined Mellon
Capital in 2005. He earned a B.A. from the University of Michigan, Ann Arbor. He
has earned the right to use the Chartered Financial Analyst designation.
Gregg Lee
joined Mellon Capital
in 1989. He earned a B.S. from the University of California at Davis in
Managerial Economics. He has earned the right to use the Chartered Financial
Analyst designation.
Nancy G.
Rogers joined Mellon
Capital in 1987. She earned a B.S. in Marketing and Finance and an M.B.A. from
Drexel University. She has earned the right to use the Chartered Financial
Analyst designation.
Stephanie
Shu joined Mellon
Capital in 2001. She earned a B.S. in Operations Research and Statistics from
Fudan University, Shanghai, China and an M.S. from Texas A&M
University. She has earned the right to use the Chartered Financial Analyst
designation.
|
|
Sub-Advisor: |
Origin
Asset Management LLP (“Origin”), One Carey Lane, London, EC2V
8AE, UK manages global equity securities for institutional
clients. |
Origin is the sub-advisor for the
Origin Emerging Markets Fund.
The portfolio managers operate as a
team, sharing authority and responsibility for research and the day-to-day
management of the portfolio with no limitation on the authority of one portfolio
manager in relation to another.
John Birkhold
has been with Origin
since 2009. He earned a B.S. and M.E. in Systems Engineering from the University
of Virginia and an M.B.A. in Finance from the University of
Chicago.
Chris Carter
has been with Origin
since 2005. Mr. Carter is a graduate of Gonville & Caius College, University
of Cambridge, with an M.A. Honours Degree in Economics and
Philosophy.
Nigel Dutson
has been with Origin
since 2005. Mr. Dutson is a graduate of Surrey University with a B.Sc. Joint
Honours Degree in Mathematics & Economics.
Tarlock Randhawa
has been with Origin
since 2005. Mr. Randhawa is a graduate of Brunel University with a B.Sc. Joint
Honours Degree in Mathematics & Management.
|
|
Sub-Advisor:
|
Passport
Capital, LLC ("Passport"), One Market Street, Steuart
Tower, Suite 2200, San Francisco, CA 94105, is a global investment firm
founded in 2000. Passport is a registered investment advisor and primarily
manages privately offered pooled investment vehicles and managed
accounts. |
Passport is the sub-advisor for the
global thematic portion of the Multi-Manager Equity Long/Short Fund.
|
|
Sub-Advisor: |
Pictet
Asset Management SA (“Pictet”), 60 Route Des Acacias, Geneva,
Switzerland 1211-73, is authorized and regulated by the FINMA in
Switzerland and the SEC in the U.S. and has been an investment advisor
since 2006. Pictet provides asset management services for institutional
investors and investment funds. |
Pictet is the sub-advisor for the
global agriculture and global timber portions of the Diversified Real Asset
Fund.
|
|
Sub-Advisor: |
Principal
Global Investors, LLC (“PGI”), 801 Grand Avenue, Des
Moines, IA 50392, manages equity and fixed-income investments, primarily
for institutional investors. PGI's other primary asset management office
is in New York, with asset management offices of affiliate advisors in
several non-U.S. locations including London, Sydney and
Singapore. |
PGI is the sub-advisor for the Blue
Chip, Credit Opportunities Explorer, Dynamic High Yield Explorer, Global
Opportunities, Global Opportunities Equity Hedged, International Equity Index,
International Small Company, Opportunistic Municipal, SystematEx International,
and SystematEx Large Value Funds. For the Blue Chip Fund, these services are
provided by PGI doing business as "Aligned Investors".
As reflected in the fund summaries,
the day-to-day portfolio management, for some funds, is shared by multiple
portfolio managers. In each such case, except the Blue Chip Fund, the portfolio
managers operate as a team, sharing authority and responsibility for research
and the day-to-day management of the portfolio with no limitation on the
authority of one portfolio manager in relation to another. For the Blue Chip
Fund, Mr. Nolin and Mr. Rozycki work as a team, sharing day-to-day management of
the Fund; however, Mr. Nolin has ultimate decision making authority. Mr. Rozycki
may execute trades in Mr. Nolin’s absence.
William C.
Armstrong has been with
PGI since 1992. He earned a bachelor's degree from Kearney State College and an
M.B.A. from the University of Iowa. Mr. Armstrong has earned the right to use
the Chartered Financial Analyst designation.
Mark P. Denkinger
has been with PGI since
1990. He earned a bachelor’s degree in Finance and an M.B.A. with a Finance
emphasis from the University of Iowa. Mr. Denkinger has earned the right to use
the Chartered Financial Analyst designation.
Jason
Hahn has been with PGI
since 2004. He earned a bachelor's degree in Finance and Economics and an M.B.A.
in Finance from the University of Iowa. Mr. Hahn has earned the right to use the
Chartered Financial Analyst designation.
Christopher Ibach
has been with PGI since
2000. He earned a bachelor’s degree in Electrical Engineering and an M.B.A. in
Finance from the University of Iowa. He has earned the right to use the
Chartered Financial Analyst designation.
Thomas L.
Kruchten has been with
PGI since 2005. He earned a B.A. in Finance from the University of Northern
Iowa. Mr. Kruchten has earned the right to use the Chartered Financial Analyst
designation and is a member of the CFA Society of Iowa.
Tiffany N.
Lavastida has been with
PGI since 1997. She earned a bachelor’s degree in Finance and an M.B.A. from the
University of Iowa. Ms. Lavastida has earned the right to use the Chartered
Financial Analyst designation.
Xiaoxi Li
has been with PGI since
2006. He earned his bachelor’s degree in Accounting from the University of
International Business and Economics, a master’s degree in Accounting from
Beijing Technology and Business University, and an M.B.A. from Duke University.
He has earned the right to use the Chartered Financial Analyst
designation.
Mark R.
Nebelung has been with
PGI since 1997. As a co-employee of PGI and Principal Global Investors (Europe)
Limited (“PGI Europe”), Mr. Nebelung manages Principal Fund assets as an
employee of PGI. He earned his bachelor's degree in Actuarial Science and
Statistics from the University of Waterloo, Canada. He has earned the right to
use the Chartered Financial Analyst designation.
James
Noble has been with PGI
since 2010. He earned a bachelor’s degree in Finance and an M.B.A. from Hofstra
University.
K. William
Nolin has been with PGI
since 1993. He earned a bachelor’s degree in Finance from the University of Iowa
and an M.B.A. from the Yale School of Management. Mr. Nolin has earned the right
to use the Chartered Financial Analyst designation.
Tina
Paris has been with PGI
since 2001. She earned a bachelor’s degree in Finance and Economics from the
University of Northern Iowa and an M.B.A. with an emphasis in Finance from the
University of Iowa. Ms. Paris has earned the right to use the Chartered
Financial Analyst.
Brian W.
Pattinson has been with
PGI since 1994. He earned a bachelor’s degree and an M.B.A. in Finance from the
University of Iowa. Mr. Pattinson has earned the right to use the Chartered
Financial Analyst designation.
Josh
Rank has been with PGI
since 2013. Prior to that, he worked at Aviva Investors Americas from 2005 to
2013. He earned a bachelor's degree in Finance from Iowa State University. Mr.
Rank has earned the right to use the Chartered Financial Analyst
designation.
Tom
Rozycki has been with
PGI since 2001. He earned a bachelor’s degree in Finance from Drake University.
Mr. Rozycki has earned the right to use the Chartered Financial Analyst
designation.
Mustafa Sagun
has been with PGI since
2000. He earned a bachelor’s degree in Electronics and Engineering from Bogazci
University, Turkey, and an M.B.A. in International Economics and Ph.D. in
Finance from the University of South Florida. He has earned the right to use the
Chartered Financial Analyst designation.
Jeffrey A.
Schwarte has been with
PGI since 1993. He earned a bachelor’s degree in Accounting from the University
of Northern Iowa. Mr. Schwarte is a CPA and has earned the right to use the
Chartered Financial Analyst designation.
Darrin E. Smith
has been with PGI since
2007. He earned a bachelor’s degree in Economics from Iowa State University and
an M.B.A. from Drake University. Mr. Smith has earned the right to use the
Chartered Financial Analyst designation.
Darryl
Trunnel has been with
PGI since 2008. He earned a bachelor's degree in Agricultural Business from Iowa
State University. Mr. Trunnel has earned the right to use the Chartered
Financial Analyst designation.
James
Welch has been with PGI
since 2014. Prior to that, Mr. Welch was a Senior Portfolio Manager at Castleton
Partners, where he was employed from 2013 to 2014; and, from 2009 to 2012, he
worked at Standish Mellon Asset Management. Mr. Welch earned a bachelor's degree
in Economics from the Pennsylvania State University.
|
|
Sub-Advisor: |
Principal
Real Estate Investors, LLC (“Principal - REI”), 801 Grand Avenue, Des Moines,
IA 50392, was founded in 2000 and manages commercial real estate across
the spectrum of public and private equity and debt investments, primarily
for institutional investors. |
Principal - REI is the sub-advisor
for the Real Estate Allocation Fund, the Real Estate Debt Income Fund and the
real estate investment trust portion of the Diversified Real Asset
Fund.
As reflected in the fund summaries,
the day-to-day portfolio management, for some funds, is shared by multiple
portfolio managers. The portfolio managers operate as a team, sharing authority
and responsibility for research and the day-to-day management of the portfolio
with no limitation on the authority of one portfolio manager in relation to
another.
Scott M. Carson
has been with Principal
- REI since 2003. He earned a bachelor’s degree in Finance from Iowa State
University. Mr. Carson has earned the right to use the Chartered Financial
Analyst designation.
Indraneel
("Indy") Karlekar has
been with Principal - REI since 2013. Prior to that, he worked at Cole Real
Estate Investments (2011-2013). He earned a Ph.D. in Economics from the
University of Cambridge.
Marc
Peterson has been with
Principal - REI since 1992. He earned a bachelor’s degree in Accounting from
Luther College and an M.B.A. from Drake University. Mr. Peterson has earned the
right to use the Chartered Financial Analyst designation.
Kelly D. Rush
has been with Principal
- REI since 2000 and the predecessor firms since 1987. He earned a B.A. in
Finance and an M.B.A. in Business Administration from the University of Iowa.
Mr. Rush has earned the right to use the Chartered Financial Analyst
designation.
|
|
Sub-Advisor:
|
Sirios
Capital Management, L.P. ("Sirios") , One International Place,
30th Floor, Boston, MA 02110, is a fundamental, bottom-up research-driven
investment firm founded in 1999. |
Sirios is the sub-advisor for the
time arbitrage portion of the Multi-Manager Equity Long/Short Fund.
|
|
Sub-Advisor:
|
Sound Point
Capital Management, LP (“Sound Point”), 375 Park Avenue, 33rd Floor,
New York, NY 10152, founded in 2009, is a registered investment advisor
that provides investment advice and portfolio management services.
|
Sound Point is one of the
sub-advisors for the Global Multi-Strategy Fund and will primarily use the
credit long/short and distressed credit strategies; however, it may also use any
of the Fund’s other investment strategies from time to time.
|
|
Sub-Advisor: |
Spectrum
Asset Management, Inc. (“Spectrum”), 2 High Ridge Park, Stamford,
CT 06905, founded in 1987, manages portfolios of preferred securities for
corporate, pension fund, insurance and endowment clients, open-end and
closed-end mutual funds, and separately managed account programs for high
net worth individual investors as well as providing volatility mitigation
solutions for some client portfolios. |
Spectrum is the sub-advisor for the
Capital Securities and Preferred Securities Funds.
The day-to-day portfolio management
is shared by a team of portfolio managers, under the leadership of the Chief
Investment Officer (who also chairs the Investment Committee) in conjunction
with the Credit and Research Team. This group has the authority and
responsibility for research, credit selection, ongoing portfolio management and
trading. For the Preferred Securities Fund, the volatility mitigation strategies
are managed by a team consisting of Mr. Jacoby, Mr. Krishnan, and Mr. Nugent;
however, Mr. Nugent is primarily responsible for day-to-day portfolio management
for the volatility mitigation strategies.
Fernando (“Fred”)
Diaz joined Spectrum in
2000.
Roberto
Giangregorio joined
Spectrum in 2003. Mr. Giangregorio earned a B.S. and M.S. in Mechanical
Engineering from S.U.N.Y. at Stony Brook and the University of
Wisconsin-Madison, respectively. He also earned an M.B.A. in Finance from
Cornell University.
L. Phillip
Jacoby, IV joined
Spectrum in 1995. Mr. Jacoby earned a B.S. in Finance from the Boston University
School of Management.
Manu
Krishnan joined
Spectrum in 2004. Mr. Krishnan earned a B.S. in Mechanical Engineering from the
College of Engineering, Osmania University, India, an M.S. in Mechanical
Engineering from the University of Delaware, and an M.B.A. in Finance from
Cornell University. Mr. Krishnan has earned the right to use the Chartered
Financial Analyst designation.
Mark A.
Lieb founded Spectrum
in 1987. Mr. Lieb earned a B.A. in Economics from Central Connecticut State
College and an M.B.A. in Finance from the University of Hartford.
Kevin
Nugent joined Spectrum
in 2012. Mr. Nugent was with Bishop Asset Management, LLC from 2010 to 2012. He
earned a B.A. from Ohio Wesleyan University.
|
|
Sub-Advisor: |
Symphony
Asset Management LLC (“Symphony”), 555 California Street, Suite
3100, San Francisco, CA 94104-1534, is a diversified alternative
investment manager and was founded in
1994. |
Symphony is the sub-advisor for the
floating rate debt portion of the Diversified Real Asset Fund.
|
|
Sub-Advisor:
|
Three
Bridges Capital, LP ("Three Bridges") , 810 7th Avenue, 32nd Floor,
New York, NY 10019, is an independent, specialist investment management
firm focused on European Equities, founded in 2011 by Gene Salamon.
|
Three Bridges is the sub-advisor for
the European macro/fundamental portion of the Multi-Manager Equity Long/Short
Fund.
|
|
Sub-Advisor: |
Tortoise
Capital Advisors, L.L.C. ("Tortoise"), 11550 Ash Street, Suite 300,
Leawood, Kansas 66211, formed in October 2002, specializes in listed
energy investments. |
Tortoise is the sub-advisor for the
master limited partnership portion of the Diversified Real Asset
Fund.
|
|
Sub-Advisor: |
Wellington
Management Company LLP (“Wellington Management”) has its principal offices at
280 Congress Street, Boston, Massachusetts 02210. Wellington Management is
a professional investment counseling firm that provides investment
services to investment companies, employee benefit plans, endowments,
foundations, and other institutions. |
Wellington Management is one of the
sub-advisors for the Global Multi-Strategy Fund and will primarily use the
equity long/short strategy; however, it may also use any of the Fund’s other
investment strategies from time to time.
|
|
Sub-Advisor: |
York
Registered Holdings, L.P. (“York”), 767 Fifth Avenue, 17th Floor,
New York, NY 10153, was formed in 2012 as part of a group of companies
established in 1991 that manages capital across various strategies. York
and certain of its affiliates manage capital for hedge funds, private
equity funds, mutual funds, UCITS III-compliant funds and separately
managed accounts for institutional
investors. |
York is one of the sub-advisors for
the Global Multi-Strategy Fund and will primarily use the event driven strategy;
however, it may also use any of the Fund's other investment strategies from time
to time.
Fees Paid to
PMC
Each Fund, with the exception of the
Capital Securities and Real Estate Allocation Funds, pays PMC a fee for its
services, which includes the fee PMC pays to each Sub-Advisor.
The management fee schedules for the
Funds that have not completed a full fiscal year are as follows:
|
|
|
|
|
|
|
Management
Fee Schedule
(as a
percentage of the average daily net assets) |
Fund |
First
$500
Million |
Next
$500
Million |
Next
$500
Million |
Over
$1.5
Billion |
Credit Opportunities
Explorer |
0.60% |
0.58% |
0.56% |
0.55% |
Dynamic High Yield
Explorer |
0.65% |
0.63% |
0.61% |
0.60% |
EDGE MidCap |
0.75% |
0.73% |
0.71% |
0.70% |
Global Opportunities Equity
Hedged |
1.10% |
1.08% |
1.06% |
1.05% |
Multi-Manager Equity
Long/Short |
1.57% |
1.55% |
1.53% |
1.52% |
Origin Emerging
Markets |
1.20% |
1.18% |
1.16% |
1.15% |
Real Estate Debt
Income |
0.55% |
0.53% |
0.51% |
0.50% |
SystematEx
International |
0.60% |
0.58% |
0.56% |
0.55% |
SystematEx Large
Value |
0.40% |
0.38% |
0.36% |
0.35% |
|
|
|
|
Management
Fee Schedule (as a percentage of the average daily net
assets) |
Fund |
All
Assets |
Real Estate
Allocation |
0.00% |
The Capital Securities Fund will not
pay PMC a fee for its services and PMC will not pay Spectrum a fee for
Spectrum's sub-advisory services to the Fund. This arrangement recognizes that
the Wrap Fee Adviser will receive a fee through the wrap fee program that takes
into account the value of any shares of the Fund held by Eligible Wrap Accounts.
|
|
|
|
|
|
Management
Fee Schedule (as a percentage of the average daily net
assets) |
Fund |
All
Assets |
Capital
Securities |
0.00 |
% |
(1) |
|
|
(1)
|
The table reflects that
Principal Management Corporation ("PMC"), the investment advisor, is
absorbing all expenses of the Capital Securities Fund. You should be
aware, however, that the Capital Securities Fund is an integral part of
"wrap-fee" programs, including those sponsored by registered investment
advisors and broker-dealers unaffiliated with the Capital Securities Fund.
Participants in these programs pay a “wrap” fee to the wrap-fee program's
sponsor ("Sponsor"). You should read carefully the wrap-fee brochure
provided to you by your Sponsor or your registered investment advisor. The
brochure is required to include information about the fees charged to you
by the Sponsor and the fees the Sponsor pays to your registered investment
advisor. |
The fee the Funds paid (as a
percentage of the average daily net assets) for the fiscal year ended August 31,
2015 was:
|
|
|
|
|
Blue Chip Fund |
0.69 |
% |
|
Bond Market Index
Fund |
0.25 |
% |
|
Capital Securities
Fund |
0.00 |
% |
|
Credit Opportunities Explorer
Fund |
0.60 |
% |
(1) |
Diversified Real Asset
Fund |
0.81 |
% |
|
Dynamic High Yield Explorer
Fund |
0.65 |
% |
(1) |
Global Multi-Strategy
Fund |
1.57 |
% |
|
Global Opportunities
Fund |
0.83 |
% |
|
International Equity Index
Fund |
0.25 |
% |
|
International Small Company
Fund |
1.05 |
% |
|
Opportunistic Municipal
Fund |
0.50 |
% |
|
Origin Emerging Markets Fund
|
1.20 |
% |
(2) |
Preferred Securities
Fund |
0.70 |
% |
|
Real Estate Allocation Fund
|
0.00 |
% |
(3) |
Real Estate Debt Income
Fund |
0.55 |
% |
(3) |
Small-MidCap Dividend Income
Fund |
0.78 |
% |
|
|
|
|
(1) |
Operations commenced on
September 10, 2014 |
(2) |
Operations commenced on January
23, 2015 |
(3) |
Operations commenced on
December 31, 2014 |
Availability of the discussions
regarding the basis for the Board of Directors approval of various management
and sub-advisory agreements is as follows:
|
|
|
|
|
|
|
Semi-Annual
Report
to
Shareholders
for the
period ending
February 29,
2016 |
Annual
Report
to
Shareholders
for the
period ending
August 31,
2016 |
Fund |
Management
Agreement |
Sub-Advisory
Agreement |
Management
Agreement |
Sub-Advisory
Agreement |
Multi-Manager Equity
Long/Short |
|
|
X |
X |
All Other Funds |
X |
X |
|
|
Manager of
Managers
The Fund operates as a Manager of
Managers. Under the conditions of an order previously received from the SEC (the
"unaffiliated order"), the Fund and PMC may enter into and materially amend
agreements with Sub-Advisors, other than those affiliated with PMC, without
obtaining shareholder approval. PMC may, without obtaining shareholder
approval:
|
|
• |
hire one or more Sub-Advisors;
|
|
|
• |
change Sub-Advisors; and
|
|
|
• |
reallocate management fees
between itself and Sub-Advisors. |
The SEC has granted an amended
exemptive order that expands the relief of the unaffiliated order to allow PMC
to enter into and materially amend agreements with wholly-owned affiliated
sub-advisors (affiliated sub-advisors which are at least 95% owned, directly or
indirectly, by PMC or an affiliated person of PMC) (the "wholly-owned order").
Further, the Fund has applied to the
SEC for another amended exemptive order, which if granted would allow PMC to
also enter into and materially amend agreements with majority-owned affiliated
sub-advisors (affiliated sub-advisors which are at least 50% owned, directly or
indirectly, by PMC or an affiliated person of PMC) (the "majority-owned order").
There is no assurance, however, that the SEC will grant the majority-owned
order.
PMC has ultimate responsibility for
the investment performance of each Fund that utilizes a Sub-Advisor due to its
responsibility to oversee Sub-Advisors and recommend their hiring, termination,
and replacement. No Fund will rely on the unaffiliated order, the wholly-owned
order, the majority-owned order, or any future order until it receives approval
from its shareholders (or, in the case of a new Fund, the Fund’s sole initial
shareholder before the Fund is available to the other purchasers).
The shareholders of the following
Funds have approved reliance, and the Funds intend to rely, on the
majority-owned order should the SEC grant that relief in the future, and the
wholly-owned order: Credit Opportunities Explorer Fund, Dynamic High Yield
Explorer Fund, EDGE MidCap Fund, Global Opportunities Equity Hedged Fund,
International Small Company Fund, Multi-Manager Equity Long/Short Fund, Origin
Emerging Markets Fund, Real Estate Allocation Fund, Real Estate Debt Income
Fund, SystematEx International Fund and SystematEx Large Value Fund. The
remaining Funds have approved the Fund's reliance on the unaffiliated order and
intend to rely on it.
PRICING OF
FUND SHARES
Each Fund’s shares are bought and
sold at the current share price. The share price of each class of each Fund is
calculated each day the New York Stock Exchange (“NYSE”) is open (share prices
are not calculated on the days on which the NYSE is closed for trading,
generally New Year’s Day, Martin Luther King, Jr. Day, Washington’s
Birthday/ Presidents’ Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day, and Christmas). The share price is determined as of the
close of business of the NYSE (normally 3:00 p.m. Central Time). When
an order to buy or sell shares is received, the share price used to fill the
order is the next price we calculate after we receive the order (in proper form)
at our transaction processing center in Canton, Massachusetts. To process your
transaction (purchase, redemption, or exchange) on the day we receive it, we
must receive the order (with complete information):
|
|
• |
on a day that the NYSE is open
and |
|
|
• |
before the close of trading on
the NYSE (normally 3 p.m. Central
Time). |
Orders received after the close of
the NYSE or on days that the NYSE is not open will be processed on the next day
that the NYSE is open for normal trading.
For all classes (except Class S), if
we receive an application or purchase request for a new mutual fund account or
subsequent purchase into an existing account that is accompanied by a check and
the application or purchase request does not contain complete information, we
may hold the application (and check) for up to two business days while we
attempt to obtain the necessary information. If we receive the necessary
information within two business days, we will process the order using the next
share price calculated. If we do not receive the information within two business
days, we will return the application and check to you.
For all Funds, the share price is
calculated by:
|
|
• |
taking the current market
value of the total assets of the Fund |
|
|
• |
subtracting liabilities of the
Fund |
|
|
• |
dividing the remainder
proportionately into the classes of the
Fund |
|
|
• |
subtracting the liability of
each class |
|
|
• |
dividing the remainder by the
total number of shares outstanding for that
class. |
With respect to the Real Estate
Allocation Fund, which invests in other registered investment company funds, the
Fund's NAV is calculated based on the NAV of such other registered investment
company funds in which the Fund invests.
Notes:
|
|
• |
If market quotations are not
readily available for a security owned by a Fund, its fair value is
determined using a policy adopted by the Directors. Fair valuation pricing
is subjective and creates the possibility that the fair value determined
for a security may differ materially from the value that could be realized
upon the sale of the security. |
|
|
• |
A Fund's securities may be
traded on foreign securities markets that generally complete trading at
various times during the day before the close of the NYSE. Foreign
securities and currencies are converted to U.S. dollars using the exchange
rate in effect at the close of the NYSE. Securities traded outside of the
Western Hemisphere are valued using a fair value policy adopted by the
Fund. These fair valuation procedures are intended to discourage
shareholders from investing in the Fund for the purpose of engaging in
market timing or arbitrage transactions. |
|
|
• |
The trading of foreign
securities generally or in a particular country or countries may not take
place on all days the NYSE is open, or may trade on days the NYSE is
closed. Thus, the value of the foreign securities held by the Fund may
change on days when shareholders are unable to purchase or redeem
shares. |
|
|
• |
Certain securities issued by
companies in emerging market countries may have more than one quoted
valuation at any point in time. These may be referred to as local price
and premium price. The premium price is often a negotiated price that may
not consistently represent a price at which a specific transaction can be
effected. The Fund has a policy to value such securities at a price at
which the Sub-Advisor expects the securities may be
sold. |
CONTACT PRINCIPAL
FUNDS, INC.
Contact information for Principal
Funds, Inc. (“Principal Funds”) is as follows:
Mailing Addresses:
|
|
|
Regular Mail |
Overnight
Mail |
Principal
Funds |
Principal
Funds |
P.O. Box 8024 |
30 Dan Road |
Boston, MA
02266-8024 |
Canton, MA
02021-2809 |
You may speak with a Client
Relations Specialist by calling 1-800-222-5852, between 7:00 a.m. and
7:00 p.m. Central Time on any day that the NYSE is open.
To obtain Automated Clearing House
(“ACH”) or wire instructions, please contact a Client Relations
Specialist.
For additional information about
Principal Funds, Inc., go to www.principalfunds.com.
PURCHASE OF FUND
SHARES
Principal Funds, Inc. offers funds
in multiple share classes: A, C, J, P, Institutional, R-1, R-2, R-3, R-4, R-5,
R-6, and S. Funds available in multiple share classes have the same
investments, but differing expenses. Classes A, C, J, P, Institutional, R-1,
R-2, R-3, R-4, R-5, R-6, and S shares are available in this
prospectus.
The Fund reserves the right to
refuse or cancel any purchase orders, including those by exchange, for any
reason. For example, the Fund does not intend to permit market timing because
short-term or other excessive trading into and out of the Funds may harm
performance by disrupting portfolio management strategies and by increasing
expenses. Accordingly, the Fund may reject any purchase orders from market
timers or investors that, in PMC's opinion, may be disruptive to the Fund. For
these purposes, PMC may consider an investor’s trading history in the Fund or
other Funds sponsored by Principal Life and accounts under common ownership or
control.
PMC may recommend to the Board, and
the Board may elect, to close certain funds or share classes to new investors or
to close certain funds or share classes to new and existing investors.
Principal Funds will not issue
certificates for shares.
No salesperson, broker-dealer or
other person is authorized to give information or make representations about a
Fund other than those contained in this Prospectus. Information or
representations not contained in this prospectus may not be relied upon as
having been provided or made by Principal Funds, a Fund, PMC, any Sub-Advisor,
or Principal Funds Distributor, Inc.
Credit
Opportunities Explorer Fund
On September 13, 2016, the Board of
Directors of Principal Funds, Inc. approved the Plan of Liquidation (the “Plan”)
for the Credit Opportunities Explorer Fund (the "Fund"). Effective as of the
close of the New York Stock Exchange on September 1, 2016, the Fund is no longer
available for purchase from new investors. Pursuant to the Plan, the Fund will
liquidate on or about October 28, 2016. All outstanding shares will be redeemed
at net asset value, proceeds will be sent to shareholders of record, and the
Fund will discontinue its operations. In light of the anticipated liquidation,
the Fund may deviate from its stated investment objective and strategies.
Procedures for
Opening an Account and Making an Investment
Classes
A and C Shares
Shares of the Funds are generally
purchased through Financial Professionals. Financial Professionals may establish
shareholder accounts according to their procedures or they may establish
shareholder accounts directly with the Fund by visiting our website to obtain
the appropriate forms.
Your Financial Professional can help
you buy shares of the Funds by mail, through bank wire, direct deposit, or
Automatic Investment Plan (“AIP”). No wires are accepted on days when the NYSE
is closed or when the Federal Reserve is closed (because the bank that would
receive your wire is closed). An investment in the Fund may be held in various
types of accounts, including individual, joint ownership, trust, and business
accounts. The Fund also offers a range of custodial accounts for those who wish
to invest for retirement and/or education expenses. Prospective shareholders
should consult with their Financial Professional before making decisions about
the account and type of investment that are appropriate for them.
Class J
Shares
Class J shares are currently
available through registered representatives of:
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Principal Securities, Inc.
("PSI") who are also employees of Principal Life distribution channels
used to directly market certain products and services of subsidiaries of
Principal Financial Group, Inc. as well as provide retirement plan
services and education on topics such as investing and retirement. These
PSI registered representatives are with Principal Connection (part of
Principal Bank) and Worksite Solutions (part of the Retirement &
Income Solutions and US Insurance Solutions Distribution area),
and |
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Selected broker-dealers that
have entered into a selling agreement to offer Class J
shares. |
Class J shares are also available
through an online IRA rollover tool on www.principalfunds.com.
For more information about Class J
shares of the Funds, please call Principal Connection at 1-800-243-4380,
extension 704.
Institutional
Class and Classes P, R-1, R-2, R-3, R-4, R-5, R-6, and S Shares
Shares may be purchased from
Principal Funds Distributor, Inc. (“PFD” or “the Distributor”). The Distributor
is an affiliate of Principal Life Insurance Company and with it are subsidiaries
of Principal Financial Group, Inc. and members of Principal ®
. There are no sales charges
on Institutional Class or Classes P, R-1, R-2, R-3, R-4, R-5, R-6, and S shares
of the Fund.
Shareholder accounts for the Fund
are maintained under an open account system. Under this system, an account is
opened and maintained for each investor (generally an omnibus account, plan
level account, or institutional investor). Each investment is confirmed by
sending the investor a statement of account showing the current purchase or sale
and the total number of shares owned. The statement of account is treated by the
Fund as evidence of ownership of Fund shares. Contact your Financial
Professional for additional information on how to buy shares.
Verification of
Identity
To help the government fight the
funding of terrorism and money laundering activities, Federal law requires
financial institutions to obtain, verify, and record information that identifies
each person who opens an account. When you open an account, we (or your
Financial Professional) may ask for your name, address, date of birth, and other
information that will allow us (or your Financial Professional) to verify your
identity. We (or your Financial Professional) may also ask to see your driver’s
license or other identifying documents.
If concerns arise with verification
of your identity, no transactions, other than redemptions, will be permitted
while we attempt to reconcile the concerns. If we are unable to verify your
identity on a timely basis, we may close your account or take such other action
as we deem appropriate.
Principal Funds will not establish
accounts with foreign addresses. If an existing shareholder with a
U.S. address moves to a foreign location and updates the address on the
shareholder’s account, we are unable to process any purchases or exchanges on
that account. Principal Funds will not establish accounts that are for the
benefit of a business/organization that is illegal under Federal and/or state
law (such as a marijuana clinic) or a person who owns or receives income from
such an entity or whose source of funds is illegal.
Eligible
Purchasers
You must be an eligible purchaser
for a particular share class to buy shares of a Fund available in that share
class. PMC reserves the right to broaden or limit the designation of eligible
purchasers. Not all of the Funds are offered in every state. Please check with
your financial advisor or our home office for state availability.
Class C
Shares - Money Market Fund
Class C shares of the Money
Market Fund may be purchased only by exchange from other Fund accounts in the
same share class or by reinvestment of distributions made on such shares.
Class C shares are not available to retirement plans qualified under IRC
section 401(a) that are not already investing in Class C shares of
other Funds of the Principal Funds, but are available to new participants in
plans that currently invest in Class C shares of the Fund.
Institutional
Class and Classes P, R-1, R-2, R-3, R-4, R-5, and R-6 Shares
Some eligible purchasers (as listed
below) purchase shares through plans or other arrangements; such plans or
arrangements may impose fees in addition to those charged by the Funds. The
services or share classes available to you may vary depending upon how you wish
to purchase shares of the Fund. Each investor's financial considerations are
different. You should speak with your financial professional to help you decide
which share class is best for you.
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Eligible
purchasers currently include, but are not limited to: |
P |
Inst. |
R-1 |
R-2 |
R-3 |
R-4 |
R-5 |
R-6 |
retirement and pension plans to
which Principal Life Insurance Company (“Principal Life”) provides
recordkeeping services |
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X |
X |
X |
X |
X |
X |
X |
separate accounts of Principal
Life |
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X |
X |
X |
X |
X |
X |
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Principal Life or any of its
subsidiaries or affiliates |
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X |
X |
X |
X |
X |
X |
X |
any fund distributed by PFD if
the fund seeks to achieve its investment objective by investing primarily
in shares of mutual funds |
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X |
X |
X |
X |
X |
X |
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clients of Principal Global
Investors, LLC |
X |
X |
X |
X |
X |
X |
X |
X |
certain employer sponsored
retirement plans with plan level omnibus accounts |
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X |
X |
X |
X |
X |
X |
X |
certain pension plans and
employee benefit plans |
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X |
X |
X |
X |
X |
X |
X |
certain retirement account
investment vehicles administered by foreign or domestic pension
plans |
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X |
X |
X |
X |
X |
X |
X |
an investor who buys shares
through an omnibus account with certain intermediaries, such as a
broker-dealer, bank, or other financial institution, pursuant to a written
agreement between the intermediary and PFD or its
affiliate |
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X |
X |
X |
X |
X |
X |
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certain retirement plan clients
that have an organization, approved by Principal Life, for purposes of
providing plan recordkeeping services |
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X |
X |
X |
X |
X |
X |
X |
investors investing at least
$1,000,000 per fund |
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X |
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sponsors, recordkeepers, or
administrators of wrap account or mutual fund asset allocation programs or
participants in those programs (such accounts and programs must trade in
an omnibus relationship) |
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X |
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sponsors, recordkeepers, or
administrators of wrap account, mutual fund asset allocation, or fee-based
programs or participants in those programs; |
X |
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certain institutional investors
that provide recordkeeping for retirement plans or other employee benefit
plans |
X |
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institutional clients that
Principal Life has approved for purposes of providing plan
recordkeeping |
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X |
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institutional investors
investing for their own account, including banks, trust companies,
financial intermediaries, corporations, endowments and
foundations |
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X |
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collective trust funds, fund of
funds or other pooled investment vehicles, and entities acting for the
account of a public entity |
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X |
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X |
clients of a private banking
division pursuant to a written agreement between the bank and PFD or its
affiliate |
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X |
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the portfolio manager of any
adviser to the fund |
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X |
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certain institutional investors
with special arrangements (for example, insurance companies, employee
benefit plans, retirement plans, and Section 529 Plans, among
others) |
X |
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Class S
Shares
Eligibility to invest in the Capital
Securities Fund is limited to certain wrap-fee program accounts. Only wrap-fee
program accounts as to which Spectrum and/or Principal Global Investors, LLC
("PGI") have an agreement with the wrap-fee program’s sponsor (“Sponsor”) or the
wrap account owner to provide investment advisory or sub-advisory services
(either directly or by providing a model investment portfolio created and
maintained by Spectrum and/or PGI to the Sponsor or one or more
Sponsor-designated investment managers) ("Eligible Wrap Accounts") are eligible
to purchase shares of the Fund. References to Wrap Fee Adviser shall mean
Spectrum and/or PGI in their role providing such services to Eligible Wrap
Accounts.
A client agreement with the Sponsor
to open an account in the Sponsor’s wrap-fee program typically may be obtained
by contacting the Sponsor or your financial advisor. Purchase and sale decisions
regarding Fund shares for your wrap account ordinarily will be made by the Wrap
Fee Adviser, the Sponsor or a Sponsor-designated investment manager, depending
on the particular wrap-fee program in which your wrap account participates. If
your wrap-fee account’s use of the Wrap Fee Adviser’s investment style is
terminated by you, the Sponsor or the Wrap Fee Adviser, your wrap account will
cease to be an Eligible Wrap Account and you will be required to redeem all your
shares of the Capital Securities Fund. Each Eligible Wrap Account, by purchasing
shares, agrees to any such redemption.
Minimum
Investments
Classes
A, C, and J Shares
Principal Funds has a minimum
initial investment amount of $1,000 and a minimum subsequent investment amount
of $100. Initial and subsequent investment minimums apply on a per-fund basis
for each Fund or Portfolio in which a shareholder invests.
Shareholders must meet the minimum
initial investment amount of $1,000 unless an Automatic Investment Plan ("AIP")
is established. With an AIP, the minimum initial investment is $100. Accounts or
automatic payroll deduction plans established with an AIP that do not meet the
minimum initial investment must maintain subsequent automatic investments that
total at least $1,200 annually.
Minimum initial and subsequent
investments may be waived on accounts set up for: certain employee benefit
plans; retirement plans qualified under Internal Revenue Code
Section 401(a); payroll deduction plans submitting contributions in an
electronic format devised and/or approved by the Fund; and purchases through an
omnibus account with a broker-dealer, investment advisor, or other financial
institution.
Institutional
Class and Classes P, R-1, R-2, R-3, R-4, R-5, R-6, and S Shares
There are no minimum initial or
subsequent investment requirements for an eligible purchaser.
Payment
Classes
A, C, and J Shares
Payments are to be made via personal
or financial institution check (for example, a bank or cashier’s check). We
consider your purchase of Fund shares by check to be your authorization to make
an automated clearing house (“ACH”) debit entry to your account. We reserve the
right to refuse any payment that we feel presents a fraud or money laundering
risk. Examples of the types of payments we will not accept are cash, starter
checks, money orders, travelers’ checks, credit card checks, and foreign
checks.
The Funds may, in their discretion
and under certain limited circumstances, accept securities as payment for Fund
shares at the applicable net asset value (“‘NAV”). For federal income tax
purposes, a purchase of shares with securities will be treated as a sale or
exchange of such securities on which the investor will generally realize a
taxable gain or loss. Each Fund will value securities used to purchase its
shares using the same method the Fund uses to value its portfolio securities as
described in this prospectus.
You may reinvest your redemption
proceeds, dividend payment or capital gain distribution without an initial sales
charge or contingent deferred sales charge, in the same share class of any other
Fund of Principal Funds within 60 days of the date of the redemption. To
purchase the shares without a sales charge (initial or contingent deferred) as
described in this section, the shareholder must notify Principal Funds at the
time of reinvestment that the shareholder is reinvesting proceeds within 60 days
of the date of redemption. The original redemption will be considered a sale for
federal (and state) income tax purposes even if the proceeds are reinvested
within 60 days. If a loss is realized on the sale, the reinvestment may be
subject to the “wash sale” rules resulting in the postponement of the
recognition of the loss for tax purposes.
Your Financial Professional can help
you make a Direct Deposit from your paycheck (if your employer approves) or from
a government allotment. Direct Deposit allows you to deposit automatically all
or part of your paycheck (or government allotment) to your Principal Funds
account(s). You can request a Direct Deposit Authorization Form to give to your
employer or the governmental agency (either of which may charge a fee for this
service). Shares will be purchased on the day the ACH notification is received
by the transfer agent’s bank. On days when the NYSE is closed, but the bank
receiving the ACH notification is open, your purchase will be priced at the next
calculated share price.
Your Financial Professional can help
you establish an Automatic Investment Plan ("AIP"). You may make regular monthly
investments with automatic deductions from your bank or other financial
institution account. You select the day of the month the deduction is to be made
(if none is selected, the investment will be made on the 15th of the month). If that date is a
non-trading day, we will process the deduction on the next trading day. If the
next trading day falls in the next month or year, we will process the deduction
on the day before your selected day.
Institutional
Class and Classes P, R-1, R-2, R-3, R-4, R-5, R-6, and S Shares
Payments are generally to be made
through your plan or intermediary. We reserve the right to refuse any payment
that we feel presents a fraud or money laundering risk. Examples of the types of
payments we will not accept are cash, starter checks, money orders, travelers’
checks, credit card checks, and foreign checks.
REDEMPTION OF
FUND SHARES
You may redeem any class of shares
of the Fund upon request. There is no charge for the redemption. The Fund Board
of Directors has determined that it is not necessary to impose a fee upon the
redemption of fund shares, because the Fund has adopted transfer restrictions as
described in “Exchange of Fund Shares.”
Principal Funds generally sends the
sale proceeds on the next business day (a day when the NYSE is open for normal
business) after the sell order is received. Under unusual circumstances,
Principal Funds may suspend redemptions, or postpone payment for up to seven
days, as permitted by federal securities law. Shares purchased by check may be
sold only after the check has cleared your bank, which may take up to
seven calendar days.
Shares are redeemed at the NAV per
share next computed after the request is received by the Fund in proper and
complete form. The amount you receive will be
reduced by any applicable CDSC except as noted below; see Choosing a Share Class
and the Costs of Investing, One-Time Fee - Contingent Deferred Sales Charge
("CDSC"), CDSC Waiver for Classes A, C, and J Shares.
Classes A, C, and
J Shares
You will be charged a $10 wire fee
if you have the sale proceeds wired to your bank. It may take additional
business days for your financial institution to post this payment to your
account at that financial institution. At your request, the check will be sent
overnight (a $15 overnight fee will be deducted from your account unless other
arrangements are made).
Distributions from IRA, SEP, SIMPLE,
403(b), and SAR-SEP accounts may be taken as:
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lump sum of the entire
interest in the account, |
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partial interest in the
account, or |
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periodic payments of either a
fixed amount or an amount based on certain life expectancy
calculations. |
Tax penalties may apply to
distributions before the participant reaches age 59 ½.
Selling shares may create a gain or
a loss for federal (and state) income tax purposes. You should maintain accurate
records for use in preparing your income tax returns.
Generally, sales proceeds
are:
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payable to all owners on the
account (as shown in the account registration)
and |
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mailed to the address on the
account (if not changed within last 15 days) or sent by wire or ACH
to previously authorized U.S. bank account.
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For other payment arrangements,
please call Principal Funds. You should also call Principal Funds for special
instructions that may apply to sales from accounts:
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when an owner has
died; |
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for certain employee benefit
plans; or |
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owned by corporations,
partnerships, agents, or fiduciaries. |
Except as described above, you may
redeem shares of the Funds in any of the following ways:
By
Mail
To sell shares by mail, you
must:
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Send a letter or our
distribution form which is signed by an owner of the account,
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Specify the account number,
and |
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Specify the number of shares
or the dollar amount to be sold. |
If you send a letter rather than our
distribution form, the letter must be in a form acceptable to the
Fund.
By
Telephone, in amounts of $100,000 or less
To sell shares by
telephone:
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The request may be made by a
shareholder or by the shareholder’s Financial
Professional. |
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The combined amount requested
from all funds to which the redemption request relates must be $100,000 or
less. |
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The address on the account
must not have been changed within the last 15 days and telephone
privileges must apply to the account from which the shares are being
sold. |
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If previously authorized, wire
or ACH can be sent to a shareholder’s U.S. bank
account. |
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If our phone lines are busy,
you may need to send in a written sell
order. |
Telephone redemption privileges are
NOT available for Principal Funds 403(b) plans and certain employer
sponsored benefit plans.
Classes A, C, and
J Shares - Systematic Withdrawal Plans
You may set up a systematic
withdrawal plan on a monthly, quarterly, semiannual, or annual basis to sell
enough shares to provide a fixed amount of money ($100 minimum amount; the
required minimum is waived to the extent necessary to meet the required minimum
distribution as defined by the Internal Revenue Code).
You can set up a systematic
withdrawal plan by:
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completing the applicable
section of the application, |
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sending us your written
instructions, |
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completing a Systematic
Withdrawal Plan Request form, or |
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calling us if you have
telephone privileges on the account (telephone privileges may not be
available for all types of accounts). |
Your systematic withdrawal plan
continues until:
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you instruct us to stop
or |
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your Fund account balance is
zero. |
When you set up the withdrawal plan,
you select which day you want the sale made (if none is selected, the sale will
be made on the 15th of the month). If the selected date is not a trading
day, the sale will take place on the preceding trading day (if that day falls in
the month or year before your selected date, the transaction will take place on
the next trading day after your selected date). If telephone privileges apply to
the account, you may change the date or amount by telephoning us. Sales made
under your systematic withdrawal plan will reduce and may eventually exhaust
your account. The Fund from which the systematic withdrawal is made makes no
recommendation as to either the number of shares or the fixed amount that you
withdraw.
Institutional
Class and Classes P, R-1, R-2, R-3, R-4, R-5, and R-6 Shares
You may redeem shares of the Funds
in any of the following ways:
Through
an Employer Sponsored Retirement Plan Administrator or
Record-Keeper
If you own Fund shares in an
eligible retirement or employee benefit plan, you must sell your shares through
the plan’s administrator or record-keeper.
Through
your Financial Professional
If your Fund shares are held for you
in nominee form, you must sell those shares through your intermediary or
dealer.
By
mail
To sell shares by mail, you
must:
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Send a letter or our
distribution form which is signed by an owner of the account,
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Specify the account number,
and |
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Specify the number of shares
or the dollar amount to be sold. |
If you send a letter rather than our
distribution form, the letter must be in a form acceptable to the
Fund.
By
telephone
To sell shares by
telephone:
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Telephone privileges must
apply to the account from which the shares are
sold. |
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A shareholder or the
shareholder’s Financial Professional may request to sell shares by
telephone. |
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A maximum amount ($10,000,000
for Institutional Class; $100,000 for Class P; and $500,000 for Classes
R-1, R-2, R-3, R-4, R-5, and R-6) of redemption requests will be permitted
per day per account, as the combined amount from all funds, provided the
proceeds are to be sent to a previously authorized U.S. bank account.
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A maximum of $500,000
($100,000 for Class P) of redemption requests will be permitted per day,
as the combined amount from all funds, provided the proceeds are to be
sent by check through the mail to the address on the account and such
address must not have changed within the last 15
days. |
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If our telephone lines are
busy, you may need to send in a written sell
order. |
Class S
Shares
The Eligible Wrap Account may redeem
shares of the Fund upon request. If you cease to be an Eligible Purchaser, you
will be required to redeem all your shares of the Capital Securities Fund. Each
Eligible Wrap Account, by purchasing shares, agrees to any such redemption. An
Eligible Wrap Account may redeem shares through its intermediary.
Distributions in
Kind
Payment for shares of the Funds
tendered for redemption is ordinarily made by check. However, the Funds may
determine that it would be detrimental to the remaining shareholders of a Fund
to make payment of a redemption order wholly or partly in cash. Under certain
circumstances, therefore, each of the Funds may pay the redemption proceeds in
whole or in part by a distribution of “in kind” of securities from the Fund’s
portfolio in lieu of cash. If a Fund pays the redemption proceeds in kind, the
redeeming shareholder might incur brokerage or other costs in selling the
securities for cash. Each Fund will value securities used to pay redemptions in
kind using the same method the Fund uses to value its portfolio securities as
described in this prospectus.
EXCHANGE OF FUND
SHARES
An exchange between Funds is a
redemption of shares of one Fund and a concurrent purchase of shares in another
Fund with the redemption proceeds. To prevent excessive exchanges, and under
other circumstances where the Fund Board of Directors or PMC believes it is
in the best interests of the Fund, the Fund reserves the right to revise or
terminate this exchange privilege, limit the amount or further limit the number
of exchanges, reject any exchange or close an account.
Classes A, C, and
J Shares
Your shares in the Funds (except
Money Market) may be exchanged without a sales charge or CDSC for the same class
of any other Principal Funds. However, the original purchase date of the shares
from which an exchange is made is used to determine if newly acquired shares are
subject to a CDSC when they are sold. The Fund reserves the right to revise or
terminate the exchange privilege at any time.
You may exchange shares
by:
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sending a written request to
Principal Funds, |
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calling us, if you have
telephone privileges on the account. |
Exchanges
from Money Market Fund
Class A shares of Money Market
Fund may be exchanged into:
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Class A shares of other
Funds. |
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If Money Market Fund shares
were acquired by direct purchase, a sales charge will be imposed on the
exchange into other Class A shares. |
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If Money Market Fund shares
were acquired by (1) exchange from other Funds, (2) conversion
of Class B shares, or (3) reinvestment of dividends earned on
Class A shares that were acquired through exchange, no sales charge
will be imposed on the exchange into other Class A
shares. |
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Class C shares of other
Funds - subject to the applicable
CDSC. |
Automatic
Exchange Election
This election authorizes an exchange
from one fund of Principal Funds to another fund of Principal Funds on a
monthly, quarterly, semiannual, or annual basis. You can set up an automatic
exchange by:
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completing the Automatic
Exchange Election section of the
application, |
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calling us if telephone
privileges apply to the account from which the exchange is to be
made, |
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sending us your written
instructions, or |
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completing an Automatic
Exchange Election form. |
Your automatic exchange continues
until:
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you instruct us to stop (by
calling us if telephone privileges apply to the account or sending us your
written instructions) or |
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your Fund account balance of
the account from which shares are redeemed is
zero. |
You may specify the day of the
exchange (if none is selected, the exchange will be made on the 15th of the month). If the selected
day is not a trading day, the sale will take place on the preceding trading day
(if that day falls in the month or year before your selected date, the
transaction will take place on the next trading day after your selected date).
If telephone privileges apply to the account, you may change the date or amount
by telephoning us.
General
An exchange by any joint owner is
binding on all joint owners.
If you do not have an existing
account in the Fund to which the exchange is being made, a new account is
established. The new account has the same owner(s), dividend and capital gain
options and dealer of record as the account from which the shares are being
exchanged.
All exchanges are subject to the
minimum investment and eligibility requirements of the Fund being
acquired.
You may acquire shares of a Fund
only if its shares are legally offered in your state of residence.
When money is exchanged or
transferred from one account registration or tax identification number to
another, the account holder is relinquishing his or her rights to the money.
Therefore, exchanges and transfers can only be accepted by telephone if the
exchange (transfer) is between:
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accounts with identical
ownership, |
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an account with a single owner
to one with joint ownership if the owner of the single owner account is
also an owner of the account with joint
ownership, |
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a single owner to a Uniform
Transfers to Minors Act (“UTMA”) account if the owner of the single owner
account is also the custodian on the UTMA account,
or |
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a single or jointly owned
account to an IRA account to fund the yearly IRA contribution of the owner
(or one of the owners in the case of a jointly owned
account). |
The exchange is treated as a sale of
shares for federal (and state) income tax purposes and may result in a capital
gain or loss.
Fund shares used to fund an employee
benefit plan may be exchanged only for shares of other Funds available to
employee benefit plans. Such an exchange must be made by following the
procedures provided in the employee benefit plan and the written service
agreement.
Class P
Shares
A shareholder, including a
beneficial owner of shares held in nominee name, may exchange Fund shares under
certain circumstances. You may exchange your Fund shares, without charge, for
shares of any other Fund of the Principal Funds available in Class P; however,
an intermediary may impose restrictions on exchanges.
Institutional
Class and Classes R-1, R-2, R-3, R-4, R-5, and R-6 Shares
A shareholder, including a
beneficial owner of shares held in nominee name or a participant in a
participant-directed employee benefit plan, may exchange Fund shares under
certain circumstances. In addition to any restrictions an intermediary or an
employee benefit plan imposes, Fund shares may be exchanged, without charge, for
shares of any other Fund of the Principal Funds, provided that:
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the shareholder has not
exchanged shares of the Fund within 30 days preceding the exchange, unless
the shareholder is exchanging into the Money Market
Fund, |
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the share class of such other
Fund is available through the plan, and |
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the share class of such other
Fund is available in the shareholder’s state of
residence. |
All exchanges completed on the same
day are considered a single exchange for purposes of this exchange limitation.
In addition, the Fund will reject an order to purchase shares of any Fund,
except shares of the Money Market Fund, if the shareholder redeemed shares from
that Fund within the preceding 30-day period. The 30-day exchange or purchase
restriction does not apply to exchanges or purchases made on a scheduled basis
such as scheduled periodic portfolio rebalancing transactions or to transactions
by managers of the fund-of-funds in shares of the underlying funds.
If Fund shares are purchased through
an intermediary that is unable or unwilling to impose the 30-day exchange or
repurchase restrictions described above, Fund management may waive these
restrictions based on:
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Exchange and repurchase
limitations that the intermediary is able to impose if, in management’s
judgment, such limitations are reasonably likely to prevent excessive
trading in Fund shares; or |
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• |
The implementation of other
transaction monitoring management believes is reasonably likely to
identify and prevent excessive trading in Fund
shares. |
Class S
Shares
Class S shares of the Capital
Securities Fund are not subject to exchange.
DIVIDENDS AND
DISTRIBUTIONS
Dividends are based on estimates of
income, expenses, and shareholder activity for the Fund. Actual income,
expenses, and shareholder activity may differ from estimates; consequently,
differences, if any, will be included in the calculation of subsequent
dividends. The Funds pay their net investment income to record date
shareholders; this record date is the business day before the payment date. The
payment schedule is as follows:
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The Opportunistic Municipal
Fund declares dividends of its daily net investment income each day its
shares are priced. The Fund pays out its accumulated declared dividends
monthly. |
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The Capital Securities, Credit
Opportunities Explorer, Dynamic High Yield Explorer, Preferred Securities,
and Real Estate Debt Income Funds pay their net investment income
monthly. |
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The Real Estate Allocation and
Small-MidCap Dividend Income Funds pay their net investment income
quarterly in March, June, September, and
December. |
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The Blue Chip, Bond Market
Index, Diversified Real Asset, EDGE Midcap, Global Multi-Strategy, Global
Opportunities, Global Opportunities Equity Hedged, International Equity
Index, International Small Company, Multi-Manager Equity Long/Short,
Origin Emerging Markets, SystematEx International, and SystematEx Large
Value Funds pay their net investment income annually in December.
|
For more details on the payment
schedule, go to:
www.principalfunds.com/individual-investor/customer-support/tax-center.
Net realized capital gains, if any,
are distributed annually in December. Payments are made to shareholders of
record on the business day before the payable date. Capital gains may be taxable
at different rates, depending on the length of time that the Fund holds its
assets.
For all classes (except Class S),
dividend and capital gains distributions will be reinvested, without a sales
charge, in shares of the Fund from which the distribution is paid; however, you
may authorize (on your application or at a later time) the distribution to
be:
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invested in shares of another
of the Principal Funds without a sales charge (distributions of a Fund may
be directed only to one receiving Fund);
or |
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paid in cash, if the amount is
$10 or more. |
All income dividend and capital
gains distributions, if any, on a Fund's Class S shares are paid out in
cash.
Generally, for federal income tax
purposes, Fund distributions are taxable as ordinary income, except that any
distributions of long-term capital gains will be taxed as such, regardless of
how long Fund shares have been held. Special tax rules apply to Fund
distributions to Individual Retirement Accounts and other retirement plans. A
tax advisor should be consulted to determine the suitability of the Fund as an
investment by such a plan and the tax treatment of distributions by the Fund. A
tax advisor can also provide information on the potential impact of possible
foreign, state, and local taxes. A Fund’s investments in foreign securities may
be subject to foreign withholding taxes. In that case, the Fund’s yield on those
securities would be decreased.
To the extent that distributions the
Fund pays are derived from a source other than net income (such as a return of
capital), a notice will be included in your quarterly statement pursuant to
Section 19(a) of the Investment Company Act of 1940, as amended, and Rule 19a-1
disclosing the source of such distributions. Furthermore, such notices shall be
posted monthly on our website at www.principalfunds.com/sources-of-distribution.
You may request a copy of all such notices, free of charge, by telephoning
1-800-222-5852. The amounts and sources of distributions included in such
notices are estimates only and you should not rely upon them for purposes of
reporting income taxes. The Fund will send shareholders a Form 1099-DIV for the
calendar year that will tell shareholders how to report these distributions for
federal income tax purposes.
A Fund’s payment of income dividends
and capital gains has the effect of reducing the share price by the amount of
the payment. Distributions from a Fund, whether received in cash or reinvested
in additional shares, may be subject to federal (and state) income tax. For
these reasons, buying shares of a Fund shortly before it makes a distribution
may be disadvantageous to you.
FREQUENT
PURCHASES AND REDEMPTIONS
The Funds are not designed for, and
do not knowingly accommodate, frequent purchases and redemptions of fund shares.
If you intend to trade frequently and/or use market timing investment
strategies, you should not purchase these Funds.
Frequent purchases and redemptions
pose a risk to the Funds because they may:
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Disrupt the management of the
Funds by: |
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forcing the Funds to hold
short-term (liquid) assets rather than investing for long-term growth,
which results in lost investment opportunities for the Funds;
and |
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causing unplanned portfolio
turnover; |
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Hurt the portfolio performance
of the Funds; and |
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Increase expenses of the Funds
due to: |
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increased broker-dealer
commissions and |
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increased recordkeeping and
related costs. |
Certain Funds may be at greater risk
of harm due to frequent purchases and redemptions. For example, those Funds that
invest in foreign securities may appeal to investors attempting to take
advantage of time-zone arbitrage. The Funds have adopted procedures to “fair
value” foreign securities owned by the Funds each day to discourage these market
timing transactions in shares of the Funds.
For all Classes (except Class S),
the Board of Directors of the Fund has also adopted policies and procedures with
respect to frequent purchases and redemptions of shares of the Funds. The Funds
monitor shareholder trading activity to identify and take action against abuses.
When we do identify abusive trading, we will apply our policies and procedures
in a fair and uniform manner. While our policies and procedures are designed to
identify and protect against abusive trading practices, there can be no
certainty that we will identify and prevent abusive trading in all instances. If
we are not able to identify such excessive trading practices, the Funds and
their shareholders may be harmed. The harm of undetected excessive trading in
shares of the underlying funds in which the funds of funds invest could flow
through to the funds of funds as they would for any fund
shareholder.
If we, or a Fund, deem abusive
trading practices to be occurring, we will take action that may include, but is
not limited to:
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Rejecting exchange
instructions from the shareholder or other person authorized by the
shareholder to direct exchanges; |
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Restricting submission of
exchange requests by, for example, allowing exchange requests to be
submitted by 1st class U.S. mail
only and disallowing requests made by facsimile, overnight courier,
telephone or via the internet; |
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Limiting the number of
exchanges during a year; and |
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• |
Taking such other action as
directed by the Fund. |
The Funds have reserved the right to
accept or reject, without prior written notice, any exchange requests. In some
instances, an exchange may be completed before a determination of abusive
trading. In those instances, we will reverse the exchange and return the account
holdings to the positions held before the exchange. We will give the shareholder
written notice in this instance.
Institutional
Class and Classes R-1, R-2, R-3, R-4, R-5, and R-6 Shares
In addition to taking any of the
foregoing actions, if we, or a Fund, deem abusive trading practices to be
occurring, we may require a holding period of a minimum of 30 days before
permitting exchanges among the Funds where there is evidence of at least one
round-trip exchange (exchange or redemption of shares that were purchased within
30 days of the exchange/redemption).
With respect to these classes, the
Funds have adopted an exchange frequency restriction, described above in
“Exchange of Fund Shares” to limit excessive trading in fund
shares.
Class S
Shares
After considering various factors,
including the intended use of the Capital Securities Fund as an investment
vehicle for a specific purpose, the limited availability of Fund shares to
investors, and the anticipated manner in which purchase and redemption decisions
will be made and implemented, the Fund’s Board has determined that it is not
necessary to impose a redemption fee or excessive trading restrictions to
implement the Fund’s policy of not knowingly accommodating excessive trading in
Fund shares.
TAX
CONSIDERATIONS
It is a policy of the Funds to make
distributions of substantially all of their respective investment income and any
net realized capital gains. Shareholders are responsible for federal income tax
(and any other taxes, including state and local income taxes, if applicable) on
dividends and capital gains distributions whether such dividends or
distributions are paid in cash or (except for Class S shares) are reinvested in
additional shares. Special tax rules apply to distributions from IRAs and other
retirement accounts. You should consult a tax advisor to determine the
suitability of the Fund as an investment by such a plan and the tax treatment of
Fund distributions.
Generally, dividends paid by the
Funds from interest, dividends, or net short-term capital gains will be taxed as
ordinary income. Distributions properly designated by the Fund as deriving from
net gains on securities held for more than one year are taxable as such
(generally at a 15% tax rate for individuals and taxable trusts, some
individuals and taxable trusts will be subject to a 20% tax rate), regardless of
how long you have held your shares. Distributions of investment income properly
designated by the Fund as derived from “qualified dividend
income” will be taxed at the rates
applicable to long-term capital gains. Some high-income individuals and taxable
trusts will be subject to a Medicare 3.8% tax on unearned net investment
income.
Because of tax law requirements, you
must provide the Fund with an accurate and certified taxpayer identification
number (for individuals, generally a Social Security number) to avoid
“back-up” withholding, which is imposed at a
rate of 28%. The Fund is required in certain cases to withhold and remit to the
U.S. Treasury 28% of ordinary income dividends and capital gain dividends, and
the proceeds of redemption of shares, paid to any shareholder who has provided
either an incorrect tax identification number or no number at all, who is
subject to backup withholding by the Internal Revenue Service for failure to
report the receipt of interest or dividend income properly, or who has failed to
certify to the Fund that it is not subject to backup withholding or that it is a
corporation or other "exempt recipient."
A shareholder recognizes gain or
loss on the sale or redemption of shares of the Fund in an amount equal to the
difference between the proceeds of the sales or redemption and the shareholder's
adjusted tax basis in the shares. All or a portion of any loss so recognized may
be disallowed if the shareholder purchases other shares of the Fund within 30
days before or after the sale or redemption. In general, any gain or loss
arising from (or treated as arising from) the sale or redemption of shares of
the Fund is considered capital gain or loss (long-term capital gain or loss if
the shares were held for longer than one year). However, any capital loss
arising from the sales or redemption of shares held for six months or less is
disallowed to the extent of the amount of exempt-interest dividends received on
such shares and (to the extent not disallowed) is treated as a long-term capital
loss to the extent of the amount of capital gain dividends received on such
shares. Capital losses in any year are deductible only to the extent of capital
gains plus, in the case of a noncorporate taxpayer, $3,000 of ordinary income
under current rules.
If a shareholder incurs a sales
charge in acquiring shares of the Fund, disposes of such shares less than 91
days after they are acquired, and subsequently acquires shares of the Fund or
another fund at a reduced sales charge pursuant to a right to reinvest at such
reduced sales charge acquired in connection with the acquisition of the shares
disposed of, then the sales charge on the shares disposed of (to the extent of
the reduction in the sales charge on the shares subsequently acquired) shall not
be taken into account in determining gain or loss on the shares disposed of but
shall be treated as incurred on the acquisition of the shares subsequently
acquired.
Any gain resulting from the
redemption or exchange (except for Class S shares, which are not subject to
exchange), of your shares will generally also be subject to tax. For shares
acquired after January 1, 2012, you will need to select a cost basis method to
be used to calculate your reported gains and losses prior to or at the time of
any redemption or exchange (except for Class S shares, which are not subject to
exchange). If you do not select a method, the Funds’ default method of average cost will
be applied to the transactions. The cost basis method used on your account could
significantly affect your taxes due and should be carefully considered. You
should consult your tax advisor for more information on your own tax situation,
including possible foreign, state, and local taxes.
Investments by a Fund in certain
debt instruments or derivatives may cause the Fund to recognize taxable income
in excess of the cash generated by such instruments. As a result, the Fund could
be required at times to liquidate other investments to satisfy its distribution
requirements under the Internal Revenue Code. The Fund’s use of derivatives will also
affect the amount, timing, and character of the Fund’s distributions.
Early in each calendar year, each
Fund will notify you of the amount and tax status of distributions paid to you
for the preceding year.
A dividend or distribution made
shortly after the purchase of shares of a Fund by a shareholder, although in
effect a return of capital to that shareholder, would be taxable to that
shareholder as described above, subject to a holding period requirement for
dividends designated as qualified dividend income.
The information contained in this
prospectus is not a complete description of the federal, state, local, or
foreign tax consequences of investing in the Fund. You should consult your tax
advisor before investing in the Fund.
Funds Investing
in Securities Generating Tax-Exempt Income
Distributions designated as
“ exempt-interest dividends
” by Funds investing in securities
generating tax-exempt income are generally not subject to federal income tax.
However, if you receive Social Security or railroad retirement benefits, you
should consult your tax advisor to determine what effect, if any, an investment
in such Funds may have on the federal taxation of your benefits. Some Funds
invest in “
AMT-subject bonds,
” which are municipal obligations
issued to finance certain “ private activities, ” such as bonds used to finance
airports, housing projects, student loan programs, and water and sewer projects.
Interest on AMT-subject bonds is an item of tax preference for purposes of the
federal individual alternative minimum tax ( “ AMT ” ) and will also give rise to
corporate alternative minimum taxes. A portion of such Funds' distributions may,
therefore, be subject to federal income taxes or to the federal alternative
minimum tax. Some Funds may invest a portion of their assets in securities that
generate income that is not exempt from federal (or state and local) income tax.
Income exempt from federal tax may be subject to state and local income tax. In
addition, any capital gains distributed by such Funds will be taxable as
described in this section. A portion of the dividends paid by such Funds may be
exempt from California State personal income tax, but not from California State
franchise tax or California State corporate income tax. Corporate taxpayers
should consult their tax advisor concerning the California state tax treatment
of investments in such Funds.
CHOOSING A SHARE
CLASS AND THE COSTS OF INVESTING
Before you invest, you should
understand the characteristics of each share class so you can be sure to choose
the class that is right for you. Fund and share class selections must be made at
the time of purchase. Classes differ regarding the costs associated with buying,
redeeming, and holding shares. Which class is best for you depends
upon:
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the dollar amount you are
investing, |
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• |
the amount of time you plan to
hold the investment, |
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any plans to make additional
investments in the Principal Funds, and |
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eligibility to purchase the
class. |
The following sections describe the
fees and expenses you may pay if you invest in a Fund. You may pay both one-time
fees and ongoing fees. Fees and expenses are important because they lower your
earnings. Before investing, you should be sure you understand the nature of
different costs. Your Financial Professional can help you with this process and
can help you choose the share class and Fund or Funds that are appropriate for
you based upon your investment objective, risk tolerance and other factors.
Financial Professionals may receive different compensation depending upon which
class of shares you purchase.
Fees and Expenses
of the Funds
Classes
A, C, and J Shares
There is no sales charge on shares
of the Funds purchased with reinvested dividends or other distributions. You may
obtain more information about sales charge reductions and waivers through a link
on our website, from the SAI, or from your Financial Professional.
In some cases, the initial sales
charge or contingent deferred sales charge may be waived or reduced. To receive
a waiver or reduction in the initial sales charge or contingent deferred sales
charge, you or your Financial Professional must let the Fund know at the time
you purchase or redeem shares that you qualify for such a waiver or reduction.
It may be necessary for you to provide information and records, such as account
statements, to determine your eligibility. If your Financial Professional or you
do not let the Fund know that you are eligible for a waiver or reduction, it is
possible you will not receive a sales charge discount to which you are otherwise
entitled.
Class C
Shares
Class C shares may not be
suitable for large investments. Due to the higher expenses associated with
Class C shares, it may be more advantageous for investors currently
purchasing, intending to purchase, or with existing assets in amounts that may
qualify for a reduced sales charge on Class A shares, including through
Rights of Accumulation and/or Statement of Intent, to purchase Class A
shares. Class C shares have higher annual expenses than Class A shares
because they are subject to higher distribution fees.
The Fund seeks to prevent
investments in Class C shares by shareholders with at least $1 million
of investments in Principal Funds eligible for inclusion pursuant to Rights of
Accumulation. If you are making an initial purchase of Principal Funds of
$1,000,000 or more and have selected Class C shares, the purchase will be
of Class A shares of the Fund(s) you have selected. If you are making
subsequent purchases into your existing Principal Funds Class C share
accounts and the combined value of the subsequent investment and your existing
Classes A, B, C, and J share accounts combined for Rights of
Accumulation purposes exceeds $1,000,000, the subsequent investment will be
applied to purchase Class A shares of the Fund(s) you have
selected.
Institutional
Class and Classes P, R-1, R-2, R-3, R-4, R-5, R-6, and S Shares
Fund shares are sold without a
front-end sales charge and do not have a contingent deferred sales charge. For
Institutional Class and Classes P, R-1, R-2, R-3, R-4, R-5, and R-6 shares,
there is no sales charge on Fund shares purchased with reinvested dividends or
other distributions; for S Class shares, Fund shares are not purchased with
reinvested dividends or other distributions.
One-Time Fee -
Initial Sales Charge
Class A
Shares
The offering price for Class A
shares is the NAV next calculated after receipt of an investor’s order in proper
form by the Fund or its servicing agent, plus any applicable initial sales
charge as shown in the table below. The right-hand column in the table indicates
what portion of the sales charge is paid to Financial Professionals and their
brokerage firms (“dealers”) for selling Class A shares. For more
information regarding compensation paid to dealers, see “Distribution Plans and
Intermediary Compensation.”
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Class A
Sales Charges(1)
Credit
Opportunities Explorer, Diversified Real Asset, Dynamic High Yield
Explorer, Global Multi-Strategy,
Opportunistic
Municipal, Preferred Securities, and Real Estate Debt Income
Funds |
|
Sales Charge
as % of: |
|
Amount of
Purchase |
Offering
Price |
Amount
Invested |
Dealer
Allowance
as % of
Offering Price |
Less than
$100,000 |
3.75% |
3.90% |
3.00% |
$100,000 but less than
$250,000 |
2.75% |
2.83% |
2.25% |
$250,000 but less than
$500,000 |
1.50% |
1.52% |
1.00% |
$500,000 or
more |
0.00% |
0.00% |
0.00%(2) |
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Class A
Sales Charges(1)
Blue Chip,
Global Opportunities, Global Opportunities Equity Hedged, International
Small Company, Multi-Manager Equity Long/Short, Origin Emerging Markets,
Real Estate Allocation, and Small-MidCap Dividend Income
Funds |
|
Sales Charge
as % of |
|
Amount of
Purchase |
Offering
Price |
Amount
Invested |
Dealer
Allowance
as % of
Offering Price |
Less than
$50,000 |
5.50% |
5.82% |
4.75% |
$50,000 but less than
$100,000 |
4.75% |
4.99% |
4.00% |
$100,000 but less than
$250,000 |
3.75% |
3.90% |
3.00% |
$250,000 but less than
$500,000 |
3.00% |
3.09% |
2.50% |
$500,000 but less than
$1,000,000 |
2.00% |
2.04% |
1.75% |
$1,000,000 or
more |
0.00% |
0.00% |
0.00%(3) |
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(1) |
Because of rounding in the
calculation of the offering price, the actual maximum front-end sales
charge paid by an investor may be higher or lower than the percentages
noted above. |
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(2) |
The Distributor may pay
authorized dealers commissions on purchases of Class A shares over
$500,000 calculated as follows: 1.00% on purchases between $500,000 and
$4,999,999, 0.50% on purchases between $5 million and $49,999,999, and
0.25% on purchases of $50 million or more. The commission rate is
determined based on the cumulative investments over the life of the
account combined with the investments in existing Classes A, C, and J
shares. |
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(3) |
The Distributor may pay
authorized dealers commissions on purchases of Class A shares over $1
million calculated as follows: 1.00% on purchases between $1,000,000 and
$4,999,999, 0.50% on purchases between $5 million and $49,999,999, and
0.25% on purchases of $50 million or more. The commission rate is
determined based on the cumulative investments over the life of the
account combined with the investments in existing Classes A, C, and J
shares. |
Initial Sales
Charge Waiver or Reduction
Class A shares of the Funds may
be purchased without a sales charge or at a reduced sales charge.
Initial Sales
Charge Waiver
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No initial sales charge will
apply to purchases of Fund shares if the purchase is of sufficient size as
disclosed in the preceding “Class A Sales Charges” table. |
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You may reinvest the Funds’
Class A share redemption proceeds without a sales charge within 60 days of
the redemption, if you previously paid a sales charge. Shares invested
directly within the Class A Money Market Fund are not eligible for this
waiver; however, shares in the Money Market Fund that were obtained by
exchange of another Fund that imposed an initial sales charge are
eligible. |
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A Fund’s Class A shares
may be purchased without an initial sales charge by the following
individuals, groups, and/or entities: |
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current and former Directors
of Principal Funds, member companies of Principal ®
, and their active or
retired employees, officers, directors, brokers, or agents (for the life
of the account). This also includes their immediate family members
(spouse, domestic partner, children (regardless of age and including
in-laws), and parents, including in-laws) and trusts created by or
primarily for the benefit of these individuals;
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any employee or registered
representative (and their immediate family members and employees) of an
authorized broker-dealer or company that has entered into a selling
agreement with the Distributor; |
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clients investing in Class A
shares through a “wrap account” offered through broker-dealers, investment
advisors, and other financial institutions that have entered into an
agreement with the Distributor which includes a requirement that such
shares be sold for the benefit of clients participating in a “wrap
account” or similar program under which clients pay a fee to the
broker-dealer, investment advisor, or financial
institution; |
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any investor who buys Class A
shares through an omnibus account held by certain financial
intermediaries, such as a bank, broker-dealer, or other financial
institution, with special arrangements and that does not accept or charge
the initial sales charge; |
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clients of registered
investment advisors that have entered into arrangements with the
Distributor providing for the shares to be used in particular investment
products made available to such clients and for which such registered
investment advisors may charge a separate
fee; |
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financial intermediaries who
have entered into an agreement with the Distributor to offer shares to
self-directed investment brokerage accounts that may or may not charge a
transaction fee to its customers; and |
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retirement plans or benefit
plans, or participants in such plans, where the plan’s investments in the
Fund are part of an omnibus account (pursuant to a written agreement). For
clarification, such plans do not include individual retirement
arrangements under IRC Section 408, such as Simplified Employee Pensions
(SEP), SIMPLE IRAs or other IRAs. |
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The following two bullet
points are only applicable to intermediaries that are affiliated with
Principal Financial Group, Inc. A Fund’s Class A shares may be purchased
without an initial sales charge by the following individuals, groups,
and/or entities: |
•Premier Credit Union when the shares
are owned directly with Principal Funds; and
•non-ERISA clients of Principal
Global Investors LLC.
Initial Sales
Charge Reduction
|
|
(1) |
Rights of Accumulation. The
sales charge varies with the size of your purchase. Purchases made by you,
your spouse or domestic partner, your children (including children of your
spouse or domestic partner) age 25 or under, and/or a trust created by or
primarily for the benefit of such persons (together “a Qualified
Purchaser”) will be combined along with the value of existing Classes A,
C, and J shares of Principal Funds owned by such persons, to determine the
applicable sales charge. Class A shares of the Money Market Fund are not
included in the calculation unless they were acquired in exchange from
other Principal Fund shares. If the total amount being invested in the
Principal Funds is near a sales charge breakpoint, you should consider
increasing the amount invested to take advantage of a lower sales
charge. |
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(2) |
Statement of Intent (SOI).
Qualified Purchasers may obtain reduced sales charges by signing an SOI.
The SOI is a nonbinding obligation on the Qualified Purchaser to purchase
the full amount indicated in the SOI. Purchases made by you, your spouse
or domestic partner, or the children of you, your spouse or domestic
partner up to and including the age of 25 and/or a trust created by or
primarily for the benefit of such persons (together “a Qualified
Purchaser”) will be combined along with the value of existing
Classes A, C and J shares of Principal Funds owned by such persons.
Purchases of Class A shares of Money Market Fund are not included.
The sales charge is based on the total amount to be invested in a 13-month
period. If the intended investment is not made (or shares are sold during
the 13 month period), sufficient shares will be sold to pay the
additional sales charge due. An SOI is not available for 401(a) plan
purchases. |
|
|
(3) |
The maximum sales charge that
applies to purchases of Class A shares by qualified plans
administered by Expertplan, Inc. that were previously converted from B
share plans is the sales charge that applies to purchases of at least
$250,000 but less than $500,000 as described in the sales charge tables;
the regular sales charge applies to purchases of $500,000 or more in such
accounts and to all purchases of the Diversified Real Asset Fund, Global
Multi-Strategy Fund, and Preferred Securities Fund
shares. |
|
|
(4) |
The maximum sales charge for
all purchases made in an account that is included in a SIMPLE IRA, SEP,
SAR-SEP, non-qualified deferred compensation, or payroll deduction plan
established before March 1, 2002 with Principal Management
Corporation as the Funds’ transfer agent, is the sales charge that applies
to purchases of at least $100,000 but less than $250,000 as described in
the sales charge tables; the regular sales charge applies to purchases of
$250,000 or more in such accounts and to all purchases of the Diversified
Real Asset Fund, Global Multi-Strategy Fund, and Preferred Securities Fund
shares. The reduced sales charge applies to purchases made by or on behalf
of participants to such plans who became participants on or before
July 28, 2007. |
Class C
Shares
Purchases of Class C shares are not
subject to a front-end sales load. The offering price for Class C shares is
the NAV next calculated after receipt of an investor’s order in proper form by
the Fund or its servicing agent, with no initial sales charge. The Distributor
currently pays authorized dealers commissions of up to 1.00% of the amount
invested in Class C shares.
Institutional
Class and Classes J, P, R-1, R-2, R-3, R-4, R-5, R-6, and S Shares
Purchases of these classes of shares
are not subject to a front-end sales load. The offering price for such shares is
the NAV next calculated after receipt of an investor’s order in proper form by
the Fund or its servicing agent, with no initial sales charge.
One-Time Fee -
Contingent Deferred Sales Charge (“CDSC”)
If you sell (redeem) shares and the
CDSC is imposed, it will reduce the amount of sales proceeds.
The CDSC is based on the lesser of
the market value at the time of redemption or the initial purchase price of the
shares sold. The CDSC does not apply to shares purchased with reinvested
dividends or other distributions. The CDSC is not charged on exchanges. However,
the original purchase date of the shares from which an exchange is made
determines if the newly acquired shares are subject to the CDSC when they are
sold.
If you sell some but not all of the
shares in your account, the shares not subject to a CDSC will be sold first.
Other shares will be sold in the order purchased (first in, first out). The CDSC
does not apply to shares redeemed according to a systematic withdrawal plan
limited to no more than 1.00% per month (measured cumulatively for non-monthly
plans) of the value of the Fund account at the time, and beginning on the date,
the systematic withdrawal plan is established.
Class A
Shares
Class A shares purchased in amounts
that are of sufficient size to qualify for a 0.00% sales charge, as disclosed in
the “Class A Sales Charges” table, are generally subject to a CDSC of 1.00% if
the shares are redeemed during the first 12 months after purchase, unless the
dealer, at its discretion, has waived the commission. The Distributor may pay
authorized dealers commissions up to 1.00% of the price of such
purchases.
There is no CDSC on Class A shares
of the Money Market Fund that are directly purchased by the shareholder. Class A
shares of the Money Market Fund that are obtained through an exchange of another
Fund's shares are generally subject to a CDSC of 1.00% on certain redemptions
made within 12 months following purchases of Fund shares that are of sufficient
size to qualify for a 0.00% sales charge as disclosed in the “Class A Sales
Charges” table.
The CDSC generally applicable to
redemptions of Class A shares made within 12 months after purchase will not be
imposed on redemptions of shares purchased through an omnibus account with
certain financial intermediaries, such as a bank or other financial institution,
where no sales charge payments were advanced for purchases made through these
entities.
Class C
Shares
Each initial and subsequent purchase
of Class C shares is subject to a CDSC of 1.00% for a period of
12 months from the date of purchase. Shares will be redeemed first from
shares purchased through reinvested dividends and capital gain distributions,
which are not subject to the CDSC, and then in order of purchase. Within 60
calendar days after the sale of Class C shares, you may reinvest any amount of
the sale proceeds in Class C shares and those shares purchased will not be
subject to the 12-month CDSC.
Class J
Shares
If you sell your Class J shares
within 18 months of purchase, a CDSC may be imposed on the shares sold. The
CDSC, if any, is determined by multiplying by 1.00% the lesser of the market
value at the time of redemption or the initial purchase price of the shares
sold. Within 60 calendar days after the sale of J shares, you may reinvest the
amount of the sale proceeds into any Principal Funds Class J shares fund; shares
purchased by redemption proceeds are not subject to the eighteen-month
CDSC.
Institutional
Class and Classes P, R-1, R-2, R-3, R-4, R-5, R-6, and S Shares
These share classes are not subject
to a CDSC.
CDSC Waiver
For Classes A, C, and J shares, the
CDSC is waived on shares:
|
|
• |
redeemed within 90 days after
an account is re-registered due to a shareholder's
death; |
|
|
• |
redeemed to pay surrender
fees; |
|
|
• |
redeemed to pay retirement
plan fees; |
|
|
• |
redeemed involuntarily from
accounts with small balances; |
|
|
• |
redeemed due to the
shareholder's disability (as defined by the Internal Revenue Code)
provided the shares were purchased before the disability;
|
|
|
• |
redeemed from retirement plans
to satisfy minimum distribution rules under the Internal Revenue
Code; |
|
|
• |
redeemed from a retirement
plan to assure the plan complies with the Internal Revenue
Code; |
|
|
• |
redeemed from retirement plans
qualified under Section 401(a) of the Internal Revenue Code due to the
plan participant's death, disability, retirement, or separation from
service after attaining age 55; |
|
|
• |
redeemed from retirement plans
to satisfy excess contribution rules under the Internal Revenue Code;
or |
|
|
• |
redeemed using a systematic
withdrawal plan (up to 1% per month (measured cumulatively with respect to
non-monthly plans) of the value of the fund account at the time, and
beginning on the date, the systematic withdrawal plan begins). (The free
withdrawal privilege not used in a calendar year is not added to the free
withdrawal privileges for any following
year.) |
For Class J shares, the CDSC also is
waived on shares:
|
|
• |
redeemed that were purchased
pursuant to the Small Amount Force Out program (SAFO);
or |
|
|
• |
of the Money Market Fund
redeemed within 30 days of the initial purchase if the redemption proceeds
are transferred to another Principal IRA, defined as either a fixed or
variable annuity issued by Principal Life Insurance Company to fund an
IRA, a Principal Bank IRA product, or a WRAP account IRA sponsored by
Principal Securities, Inc. |
Ongoing
Fees
The ongoing fees are the operating
expenses of a Fund, which are described in the “Annual Fund Operating Expenses”
table included in the Summary for each Fund. These expenses reduce the value of
each share you own. Because they are ongoing, they increase the cost of
investing in the Funds.
The Real Estate Allocation Fund, as
a shareholder in underlying funds, bears its pro rata share of the operating
expenses incurred by each underlying fund. The investment return of the Real
Estate Allocation Fund is net of the underlying funds' operating
expenses.
With the exception of Class S of the
Capital Securities Fund, each Fund pays ongoing fees to PMC and others who
provide services to the Fund. These fees include:
|
|
• |
Management Fee (all Classes
except Class S) — Through the Management Agreement with the Fund, PMC has
agreed to provide investment advisory services and corporate
administrative services to the Fund. |
|
|
• |
Distribution Fee (Classes A,
C, J, R-1, R-2, R-3, and R-4 Shares) — Each Fund has adopted a
distribution plan under Rule 12b-1 of the Investment Company Act of
1940 for the foregoing classes. Under the plan, Classes A, C, J, R-1, R-2,
R-3, and R-4 pay a distribution fee based on the average daily NAV of the
Fund. These fees pay distribution and other expenses for the sale of Fund
shares and for services provided to shareholders. Because they are ongoing
fees, over time, these fees may exceed other types of sales
charges. |
|
|
• |
Other Expenses — (all Classes
except Class S) - A portion of expenses that are allocated to all classes
of the Fund. Other expenses include interest expense, expenses related to
fund investments, and index licensing fees. Additional examples of other
expenses include: |
|
|
• |
Transfer Agent Fee (all
Classes except Class S) - Principal Shareholder Services, Inc.
(“PSS”) has entered into a Transfer Agency Agreement with the Fund under
which PSS provides transfer agent services to these classes. For Class J
shares, these services are currently provided at a rate that includes a
profit; for Classes A, C, P, and Institutional Class shares, these
services are currently provided at cost. The Fund does not pay for these
services for Classes R-1, R-2, R-3, R-4, R-5, and R-6 shares.
|
|
|
• |
Certain Operating Expenses
(Institutional Class and Classes A, C, J, P, and R-6
Shares) - expenses of registering and qualifying shares for
sale, the cost of producing and distributing reports and prospectuses to
foregoing classes shareholders, the cost of shareholder meetings held
solely for shares of the foregoing classes, and other operating expenses
of the Fund. |
|
|
• |
Service Fee (Classes R-1, R-2,
R-3, R-4, and R-5) - PMC has entered into a Service Agreement
with the Fund under which PMC provides certain personal services to
shareholders (plan sponsors) and beneficial owners (plan members), such as
responding to plan sponsor and plan member inquiries.
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|
• |
Administrative Services Fee
(Classes R-1, R-2, R-3, R-4, and R-5) - PMC has entered into an
Administrative Services Agreement with Principal Funds under which PMC
provides shareholder and administrative services for retirement plans and
other beneficial owners of Fund shares. |
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|
• |
Acquired Fund Fees and
Expenses (all Classes except Class S) - fees and expenses charged by other
investment companies in which a Fund invests a portion of its
assets. |
Class S
Shares
The Capital Securities Fund does not
pay any direct advisory, administrative, or other fees. PMC, the investment
advisor, has contractually agreed to absorb all expenses of the Capital
Securities Fund. PMC also pays or absorbs expenses attributable to Class S
shares by paying expenses normally payable by the Capital Securities Fund,
excluding interest expense.
DISTRIBUTION
PLANS AND INTERMEDIARY COMPENSATION
Distribution
and/or Service (12b-1) Fees
Principal Funds Distributor, Inc.
("PFD" or the "Distributor") is the distributor for the shares of Principal
Funds, Inc. PFD is an affiliate of Principal Life Insurance Company and with it
is a subsidiary of Principal Financial Group, Inc. and member of
Principal ®
.
Principal Funds has adopted a
distribution plan pursuant to Rule 12b-1 under the Investment Company Act for
each of the Classes A, C, J, R-1, R-2, R-3, and R-4 shares of Principal Funds.
Under the 12b-1 Plans, except as noted below, each Fund makes payments from its
assets attributable to the particular share class to the Fund’s Distributor for
distribution-related expenses and for providing services to shareholders of that
share class. Payments under the 12b-1 plans are made by the Funds to the
Distributor pursuant to the 12b-1 plans regardless of the expenses incurred by
the Distributor. When the Distributor receives Rule 12b-1 fees, it may pay some
or all of them to intermediaries whose customers are shareholders of the funds
for sales support services and for providing services to shareholders of that
share class. Intermediaries may include, among others, broker-dealers,
registered investment advisors, banks, trust companies, pension plan
consultants, retirement plan administrators, and insurance companies. These
intermediaries include Principal Securities, Inc., a broker-dealer affiliated
with PMC. Because Rule 12b-1 fees are paid out of Fund assets and are ongoing
fees, over time they will increase the cost of your investment in the Funds and
may cost you more than other types of sales charges.
The maximum annual Rule 12b-1 fee
for distribution related expenses and/or for providing services to shareholders
under each 12b-1 plan (as a percentage of average daily net assets)
is:
|
|
|
Share
Class |
Maximum
Annualized Rate
12b-1
Fee |
A |
0.25%* |
C |
1.00% |
J |
0.15% |
R-1 |
0.35% |
R-2 |
0.30% |
R-3 |
0.25% |
R-4 |
0.10% |
* Effective September 1, 2016,
the 12b-1 fee for the Credit Opportunities Explorer Fund was
eliminated. |
The Distributor generally uses Rule
12b-1 fees to finance any activity that is primarily intended to result in the
sale of shares and for providing services to shareholders of the share class,
and the activities vary depending on the share class. In addition to shareholder
services, examples of such sales or distribution related expenses include, but
are not limited to:
|
|
• |
Compensation to salespeople
and selected dealers, including ongoing commissions
payments. |
|
|
• |
Printing of prospectuses and
statements of additional information and reports for other than existing
shareholders, and preparing and conducting sales
seminars. |
Examples of services to shareholders
include furnishing information as to the status of shareholder accounts,
responding to telephone and written inquiries of shareholders, and assisting
shareholders with tax information.
Payments under the 12b-1 plans will
not automatically terminate for funds that are closed to new investors or to
additional purchases by existing shareholders. The fund Board will determine
whether to terminate, modify, or leave unchanged the 12b-1 plans when the Board
directs the implementation of the closure of a fund.
Classes
A and C Shares
Generally, to receive 12b-1 fees
from the Distributor, dealers or other intermediaries must be the dealer of
record for shares with average daily net assets of at least $100,000. Generally,
Class A shares must be held for three months before these fees are paid. In the
case of Class C shares, generally these fees are not paid until such shares have
been held for twelve months.
Class J
Shares
Effective December 31, 2015, the
Distributor has voluntarily agreed to limit the Distribution Fees attributable
to Class J. The voluntary fee waiver will reduce the Fund’s Distribution Fees by
0.018%. The voluntary waiver may be revised or terminated at any time without
notice to shareholders.
Commissions,
Finder’s Fees, and Ongoing Payments
See "Choosing a Share Class and The
Costs of Investing" for more details.
Class A
Shares
All or a portion of the initial
sales charge that you pay may be paid by the Distributor to intermediaries
selling Class A shares. The Distributor may pay these intermediaries a
commission of up to 1.00% on purchases of $1,000,000 or more (or $500,000 or
more depending on the Fund purchased), excluding purchases by qualified
retirement plans in omnibus accounts which are not subject to initial sales
charges.
In lieu of commissions, the
Distributor may pay intermediaries a finder’s fee on initial investment by
qualified retirement plans in omnibus accounts which are not subject to initial
sales charges, provided the selling intermediary notifies the Distributor within
90 days of the initial investment that the transaction is eligible for the
payment of a finder’s fee. The finder’s fee on such initial investments may be
up to 1.00% on initial investments between $500,000 and $4,999,999, 0.50% on
initial investments between $5 million and $49,999,999, 0.25% on initial
investments of $50 million or more. Initial investments include transfers,
rollovers and other lump sum purchases, excluding ongoing systematic
investments, made within 90 days of the initial funding of the account. The
intermediary shall, upon request by the Distributor provided within 90 days of
the triggering event, refund the finder’s fee to the Distributor to the extent
shares are redeemed within 12 months of the initial investment or trading
restrictions are placed on the account in accordance with the Funds' frequent
trading policy.
Classes
A, J, R-1, R-2, R-3, and R-4 Shares
Additionally, the Distributor
generally makes ongoing 12b-1 fee payments to your intermediary at a rate that
varies by class, as noted above under “Distribution and/or Service (12b-1)
Fees.”
Class C
Shares
The Distributor will pay, at the
time of your purchase, a commission to your intermediary equal to 1.00% of your
investment. Additionally, the Distributor generally makes ongoing 12b-1 fee
payments to your intermediary as noted above under “Distribution and/or Service
(12b-1) Fees.”
Additional
Payments to Intermediaries
Shares of the Fund are sold
primarily through intermediaries, such as brokers, dealers, investment advisors,
banks, trust companies, pension plan consultants, retirement plan
administrators, and insurance companies.
Classes
A, C, J, and P Shares
In addition to payments pursuant to
12b-1 plans, sales charges, commissions and finder’s fees, including
compensation for referrals, PMC or its affiliates enter into agreements with
some intermediaries pursuant to which the intermediaries receive payments for
providing services relating to Fund shares. Examples of such services are
administrative, networking, recordkeeping, sub-transfer agency and shareholder
services. In some situations, the Fund will reimburse PMC or its affiliates for
making such payments; in others, the Fund may make such additional payments
directly to intermediaries.
PMC or its affiliates may also pay,
without reimbursement from the Fund, compensation from their own resources to
certain intermediaries that support the distribution of shares of the Fund or
provide services to Fund shareholders.
Such additional payments may vary,
but generally do not exceed: (a) 0.25% of the current year's sales of Fund
shares by that intermediary and/or (b) 0.25% of average net asset value of Fund
shares held by clients of such intermediary.
The Distributor and its affiliates
may pay a bonus or other consideration or incentive to intermediaries if an
employee covered under an employer sponsored benefit program purchases a product
from an affiliate of Distributor with the assistance of a registered
representative of an affiliate of Distributor, if the intermediary sold the
funding vehicle the employer sponsored benefit program utilizes or if the
intermediary subsequently became the broker of record with regard to the
employer sponsored benefit program.
The Distributor and/or its
affiliates provide services to and/or funding vehicles for retirement plans and
employer sponsored benefit programs. The Distributor and its affiliates may pay
a bonus or other consideration or incentive to intermediaries if a participant
in such a retirement plan establishes a rollover individual retirement account
with the assistance of a registered representative of an affiliate of
Distributor, if the intermediary sold the funding vehicle the retirement plan
utilizes or if the intermediary subsequently became the broker of record with
regard to the retirement plan.
Institutional
Class and Classes R-1, R-2, R-3, R-4, and R-5 Shares
In addition to payments pursuant to
12b-1 plans, PMC or its affiliates enter into agreements with some
intermediaries pursuant to which the intermediaries receive payments for
providing services relating to Fund shares. Examples of such services are
administrative, networking, recordkeeping, sub-transfer agency and/or
shareholder services. For Classes R-1, R-2, R-3, R-4, and R-5 shares, such
compensation is generally paid out of the Service Fees and Administrative
Service Fees that are disclosed in this prospectus as Other Expenses. For
Institutional Class shares, in some situations, the Fund will reimburse PMC or
its affiliates for making such payments; in others, the Fund may make such
payments directly to the intermediaries.
PMC or its affiliates may also pay,
without reimbursement from the Fund, compensation from their own resources to
certain intermediaries that support the distribution of shares of the Fund or
provide services to Fund shareholders.
For Institutional Class shares, such
payments may vary, but generally do not exceed: (a) 0.10% of the current year’s
sales of Fund shares by that intermediary or (b) 0.10% of the average net asset
value of Fund shares held by clients of such intermediary.
Principal Life Insurance Company is
one such intermediary that provides services relating to Fund shares held in
retirement plans, and it is typically paid some or all of the Service Fees and
Administrative Service Fees pertaining to such plans, and it also receives
compensation paid by PMC from its own resources.
Institutional
Class and Classes A, C, J, P, R-1, R-2, R-3, R-4, and R-5 Shares
The intermediary may pay to its
Financial Professionals some or all of the amounts the Distributor and its
affiliates pay to the intermediary.
The amounts paid to intermediaries
vary by share class and by Fund.
In some cases, the Distributor and
its affiliates will provide payments or reimbursements in connection with the
costs of conferences, educational seminars, training and marketing efforts
related to the Funds. Such activities may be sponsored by intermediaries or the
Distributor. The costs associated with such activities may include travel,
lodging, entertainment, and meals. In some cases, the Distributor will also
provide payment or reimbursement for expenses associated with transactions
("ticket") charges and general marketing expenses.
For more information, see the
Statement of Additional Information (SAI).
The payments described in this
prospectus may create a conflict of interest by influencing your Financial
Professional or your intermediary to recommend the Fund over another investment,
or to recommend one share class of the Fund over another share class. Ask your
Financial Professional or visit your intermediary's website for more information
about the total amounts paid to them by PMC and its affiliates, and by sponsors
of other investment companies your Financial Professional may recommend to
you.
Your intermediary may charge you
additional fees other than those disclosed in this prospectus. Ask your
Financial Professional about any fees and commissions they charge.
Classes
S and R-6 Shares
The Distributor and its affiliates
do not pay compensation to intermediaries for distribution or other services for
Classes S and R-6 shares. For more information, see the Statement of Additional
Information (SAI).
FUND ACCOUNT
INFORMATION
Statements
You will receive quarterly
statements for the Funds you own, or if you purchase through a third party
intermediary, on a periodic basis established by such intermediary. Such
statements provide the number and value of shares you own, transactions during
the period, dividends declared or paid, and other information. The year-end
statement includes information for all transactions that took place during the
year. Please review your statement as soon as you receive it. Keep your
statements, as you may need them for tax reporting purposes.
Generally, each time you buy, sell,
or exchange shares in Principal Funds, you will receive a confirmation shortly
thereafter. It summarizes all the key information - what you bought or sold, the
amount of the transaction, and other important information.
Certain purchases and sales are only
included on your quarterly statement. These include accounts:
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|
• |
when the only activity during
the quarter are: |
|
|
• |
purchases of shares from
reinvested dividends and/or capital
gains, |
|
|
• |
purchases under an Automatic
Investment Plan, |
|
|
• |
sales under a Systematic
Withdrawal Plan, or |
|
|
• |
purchases or sales under an
Automatic Exchange Election; |
|
|
• |
used to fund certain
individual retirement or individual pension plans;
or |
|
|
• |
established under a payroll
deduction plan. |
If you need information about your
account(s) at other times, you may call us or access your account on the
internet.
Orders Placed by
Intermediaries
Principal Funds may have an
agreement with your intermediary, such as a broker-dealer, third party
administrator, or trust company, that permits the intermediary to receive orders
on behalf of the Fund until 3 p.m. Central Time. The agreement may include
authorization for your intermediary to designate other intermediaries
(“sub-designees”) to receive orders on behalf of the Fund on the same terms that
apply to the intermediary. In such cases, if your intermediary or a sub-designee
receives your order in correct form by 3 p.m. Central Time, transmits it to the
Fund, and pays for it in accordance with the agreement, the Fund will price the
order at the next net asset value per share it computes after your intermediary
or sub-designee received your order.
The time at which the Fund prices
orders and the time until which the Fund or your intermediary or sub-designee
will accept orders may change in the case of an emergency or if the NYSE closes
at a time other than 3 p.m. Central Time.
Transactions
through Financial Institutions/Professionals
Financial institutions and dealers
may charge their customers a processing or service fee in connection with the
purchase or redemption of Fund shares. The amount and applicability of such a
fee is determined and disclosed to its customers by each individual financial
institution or dealer. Processing or service fees typically are fixed, nominal
dollar amounts and are in addition to the sales and other charges described in
this prospectus and the SAI.
Your financial institution or dealer
will provide you with specific information about any processing or service fees
you will be charged.
Telephone and
Internet Instructions
The Funds reserve the right to
refuse telephone and/or internet instructions. You are liable for a loss
resulting from a fraudulent telephone or internet instruction that we reasonably
believe is genuine. We use reasonable procedures to assure instructions are
genuine. If the procedures are not followed, we may be liable for loss due to
unauthorized or fraudulent transactions. The procedures include: recording all
telephone instructions, requiring the use of a password (Personal Identification
Number) for internet instructions, requesting personal identification
information, and sending written confirmation to the shareholder’s address of
record.
If you elect telephone privileges,
instructions regarding your account(s) may be given to us via the telephone or
internet. Your instructions:
|
|
• |
may be given by calling
us; |
|
|
• |
may be given via our website
for certain transactions (for security purposes you need a user name and
password to use any of the internet services, including viewing your
account information on-line. If you don’t have a user name or password,
you may obtain one at our website); or |
|
|
• |
may be given to your Financial
Professional (a person employed by or affiliated with broker/dealer firms)
who will in turn contact us with your
instructions. |
Instructions received from one owner
are binding on all owners. In the case of an account owned by a corporation or
trust, instructions received from an authorized person are binding on the
corporation/trust unless we have a written notification requiring that more than
one authorized person execute written instructions.
Signature
Guarantees
For all classes (except Class S),
certain transactions require that your signature be guaranteed. If required, the
signature(s) must be guaranteed by a commercial bank, trust company, credit
union, savings and loan, national securities exchange member, or brokerage firm
that participates in a Medallion program recognized by the Securities Transfer
Association. A signature guaranteed by a notary public or savings bank is not
acceptable.
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Signature
guarantees are required in any of the following
circumstances: |
A |
C |
J |
Inst. |
P |
R-1 |
R-2 |
R-3 |
R-4 |
R-5 |
R-6 |
if you sell more than $100,000
(in the aggregate) from the Funds |
X |
X |
X |
|
|
|
|
|
|
|
|
if you sell more than $500,000
(in the aggregate) from the Funds |
|
|
|
X |
X |
X |
X |
X |
X |
X |
X |
if you sell more than
$10,000,000 if you have the proceeds sent electronically to a previously
authorized U.S. bank account |
|
|
|
X |
|
|
|
|
|
|
|
if a sales proceeds check is
payable to a party other than the account shareholder(s) |
|
|
|
X |
|
X |
X |
X |
X |
X |
X |
if a sales proceeds check is
payable to a party other than the account shareholder(s) or Principal
Life, Principal Bank, a retirement plan trustee or custodian that has
agreed in writing to accept a transfer of assets from the Fund or
Principal Securities, Inc. payable through Pershing |
X |
X |
X |
|
X |
|
|
|
|
|
|
to change ownership of an
account |
X |
X |
X |
X |
X |
X |
X |
X |
X |
X |
X |
to add telephone transaction
services and/or wire or ACH redemption privileges to an existing account
if there is not a common owner between the bank account and mutual fund
account |
X |
X |
X |
X |
X |
X |
X |
X |
X |
X |
X |
to change bank account
information designated under an existing telephone withdrawal plan if
there is not a common owner between the bank account and mutual fund
account |
X |
X |
X |
X |
X |
X |
X |
X |
X |
X |
X |
to wire or ACH to a
shareholder’s U.S. bank account not previously authorized or when the
request does not include a voided check or deposit slip indicating a
common owner between the bank account and mutual fund
account |
X |
X |
X |
X |
X |
X |
X |
X |
X |
X |
X |
to exchange or transfer among
accounts with different ownership |
X |
X |
X |
X |
X |
X |
X |
X |
X |
X |
X |
to have a sales proceeds check
mailed to an address other than the address on the account or to the
address on the account if it has been changed within the preceding 15
days |
X |
X |
X |
X |
X |
X |
X |
X |
X |
X |
X |
Reservation of
Rights
Principal Funds reserves the right
to amend or terminate the special plans described in this prospectus.
Shareholders will be notified of any such action to the extent required by
law.
Such plans include, for example,
automatic investment, systematic withdrawal, waiver of Fund minimums for certain
accounts and waiver or reduction of the sales charge or contingent deferred
sales charge for certain purchasers.
Classes A, C, and
J Shares - Minimum Account Balance
Each Fund has a minimum required
account balance of $1000. The Fund reserves the right to redeem all shares in
your account if the value of your account falls below $1000. The Fund will mail
the redemption proceeds to you. An involuntary redemption of a small account
will not be triggered by market conditions alone. The Fund will notify you
before involuntarily redeeming your account. You will have 30 days to make an
additional investment of an amount that brings your account up to the required
minimum. The Funds reserve the right to increase the required
minimum.
Householding
To avoid sending duplicate copies of
materials to households, mailings for accounts held by members of your household
may be combined so that only one copy of each prospectus, annual and semiannual
reports will be mailed. In addition, your account information may be included
with other householded accounts on the same quarterly and annual statements. The
consolidation of these mailings, called householding, benefits Principal Funds
and our shareholders through reduced printing and mailing expenses. If you
prefer to receive multiple copies of these materials, you may write or call
Principal Funds. Householding will be stopped within thirty (30) days after we
receive your request.
Multiple
Translations
This prospectus may be translated
into other languages. In the event of any inconsistencies or ambiguity as to the
meaning of any word or phrase in a translation, the English text will
prevail.
Financial
Statements
Shareholders will receive annual
financial statements for the Funds, audited by the Funds’ independent registered
public accounting firm. Shareholders will also receive a semiannual financial
statement that is unaudited.
FINANCIAL
HIGHLIGHTS
To be filed by amendment.
APPENDIX A –
DESCRIPTION OF BOND RATINGS
Moody's
Investors Service, Inc. Rating Definitions:
Long-Term Obligation
Ratings
Ratings assigned on Moody's global
long-term obligation rating scales are forward-looking opinions of the relative
credit risk of financial obligations issued by non-financial corporates,
financial institutions, structured finance vehicles, project finance vehicles,
and public sector entities. Long-term ratings are assigned to issuers or
obligations with an original maturity of one year or more and reflect both on
the likelihood of default on contractually promised payments and the expected
financial loss suffered in the event of default.1
1
For certain
structured finance, preferred stock and hybrid securities in which payment
default events are either not defined or do not match investor’s expectations
for timely payment, the ratings reflect the likelihood of impairment and the
expected financial loss in the event of impairment.
|
|
Aaa: |
Obligations rated Aaa are
judged to be of the highest quality, subject to the lowest level of credit
risk. |
|
|
Aa: |
Obligations rated Aa are
judged to be of high quality and are subject to very low credit
risk. |
|
|
A: |
Obligations rated A are
considered upper-medium grade and are subject to low credit
risk. |
|
|
Baa: |
Obligations rated Baa are
subject to moderate credit risk. They are considered medium-grade and as
such may possess certain speculative
characteristics. |
|
|
Ba: |
Obligations rated Ba are
judged to be speculative and are subject to substantial credit
risk. |
|
|
B: |
Obligations rated B are
considered speculative and are subject to high credit
risk. |
|
|
Caa: |
Obligations rated Caa are
judged to be speculative of poor standing and are subject to very high
credit risk. |
|
|
Ca: |
Obligations rated Ca are
highly speculative and are likely in, or very near, default, with some
prospect of recovery of principal and
interest. |
|
|
C: |
Obligations rated C are the
lowest rated class of bonds and are typically in default, with little
prospect for recovery of principal or
interest. |
NOTE: Moody's appends numerical
modifiers, 1, 2, and 3 to each generic rating classification from Aa through
Caa. The modifier 1 indicates that the obligation ranks in the higher end of its
generic rating category, the modifier 2 indicates a mid-range ranking, and the
modifier 3 indicates a ranking in the lower end of that generic rating category.
Additionally, a “(hyb)” indicator is appended to all ratings of hybrid
securities issued by banks, issuers, financial companies, and securities
firms.*
* By their
terms, hybrid securities allow for the omission of scheduled dividends,
interest, or principal payments, which can potentially result in impairment if
such an omission occurs. Hybrid securities may also by subject to contractually
allowable write-downs of principal that could result in impairment. Together the
hybrid indicator, the long-term obligation rating assigned to a hybrid security
is an expression of the relative credit risk associated with that
security.
SHORT-TERM NOTES: Short-term ratings
are assigned to obligations with an original maturity of thirteen months or less
and reflect the likelihood of a default on contractually promised payments.
Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:
Issuers rated Prime-1 (or related
supporting institutions) have a superior ability to repay short-term debt
obligations.
Issuers rated Prime-2 (or related
supporting institutions) have a strong ability to repay short-term debt
obligations.
Issuers rated Prime-3 (or related
supporting institutions) have an acceptable ability to repay short-term
promissory obligations.
Issuers rated Not Prime do not fall
within any of the Prime rating categories.
US MUNICIPAL SHORT-TERM DEBT: The
Municipal Investment Grade (MIG) scale is used to rate US municipal bonds of up
to three years maturity. MIG ratings are divided into three levels - MIG 1
through MIG 3 - while speculative grade short-term obligations are designed
SG.
MIG 1 denotes superior credit
quality, afforded excellent protection from established cash flows, reliable
liquidity support, or broad-based access to the market for
refinancing.
MIG 2 denotes strong credit quality
with ample margins of protection, although not as large as in the preceding
group.
MIG 3 notes are of acceptable credit
quality. Liquidity and cash-flow protection may be narrow and market access for
refinancing is likely to be less well-established
SG denotes speculative-grade credit
quality and may lack sufficient margins of protection.
Description
of S&P Global Ratings' Credit Rating Definitions :
S&P Global's credit rating, both
long-term and short-term, is a forward-looking opinion of the creditworthiness
of an obligor with respect to a specific obligation. This assessment takes into
consideration obligors such as guarantors, insurers, or lessees.
The credit rating is not a
recommendation to purchase, sell or hold a security, inasmuch as it does not
comment as to market price or suitability for a particular
investor.
The ratings are statements of
opinion as of the date they are expressed furnished by the issuer or obtained by
S&P Global from other sources S&P Global considers reliable. S&P
Global does not perform an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be changed,
suspended, or withdrawn as a result of changes in, or unavailability of, such
information, or for other circumstances.
The ratings are based, in varying
degrees, on the following considerations:
|
|
• |
Likelihood of default -
capacity and willingness of the obligor to meet its financial commitment
on an obligation in accordance with the terms of the
obligation; |
|
|
• |
Nature of and provisions of
the obligation; |
|
|
• |
Protection afforded by, and
relative position of, the obligation in the event of bankruptcy,
reorganization, or other arrangement under the laws of bankruptcy and
other laws affecting creditor's rights. |
LONG-TERM CREDIT
RATINGS:
|
|
AAA: |
Obligations rated ‘AAA’ have
the highest rating assigned by S&P Global. The obligor’s capacity to
meet its financial commitment on the obligation is extremely
strong. |
|
|
AA: |
Obligations rated ‘AA’ differ
from the highest-rated issues only in small degree. The obligor’s capacity
to meet its financial commitment on the obligation is very
strong. |
|
|
A: |
Obligations rated ‘A’ have a
strong capacity to meet financial commitment on the obligation although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than obligations in higher-rated
categories. |
|
|
BBB: |
Obligations rated ‘BBB’
exhibit adequate protection parameters; however, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to meet financial commitment on the obligation.
|
|
|
BB, B, CCC, |
Obligations rated ‘BB’, ‘B’,
‘CCC’, ‘CC’, and ‘C’ are regarded, on balance, as having
significant |
|
|
CC, and C: |
speculative characteristics.
‘BB’ indicates the lowest degree of speculation and ‘C’ the highest degree
of speculation. While such obligations will likely have some quality and
protective characteristics, these may be outweighed by large uncertainties
or major risk exposures to adverse
conditions. |
|
|
BB: |
Obligations rated ‘BB’ are
less vulnerable to nonpayment than other speculative issues. However it
faces major ongoing uncertainties or exposure to adverse business,
financial, or economic conditions which could lead to the obligor’s
inadequate capacity to meet its financial commitment on the
obligation. |
|
|
B: |
Obligations rated ‘B’ are more
vulnerable to nonpayment than ‘BB’ but the obligor currently has the
capacity to meet its financial commitment on the obligation. Adverse
business, financial, or economic conditions will likely impair this
capacity. |
|
|
CCC: |
Obligations rated ‘CCC’ are
currently vulnerable to nonpayment and is dependent upon favorable
business, financial, and economic conditions for the obligor to meet its
financial commitment on the obligation. If adverse business, financial, or
economic conditions occur, the obligor is not likely to have the capacity
to meeting its financial commitment on the
obligation. |
|
|
CC: |
Obligations rated ‘CC’ are
currently highly vulnerable to nonpayment. The ‘CC’ rating is used when a
default has not yet occurred but S&P Global expects default to be a
virtual certainty, regardless of anticipated time to default.
|
|
|
C: |
The rating ‘C’ is highly
vulnerable to nonpayment, the obligation is expected to have lower
relative seniority or lower ultimate recovery compared to higher rated
obligations. |
|
|
D: |
Obligations rated ‘D’ are in
default, or in breach of an imputed promise. For non-hybrid capital
instruments, the ‘D’ rating category is used when payments on an
obligation are not made on the date due, unless S&P Global believes
that such payments will be made within five business days in the absence
of a stated grace period or within the earlier of the stated grace period
or 30 calendar days. This rating will also be used upon filing for
bankruptcy petition or the taking or similar action and where default is a
virtual certainty. If an obligation is subject to a distressed exchange
offer the rating is lowered to ‘D’. |
Plus (+) or Minus (-): The ratings
from ‘AA’ to ‘CCC’ may be modified by the addition of a plus or minus sign to
show relative standing within the major rating categories.
|
|
NR: |
Indicates that no rating has
been requested, that there is insufficient information on which to base a
rating or that S&P Global does not rate a particular type of
obligation as a matter of policy. |
SHORT-TERM CREDIT RATINGS:
Short-Term credit ratings are forward-looking opinions of the likelihood of
timely payment of obligations having an original maturity of no more than 365
days. Ratings are graded into four categories, ranging from ‘A-1’ for the
highest quality obligations to ‘D’ for the lowest. Ratings are applicable to
both taxable and tax-exempt commercial paper. The four categories are as
follows:
|
|
A-1: |
This is the highest category.
The obligor’s capacity to meet its financial commitment on the obligation
is strong. Within this category, certain obligations are designated with a
plus sign (+). This indicates that the obligor’s capacity to meet its
financial commitment on these obligations is extremely
strong. |
|
|
A-2: |
Issues carrying this
designation are somewhat more susceptible to the adverse effects of the
changes in circumstances and economic conditions than obligations in
higher rating categories. However, the obligor’s capacity to meet its
financial commitment on the obligation is
satisfactory. |
|
|
A-3: |
Issues carrying this
designation exhibit adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet it financial commitment on the
obligation. |
|
|
B: |
Issues rated ‘B’ are regarded
as vulnerable and have significant speculative characteristics. The
obligor has capacity to meet financial commitments; however, it faces
major ongoing uncertainties which could lead to obligor’s inadequate
capacity to meet its financial
obligations. |
|
|
C: |
This rating is assigned to
short-term debt obligations that are currently vulnerable to nonpayment
and is dependent upon favorable business, financial, and economic
conditions to meet its financial commitment on the
obligation. |
|
|
D: |
This rating indicates that the
issue is either in default or in breach of an imputed promise. For
non-hybrid capital instruments, the ‘D’ rating category is used when
payments on an obligation are not made on the date due, unless S&P
Global believes that such payments will be made within five business days
in the absence of a stated grace period or within the earlier of the
stated grace period or 30 calendar days. This rating will also be used
upon filing for bankruptcy petition or the taking or similar action and
where default is a virtual certainty. If an obligation is subject to a
distressed exchange offer the rating is lowered to ‘D’.
|
MUNICIPAL SHORT-TERM NOTE RATINGS:
S&P Global rates U.S. municipal notes with a maturity of less than three
years as follows:
|
|
SP-1: |
A strong capacity to pay
principal and interest. Issues that possess a very strong capacity to pay
debt service is given a "+" designation. |
|
|
SP-2: |
A satisfactory capacity to pay
principal and interest, with some vulnerability to adverse financial and
economic changes over the terms of the
notes. |
|
|
SP-3: |
A speculative capacity to pay
principal and interest. |
Fitch,
Inc. Rating Definitions:
Fitch’s credit ratings are forward
looking and typically attempt to assess the likelihood of repayment by the
obligor at “ultimate/final maturity” and thus material changes in economic
conditions and expectations (for a particular issuer) may result in a rating
change. Credit ratings are opinions on relative credit quality and not a
predictive measure of specific default probability.
Investment Grade
|
|
AAA: |
Highest credit quality. ‘AAA’
ratings denote the lowest expectation of credit risk. They are assigned
only in case of exceptionally strong capacity for payment of financial
commitments. This capacity is highly unlikely to be adversely affected by
foreseeable events. |
|
|
AA: |
Very high credit quality. ‘AA’
ratings denote expectations of very low credit risk. They indicate very
strong capacity for timely payment of financial commitments. This capacity
is not significantly vulnerable to foreseeable
events. |
|
|
A: |
High credit quality. ‘A’
ratings denote low expectation of credit risk. The capacity for timely
payment of financial commitments is considered strong. This capacity may,
nevertheless, be more vulnerable to adverse business or economic
conditions than is the case for higher
ratings. |
|
|
BBB: |
Good credit quality. ‘BBB’
ratings indicate that expectations of credit risk are currently low. The
capacity for payment of financial commitments is considered adequate, but
adverse business or economic conditions are more likely to impair this
capacity. |
Speculative Grade
|
|
BB: |
Speculative. ‘BB’ ratings
indicate an elevated vulnerability to credit risk, particularly in the
event of adverse changes in business or economic conditions over time;
however, business or financial alternatives may be available to allow
financial commitments to be met. |
|
|
B: |
Highly speculative. ‘B’
ratings indicate that material credit risk is
present. |
|
|
CCC: |
Substantial credit risk. ‘CCC’
ratings indicate that substantial credit risk is
present. |
|
|
CC: |
Very high levels of credit
risk. ‘CC’ ratings indicate very high levels of credit
risk. |
|
|
C: |
Exceptionally high levels of
credit risk. ‘C’ indicates exceptionally high levels of credit
risk. |
|
|
D: |
Default. ‘D’ ratings indicate
an issuer has entered into bankruptcy filings, administration,
receivership, liquidation or which has otherwise ceased
business. |
Note: The
modifiers “+” or “-“may be appended to a rating to denote relative status within
major rating categories. Such suffixes are not added to the ‘AAA’ obligation
rating category, or to corporate finance obligation ratings in the categories
below ‘B’.
Short-Term Credit
Ratings
A short-term issuer or obligation
rating is based in all cases on the short-term vulnerability to default of the
rated entity or security stream, and relates to the capacity to meet financial
obligations in accordance with the documentation governing the relevant
obligation. Short-Term Ratings are assigned to obligations whose initial
maturity is viewed as “short term” based on market convention. Typically, this
means up to 13 months for corporate, structured and sovereign obligations, and
up to 36 months for obligations in US public finance markets.
|
|
F1: |
Highest short-term credit
quality. Indicates the strongest intrinsic capacity for timely payment of
financial commitments; may have an added “+” to denote any exceptionally
strong credit feature. |
|
|
F2: |
Good short-term credit
quality. Good intrinsic capacity for timely payment of financial
commitments. |
|
|
F3: |
Fair short-term credit
quality. The intrinsic capacity for timely payment of financial
commitments is adequate. |
|
|
B: |
Speculative short-term credit
quality. Minimal capacity for timely payment of financial commitments,
plus heightened vulnerability to near term adverse changes in financial
and economic conditions. |
|
|
C: |
High short-term default risk.
Default is a real possibility. |
|
|
RD: |
Restricted default. Indicates
an entity that has defaulted on one or more of its financial commitments,
although it continues to meet other financial obligations. Typically
applicable to entity ratings only. |
|
|
D: |
Default. Indicates a
broad-based default event for an entity, or the default of a specific
short-term obligation. |
Recovery Ratings
Recovery Ratings are assigned to
selected individual securities and obligations, most frequently for individual
obligations of corporate issuers with speculative grade ratings.
Among the factors that affect
recovery rates for securities are the collateral, the seniority relative to
other obligations in the capital structure (where appropriate), and the expected
value of the company or underlying collateral in distress.
The Recovery Rating scale is based
upon the expected relative recovery characteristics of an obligation upon the
curing of a default, emergence from insolvency or following the liquidation or
termination of the obligor or its associated collateral. Recovery Ratings are an
ordinal scale and do not attempt to precisely predict a given level of recovery.
As a guideline in developing the rating assessments, the agency employs broad
theoretical recovery bands in its ratings approach based on historical averages,
but actual recoveries for a given security may deviate materially from
historical averages.
|
|
RR1: |
Outstanding recovery prospects
given default. ‘RR1’ rated securities have characteristics consistent with
securities historically recovering 91%-100% of current principal and
related interest. |
|
|
RR2: |
Superior recovery prospects
given default. ‘RR2’ rated securities have characteristics consistent with
securities historically recovering 71%-90% of current principal and
related interest. |
|
|
RR3: |
Good recovery prospects given
default. ‘RR3’ rated securities have characteristics consistent with
securities historically recovering 51%-70% of current principal and
related interest. |
|
|
RR4: |
Average recovery prospects
given default. ‘RR4’ rated securities have characteristics consistent with
securities historically recovering 31%-50% of current principal and
related interest. |
|
|
RR5: |
Below average recovery
prospects given default. ‘RR5’ rated securities have characteristics
consistent with securities historically recovering 11%-30% of current
principal and related interest. |
|
|
RR6: |
Poor recovery prospects given
default. ‘RR6’ rated securities have characteristics consistent with
securities historically recovering 0%-10% of current principal and related
interest. |
APPENDIX B –
ADDITIONAL FUND-SPECIFIC INFORMATION
International
Equity Index Fund
THIS FUND IS NOT SPONSORED,
ENDORSED, SOLD OR PROMOTED BY MSCI INC. (“MSCI”), ANY OF ITS AFFILIATES, ANY OF
ITS INFORMATION PROVIDERS OR ANY OTHER THIRD PARTY INVOLVED IN, OR RELATED TO,
COMPILING, COMPUTING OR CREATING ANY MSCI INDEX (COLLECTIVELY, THE “MSCI
PARTIES”). THE MSCI INDEXES ARE THE EXCLUSIVE PROPERTY OF MSCI. MSCI AND THE
MSCI INDEX NAMES ARE SERVICE MARK(S) OF MSCI OR ITS AFFILIATES AND HAVE BEEN
LICENSED FOR USE FOR CERTAIN PURPOSES BY PMC. NONE OF THE MSCI PARTIES MAKES ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, TO THE ISSUER OR OWNERS OF THIS
FUND OR ANY OTHER PERSON OR ENTITY REGARDING THE ADVISABILITY OF INVESTING IN
FUNDS GENERALLY OR IN THIS FUND PARTICULARLY OR THE ABILITY OF ANY MSCI INDEX TO
TRACK CORRESPONDING STOCK MARKET PERFORMANCE. MSCI OR ITS AFFILIATES ARE THE
LICENSORS OF CERTAIN TRADEMARKS, SERVICE MARKS AND TRADE NAMES AND OF THE MSCI
INDEXES WHICH ARE DETERMINED, COMPOSED AND CALCULATED BY MSCI WITHOUT REGARD TO
THIS FUND OR THE ISSUER OR OWNERS OF THIS FUND OR ANY OTHER PERSON OR ENTITY.
NONE OF THE MSCI PARTIES HAS ANY OBLIGATION TO TAKE THE NEEDS OF THE ISSUER OR
OWNERS OF THIS FUND OR ANY OTHER PERSON OR ENTITY INTO CONSIDERATION IN
DETERMINING, COMPOSING OR CALCULATING THE MSCI INDEXES. NONE OF THE MSCI PARTIES
IS RESPONSIBLE FOR OR HAS PARTICIPATED IN THE DETERMINATION OF THE TIMING OF,
PRICES AT, OR QUANTITIES OF THIS FUND TO BE ISSUED OR IN THE DETERMINATION OR
CALCULATION OF THE EQUATION BY OR THE CONSIDERATION INTO WHICH THIS FUND IS
REDEEMABLE. FURTHER, NONE OF THE MSCI PARTIES HAS ANY OBLIGATION OR LIABILITY TO
THE ISSUER OR OWNERS OF THIS FUND OR ANY OTHER PERSON OR ENTITY IN CONNECTION
WITH THE ADMINISTRATION, MARKETING OR OFFERING OF THIS FUND.
ALTHOUGH MSCI SHALL OBTAIN
INFORMATION FOR INCLUSION IN OR FOR USE IN THE CALCULATION OF THE MSCI INDEXES
FROM SOURCES THAT MSCI CONSIDERS RELIABLE, NONE OF THE MSCI PARTIES WARRANTS OR
GUARANTEES THE ORIGINALITY, ACCURACY AND/OR THE COMPLETENESS OF ANY MSCI INDEX
OR ANY DATA INCLUDED THEREIN. NONE OF THE MSCI PARTIES MAKES ANY WARRANTY,
EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE ISSUER OF THE FUND,
OWNERS OF THE FUND, OR ANY OTHER PERSON OR ENTITY, FROM THE USE OF ANY MSCI
INDEX OR ANY DATA INCLUDED THEREIN. NONE OF THE MSCI PARTIES SHALL HAVE ANY
LIABILITY FOR ANY ERRORS, OMISSIONS OR INTERRUPTIONS OF OR IN CONNECTION WITH
ANY MSCI INDEX OR ANY DATA INCLUDED THEREIN. FURTHER, NONE OF THE MSCI PARTIES
MAKES ANY EXPRESS OR IMPLIED WARRANTIES OF ANY KIND, AND THE MSCI PARTIES HEREBY
EXPRESSLY DISCLAIM ALL WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, WITH RESPECT TO EACH MSCI INDEX AND ANY DATA INCLUDED
THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL ANY OF THE
MSCI PARTIES HAVE ANY LIABILITY FOR ANY DIRECT, INDIRECT, SPECIAL, PUNITIVE,
CONSEQUENTIAL OR ANY OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF
THE POSSIBILITY OF SUCH DAMAGES.
Diversified Real
Asset Fund
Macquarie Capital Investment
Management LLC ("Macquarie") is not an authorized deposit-taking institution for
the purposes of the Banking Act 1959 (Commonwealth of Australia). Macquarie
obligations do not represent deposits or other liabilities of Macquarie Bank
Limited ABN 46 008 583 542 (“MBL”). MBL does not guarantee or otherwise provide
assurance in respect of the obligations of Macquarie, unless noted
otherwise.
APPENDIX C –
RELATED PERFORMANCE OF CERTAIN SUB-ADVISORS
Edge Asset
Management, Inc.
Edge Asset Management, Inc. (“Edge”)
is the sub-advisor for the EDGE MidCap Fund (the "Fund"). The Fund has no
historical performance to disclose in this prospectus. Therefore, the Fund
provides you with the following Performance Results table that shows the
performance results of EDGE MidCap Core Composite as well as the performance of
the Russell Midcap Index, a broad-based securities market index against which
the Fund's performance is compared.
Edge's composite consists of
historical information about all client accounts Edge manages that have
investment objectives, policies, and strategies substantially similar to those
of the Fund. The composite is provided to illustrate Edge's past performance in
managing accounts with investment objectives and strategies substantially
similar to those of the Fund. The composite does not represent the performance
of the Fund. Edge's composite is provided for time periods during which the Fund
did not exist and, therefore, had no performance.
Edge computes its composite
performance based upon its asset weighted average performance with regard to
accounts it manages that have investment objectives, policies, and strategies
substantially similar to those of the Fund. Edge's composite performance results
are net of trading expenses, management fees, and any performance incentive fees
incurred by any client account in the composite. If Edge's composite performance
results were to be adjusted to reflect the fees and expenses of the Fund, the
composite performance results shown would be lower. Although the Fund and the
client accounts comprising the Edge composite have substantially similar
investment objectives, policies, and strategies, you should not assume that the
Fund will achieve the same performance as the composite. For example, the Fund’s
future performance may be better or worse than the composite's performance due
to, among other things, differences in sales charges, expenses, asset sizes, and
cash flows of the Fund and those of the client accounts represented in the
composite.
The client accounts in Edge's
composite can change from time-to-time. The accounts included in the Edge
composite are not mutual funds registered under the Investment Company Act of
1940 (“1940 Act”). The accounts are not subject to investment limitations,
diversification requirements, and other restrictions imposed by the 1940 Act and
the Internal Revenue Code. If such requirements were applicable to these
accounts, the performance of the composite shown below may have been
lower.
Portions of the information below
are based on data supplied by Edge and from statistical services, reports, or
other sources believed by Principal Management Corporation (“PMC”) to be
reliable. However, PMC has not verified or audited such information.
Composite performance reflects taxes
paid on foreign dividends and is calculated on an individual client basis to
reflect each client’s tax status.
Current performance of the Edge
composite may be lower or higher than the performance data shown
below.
PERFORMANCE
RESULTS
Total Returns as
of December 31
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q3
'09 |
21.04% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q4
'08 |
(21.80)% |
|
|
|
|
|
|
|
Average
Annual Total Returns
Through
December 31, 2015 |
1
YR |
5YR |
10YR |
Since
Inception of Composite (8/1/2007) |
EDGE MidCap Core
Composite |
1.90% |
12.58% |
N/A |
8.12% |
Russell Midcap
Index |
(2.44)% |
11.44% |
8.00% |
6.99% |
Origin Asset
Management LLP
Origin Asset Management LLP
("Origin") is the sub-advisor for the Origin Emerging Markets Fund (the "Fund").
The Fund has no historical performance to disclose in this prospectus.
Therefore, the Fund provides you with the following Performance Results table
that shows the performance results of Origin's Emerging Markets Composite as
well as the performance of the MSCI Emerging Markets NR Index, a broad-based
securities market index against which the Fund's performance is compared.
Origin's composite consists of
historical information about all client accounts Origin manages that have
investment objectives, policies, and strategies substantially similar to those
of the Fund. The composite is provided to illustrate Origin's past performance
in managing accounts with investment objectives and strategies substantially
similar to those of the Fund. The composite does not represent the performance
of the Fund. Origin's composite is provided for time periods during which the
Fund did not exist and, therefore, had no performance.
Origin computes its composite
performance based upon its asset weighted average performance with regard to
accounts it manages that have investment objectives, policies, and strategies
substantially similar to those of the Fund. Origin's composite performance
results are net of trading expenses, management fees, and any performance
incentive fees incurred by any client account in the composite. If Origin's
composite performance results were to be adjusted to reflect the fees and
expenses of the Fund, the composite performance results shown would be lower.
Although the Fund and the client accounts comprising the Origin composite have
substantially similar investment objectives, policies, and strategies, you
should not assume that the Fund will achieve the same performance as the
composite. For example, the Fund’s future performance may be better or worse
than the composite's performance due to, among other things, differences in
sales charges, expenses, asset sizes, and cash flows of the Fund and those of
the client accounts represented in the composite.
The client accounts in Origin's
composite can change from time-to-time. The accounts included in the Origin
composite are not mutual funds registered under the Investment Company Act of
1940 (“1940 Act”). The accounts are not subject to investment limitations,
diversification requirements, and other restrictions imposed by the 1940 Act and
the Internal Revenue Code. If such requirements were applicable to these
accounts, the performance of the composite shown below may have been
lower.
Portions of the information below
are based on data supplied by Origin and from statistical services, reports, or
other sources believed by Principal Management Corporation (“PMC”) to be
reliable. However, PMC has not verified or audited such information.
Composite performance reflects taxes
paid on foreign dividends and is calculated on an individual client basis to
reflect each client’s tax status.
Current performance of the Origin
composite may be lower or higher than the performance data shown
below.
PERFORMANCE
RESULTS
Total Returns as
of December 31
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q1
'12 |
13.40% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q3
'15 |
(16.36)% |
|
|
|
|
|
|
|
Average
Annual Total Returns
Through
December 31, 2015 |
1
YR |
5YR |
10YR |
Since
Inception of Composite (1/4/2011) |
Origin Emerging Markets
Composite |
(12.15)% |
(6.58)% |
N/A |
(6.58)% |
MSCI Emerging Markets NR
Index |
(14.92)% |
(4.81)% |
3.61% |
(5.04)% |
Principal Global
Investors, LLC
Principal Global Investors, LLC
("PGI") is the sub-advisor for the Credit Opportunities Explorer Fund (the
"Fund"). The Fund has limited historical performance to disclose in this
prospectus. Therefore, the Fund provides you with the following Performance
Results table that shows the performance results of PGI's Global Credit
Opportunities Composite as well as the performance of the Bloomberg Barclays
Global Aggregate Corporate USD Hedged Index, a broad-based securities market
index against which the Fund's performance is compared.
PGI's composite consists of
historical information about all client accounts PGI manages that have
investment objectives, policies, and strategies substantially similar to those
of the Fund. The composite is provided to illustrate PGI's past performance in
managing accounts with investment objectives and strategies substantially
similar to those of the Fund. The composite does not represent the performance
of the Fund. PGI's composite is provided for time periods during which the Fund
existed and, therefore, can be compared to the past performance of the
Fund.
PGI computes its composite
performance based upon its asset weighted average performance with regard to
accounts it manages that have investment objectives, policies, and strategies
substantially similar to those of the Fund. PGI’s composite performance results
are net of trading expenses, management fees, and any performance incentive fees
incurred by any client account in the composite. If PGI's composite performance
results were to be adjusted to reflect the fees and expenses of the Fund, the
composite performance results shown would be lower. Although the Fund and the
client accounts comprising the PGI composite have substantially similar
investment objectives, policies, and strategies, you should not assume that the
Fund will achieve the same performance as the composite. For example, the Fund’s
future performance may be better or worse than the composite's performance due
to, among other things, differences in sales charges, expenses, asset sizes, and
cash flows of the Fund and those of the client accounts represented in the
composite.
The client accounts in PGI’s
composite can change from time-to-time. Some of the accounts included in the PGI
composite are not mutual funds registered under the Investment Company Act of
1940 (“1940 Act”). Those accounts are not subject to investment limitations,
diversification requirements, and other restrictions imposed by the 1940 Act and
the Internal Revenue Code. If such requirements were applicable to these
accounts, the performance of the composite shown below may have been
lower.
Portions of the information below
are based on data supplied by PGI and from statistical services, reports, or
other sources believed by Principal Management Corporation (“PMC”) to be
reliable. However, PMC has not verified or audited such information.
Composite performance reflects taxes
paid on foreign dividends and is calculated on an individual client basis to
reflect each client’s tax status.
Current performance of the PGI
composite may be lower or higher than the performance data shown
below.
PERFORMANCE
RESULTS
Total Returns as
of December 31
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q2
'12 |
5.29% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q2
'13 |
(3.11)% |
|
|
|
|
|
Average
Annual Total Returns
Through
December 31, 2015 |
1 YR |
Since
Inception of Composite (1/1/2012) |
Global Credit Opportunities
Composite |
(2.62)% |
5.35% |
Bloomberg Barclays Global
Aggregate Corporate USD Hedged Index |
(0.24)% |
4.48% |
Principal Global
Investors, LLC
Principal Global Investors, LLC
("PGI") is the sub-advisor for the International Small Company Fund (the
"Fund"). The Fund has limited historical performance. Therefore, the Fund
provides you with the following Performance Results table that shows the
performance results of PGI's International SmallCap Equity Composite as well as
the performance of the MSCI World ex-USA Small Cap Index, a broad-based
securities market index against which the Fund's performance is compared.
PGI's composite consists of
historical information about all client accounts PGI manages that have
investment objectives, policies, and strategies substantially similar to those
of the Fund. The composite is provided to illustrate PGI's past performance in
managing accounts with investment objectives and strategies substantially
similar to those of the Fund. The composite does not represent the performance
of the Fund. PGI's composite is provided for time periods during which the Fund
existed and, therefore, can be compared to the past performance of the
Fund.
PGI computes its composite
performance based upon its asset weighted average performance with regard to
accounts it manages that have investment objectives, policies, and strategies
substantially similar to those of the Fund. PGI’s composite performance results
are net of trading expenses, management fees, and any performance incentive fees
incurred by any client account in the composite. If PGI's composite performance
results were to be adjusted to reflect the fees and expenses of the Fund, the
composite performance results shown would be lower. Although the Fund and the
client accounts comprising the PGI composite have substantially similar
investment objectives, policies, and strategies, you should not assume that the
Fund will achieve the same performance as the composite. For example, the Fund’s
future performance may be better or worse than the composite's performance due
to, among other things, differences in sales charges, expenses, asset sizes, and
cash flows of the Fund and those of the client accounts represented in the
composite.
The client accounts in PGI’s
composite can change from time-to-time. Some of the accounts included in the PGI
composite are not mutual funds registered under the Investment Company Act of
1940 (“1940 Act”). Those accounts are not subject to investment limitations,
diversification requirements, and other restrictions imposed by the 1940 Act and
the Internal Revenue Code. If such requirements were applicable to these
accounts, the performance of the composite shown below may have been
lower.
Portions of the information below
are based on data supplied by PGI and from statistical services, reports, or
other sources believed by Principal Management Corporation (“PMC”) to be
reliable. However, PMC has not verified or audited such information.
Composite performance reflects taxes
paid on foreign dividends and is calculated on an individual client basis to
reflect each client’s tax status.
Current performance of the PGI
composite may be lower or higher than the performance data shown
below.
PERFORMANCE
RESULTS
Total Returns as
of December 31
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q2
'09 |
28.46% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q3
'08 |
(27.75)% |
|
|
|
|
|
|
|
Average
Annual Total Returns
Through
December 31, 2015 |
1
YR |
5
YR |
10
YR |
Since
Inception of Composite (1/1/1995) |
PGI International SmallCap
Equity Composite |
9.22% |
8.82% |
6.70% |
11.82% |
MSCI World ex-USA Small Cap
Index1 |
5.46% |
4.39% |
4.09% |
|
S&P Developed ex-U.S.
Small-Cap Index2 |
|
|
|
6.87% |
1
The PGI
International SmallCap Equity Composite has been benchmarked against the
MSCI World ex-USA SmallCap Index since January 1, 1999. The MSCI World
ex-USA Small Cap Index is an unmanaged index that measures the performance
of stocks with the smallest 15% of cumulative market capitalization by
market across developed markets outside the U.S.
2
Prior to
January 1, 1999, the PGI International SmallCap Equity Composite was
benchmarked against the S&P Developed ex-U.S. Small-Cap Index. The
S&P Developed ex-US Small-Cap Index is comprised of stocks
representing the lowest 15% of float-adjusted market cap in each developed
country. |
Principal Real
Estate Investors, LLC
Principal Real Estate Investors, LLC
("Principal-REI") is the sub-advisor for the Real Estate Debt Income Fund (the
"Fund"). The Fund has limited historical performance to disclose in this
prospectus. Therefore, the Fund provides you with the following Performance
Results table that shows the performance results of Principal-REI's ERISA Yield
Oriented Total Return Composite and Principal-REI's Balanced CMBS Yield Oriented
Composite. The Principal-REI ERISA Yield Oriented Total Return Composite
terminated on March 1, 2016, at which time the performance of the Fund was
included in the Principal-REI Balanced CMBS Yield Oriented Composite. The
Performance Results table also includes the performance of the Bloomberg
Barclays CMBS ERISA - Eligible Index, a broad-based securities market index
against which the Fund's performance is compared.
Principal-REI's composite consists
of historical information about all client accounts Principal-REI manages that
have investment objectives, policies, and strategies substantially similar to
those of the Fund. The composite is provided to illustrate Principal-REI's past
performance in managing accounts with investment objectives and strategies
substantially similar to those of the Fund. The composite does not represent the
performance of the Fund. Principal-REI's composite is provided for time periods
during which the Fund existed and, therefore, can be compared to the past
performance of the Fund.
Principal-REI computes its composite
performance based upon its asset weighted average performance with regard to
accounts it manages that have investment objectives, policies, and strategies
substantially similar to those of the Fund. Principal-REI’s composite
performance results are net of trading expenses, management fees, and any
performance incentive fees incurred by any client account in the composite. If
Principal-REI's composite performance results were to be adjusted to reflect the
fees and expenses of the Fund, the composite performance results shown would be
lower. Although the Fund and the client accounts comprising the Principal-REI
composite have substantially similar investment objectives, policies, and
strategies, you should not assume that the Fund will achieve the same
performance as the composite. For example, the Fund’s future performance may be
better or worse than the composite's performance due to, among other things,
differences in sales charges, expenses, asset sizes, and cash flows of the Fund
and those of the client accounts represented in the composite.
The client accounts in
Principal-REI’s composite can change from time-to-time. Some of the accounts
included in the Principal-REI composite are not mutual funds registered under
the Investment Company Act of 1940 (“1940 Act”). Those accounts are not subject
to investment limitations, diversification requirements, and other restrictions
imposed by the 1940 Act and the Internal Revenue Code. If such requirements were
applicable to these accounts, the performance of the composite shown below may
have been lower.
Portions of the information below
are based on data supplied by Principal-REI and from statistical services,
reports, or other sources believed by Principal Management Corporation (“PMC”)
to be reliable. However, PMC has not verified or audited such
information.
Composite performance reflects taxes
paid on foreign dividends and is calculated on an individual client basis to
reflect each client’s tax status.
Current performance of the
Principal-REI composite may be lower or higher than the performance data shown
below.
PERFORMANCE
RESULTS
Total Returns as
of December 31 for the Principal-REI Balanced CMBS Yield Oriented
Composite
|
|
|
|
Highest
return for a quarter during the period of the bar chart
above: |
Q3
'09 |
56.50% |
Lowest
return for a quarter during the period of the bar chart
above: |
Q3
'11 |
(10.81)% |
|
|
|
|
|
|
Average
Annual Total Returns
Through
December 31, 2015 |
1
YR |
5
YR |
Since
Inception of Composite (7/1/2008) |
Principal-REI Balanced CMBS
Yield Oriented Composite* |
1.40% |
8.96% |
8.84% |
Principal-REI ERISA Yield
Oriented Total Return Composite* |
0.60% |
N/A |
N/A** |
Bloomberg Barclays CMBS ERISA -
Eligible Index |
0.97% |
4.09% |
5.92% |
*The Principal-REI ERISA Yield
Oriented Total Return Composite terminated on March 1, 2016, at which time the
performance of the Fund was included in the Principal-REI Balanced CMBS Yield
Oriented Composite.
**N/A means "not applicable" because
the Principal-REI ERISA Yield Oriented Total Return Composite was not in
existence at that time.
ADDITIONAL
INFORMATION
Additional information about the
Fund is available in the Statement of Additional Information dated December 31,
2015, which is incorporated by reference into this prospectus. Additional
information about the Funds’ investments is available in the Fund’s annual and
semiannual reports to shareholders. In the Fund’s annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected the Funds’ performance during the last fiscal year. The Statement of
Additional Information and the Fund’s annual and semiannual reports can be
obtained free of charge by writing Principal Funds, P.O. Box 8024,
Boston, MA 02266-8024. In addition, the Fund makes its Statement of Additional
Information and annual and semiannual reports available, free of charge, on our
website www.principalfunds.com/prospectuses. To request this and other
information about the Fund and to make shareholder inquiries, telephone
1-800-222-5852.
Information about the Fund
(including the Statement of Additional Information) can be reviewed and copied
at the Securities and Exchange Commission’s Public Reference Room in
Washington, D.C. Information on the operation of the Public Reference Room
may be obtained by calling the Commission at 1-202-551-8090. Reports and other
information about the Fund are available on the EDGAR Database on the
Commission’s internet site at www.sec.gov. Copies of this information may be
obtained, upon payment of a duplicating fee, by electronic request at the
following e-mail address: [email protected], or by writing the Commission’s
Public Reference Section, 100 F Street, N.E., Washington, D.C.
20549-1520.
PFI has entered into a management
agreement with Principal Management Corporation (“PMC”). PFI and/or PMC, on
behalf of the Funds, enter into contractual arrangements with various parties,
including, among others, the Funds’ sub-advisors, distributor, transfer agent
and custodian, who provide services to the Funds. These arrangements are between
PFI and/or PMC and the applicable service provider. Shareholders are not parties
to, or intended to be third-party beneficiaries of, any of these arrangements.
Such arrangements are not intended to create in any individual shareholder or
group of shareholders any right, including the right to enforce such
arrangements against the service providers or to seek any remedy thereunder
against PMC or any other service provider, either directly or on behalf of PFI
or any Fund.
This prospectus provides information
that you should consider in determining whether to purchase shares of a Fund.
This prospectus, the Statement of Additional Information, or the contracts that
are exhibits to PFI’s registration statement are not intended to give rise to
any agreement or contract between PFI and/or any Fund and any investor, or give
rise to any contract or other rights in any individual shareholder, group of
shareholders or other person other than any rights conferred explicitly by
federal or state securities laws that may not be waived.
The U.S. government does not
insure or guarantee an investment in any of the Funds.
Shares of the Funds are not deposits
or obligations of, or guaranteed or endorsed by, Principal Bank or any other
financial institution, nor are shares of the Funds federally insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other
agency.
Principal Funds, Inc. SEC File
811-07572