THE SECURITIES ACT OF 1933
|
X
|
Post-Effective Amendment No. 13
|
X
|
THE INVESTMENT COMPANY ACT OF 1940
|
X
|
Amendment No. 15
|
X
|
(Check Appropriate Box or Boxes)
|
|
Name and Address of Agent for Service:
|
|
with a copy to:
|
Adam U. Shaikh
|
|
Veena K. Jain
|
Principal Financial Group
|
|
Drinker Biddle & Reath LLP
|
Des Moines, IA 50392
|
|
191 N. Wacker Drive, Suite 3700
|
|
|
Chicago, IL 60606-1698
|
____
|
This post-effective amendment designates a new effective date for a previously filed post-effective amendment.
|
Fund
|
Ticker Symbol
|
Principal U.S. Listing Exchange
|
Principal EDGE Active Income ETF
|
YLD
|
NYSE Arca
|
Principal Healthcare Innovators Index ETF
|
BTEC
|
The NASDAQ Stock Market LLC
|
Principal Millennials Index ETF
|
GENY
|
The NASDAQ Stock Market LLC
|
Principal Morley Securitized Debt Index ETF
|
[Pending]
|
NYSE Arca
|
Principal Price Setters Index ETF
|
PSET
|
The NASDAQ Stock Market LLC
|
Principal Shareholder Yield Index ETF
|
PY
|
The NASDAQ Stock Market LLC
|
|
|
FUND SUMMARIES
|
|
PRINCIPAL EDGE ACTIVE INCOME ETF
|
|
PRINCIPAL HEALTHCARE INNOVATORS INDEX ETF
|
|
PRINCIPAL MILLENNIALS INDEX ETF
|
|
PRINCIPAL MORLEY SECURITIZED DEBT INDEX ETF
|
|
PRINCIPAL PRICE SETTERS INDEX ETF
|
|
PRINCIPAL SHAREHOLDER YIELD INDEX ETF
|
|
ADDITIONAL INFORMATION ABOUT INVESTMENT STRATEGIES AND RISKS
|
|
PORTFOLIO HOLDINGS INFORMATION
|
|
MANAGEMENT OF THE FUNDS
|
|
DISTRIBUTOR AND OTHER FUND SERVICE PROVIDERS
|
|
PRICING OF FUND SHARES
|
|
PURCHASE AND SALE OF FUND SHARES
|
|
DIVIDENDS AND DISTRIBUTIONS
|
|
FREQUENT PURCHASES AND REDEMPTIONS
|
|
TAX CONSIDERATIONS
|
|
DISTRIBUTION PLANS AND INTERMEDIARY COMPENSATION
|
|
FUND ACCOUNT INFORMATION
|
|
FINANCIAL HIGHLIGHTS
|
|
APPENDIX A - DESCRIPTION OF BOND RATINGS
|
|
ADDITIONAL INFORMATION
|
Management Fees
|
0.75
|
%
|
|
Other Expenses
(1)
|
0.19
|
%
|
|
Total Annual Fund Operating Expenses
|
0.94
|
%
|
|
Fee Waiver and/or Expense Reimbursement
(2)
|
(0.09
|
)%
|
|
Total Annual Fund Operating Expenses After Expense Reimbursement
|
0.85
|
%
|
|
(1)
|
Based on estimated amounts for the current fiscal year.
|
(2)
|
Principal Management Corporation ("Principal"), 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%. It is expected that the expense limits will continue through the period ending
October 31, 2016
; however, Principal Exchange-Traded Funds and Principal, the parties to the agreement, may mutually agree to terminate the expense limits prior to the end of the period.
|
|
1 year
|
3 years
|
Principal EDGE Active Income ETF
|
$87
|
$287
|
•
|
Medium Market Capitalization Companies
. Investments in medium-size companies may involve greater risk and price volatility than investments in larger, more mature companies.
|
•
|
Charles D. Averill (since 2015), Portfolio Manager
|
•
|
Jill R. Cuniff (since 2015), President and Portfolio Manager
|
•
|
Todd A. Jablonski (since 2015), Chief Investment Officer and Portfolio Manager
|
•
|
Paul Kim (since 2015), Portfolio Manager
|
•
|
Daniela Spassova (since 2016), Portfolio Manager
|
Objective
:
|
The Fund seeks to provide investment results that closely correspond, before expenses, to the performance of the Nasdaq Healthcare Innovators Index (the "Index").
|
(1)
|
The investment management agreement (the “Management Agreement”) between the Fund and Principal Management Corporation (“Principal”) provides that Principal will pay all operating expenses of the Fund, except for the Management Fee, payments made under each Series 12b-1 plan (if or when such fees are imposed), brokerage commissions and other expenses connected to the execution of portfolio transactions, interest expense, taxes, acquired fund fees and expenses, litigation expenses and other extraordinary expenses.
|
|
1 year
|
3 years
|
Principal Healthcare Innovators Index ETF
|
$43
|
$135
|
•
|
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 a 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.
|
•
|
Healthcare Industry Risk.
Given the present composition of the Index, the Fund expects to have more than 25% of its assets invested in the healthcare industry. A fund that invests in securities of companies in the healthcare industry (which are companies involved in medical services or health care, including biotechnology research an
d production, drugs and pharmaceuticals and health care facilities and services) is subject to the direct risks of investing in such companies. These companies are subject to extensive competition (due to, among others, generic drug sales or the loss of patent protection), product liability litigation and increased government regulation. Research and development costs of bringing new drugs to market are substantial, and there is no guarantee that a proposed product will ever come to market. Such companies are heavily dependent on patent and intellectual property rights, the loss or impairment of which may adversely affect profitability. Healthcare facility operators may be affected by the demand for services, efforts by government or insurers to limit rates, restriction of government financial assistance and competition from other providers.
|
•
|
Paul S. Kim (since 2016), Portfolio Manager
|
•
|
Mark R. Nebelung (since 2016), Portfolio Manager
|
•
|
Jeffrey A. Schwarte (since 2016), Portfolio Manager
|
Objective
:
|
The Fund seeks to provide investment results that closely correspond, before expenses, to the performance of the Nasdaq Global Millennial Opportunity Index (the "Index").
|
(1)
|
The investment management agreement (the “Management Agreement”) between the Fund and Principal Management Corporation (“Principal”) provides that Principal will pay all operating expenses of the Fund, except for the Management Fee, payments made under each Series 12b-1 plan (if or when such fees are imposed), brokerage commissions and other expenses connected to the execution of portfolio transactions, interest expense, taxes, acquired fund fees and expenses, litigation expenses and other extraordinary expenses.
|
|
1 year
|
3 years
|
Principal Millennials Index ETF
|
$46
|
$144
|
•
|
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 a 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.
|
•
|
Paul S. Kim (since 2016), Portfolio Manager
|
•
|
Mark R. Nebelung (since 2016), Portfolio Manager
|
•
|
Jeffrey A. Schwarte (since 2016), Portfolio Manager
|
Objective
:
|
The Fund seeks to provide investment results that closely correspond, before expenses, to the performance of the BofA Merrill Lynch Low Duration U.S. ABS & CMBS Equal Par Index (the "Index").
|
Management Fees
|
|
|
Other Expenses
|
|
|
Total Annual Fund Operating Expenses
(1)
|
|
|
(1)
|
The investment management agreement (the “Management Agreement”) between the Fund and Principal Management Corporation (“Principal”) provides that Principal will pay all operating expenses of the Fund, except for the Management Fee, payments made under each Series 12b-1 plan (if or when such fees are imposed), brokerage commissions and other expenses connected to the execution of portfolio transactions, interest expense, taxes, acquired fund fees and expenses, litigation expenses and other extraordinary expenses.
|
|
1 year
|
3 years
|
Principal Morley Securitized Debt Index ETF
|
|
|
•
|
Mark Kummerer (since 2016), Senior Portfolio Manager
|
•
|
Rupa Raman (since 2016), Portfolio Manager
|
•
|
Paul S. Kim (since 2016), Portfolio Manager
|
•
|
Daniela Spassova (since 2016), Portfolio Manager
|
Objective
:
|
The Fund seeks to provide investment results that closely correspond, before expenses, to the performance of the Nasdaq U.S. Price Setters Index
(the "Index").
|
(1)
|
The investment management agreement (the “Management Agreement”) between the Fund and Principal Management Corporation (“Principal”) provides that Principal will pay all operating expenses of the Fund, except for the Management Fee, payments made under each Series 12b-1 plan
(if or when such fees are imposed
), brokerage commissions and other expenses connected to the execution of portfolio transactions, interest expense, taxes, acquired fund fees and expenses, litigation expenses and other extraordinary expenses.
|
|
1 year
|
3 years
|
Principal Price Setters Index ETF
|
$41
|
$128
|
•
|
Medium Market Capitalization Companies
. Investments in
medium-size
companies may involve greater risk and price volatility than investments in larger, more mature companies.
|
•
|
Paul S. Kim (since 2016), Portfolio Manager
|
•
|
Mark R. Nebelung (since 2016), Portfolio Manager
|
•
|
Jeffrey A. Schwarte (since 2016), Portfolio Manager
|
Objective
:
|
The Fund seeks to provide investment results that closely correspond, before expenses, to the performance of the Nasdaq U.S. Shareholder Yield Index
(the "Index")
.
|
(1)
|
The investment management agreement (the “Management Agreement”) between the Fund and Principal Management Corporation (“Principal”) provides that Principal will pay all operating expenses of the Fund, except for the Management Fee, payments made under each Series 12b-1 plan
(if or when such fees are impos
ed), brokerage commissions and other expenses connected to the execution of portfolio transactions, interest expense, taxes, acquired fund fees and expenses, litigation expenses and other extraordinary expenses.
|
|
1 year
|
3 years
|
Principal Shareholder Yield Index ETF
|
$41
|
$128
|
•
|
Medium Market Capitalization Companies
. Investments in
medium-size
companies may involve greater risk and price volatility than investments in larger, more mature companies.
|
•
|
Paul S. Kim (since 2016), Portfolio Manager
|
•
|
Mark R. Nebelung (since 2016), Portfolio Manager
|
•
|
Jeffrey A. Schwarte (since 2016), Portfolio Manager
|
INVESTMENT STRATEGIES AND RISKS
|
Principal EDGE Active
Income ETF
|
Principal Healthcare
Innovators Index ETF
|
Principal Millennials
Index ETF
|
Bank Loans (also known as Senior Floating Rate interests)
|
Non-Principal
|
Not Applicable
|
Not Applicable
|
Convertible Securities
|
Principal
|
Not Applicable
|
Not Applicable
|
Derivatives
|
Non-Principal
|
Not Applicable
|
Not Applicable
|
Emerging Markets
|
Principal
|
Not Applicable
|
Not Applicable
|
Equity Securities
|
Principal
|
Principal
|
Principal
|
•
Growth Stock
|
Non-Principal
|
Principal
|
Principal
|
•
Small and Medium Capitalization Companies
|
Principal
|
Principal
|
Principal
|
•
Value Stock
|
Non-Principal
|
Principal
|
Principal
|
Exchange Traded Funds (ETFs)
|
Non-Principal
|
Not Applicable
|
Not Applicable
|
Fixed-Income Securities
|
Principal
|
Not Applicable
|
Not Applicable
|
Foreign Currency
|
Principal
|
Non-Principal
|
Principal
|
Foreign Securities
|
Principal
|
Non-Principal
|
Principal
|
Hedging
|
Non-Principal
|
Not Applicable
|
Not Applicable
|
High Yield Securities
|
Principal
|
Not Applicable
|
Not Applicable
|
Industry Concentration
|
Not Applicable
|
Principal
(1)
|
Non-Principal
(1)
|
Inverse Floating Rate Investments
|
Principal
|
Not Applicable
|
Not Applicable
|
Investment Company Risk
|
Non-Principal
|
Not Applicable
|
Not Applicable
|
Leverage
|
Non-Principal
|
Not Applicable
|
Not Applicable
|
Master Limited Partnerships (MLPs)
|
Principal
|
Not Applicable
|
Not Applicable
|
Municipal Obligations and AMT-Subject Bonds
|
Non-Principal
|
Not Applicable
|
Not Applicable
|
Portfolio Duration
|
Principal
|
Not Applicable
|
Not Applicable
|
Portfolio Turnover (Active Trading)
|
Principal
|
Not Applicable
|
Not Applicable
|
Preferred Securities
|
Principal
|
Not Applicable
|
Not Applicable
|
Real Estate Investment Trusts (REITs)
|
Principal
|
Non-Principal
|
Non-Principal
|
Real Estate Securities
|
Principal
|
Non-Principal
|
Non-Principal
|
Redemption Risk
|
Principal
|
Not Applicable
|
Not Applicable
|
Repurchase Agreements
|
Non-Principal
|
Not Applicable
|
Not Applicable
|
Securitized Products
|
Principal
|
Not Applicable
|
Not Applicable
|
Shares May Trade at Prices Different Than NAV
|
Principal
|
Principal
|
Principal
|
U.S. Government and U.S. Government-Sponsored Securities
|
Principal
|
Not Applicable
|
Not Applicable
|
(1)
|
An index fund that using a replication strategy may concentrate its investments in a particular industry only to the extent that the relevant index is so concentrated.
|
INVESTMENT STRATEGIES AND RISKS
|
Principal Morley
Securitized Debt Index ETF
|
Principal Price Setters Index ETF
|
Principal Shareholder Yield Index ETF
|
Bank Loans (also known as Senior Floating Rate interests)
|
Not Applicable
|
Not Applicable
|
Not Applicable
|
Convertible Securities
|
Not Applicable
|
Not Applicable
|
Not Applicable
|
Derivatives
|
Non-Principal
|
Not Applicable
|
Not Applicable
|
Emerging Markets
|
Not Applicable
|
Not Applicable
|
Not Applicable
|
Equity Securities
|
Not Applicable
|
Principal
|
Principal
|
•
Growth Stock
|
Not Applicable
|
Non-Principal
|
Non-Principal
|
•
Small and Medium Capitalization Companies
|
Not Applicable
|
Principal
|
Principal
|
•
Value Stock
|
Not Applicable
|
Non-Principal
|
Non-Principal
|
Exchange Traded Funds (ETFs)
|
Non-Principal
|
Not Applicable
|
Not Applicable
|
Fixed-Income Securities
|
Principal
|
Not Applicable
|
Not Applicable
|
Foreign Currency
|
Not Applicable
|
Not Applicable
|
Not Applicable
|
Foreign Securities
|
Not Applicable
|
Not Applicable
|
Not Applicable
|
Hedging
|
Not Applicable
|
Not Applicable
|
Not Applicable
|
High Yield Securities
|
Not Applicable
|
Not Applicable
|
Not Applicable
|
Industry Concentration
|
Principal
|
Non-Principal
(1)
|
Non-Principal
(1)
|
Inverse Floating Rate Investments
|
Not Applicable
|
Not Applicable
|
Not Applicable
|
Investment Company Risk
|
Not Applicable
|
Not Applicable
|
Not Applicable
|
Leverage
|
Not Applicable
|
Not Applicable
|
Not Applicable
|
Master Limited Partnerships (MLPs)
|
Not Applicable
|
Not Applicable
|
Not Applicable
|
Municipal Obligations and AMT-Subject Bonds
|
Not Applicable
|
Not Applicable
|
Not Applicable
|
Portfolio Duration
|
Principal
|
Not Applicable
|
Not Applicable
|
Portfolio Turnover (Active Trading)
|
Non-Principal
|
Not Applicable
|
Not Applicable
|
Preferred Securities
|
Not Applicable
|
Not Applicable
|
Not Applicable
|
Real Estate Investment Trusts (REITs)
|
Non-Principal
|
Non-Principal
|
Non-Principal
|
Real Estate Securities
|
Principal
|
Non-Principal
|
Non-Principal
|
Redemption Risk
|
Not Applicable
|
Not Applicable
|
Not Applicable
|
Repurchase Agreements
|
Not Applicable
|
Not Applicable
|
Not Applicable
|
Securitized Products
|
Principal
|
Not Applicable
|
Not Applicable
|
Shares May Trade at Prices Different Than NAV
|
Principal
|
Principal
|
Principal
|
U.S. Government and U.S. Government-Sponsored Securities
|
Non-Principal
|
Not Applicable
|
Not Applicable
|
(1)
|
An index fund using a replication strategy may concentrate its investments in a particular industry only to the extent that the relevant index is so concentrated.
|
•
|
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.
|
•
|
Commodity Index-Linked Notes. Commodities are assets that have tangible properties, such as oil, coal, natural gas, agricultural products, industrial metals, livestock and precious metals. Funds may seek exposure to commodity markets through investments in commodity index-linked notes, which are derivative debt instruments issued by U.S. and foreign banks, brokerage firms, insurance companies and other corporations with principal and/or coupon payments linked to the performance of commodity indices. These notes expose a fund to movements in commodity prices. They are also subject to credit, counterparty, and interest rate risk. Commodity index-linked notes are often leveraged, increasing the volatility of each note's market value relative to changes in the underlying commodity index. At the maturity of the note, a fund may receive more or less principal than it originally invested. A fund may also receive interest payments on the note that are less than the stated coupon interest payments.
|
•
|
Credit Default Swap Agreements. A fund may enter into credit default swap agreements as a "buyer" or "seller" of credit protection. Credit default swap agreements involve special risks because they may be difficult to value, are highly susceptible to liquidity and credit risk, and generally pay a return to the party that has paid the premium only in the event of an actual default by the issuer of the underlying obligation (as opposed to a credit downgrade or other indication of financial difficulty). Credit default swaps can increase credit risk because a fund has exposure to both the issuer of the referenced obligation and the counterparty to the credit default swap.
|
•
|
Foreign Currency Contracts. A fund may use foreign currency options and foreign currency forward and swap contracts 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. A fund will not hedge currency exposure to an extent greater than the approximate aggregate market value of the securities held or to be purchased by the fund (denominated or generally quoted or currently convertible into the currency). For currency contracts, there is also a risk of government action through exchange controls that would restrict the ability of a fund to deliver or receive currency.
|
•
|
Forwards, futures, options and swaps. These derivative instruments are commonly used for traditional hedging purposes to attempt to protect a fund from loss due to changing interest rates, securities prices, asset values, or currency exchange rates and as a low-cost method of gaining exposure to a particular market without investing directly in those securities or assets. A fund may enter into put or call options, futures contracts, options on futures contracts, over-the-counter swap contracts (e.g., interest rate swaps, total return swaps and credit default swaps), commodities futures and options thereon, currency futures contracts and options, options on currencies, and forward currency contracts or currency swaps for both hedging and non-hedging purposes. 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.
|
•
|
Forward, futures and swap contracts. These derivative investments are subject to special risk considerations, such as: the imperfect correlation between the change in market value of the instruments held by a fund and the price of the forward, swap or futures contract; and if a fund has insufficient cash, it may have to sell securities from its portfolio to meet daily variation margin requirements, and a fund may have to sell securities when it may be disadvantageous to do so.
|
•
|
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).
|
•
|
Options. Some of the risks associated with options include imperfect correlation, 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.
|
•
|
Swap Agreements. Swap agreements involve the risk that the party with whom the fund has entered into the swap will default on its obligation to pay the fund and the risk that the fund will not be able to meet its obligations to pay the other party to the agreement.
|
•
|
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.
|
•
|
increased social, political, and economic instability;
|
•
|
a smaller market for these securities and low or nonexistent volume of trading that results in a lack of liquidity and in 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 the Fund to vote proxies, exercise shareholder rights, pursue legal remedies, and obtain judgments in foreign courts; and
|
•
|
possible losses through the holding of securities in domestic and foreign custodial banks and depositories.
|
•
|
Interest Rate Changes: 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, the 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 much, or as quickly, as interest rates in general. Conversely, floating rate securities will not generally increase in value if interest rates decline
.
|
•
|
Credit Risk: Fixed-income security prices 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
.
|
•
|
companies whose principal securities trading market is outside the U.S.
|
•
|
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
|
•
|
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.
|
|
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.
|
|
Sub-Advisor:
|
Morley Capital Management, Inc. ("Morley"),
1300 SW Fifth Avenue, Suite 3300, Portland, OR 97201.
|
|
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.
|
|
Fund
|
First $500
Million
|
Next $500
Million
|
Next $500
Million
|
Over $1.5
Billion
|
Principal EDGE Active Income ETF
|
0.75%
|
0.73%
|
0.71%
|
0.70%
|
Fund
|
First $500
Million
|
Next $500
Million
|
Next $500
Million
|
Over $1.5
Billion
|
Principal Healthcare Innovators Index ETF
|
0.42%
|
0.40%
|
0.38%
|
0.37%
|
Principal Millennials Index ETF
|
0.45%
|
0.43%
|
0.41%
|
0.40%
|
Principal Price Setters Index ETF
|
0.40%
|
0.38%
|
0.36%
|
0.35%
|
Principal Shareholder Yield Index ETF
|
0.40%
|
0.38%
|
0.36%
|
0.35%
|
Fund
|
All Assets
|
Principal Morley Securitized Debt Index ETF
|
|
|
Annual Report
to Shareholders
for the period ending
June 30, 2016
|
Semi-Annual Report
to Shareholders
for the period ending
December 31, 2016
|
||
Fund
|
Management
Agreement
|
Sub-Advisory
Agreement
|
Management
Agreement
|
Sub-Advisory
Agreement
|
Principal EDGE Active Income ETF, Principal Price Setters Index ETF, and Principal Shareholder Yield Index ETF
|
X
|
X
|
|
|
Principal Healthcare Innovators Index ETF, Principal Millennials Index ETF, and Principal Morley Securitized Debt Index ETF
|
|
|
X
|
X
|
•
|
hire one or more Sub-Advisors;
|
•
|
change Sub-Advisors; and
|
•
|
reallocate management fees between itself and Sub-Advisors.
|
•
|
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
Trustees
. 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.
|
•
|
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.
|
Note:
|
No salesperson, broker-dealer, or other person is authorized to give information or make representations about the 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 the Trust, the Funds, Principal, any Sub-Advisor, or the Distributor.
|
•
|
monthly for the Principal EDGE Active Income ETF and Principal Morley Securitized Debt Index ETF. The factors that could affect a Fund’s ability to make regular monthly distributions include, without limitation, changes in interest rates, the performance of the financial markets in which the Fund invests, the allocation of Fund assets across different asset classes and investments, the performance of the Fund’s investment strategies, and the amount and timing of the Fund’s prior distributions. Each Fund seeks to tailor the amount of its monthly income payments to moderate fluctuations in the amounts it distributes to shareholders over the course of the year. Although each Fund attempts to moderate fluctuations, the amounts it distributes to shareholders are not fixed and may not be the same each month. Further, neither Fund guarantees it will make any monthly income payments to its shareholders.
|
•
|
quarterly for the Principal Healthcare Innovators Index ETF, Principal Millennials Index ETF, Principal Price Setters Index ETF and Principal Shareholder Yield Index ETF. The Funds do not guarantee they will make any quarterly payments to their shareholders.
|
•
|
a Fund makes distributions,
|
•
|
you sell your Shares listed on the exchange, and
|
•
|
you purchase or redeem Creation Units.
|
•
|
Investment-grade rating (based on an average of Moody’s, S&P Global and Fitch),
|
•
|
a term of at least one year remaining until final stated maturity, and
|
•
|
at least one month to the last expected cash flow.
|
•
|
a fixed or floating rate coupon,
|
•
|
an original deal size for the collateral group of at least $250 million and a current outstanding deal size for the collateral group greater than or equal to 10% of the original deal size, and
|
•
|
a minimum outstanding tranche size of $50 million for senior tranches and $10 million for mezzanine and subordinated tranches.
|
•
|
a fixed coupon schedule,
|
•
|
an original deal size for the collateral group of at least $250 million and a current outstanding deal size for the collateral group that is greater than or equal to 10% of the original deal size, and
|
•
|
a minimum outstanding tranche size of $50M for senior tranches and $25 million for mezzanine and subordinated tranches.
|
•
|
Securities related to home equity and manufactured housing are excluded,
|
•
|
CMBS are limited to AAA credit quality (based on an average of Moody’s, S&P Global and Fitch),
|
•
|
CMBS will be 2011 vintage and later, and
|
•
|
Duration is less than 5 years.
|
•
|
High exposure, large cap securities in the top 50% of the two factor ranking receive 24% index weight;
|
•
|
High exposure, large cap securities in the bottom 50% of the two factor ranking receive 16% index weight;
|
•
|
High exposure, small-mid cap securities in the top 50% of the two factor ranking receive 18% index weight; and
|
•
|
High exposure, small-mid cap securities in the bottom 50% of the two factor ranking receive 12% index weight.
|
•
|
Medium exposure, large cap securities in the top 50% of the two factor ranking receive 20% index weight;
|
•
|
Medium exposure, small-mid cap securities in the top 50% of the two factor ranking receive 10% index weight.
|
1.
|
Large cap, high exposure to Millennials, top 50% of the two factor ranking system (24% index weight)
|
2.
|
Large cap, high exposure to Millennials, bottom 50% of the two factor ranking system (16% index weight)
|
3.
|
Small-mid-cap, high exposure to Millennials, top 50% of the two factor ranking system (18% index weight)
|
4.
|
Small-mid-cap, high exposure to Millennials, bottom 50% of the two factor ranking system (12% index weight)
|
5.
|
Large cap, medium exposure to Millennials, top 50% of the two factor ranking system (20% index weight)
|
6.
|
Small-mid-cap, medium exposure to Millennials, top 50% of the two factor ranking system (10% index weight)
|
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.*
|
•
|
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.
|
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’.
|
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.
|
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’.
|
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.
|
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.
|
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.
|
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.
|
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.
|
Fund
|
Ticker Symbol
|
Principal U.S. Listing Exchange
|
Principal EDGE Active Income ETF
|
YLD
|
NYSE Arca
|
Principal Healthcare Innovators Index ETF
|
BTEC
|
The NASDAQ Stock Market LLC
|
Principal Millennials Index ETF
|
GENY
|
The NASDAQ Stock Market LLC
|
Principal Morley Securitized Debt Index ETF
|
[pending]
|
NYSE Arca
|
Principal Price Setters Index ETF
|
PSET
|
The NASDAQ Stock Market LLC
|
Principal Shareholder Yield Index ETF
|
PY
|
The NASDAQ Stock Market LLC
|
TABLE OF CONTENTS
|
|
GENERAL DESCRIPTON OF TRUST AND FUNDS
|
|
EXCHANGE LISTING AND TRADING
|
|
DESCRIPTION OF THE FUNDS' INVESTMENTS AND RISKS
|
|
LEADERSHIP STRUCTURE AND BOARD OF TRUSTEES
|
|
INVESTMENT ADVISORY AND OTHER SERVICES
|
|
INTERMEDIARY COMPENSATION
|
|
PURCHASE AND REDEMPTION OF CREATION UNITS
|
|
CALCULATION OF NAV
|
|
TAX CONSIDERATIONS
|
|
PORTFOLIO HOLDINGS DISCLOSURE
|
|
PROXY VOTING POLICIES AND PROCEDURES
|
|
FINANCIAL STATEMENTS
|
|
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
|
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
|
|
PORTFOLIO MANAGER DISCLOSURE
|
|
APPENDIX A
|
|
APPENDIX B – DESCRIPTION OF BOND RATINGS
|
|
APPENDIX C – FOREIGN MARKET HOLIDAYS
|
|
APPENDIX D – PROXY VOTING POLICIES
|
•
|
Principal EDGE Active Income ETF
|
•
|
Principal Healthcare Innovators Index ETF
|
•
|
Principal Millennials Index ETF
|
•
|
Principal Morley Securitized Debt Index ETF
|
•
|
Principal Price Setters Index ETF
|
•
|
Principal Shareholder Yield Index ETF
|
Fund
|
Principal U.S. Listing Exchange
|
Principal EDGE Active Income ETF
|
NYSE Arca
|
Principal Healthcare Innovators Index ETF
|
The NASDAQ Stock Market LLC
|
Principal Millennials Index ETF
|
The NASDAQ Stock Market LLC
|
Principal Morley Securitized Debt Index ETF
|
NYSE Arca
|
Principal Price Setters Index ETF
|
The NASDAQ Stock Market LLC
|
Principal Shareholder Yield Index ETF
|
The NASDAQ Stock Market LLC
|
|
1)
|
May not issue senior securities, except as permitted under the 1940 Act, as amended, and as interpreted, modified or otherwise permitted by regulatory authority having jurisdiction, from time to time.
|
2)
|
May not purchase or sell commodities, except as permitted under the 1940 Act, as amended, and as interpreted, modified or otherwise permitted by regulatory authority having jurisdiction, from time to time.
|
3)
|
May not purchase or sell real estate, which term does not include securities of companies which deal in real estate or mortgages or investments secured by real estate or interests therein, except that the Fund reserves freedom of action to hold and to sell real estate acquired as a result of the Fund’s ownership of securities.
|
4)
|
May not borrow money, except as permitted under the 1940 Act, as amended, and as interpreted, modified or otherwise permitted by regulatory authority having jurisdiction, from time to time.
|
5)
|
May not make loans except as permitted under the 1940 Act, as amended, and as interpreted, modified or otherwise permitted by regulatory authority having jurisdiction, from time to time.
|
6)
|
Has elected to be treated as a “diversified” investment company, as that term is used in the 1940 Act, as amended, and as interpreted, modified or otherwise permitted by regulatory authority having jurisdiction, from time to time.
|
7)
|
May not concentrate, as that term is used in the 1940 Act, its investments in a particular industry, except as permitted under the 1940 Act, as amended, and as interpreted, modified or otherwise permitted by regulatory authority having jurisdiction, from time to time.
|
8)
|
May not act as an underwriter of securities, except to the extent that the Fund may be deemed to be an underwriter in connection with the sale of securities held in its portfolio.
|
1)
|
Invest more than 15% of its net assets in illiquid securities and in repurchase agreements maturing in more than seven days except to the extent permitted by applicable law or regulatory authority having jurisdiction, from time to time.
|
2)
|
Pledge, mortgage, or hypothecate its assets, except to secure permitted borrowings. The deposit of underlying securities and other assets in escrow and other collateral arrangements in connection with transactions that involve any future payment obligation, as permitted under the 1940 Act, as amended, and as interpreted, modified or otherwise permitted by any regulatory authority having jurisdiction, from time to time, are not deemed to be pledges, mortgages, hypothecations, or other encumbrances.
|
3)
|
Invest in companies for the purpose of exercising control or management.
|
|
1)
|
May not issue senior securities, except as permitted under the 1940 Act, as amended, and as interpreted, modified or otherwise permitted by regulatory authority having jurisdiction, from time to time.
|
2)
|
May not purchase or sell commodities, except as permitted under the 1940 Act, as amended, and as interpreted, modified or otherwise permitted by regulatory authority having jurisdiction, from time to time.
|
3)
|
May not purchase or sell real estate, which term does not include securities of companies which deal in real estate or mortgages or investments secured by real estate or interests therein, except that the Fund reserves freedom of action to hold and to sell real estate acquired as a result of the Fund’s ownership of securities.
|
4)
|
May not borrow money, except as permitted under the 1940 Act, as amended, and as interpreted, modified or otherwise permitted by regulatory authority having jurisdiction, from time to time.
|
5)
|
May not make loans except as permitted under the 1940 Act, as amended, and as interpreted, modified or otherwise permitted by regulatory authority having jurisdiction, from time to time.
|
6)
|
Has elected to be treated as a “diversified” investment company, as that term is used in the 1940 Act, as amended, and as interpreted, modified or otherwise permitted by regulatory authority having jurisdiction, from time to time.
|
7)
|
May not concentrate, as that term is used in the 1940 Act, its investments in a particular industry, except as permitted under the 1940 Act, as amended, and as interpreted, modified or otherwise permitted by regulatory authority having jurisdiction, from time to time. (This restriction applies to the above-listed funds except to the extent that the related index is also so concentrated. This restriction does not apply to the Principal Morley Securitized Debt Index ETF, which has adopted a policy to concentrate its investments in the ABS and CMBS group of industries.)
|
8)
|
May not act as an underwriter of securities, except to the extent that the Fund may be deemed to be an underwriter in connection with the sale of securities held in its portfolio.
|
1)
|
Invest more than 15% of its net assets in illiquid securities and in repurchase agreements maturing in more than seven days except to the extent permitted by applicable law or regulatory authority having jurisdiction, from time to time.
|
2)
|
Pledge, mortgage, or hypothecate its assets, except to secure permitted borrowings. The deposit of underlying securities and other assets in escrow and other collateral arrangements in connection with transactions that involve any future payment obligation, as permitted under the 1940 Act, as amended, and as interpreted, modified or otherwise permitted by any regulatory authority having jurisdiction, from time to time, are not deemed to be pledges, mortgages, hypothecations, or other encumbrances.
|
3)
|
Invest in companies for the purpose of exercising control or management.
|
4)
|
Acquire securities of other investment companies in reliance on Section 12(d)(1)(F) or (G) of the 1940 Act, invest more than 10% of its total assets in securities of other investment companies, invest more than 5% of its total assets in the securities of any one investment company, or acquire more than 3% of the outstanding voting securities of any one investment company except in connection with a merger, consolidation, or plan of reorganization and except as permitted by the 1940 Act, SEC rules adopted under the 1940 Act or exemptions granted by the Securities and Exchange Commission. The Fund may purchase securities of closed-end investment companies in the open market where no underwriter or dealer’s commission or profit, other than a customary broker’s commission, is involved.
|
•
|
American Depositary Receipts ("ADRs") - receipts issued by an American bank or trust company evidencing ownership of underlying securities issued by a foreign issuer. They are designed for use in U.S. securities markets.
|
•
|
European Depositary Receipts ("EDRs") and Global Depositary Receipts ("GDRs") - receipts typically issued by a foreign financial institution to evidence an arrangement similar to that of ADRs.
|
•
|
Exchange-Traded Options. An exchange-traded option may be closed out only on an exchange that generally provides a liquid secondary market for an option of the same series. If a liquid secondary market for an exchange-traded option does not exist, it might not be possible to effect a closing transaction with respect to a particular option, with the result that a Fund would have to exercise the option in order to consummate the transaction.
|
•
|
Over the Counter ("OTC") Options. OTC options differ from exchange-traded options in that they are two-party contracts, with price and other terms negotiated between buyer and seller, and generally do not have as much market liquidity as exchange-traded options. An OTC option (an option not traded on an established exchange) may be closed out only by agreement with the other party to the original option transaction. With OTC options, a Fund is at risk that the other party to the transaction will default on its obligations or will not permit the Fund to terminate the transaction before its scheduled maturity. While a Fund will seek to enter into OTC options only with dealers who agree to or are expected to be capable of entering into closing transactions with a Fund, there can be no assurance that a Fund will be able to liquidate an OTC option at a favorable price at any time prior to its expiration. OTC options are not subject to the protections afforded purchasers of listed options by the Options Clearing Corporation or other clearing organizations.
|
•
|
Interest Rate Swaps. Interest rate swaps involve the exchange by a Fund with another party of their respective commitments to pay or receive interest (for example, an exchange of floating rate payments for fixed rate payments with respect to a notional amount of principal).
Forms of swap agreements also include interest rate caps, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates exceed a specified rate, or "cap"; interest rate floors, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates fall below a specified rate, or "floor"; and interest rate collars, under which a party sells a cap and purchases a floor or vice versa in an attempt to protect itself against interest rate movements exceeding given minimum or maximum levels.
|
•
|
Currency Swaps. A currency swap is an agreement to exchange cash flows on a notional amount based on changes in the relative values of the specified currencies.
|
•
|
Index Swaps. An index swap is an agreement to make or receive payments based on the different returns that would be achieved if a notional amount were invested in a specified basket of securities (such as the S&P 500 Index) or in some other investment (such as U.S. Treasury Securities).
|
•
|
Total Return Swaps. A total return swap is an agreement to make payments of the total return from a specified asset or instrument (or a basket of such instruments) during the specified period, in return for payments equal to a fixed or floating rate of interest or the total return from another specified asset or instrument. Alternatively, a total return swap can be structured so that one party will make payments to the other party if the value of the relevant asset or instrument increases, but receive payments from the other party if the value of that asset or instrument decreases.
|
•
|
Commodity Swap Agreements. Consistent with a Fund's investment objectives and general investment policies, certain of the funds may invest in commodity swap agreements. For example, an investment in a commodity swap agreement may involve the exchange of floating-rate interest payments for the total return on a commodity index. In a total return commodity swap, a Fund will receive the price appreciation of a commodity index, a portion of the index, or a single commodity in exchange for paying an agreed-upon fee. If the commodity swap is for one period, the Fund may pay a fixed fee, established at the outset of the swap. However, if the term of the commodity swap is for more than one period, with interim swap payments, the Fund may pay an adjustable or floating fee. With a "floating" rate, the fee may be pegged to a base rate, such as the London Interbank Offered Rate, and is adjusted each period. Therefore, if interest rates increase over the term of the swap contract, the Fund may be required to pay a higher fee at each swap reset date.
|
•
|
Credit Default Swap Agreements. The "buyer" in a credit default contract is obligated to pay the "seller" a periodic stream of payments over the term of the contract provided that no event of default on an underlying reference obligation has occurred. If an event of default occurs, the seller must pay the buyer the full notional value, or "par value," of the reference obligation in exchange for the reference obligation. A Fund may be either the buyer or seller in a credit default swap transaction. If the Fund is a buyer and no event of default occurs, the Fund will lose its investment and recover nothing. However, if an event of default occurs, the Fund (if the buyer) will receive the full notional value of the reference obligation that may have little or no value. As a seller, the Fund receives a fixed rate of income throughout the term of the contract, which typically is between six months and five years, provided that there is no default event. If an event of default occurs, the seller must pay the buyer the full notional value of the reference obligation. In addition, collateral posting requirements are individually negotiated and there is no regulatory requirement that a counterparty post collateral to secure its obligations or a specified amount of cash, depending upon the terms of the swap, under a credit default swap. Furthermore, there is no requirement that a party be informed in advance when a credit default swap agreement is sold. Accordingly, the Fund may have
|
•
|
Investment Pools. Each Fund may invest in publicly or privately issued interests in investment pools whose underlying assets are credit default, credit-linked, interest rate, currency exchange, equity-linked or other types of swap contracts and related underlying securities or securities loan agreements. The pools’ investment results may be designed to correspond generally to the performance of a specified securities index or “basket” of securities, or sometimes a single security. These types of pools are often used to gain exposure to multiple securities with a smaller investment than would be required to invest directly in the individual securities. They also may be used to gain exposure to foreign securities markets without investing in the foreign securities themselves and/or the relevant foreign market. To the extent that a Fund invests in pools of swaps and related underlying securities or securities loan agreements whose return corresponds to the performance of a foreign securities index or one or more foreign securities, investing in such pools will involve risks similar to the risks of investing in foreign securities. In addition to the risks associated with investing in swaps generally, a Fund bears the risks and costs generally associated with investing in pooled investment vehicles, such as paying the fees and expenses of the pool and the risk that the pool or the operator of the pool may default on its obligations to the holder of interests in the pool, such as a Fund. Interests in privately offered investment pools of swaps may be considered illiquid.
|
•
|
Contracts for Differences. “Contracts for differences” are swap arrangements in which a Fund may agree with a counterparty that its return (or loss) will be based on the relative performance of two different groups or “baskets” of securities. For example, as to one of the baskets, a Fund’s return is based on theoretical long futures positions in the securities comprising that basket, and as to the other basket, the Fund’s return is based on theoretical short futures positions in the securities comprising that other basket. The notional sizes of the baskets will not necessarily be the same, which can give rise to investment leverage. Each Fund may also use actual long and short futures positions to achieve the market exposure(s) as contracts for differences. Each Fund may enter into swaps and contracts for differences for investment return, hedging, risk management and for investment leverage.
|
•
|
Swaptions. A swap option (also known as “swaptions”) is a contract that gives a counterparty the right (but not the obligation) in return for payment of a premium, to enter into a new swap agreement or to shorten, extend, cancel, or otherwise modify an existing swap agreement, at some designated future time on specified terms. The buyer and seller of the swap option agree on the strike price, length of the option period, the term of the swap, notional amount, amortization and frequency of settlement. Each Fund may engage in swap options for hedging purposes or in an attempt to manage and mitigate credit and interest rate risk. Each Fund may write (sell) and purchase put and call swap options. The use of swap options involves risks, including, among others, imperfect correlation between movements of the price of the swap options and the price of the securities, indices or other assets serving as reference instruments for the swap option, reducing the effectiveness of the instrument for hedging or investment purposes.
|
•
|
the frequency of trades and quotations,
|
•
|
the number of dealers and prospective purchasers in the marketplace,
|
•
|
dealer undertakings to make a market,
|
•
|
the nature of the security (including any demand or tender features), and
|
•
|
the nature of the marketplace for trades (including the ability to assign or offset a portfolio's rights and obligations relating to the investment).
|
•
|
Bank Notes are notes issued by local governmental bodies and agencies such as those described above to commercial banks as evidence of borrowings. The purposes for which the notes are issued are varied but they are frequently issued to meet short-term working-capital or capital-project needs. These notes may have risks similar to the risks associated with TANs and RANs.
|
•
|
Bond Anticipation Notes ("BANs") are usually general obligations of state and local governmental issuers which are sold to obtain interim financing for projects that will eventually be funded through the sale of long-term debt obligations or bonds. The ability of an issuer to meet its obligations on its BANs is primarily dependent on the issuer's access to the long-term municipal bond market and the likelihood that the proceeds of such bond sales will be used to pay the principal and interest on the BANs.
|
•
|
Construction Loan Notes are issued to provide construction financing for specific projects. Permanent financing, the proceeds of which are applied to the payment of construction loan notes, is sometimes provided by a commitment by the Government National Mortgage Association ("GNMA") to purchase the loan, accompanied by a commitment by the Federal Housing Administration to insure mortgage advances thereunder. In other instances, permanent financing is provided by commitments of banks to purchase the loan.
|
•
|
Revenue Anticipation Notes ("RANs") are issued by governments or governmental bodies with the expectation that future revenues from a designated source will be used to repay the notes. In general they also constitute general obligations of the issuer. A decline in the receipt of projected revenues, such as anticipated revenues from another level of government, could adversely affect an issuer's ability to meet its obligations on outstanding RANs. In addition, the possibility that the revenues would, when received, be used to meet other obligations could affect the ability of the issuer to pay the principal and interest on RANs.
|
•
|
Tax Anticipation Notes ("TANs") are issued by state and local governments to finance the current operations of such governments. Repayment is generally to be derived from specific future tax revenues. TANs are usually general obligations of the issuer. A weakness in an issuer's capacity to raise taxes due to, among other things, a decline in its tax base or a rise in delinquencies, could adversely affect the issuer's ability to meet its obligations on outstanding TANs.
|
•
|
Traditional Preferred Securities. Traditional preferred securities may be issued by an entity taxable as a corporation and pay fixed or floating rate dividends. However, these claims are subordinated to more senior creditors, including senior debt holders. “Preference” means that a company must pay dividends on its preferred securities before paying any dividends on its common stock, and the claims of preferred securities holders are 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. Preferred securities share many investment characteristics with both common stock and bonds.
|
•
|
Hybrid or Trust Preferred Securities. Hybrid-preferred securities are debt instruments that have characteristics similar to those of traditional preferred securities (characteristics of both subordinated debt and preferred stock). Hybrid preferred securities may be issued by corporations, generally in the form of interest-bearing instruments with preferred securities characteristics, or by an affiliated trust or partnership of the corporation, generally in the form of preferred interests in subordinated business trusts or similarly structured securities. The hybrid-preferred securities market consists of both fixed and adjustable coupon rate securities that are either perpetual in nature or have stated maturity dates. Hybrid preferred holders generally have claims to assets in a corporate liquidation that are senior to those of traditional preferred securities but subordinate to those of senior debt holders. Certain subordinated debt and senior debt issues that have preferred characteristics are also considered to be part of the broader preferred securities market.
|
•
|
Floating rate preferred securities provide for a periodic adjustment in the interest rate paid on the securities. The terms of such securities provide that interest rates are adjusted periodically based upon an interest rate adjustment index. The adjustment intervals may be regular, and range from daily up to annually, or may be event-based, such as a change in the short-term interest rate. Because of the interest rate reset feature, floating rate securities provide a Fund with a certain degree of protection against rising interest rates, although the interest rates of floating rate securities will participate in any declines in interest rates as well.
|
•
|
U.S. Government Securities - Securities issued or guaranteed by the U.S. government, including treasury bills, notes, and bonds.
|
•
|
U.S. Government Agency Securities - Obligations issued or guaranteed by agencies or instrumentalities of the U.S. government.
|
•
|
U.S. agency obligations include, but are not limited to, the Bank for Cooperatives, Federal Home Loan Banks, and Federal Intermediate Credit Banks.
|
•
|
U.S. instrumentality obligations include, but are not limited to, the Export-Import Bank, Federal Home Loan Mortgage Corporation, and Federal National Mortgage Association.
|
•
|
Bank Obligations - Certificates of deposit, time deposits and bankers' acceptances of U.S. commercial banks having total assets of at least one billion dollars and overseas branches of U.S. commercial banks and foreign banks, which in the opinion of those managing the Fund's investments, are of comparable quality. A Fund may acquire obligations of U.S. banks that are not members of the Federal Reserve System or of the Federal Deposit Insurance Corporation.
|
•
|
Commercial Paper - Short-term promissory notes issued by U.S. or foreign corporations.
|
•
|
Short-term Corporate Debt - Corporate notes, bonds, and debentures that at the time of purchase have 397 days or less remaining to maturity.
|
•
|
Repurchase Agreements - Instruments under which securities are purchased from a bank or securities dealer with an agreement by the seller to repurchase the securities at the same price plus interest at a specified rate.
|
•
|
Taxable Municipal Obligations - Short-term obligations issued or guaranteed by state and municipal issuers which generate taxable income.
|
Name, Address,
and Year of Birth
|
Position(s)
Held
with Fund
|
Length of
Time
Served
|
Positions with the Manager
and its affiliates;
Principal Occupation(s)
During Past 5 Years**
(unless noted otherwise)
|
Number of
Portfolios
in Fund
Complex
Overseen
by Trustee
|
Other
Directorships
Held by
Trustee
During Past
5 Years
|
Michael J. Beer
Des Moines, IA 50392
1961
|
Trustee
Chief Executive Officer
President
Executive Vice President
Member Executive Committee
|
Since 2013 Since 2015 Since 2015
2013-2015
|
Chief Executive Officer, PFD
Director, PFD (since 2015)
VP/Mutual Funds & Broker Dealer, PLIC (2001-2014)
VP/Chief Operating Officer Principal Funds, PLIC (2014-2015)
Executive Director/Principal Funds & Trust, PLIC (since 2015)
President & Chief Executive Officer, PMC (since 2015)
EVP/Chief Operating Officer, PMC (2008-2015)
Chair, PMC (since 2015)
Director, PMC (2006-2015)
Director, PSI (2005-2015)
President, PSI(2005-2015)
Chairman, PSS (since 2015)
Director, PSS (2007-2015)
President, PSS (2007-2015)
Executive Vice President, PSS (since 2015)
|
121
|
None
|
|
|
|
|
|
|
Nora M. Everett
Des Moines, IA 50392
1959
|
Chair
Trustee
Member Executive
Committee
|
Since 2013
Since 2013
|
Director, Finisterre
Director, Origin
Chairman, PFA (2010-2015)
Chairman, PFD (2011-2015)
President/RIS, PLIC (since 2015)
Senior Vice President/RIS, PLIC (2008-2015)
Chairman, PMC (2011-2015)
President, PMC (2008-2015)
Director, PSI (2008-2011, and since 2015)
Chief Executive Officer, PSI (2009-2015)
Chairman, PSI (2011-2015)
Chairman, PSS (2011-2015)
|
121
|
None
|
Name, Address
and Year of Birth
|
Position(s) Held
with Trust and
Length of Time Served
|
Positions with the Manager and its Affiliates;
Principal Occupations During Past 5 Years**
(unless noted otherwise)
|
Carolyn F. Kolks
Des Moines, IA 50392
1962
|
Assistant Tax Counsel
(since 2013)
|
Counsel, PGI
Counsel, PLIC
|
|
|
|
Layne A. Rasmussen
Des Moines, Iowa 50392
1958
|
Vice President (since 2005)
Controller (since 2000)
|
Vice President/Controller, PMC
|
|
|
|
Greg Reymann
Des Moines, IA 50392
1958
|
Assistant Counsel (since 2014)
|
Assistant General Counsel, PLIC (since 2014)
Assistant General Counsel, PMC (since 2015)
Assistant General Counsel, TAMG (2013-2014)
Vice President/CFTC Principal, TAM (2013-2014)
VP, Chief Compliance Officer and Chief Risk Officer, TAM (2010-2012)
|
|
|
|
Teri R. Root
Des Moines, IA 50392
1979
|
Deputy Chief Compliance Officer
(since 2015)
|
Vice President and Chief Compliance Officer, PMC (since 2015)
Compliance Officer, PMC (2010-2013)
Vice President, PSS (since 2015)
|
|
|
|
Britney L. Schnathorst
Des Moines, IA 50392
1981
|
Assistant Counsel
(since 2014)
|
Counsel, PLIC (since 2013)
Prior thereto, Attorney in Private Practice
|
|
|
|
Adam U. Shaikh
Des Moines, IA 50392
1972
|
Assistant Counsel
(since 2013)
|
Counsel, PFD (2006-2013)
Counsel, PLIC
Counsel, PMC (2007-2013, 2014-present)
Counsel, PSI (2007-2013)
Counsel, PSS (2007-2013)
|
|
|
|
Dan L. Westholm
Des Moines, IA 50392
1966
|
Assistant Treasurer
(since 2013)
|
Assistant Vice President/Treasury, PFA (since 2013)
Director-Treasury, PFA (2011-2013)
Assistant Vice President/Treasury, PFD (since 2013)
Director-Treasury, PFD (2011-2013)
Assistant Vice President/Treasury, PLIC (since 2014)
Director-Treasury, PLIC (2007-2014)
Director-Treasury, PMC (2003-2013)
Assistant Vice President/Treasury, PMC (since 2013)
Assistant Vice President/Treasury, PSI (since 2013)
Director-Treasury, PSI (2011-2013)
Assistant Vice President/Treasury, PSS (since 2013)
Director-Treasury, PSS (2007-2013)
|
|
|
|
Beth C. Wilson
Des Moines, IA 50392
1956
|
Vice President and Secretary (since 2013)
|
Director and Secretary-Funds, PLIC
Vice President, PMC (2007-2013)
|
|
|
|
Clint Woods
Des Moines, IA 50392
1961
|
Vice President (since 2016)
Counsel (since 2015)
|
Vice President, Associate General Counsel, Governance Officer, and Assistant Corporate Secretary, PLIC (since 2015)
Assistant General Counsel, Assistant Corporate Secretary, and Governance Officer, PLIC (2013-2015)
Associate General Counsel, AEGON (2003-2012)
|
**
|
The Principal Healthcare Innovators Index ETF, Principal Millennials Index ETF, Principal Morley Securitized Debt Index ETF, Principal Price Setters Index ETF and Principal Shareholder Yield Index ETF were not in operation as of December 31, 2015.
|
|
Beer
|
Everett
|
Principal EDGE Active Income ETF *
|
A
|
A
|
|
|
|
Total Fund Complex
|
E
|
E
|
*
|
The Principal Healthcare Innovators Index ETF, Principal Millennials Index ETF, Principal Morley Securitized Debt Index ETF, Principal Price Setters Index ETF and Principal Shareholder Yield Index ETF were not in operation as of December 31, 2015.
|
Trustee
|
The Funds
(1)
|
Fund Complex
|
Elizabeth Ballantine
|
$88
|
$252,250
|
Leroy Barnes
|
$90
|
$261,000
|
Craig Damos
|
$94
|
$271,000
|
Mark A. Grimmett
|
$103
|
$297,500
|
Fritz Hirsch
|
$98
|
$281,500
|
Tao Huang
|
$92
|
$266,500
|
Drew E. Lawton
(2)
|
$70
|
$128,683
|
Karen ("Karrie") McMillan
|
$90
|
$264,300
|
Elizabeth Nickels
(3)
|
$95
|
$254,133
|
Daniel Pavelich
|
$98
|
$281,000
|
(1)
|
The Principal Healthcare Innovators Index ETF, Principal Millennials Index ETF, and Principal Morley Securitized Debt Index ETF were not in operation during the period ended June 30, 2016.
|
(2)
|
Trustee's appointment effective March 16, 2016.
|
(3)
|
Trustee’s appointment effective September 16, 2015.
|
Sub-Advisor:
|
Edge Asset Management, Inc. ("Edge")
is an affiliate of Principal and a member of the Principal Financial Group.
|
Fund:
|
Principal EDGE Active Income ETF
|
Sub-Advisor:
|
Morley Capital Management, Inc. ("Morley")
is an affiliate of Principal and a member of the Principal Financial Group.
|
Fund:
|
Principal Morley Securitized Debt Index ETF
|
Sub-Advisor:
|
Principal Global Investors, LLC (“PGI”)
is an indirect wholly owned subsidiary of Principal Life Insurance Company, an affiliate of Principal, and a member of the Principal Financial Group.
|
Fund:
|
Principal EDGE Active Income ETF, Principal Healthcare Innovators Index ETF, Principal Millennials Index ETF, Principal Price Setters Index ETF, and Principal Shareholder Yield Index ETF
|
Fund
|
First $500
Million
|
Next $500
Million
|
Next $500
Million
|
Over $1.5
Billion
|
Principal EDGE Active Income ETF
|
0.75%
|
0.73%
|
0.71%
|
0.70%
|
Principal Healthcare Innovators Index ETF
|
0.42%
|
0.40%
|
0.38%
|
0.37%
|
Principal Millennials Index ETF
|
0.45%
|
0.43%
|
0.41%
|
0.40%
|
Principal Morley Securitized Debt Index ETF
|
|
|
|
|
Principal Price Setters Index ETF
|
0.40%
|
0.38%
|
0.36%
|
0.35%
|
Principal Shareholder Yield Index ETF
|
0.40%
|
0.38%
|
0.36%
|
0.35%
|
Contractual Limit on Total Annual Fund Operating Expenses
|
||
Fund
|
Limit
|
Expiration
|
Principal EDGE Active Income ETF
|
0.85%
|
10/31/2016
|
•
|
when the Fund announces before the open of trading that all purchases, all redemptions or all purchases and redemptions on that day will be made entirely in cash;
|
•
|
when the securities in the In-Kind Creation Basket may not be available in sufficient quantity for delivery or may not be eligible for transfer through the systems of DTC or the Clearing Process; and
|
•
|
when the AP or its underlying investor is restricted under U.S. or local securities laws or policies from transacting in one or more securities in the In-Kind Creation Basket.
|
Fund
|
Standard Creation
Transaction
Fee *
|
Maximum Variable Charge for
Cash Creation **
|
Standard Redemption
Transaction Fee *
|
Maximum Variable Charge for
Cash Redemptions **
|
Principal EDGE Active Income ETF
|
$500
|
3.00%
|
$500
|
2.00%
|
Principal Healthcare Innovators Index ETF
|
$600
|
3.00%
|
$500
|
2.00%
|
Principal Millennials Index ETF
|
$1,000
|
3.00%
|
$500
|
2.00%
|
Principal Morley Securities Debt Index ETF
|
$500
|
3.00%
|
$500
|
2.00%
|
Principal Price Setters Index ETF
|
$500
|
3.00%
|
$500
|
2.00%
|
Principal Shareholder Yield Index ETF
|
$500
|
3.00%
|
$500
|
2.00%
|
Fund
|
Percent
of
Ownership
|
Name of Owner
|
Address of Owner
|
Principal EDGE Active Income ETF
|
75.75%
|
Bank of New York
|
One Wall Street
|
|
|
|
New York, NY 10286
|
|
|
|
|
Principal EDGE Active Income ETF
|
11.07%
|
SSB/TETF
|
State Street Financial Center
|
|
|
|
One Lincoln Street
|
|
|
|
Boston, MA 02111
|
|
|
|
|
Principal EDGE Active Income ETF
|
5.61%
|
NFS LLC
|
200 Liberty St,
|
|
|
|
One World Financial Center
|
|
|
|
New York, NY 10281-1003
|
|
|
|
|
Principal Price Setters Index ETF
|
81.30%
|
NFS LLC
|
200 Liberty St,
|
|
|
|
One World Financial Center
|
|
|
|
New York, NY 10281-1003
|
|
|
|
|
Principal Price Setters Index ETF
|
14.48%
|
KCG
|
545 Washington Boulevard, 3rd Floor
|
|
|
|
Jersey City, NJ 07310
|
|
|
|
|
Principal Shareholder Yield Index ETF
|
81.66%
|
NFS LLC
|
200 Liberty St,
|
|
|
|
One World Financial Center
|
|
|
|
New York, NY 10281-1003
|
|
|
|
|
Principal Shareholder Yield Index ETF
|
14.10%
|
Goldman Sachs Execution & Clearing
|
30 Hudson Street
|
|
|
|
Jersey City, NJ 07302
|
|
|
Other Accounts Managed
|
|||
|
Total
Number
of Accounts
|
Total Assets
in the
Accounts
|
Number of
Accounts
that base
the Advisory
Fee on
Performance
|
Total Assets
of the
Accounts
that
base the
Advisory
Fee on
Performance
|
Charles D. Averill:
Principal EDGE Active Income ETF
|
|
|
|
|
Registered investment companies
|
|
|
|
|
Other pooled investment vehicles
|
|
|
|
|
Other accounts
|
|
|
|
|
|
|
|
|
|
Jill R. Cuniff:
Principal EDGE Active Income ETF
|
|
|
|
|
Registered investment companies
|
|
|
|
|
Other pooled investment vehicles
|
|
|
|
|
Other accounts
|
|
|
|
|
|
|
|
|
|
Todd A. Jablonski:
Principal EDGE Active Income ETF
|
|
|
|
|
Registered investment companies
|
|
|
|
|
Other pooled investment vehicles
|
|
|
|
|
Other accounts
|
|
|
|
|
Portfolio Manager
|
Trust Funds Managed by Portfolio Manager
(list each fund on its own line)
|
Dollar Range of Securities Owned by the Portfolio Manager
|
Charles D. Averill
|
Principal EDGE Active Income ETF
|
|
Jill R. Cuniff
|
Principal EDGE Active Income ETF
|
|
Todd A. Jablonski
|
Principal EDGE Active Income ETF
|
|
|
|
Other Accounts Managed
|
|||
|
Total
Number
of Accounts
|
Total Assets
in the
Accounts
|
Number of
Accounts
that base
the Advisory
Fee on
Performance
|
Total Assets
of the
Accounts
that
base the
Advisory
Fee on
Performance
|
Mark Kummerer:
Principal Morley Securitized Debt Index ETF
|
|
|
|
|
Registered investment companies
|
|
|
|
|
Other pooled investment vehicles
|
|
|
|
|
Other accounts
|
|
|
|
|
|
|
|
|
|
Rupa Raman:
Principal Morley Securitized Debt Index ETF
|
|
|
|
|
Registered investment companies
|
|
|
|
|
Other pooled investment vehicles
|
|
|
|
|
Other accounts
|
|
|
|
|
Portfolio Manager
|
Trust Funds Managed by Portfolio Manager
(list each fund on its own line)
|
Dollar Range of Securities Owned by the Portfolio Manager
|
Mark Kummerer
|
Principal Morley Securitized Debt Index ETF
|
|
Rupa Raman
|
Principal Morley Securitized Debt Index ETF
|
|
|
|
Other Accounts Managed
|
|||
|
Total
Number
of Accounts
|
Total Assets
in the
Accounts
|
Number of
Accounts
that base
the Advisory
Fee on
Performance
|
Total Assets
of the
Accounts
that
base the
Advisory
Fee on
Performance
|
Paul S. Kim:
Principal EDGE Active Income ETF, Principal Healthcare Innovators Index ETF, Principal Millennials Index ETF, Principal Morley Securitized Debt Index ETF, Principal Price Setters Index ETF, and Principal Shareholder Yield Index ETF
|
|
|
|
|
Registered investment companies
|
|
|
|
|
Other pooled investment vehicles
|
|
|
|
|
Other accounts
|
|
|
|
|
|
|
|
|
|
Mark R. Nebelung:
Principal Healthcare Innovators Index ETF, Principal Millennials Index ETF, Principal Price Setters Index ETF, and Principal Shareholder Yield Index ETF
|
|
|
|
|
Registered investment companies
|
|
|
|
|
Other pooled investment vehicles
|
|
|
|
|
Other accounts
|
|
|
|
|
|
|
|
|
|
Jeffrey A. Schwarte:
Principal Healthcare Innovators Index ETF, Principal Millennials Index ETF, Principal Price Setters Index ETF, and Principal Shareholder Yield Index ETF
|
|
|
|
|
Registered investment companies
|
|
|
|
|
Other pooled investment vehicles
|
|
|
|
|
Other accounts
|
|
|
|
|
|
|
|
|
|
Daniela Spassova:
Principal EDGE Active Income ETF, Principal Morley Securitized Debt Index ETF
|
|
|
|
|
Registered investment companies
|
|
|
|
|
Other pooled investment vehicles
|
|
|
|
|
Other accounts
|
|
|
|
|
Portfolio Manager
|
Trust Funds Managed by Portfolio Manager
(list each fund on its own line)
|
Dollar Range of Securities Owned by the Portfolio Manager
|
Paul S. Kim
|
Principal EDGE Active Income ETF
|
|
Paul S. Kim
|
Principal Healthcare Innovators Index ETF
|
|
Paul S. Kim
|
Principal Millennials Index ETF
|
|
Paul S. Kim
|
Principal Morley Securitized Debt Index ETF
|
|
Paul S. Kim
|
Principal Price Setters Index ETF
|
|
Paul S. Kim
|
Principal Shareholder Yield Index ETF
|
|
Mark R. Nebelung
|
Principal Healthcare Innovators Index ETF
|
|
Mark R. Nebelung
|
Principal Millennials Index ETF
|
|
Mark R. Nebelung
|
Principal Price Setters Index ETF
|
|
Mark R. Nebelung
|
Principal Shareholder Yield Index ETF
|
|
Jeffrey A. Schwarte
|
Principal Healthcare Innovators Index ETF
|
|
Jeffrey A. Schwarte
|
Principal Millennials Index ETF
|
|
Jeffrey A. Schwarte
|
Principal Price Setters Index ETF
|
|
Jeffrey A. Schwarte
|
Principal Shareholder Yield Index ETF
|
|
Daniela Spassova
|
Principal EDGE Active Income ETF
|
|
Daniela Spassova
|
Principal Morley Securitized Debt Index ETF
|
|
*
|
As of December 31, 2014
|
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.
|
*
|
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.
|
•
|
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.
|
AAA:
|
Obligations rated ‘AAA’ have the highest rating assigned by
S&P Global Ratings
. The obligor’s capacity to meet its financial commitment on the obligation is extremely strong.
|
AA:
|
Obligations rated ‘AA’ differ from the highest-rated issues only in small degree. The obligor’s capacity to meet its financial commitment on the obligation is very strong.
|
A:
|
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’.
|
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.
|
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’.
|
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.
|
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.
|
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.
|
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.
|
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.
|
KEY:
|
B: Bank holidays
|
E: Exchange holidays
|
|
FS: Friday and Saturday
|
SS: Saturday and Sunday
|
|
*
Early closing
|
** Date is approximate
|
^ See holiday exceptions
|
# Late opening
|
SETTLEMENT PERIODS GREATER THAN SEVEN DAYS FOR YEAR 2016 *
|
||||||
|
Beginning of Settlement Period
|
|
End of Settlement
Period
|
|
Number of Days in Settlement Period
|
|
Australia
|
12/23/2015
|
|
1/4/2016
|
|
12
|
|
|
12/20/2016
|
|
12/29/2016
|
|
9
|
|
|
12/21/2016
|
|
1/2/2017
|
|
12
|
|
|
12/22/2016
|
|
1/3/2017
|
|
12
|
|
China
|
2/3/2016
|
|
2/17/2016
|
|
14
|
|
|
2/4/2016
|
|
2/18/2016
|
|
14
|
|
|
2/5/2016
|
|
2/19/2016
|
|
14
|
|
|
4/27/2016
|
|
5/9/2016
|
|
12
|
|
|
4/28/2016
|
|
5/10/2016
|
|
12
|
|
|
4/29/2016
|
|
5/11/2016
|
|
12
|
|
|
9/28/2016
|
|
10/11/2016
|
|
13
|
|
|
9/29/2016
|
|
10/12/2016
|
|
13
|
|
|
9/30/2016
|
|
10/13/2016
|
|
13
|
|
Colombia
|
3/18/2016
|
|
3/28/2016
|
|
10
|
|
Indonesia
|
6/29/2016
|
|
7/11/2016
|
|
12
|
|
|
6/30/2016
|
|
7/12/2016
|
|
12
|
|
|
7/1/2016
|
|
7/13/2016
|
|
12
|
|
Israel
|
4/20/2016
|
|
5/1/2016
|
|
11
|
|
|
4/21/2016
|
|
5/2/2016
|
|
11
|
|
|
10/10/2016
|
|
10/25/2016
|
|
15
|
|
|
10/13/2016
|
|
10/26/2016
|
|
13
|
|
Japan
|
4/27/2016
|
|
5/6/2016
|
|
9
|
|
|
4/28/2016
|
|
5/9/2016
|
|
11
|
|
|
5/2/2016
|
|
5/10/2016
|
|
8
|
|
Malaysia
|
7/1/2016
|
|
7/11/2016
|
|
10
|
|
|
7/4/2016
|
|
7/12/2016
|
|
8
|
|
|
7/5/2016
|
|
7/13/2016
|
|
8
|
|
Mexico
|
3/18/2016
|
|
3/28/2016
|
|
10
|
|
Morocco
|
9/7/2016
|
|
9/15/2016
|
|
8
|
|
|
9/8/2016
|
|
9/16/2016
|
|
8
|
|
|
9/9/2016
|
|
9/19/2016
|
|
10
|
|
Norway
|
3/21/2016
|
|
3/29/2016
|
|
8
|
|
|
3/22/2016
|
|
3/30/2016
|
|
8
|
|
Philippines
|
12/23/2015
|
|
1/4/2016
|
|
12
|
|
|
12/28/2015
|
|
1/5/2016
|
|
8
|
|
|
12/29/2015
|
|
1/6/2016
|
|
8
|
|
South Africa
|
12/24/2015
|
|
1/4/2016
|
|
11
|
|
|
12/28/2015
|
|
1/5/2016
|
|
8
|
|
|
12/29/2015
|
|
1/6/2016
|
|
8
|
|
|
12/30/2015
|
|
1/7/2016
|
|
8
|
|
|
12/31/2015
|
|
1/8/2016
|
|
8
|
|
|
3/14/2016
|
|
3/22/2016
|
|
8
|
|
|
3/15/2016
|
|
3/23/2016
|
|
8
|
|
|
3/16/2016
|
|
3/24/2016
|
|
8
|
|
|
3/17/2016
|
|
3/29/2016
|
|
12
|
|
|
3/18/2016
|
|
3/30/2016
|
|
12
|
|
•
|
The requesting Portfolio Manager must put forth, in writing, the reasons for their decision;
|
•
|
The approval of Principal’s Chief Investment Officer;
|
•
|
Notification to the Proxy Voting Coordinator and other appropriate personnel (including PGI Portfolio Managers whose clients may own the particular security);
|
•
|
A determination that the decision is not influenced by any conflict of interest; and
|
•
|
The creation of a written record reflecting the process.
|
•
|
Restrictions for share blocking countries;
1
|
•
|
Casting a vote on a foreign security may require that Principal engage a translator;
|
•
|
Restrictions on foreigners’ ability to exercise votes;
|
•
|
Requirements to vote proxies in person;
|
•
|
Requirements to provide local agents with power of attorney to facilitate the voting instructions;
|
•
|
Untimely notice of shareholder meeting;
|
•
|
Restrictions on the sale of securities for a period of time in proximity to the shareholder meeting.
|
•
|
Client request to review proxy votes:
|
◦
|
Any request, whether written (including e- mail) or oral, received by any
Employee of Principal, must be promptly reported to the Proxy Voting Coordinator. All written requests must be retained in the client’s permanent file.
|
◦
|
The Proxy Voting Coordinator will record the identity of the client, the date of the request, and the disposition (e.g., provided a written or oral response to client’s request, referred to third-party, not a proxy voting client, other dispositions, etc.) in a suitable place.
|
◦
|
The Proxy Voting Coordinator will furnish the information requested to the client within a reasonable time period (generally within 10 business days). Principal will maintain a copy of the written record provided in response to client’s written (including e-mail) or oral request. A copy of the written response should be attached and maintained with the client’s written request, if applicable and maintained in the permanent file.
|
◦
|
Clients are permitted to request the proxy voting record for the 5 year period prior to their request.
|
•
|
Proxy statements received regarding client securities:
|
◦
|
Upon inadvertent receipt of a proxy, Principal will generally forward to ISS for voting, unless the client has instructed otherwise.
|
◦
|
Note: Principal is permitted to rely on proxy statements filed on the SEC’s EDGAR system instead of keeping their own copies.
|
•
|
Proxy voting records:
|
◦
|
Principals’ proxy voting record is maintained by ISS. The Proxy Voting Coordinator, with the assistance of the Client Services Department, will periodically ensure that ISS has complete, accurate, and current records.
|
◦
|
Principal will maintain documentation to support the decision to vote against ISS recommendation.
|
◦
|
Principal will maintain documentation or notes or any communications
received from third-parties, other industry analysts, third-party service providers, company’s management discussions, etc. that were material in the basis for the decision.
|
1.
|
Written affirmation that all proxies voted during the preceding calendar quarter, other than those specifically identified by the advisor or sub-advisor, were voted in a manner consistent with the advisor's or sub-advisor's voting policies and procedures. In order to monitor the potential effect of conflicts of interest of an advisor or sub-advisor, the advisor or sub-advisor will identify any proxies the advisor or sub-advisor voted in a manner inconsistent with its policies and procedures. The advisor or sub-advisor shall list each vote, explain why the advisor or sub-advisor voted in a manner contrary to its policies and procedures, state whether the advisor or sub-advisor’s vote was consistent with the recommendation to the advisor or sub-advisor of a third party and, if so, identify the third party; and
|
2.
|
Written notification of any changes to the advisor's or sub-advisor's proxy voting policies and procedures made during the preceding calendar quarter.
|
1.
|
Identification of the issuer of the security;
|
2.
|
Exchange ticker symbol of the security;
|
3.
|
CUSIP number of the security;
|
4.
|
The date of the shareholder meeting;
|
5.
|
A brief description of the subject of the vote;
|
6.
|
Whether the proposal was put forward by the issuer or a shareholder;
|
7.
|
Whether and how the vote was cast;
|
8.
|
Whether the vote was cast for or against management of the issuer.
|
|
|
•
|
Edge believes it is in the best interest of its clients to delegate the proxy voting responsibility to expert third-party proxy voting organization, Institutional Shareholder Services, Inc. (“ISS”). ISS provides policy guidelines and proxy research and analysis in addition to proxy voting. Edge may override any ISS guideline or recommendation that Edge feels is not in the best interest of the client.
|
•
|
Edge has elected to follow the ISS Standard Proxy Voting Guidelines (the “ Guidelines”), which embody the positions and factors that Edge generally considers important in casting proxy votes, including, but not limited to, shareholder voting rights, anti-takeover defenses, board structures, election of directors, executive and director compensation, reorganizations, mergers and various shareholder proposals.
|
2.
|
Conflicts of Interest
|
•
|
Votes cast by ISS on Edge’s behalf consistent with its Guidelines and recommendations are not considered to create a conflict of interest. If ISS or Edge abstains from voting a proxy due to a conflict, or if Edge elects to override an ISS recommendation, it will seek to identify and evaluate whether any conflicts of interest may exist between the issuer and Edge or its employees and clients.
|
•
|
Material conflicts will be evaluated, and if it’s determined that one exists, Edge will disclose the conflict to the affected client, and request instruction from the client as to how the proxy should be voted.
|
3.
|
New Accounts
|
•
|
Edge or its affiliate, Principal Global Investors, shall provide a proxy authorization letter to the client’s custodian upon the opening of a new client account. Clients may also choose to vote proxies themselves or receive individualized reports or services.
|
•
|
Edge may refrain from voting when it believes it is in the client’s best interests.
|
•
|
Edge will not reveal or disclose to any third-party how it may have voted or intends to vote until such proxies have been counted at a shareholders’ meeting. Edge may in any event disclose its general policy to follow ISS’s guidelines. No employee of Edge may accept any remuneration in the solicitation of proxies.
|
•
|
Edge will document errors and the resolution of errors.
|
•
|
Documentation shall be maintained for at least five years. Edge will keep records regarding all client requests to review proxy votes and accompanying responses. Edge may rely on proxy statements filed on the SEC’s EDGAR system instead of keeping its own copies.
|
•
|
Edge’s proxy voting record will be maintained by ISS. Edge will maintain documentation to support any decisions to vote against ISS Guidelines or recommendations.
|
•
|
Edge generally does not file class action claims on behalf of its clients and specifically will not act on behalf of former clients that have terminated their relationship with Edge. Edge will only file permitted class action claims if that responsibility in specifically stated in the advisory contract. Edge will maintain documentation related to any cost-benefit analysis to support decisions to opt out of any class action settlement. This policy is disclosed in the firm’s Form ADV filing.
|
•
|
Proxies are received by MCM at its office. The receiving party shall provide a copy of the proxy and any supporting documentation (Proxy) to the COO or his or her designee to facilitate the review process.
|
•
|
The COO shall provide a copy of the Proxy to the CIO and CCO for evaluation.
|
•
|
The CIO shall evaluate each Proxy on a case-by-case basis with consideration of relevant facts and circumstances at the time of the vote and determine:
|
◦
|
If a vote should be cast;
|
◦
|
If there is a potential conflict of interest associated with the vote; and
|
◦
|
What his or her recommendation will be with respect to the proxy vote.
|
•
|
The CIO’s recommendation will be provided to the COO and CCO.
|
•
|
The COO and CCO will evaluate the vote recommendation to determine if a potential conflict of interest exists.
|
◦
|
If there is a conflict, the CIO, COO, and CCO will seek to resolve the conflict in the best interest of MCM’s clients.
|
◦
|
If there is no conflict, the COO will cast the vote.
|
•
|
The COO will provide a record of the vote and any supporting documentation to the Investment Committee.
|
•
|
The COO will maintain applicable documentation pursuant to this policy, the corresponding procedures, MCM’s Books and Records policy, and applicable regulatory requirements.
|
•
|
Any client requests for the proxy voting policies or procedures will be forwarded to the CCO, who will facilitate the response to the requesting client.
|
•
|
The CCO will update the policy and disclosure documentation as needed.
|
|
•
|
The Advisers do not maintain a written proxy voting policy as required by Rule 206(4)-6.
|
•
|
Proxies are not voted in Clients’ best interests.
|
•
|
Proxies are not identified and voted in a timely manner.
|
•
|
Conflicts between the Advisers’ interests and the Client are not identified; therefore, proxies are not voted appropriately.
|
•
|
The third-party proxy voting services utilized by the Advisers are not independent.
|
•
|
Proxy voting records and Client requests to review proxy votes are not maintained.
|
1.
|
The requesting PM Team to set forth the reasons for their decision;
|
2.
|
The approval of the lead Portfolio Manager for the requesting PM Team;
|
3.
|
Notification to the Proxy Voting Coordinator and other appropriate personnel (including other PGI/PrinREI Portfolio Managers who may own the particular security);
|
4.
|
A determination that the decision is not influenced by any conflict of interest; and
|
5.
|
The creation of a written record reflecting the process (See
Appendix XXXI
).
|
|
|
1
The Advisers have various Portfolio Manager Teams organized by asset classes and investment strategies.
|
•
|
Restrictions for share blocking countries;
2
|
•
|
Casting a vote on a foreign security may require that the adviser engage a translator;
|
•
|
Restrictions on foreigners’ ability to exercise votes;
|
•
|
Requirements to vote proxies in person;
|
•
|
Requirements to provide local agents with power of attorney to facilitate the voting instructions;
|
•
|
Untimely notice of shareholder meeting;
|
•
|
Restrictions on the sale of securities for a period of time in proximity to the shareholder meeting.
|
|
|
2
In certain markets where share blocking occurs, shares must be “frozen” for trading purposes at the custodian or sub-custodian in order to vote. During the time that shares are blocked, any pending trades will not settle. Depending on the market, this period can last from one day to three weeks. Any sales that must be executed will settle late and potentially be subject to interest charges or other punitive fees.
|
•
|
Any request, whether written (including e-mail) or oral, received by any Employee of the Advisers, must be promptly reported to the Proxy Voting Coordinator. All written requests must be retained in the Client’s permanent file.
|
•
|
The Proxy Voting Coordinator will record the identity of the Client, the date of the request, and the disposition (e.g., provided a written or oral response to Client’s request, referred to third party, not a proxy voting client, other dispositions, etc.) in a suitable place.
|
•
|
The Proxy Voting Coordinator will furnish the information requested to the Client within a reasonable time period (generally within 10 business days). The Advisers will maintain a copy of the written record provided in response to Client’s written (including e-mail) or oral request. A copy of the written response should be attached and maintained with the Client’s written request, if applicable and maintained in the permanent file.
|
•
|
Clients are permitted to request the proxy voting record for the 5 year period prior to their request.
|
•
|
Upon inadvertent receipt of a proxy, the Advisers will generally forward to ISS for voting, unless the client has instructed otherwise.
|
•
|
The Advisers’ proxy voting record is maintained by ISS. The Advisers’ Proxy Voting Coordinator, with the assistance of the Investment Accounting and SMA Operations Departments, will periodically ensure that ISS has complete, accurate, and current records of Clients who have instructed the Advisers to vote proxies on their behalf.
|
•
|
The Advisers will maintain documentation to support the decision to vote against the ISS recommendation.
|
•
|
The Advisers will maintain documentation or notes or any communications received from third parties, other industry analysts, third party service providers, company’s management discussions, etc. that were material in the basis for the decision.
|
Revised 12/2011 ♦ Supersedes 12/2010
|
(a)
|
(i)
|
Certificate of Trust -- Filed as Exhibit 99.(a)(i) on 02/06/2015 (Accession No. 0001572661-15-000008)
|
|
|
(ii)
|
Agreement and Declaration of Trust Instrument -- Filed as Exhibit 99.(a)(ii) on 02/06/2015 (Accession No. 0001572661-15-000008)
|
|
(b)
|
By-laws effective 12/15/2015 -- Filed as Exhibit 99.(b) on 02/24/2016 (Accession No. 0001572661-16-000073)
|
||
(c)
|
Agreement and Declaration of Trust; Articles II, VII and IX, and By-Laws; Articles 2, 3, 9 and 10 -- Filed as Exhibit
99.(a)(ii) on 02/06/2015 (Accession No. 0001572661-15-000008)
|
||
(d)
|
Investment Advisory Agreement
|
||
|
(i)
|
a.
|
Management Agreement with Principal Management Corporation dated 07/08/2015 -- Filed as Exhibit 99.(d)(i) on 10/27/2015 (Accession No. 0001572661-15-000049)
|
|
(ii)
|
a.
|
Management Agreement with Principal Management Corporation dated 03/21/2016 -- Filed as Exhibit 99.(d)(i)a on 05/05/2016 (Accession No. 0001572661-16-000132)
|
|
|
b.
|
Form of Management Agreement with Principal Management Corporation -- Filed as Exhibit 99.(d)(i)b on 05/05/2016 (Accession No. 0001572661-16-000132)
|
|
|
c.
|
Form of Management Agreement with Principal Management Corporation **
|
|
(iii)
|
Sub-Advisory Agreement with Edge Asset Management, Inc. dated 07/08/2015 -- Filed as Exhibit 99.(d)(ii) on 10/27/2015 (Accession No. 0001572661-15-000049)
|
|
|
(iv)
|
a.
|
Sub-Advisory Agreement with Principal Global Investors, LLC dated 07/08/2015 -- Filed as Exhibit 99.(d)(iii) on 10/27/2015 (Accession No. 0001572661-15-000049)
|
|
|
b.
|
Form of Amended & Restated Sub-Advisory Agreement with Principal Global Investors, LLC **
|
|
(v)
|
a.
|
Sub-Advisory Agreement with Principal Global Investors, LLC dated 03/21/2016 -- Filed as Exhibit 99.(d)(iii)b on 05/05/2016 (Accession No. 0001572661-16-000132)
|
|
|
b.
|
Form of Amended & Restated Sub-Advisory Agreement with Principal Global Investors, LLC -- Filed as Exhibit 99.(d)(iii)c on 05/05/2016 (Accession No. 0001572661-16-000132)
|
|
(vi)
|
a.
|
Form of Sub-Advisory Agreement with Spectrum Asset Management, Inc. **
|
(e)
|
(i)
|
a.
|
Distribution Agreement with ALPS Distributors, Inc. dated 05/01/2015 -- Filed as Exhibit 99.(e)(i) on 10/27/2015 (Accession No. 0001572661-15-000049)
|
|
|
b.
|
Distribution Agreement Amendment No. 1 with ALPS Distributors, Inc. dated 02/23/2016 -- Filed as Exhibit 99.(e)(i)b on 05/05/2016 (Accession No. 0001572661-16-000132)
|
|
(ii)
|
Form of Authorized Participant Agreement -- Filed as Exhibit 99.(e)(ii) on 04/21/2015 (Accession No. 0001572661-15-000016)
|
|
(f)
|
Bonus, profit sharing or pension plans -- N/A
|
||
(g)
|
(i)
|
Custodian Agreement with State Street Bank and Trust Company dated 05/21/2015 -- Filed as Exhibit 99.(g) on 10/27/2015 (Accession No. 0001572661-15-000049)
|
|
|
(ii)
|
Custodian Agreement Amendment (letter) dated 03/11/2016 *
|
|
(h)
|
(i)
|
a.
|
Transfer Agency and Service Agreement with State Street Bank and Trust Company dated 05/21/2015 -- Filed as Exhibit 99.(h)(ii) on 10/27/2015 (Accession No. 0001572661-15-000049)
|
|
|
b.
|
Letter Amendment to Transfer Agency and Service Agreement with State Street Bank and Trust Company dated 03/11/2016 -- Filed as Exhibit 99.(h)(i)b on 05/05/2016 (Accession No. 0001572661-16-000132)
|
|
(ii)
|
Contractual Fee Waiver Agreement dated 07/08/2015 -- Filed as Exhibit 99.(h)(ii) on 10/27/2015 (Accession No. 0001572661-15-000049)
|
|
(i)
|
Legal Opinion **
|
||
(j)
|
(i)
|
Consent of Independent Registered Public Accounting Firm -- N/A
|
|
|
(ii)
|
Rule 485(b) Opinion -- N/A
|
|
|
(iii)
|
Powers of Attorney -- Filed as Exhibit 99.(j)(ii) on 02/06/2015 (Accession No. 0001572661-15-000008), as Exhibit 99.(j)(iii) for E. A. Nickels on 10/27/2015 (Accession No. 0001572661-15-000049), and for D. E. Lawton 05/23/2016 (Accession No. 0001572661-16-000136)
|
|
(k)
|
Omitted Financial Statements -- N/A
|
||
(l)
|
(i)
|
Letter of Investment Intent dated May 21, 2015 -- Filed as Exhibit 99.(l) on 06/18/2015 (Accession No. 0001572661-15-000022)
|
|
|
(ii)
|
Letter of Investment Intent dated March 21, 2016 -- Filed as Exhibit 99.(l)(ii) on 05/05/2016 (Accession No. 0001572661-16-000132)
|
(m)
|
Form of Distribution Plan and Agreement Pursuant to Rule 12b-1 with respect to shares of the Registrant -- Filed as Exhibit 99.(m) on 04/21/2015 (Accession No. 0001572661-15-000016)
|
||
(n)
|
Plan Pursuant to Rule 18f-3 under the 1940 Act -- N/A
|
||
(o)
|
Reserved.
|
||
(p)
|
(i)
|
Code of Ethics of Registrant dated 01/01/2016 -- Filed as Exhibit 99.(p)(i) on 02/24/2016 (Accession No. 0001572661-16-000073)
|
|
|
(ii)
|
Code of Ethics of Edge Asset Management, Inc. dated 07/23/2015 -- Filed as Exhibit 99.(p)(ii) on 02/24/2016 (Accession No. 0001572661-16-000073)
|
|
|
(iii)
|
Code of Ethics of Morley Capital Management, LLC dated 02/2016 *
|
|
|
(iv)
|
Code of Ethics of Principal Global Investors, LLC dated 01/01/2015 -- Filed as Exhibit 99.(p)(iii) on 02/24/2016 (Accession No. 0001572661-16-000073)
|
|
|
(v)
|
Code of Ethics of Principal Management Corporation dated 01/01/2016 -- Filed as Exhibit 99.(p)(iv) on 02/24/2016 (Accession No. 0001572661-16-000073)
|
|
NAME & OFFICE
|
|
NATURE OF RELATIONSHIP
|
|
WITH
|
OTHER COMPANY & PRINCIPAL
|
(INVESTMENT ADVISER OFFICER'S
|
|
INVESTMENT ADVISER
|
BUSINESS ADDRESS
|
OFFICE WITH OTHER COMPANY)
|
|
|
|
|
|
Patricia A. Barry
|
Principal Life Insurance Company (1)
|
Counsel/Assistant Corporate
|
|
Assistant Secretary
|
|
Secretary
|
|
|
|
|
*
|
Michael J. Beer
|
Principal Life Insurance Company (1)
|
See Part B
|
|
President/Chief Executive Officer
|
|
|
|
and Chairman of the Board
|
|
|
|
|
|
|
*
|
Jennifer A. Block
|
Principal Life Insurance Company (1)
|
See Part B
|
|
Counsel
|
|
|
|
|
|
|
*
|
Tracy W. Bollin
|
Principal Funds Distributor, Inc. (2)
|
See Part B
|
|
Senior Vice President, Chief Operating
|
and Principal Securities, Inc. (1)
|
|
|
Officer and Director
|
|
|
|
|
|
|
*
|
David J. Brown
|
Principal Life Insurance Company (1)
|
See Part B
|
|
Senior Vice President
|
|
|
|
|
|
|
*
|
Gina L. Graham
|
Principal Life Insurance Company (1)
|
See Part B
|
|
Vice President and Treasurer
|
|
|
|
|
|
|
|
Gregory B. Elming
|
Principal Life Insurance Company (1)
|
Senior Vice President and
|
|
Director
|
|
Chief Risk Officer
|
|
|
|
|
|
Stephen G. Gallaher
|
Principal Life Insurance Company (1)
|
Assistant General Counsel
|
|
Assistant General Counsel and
|
|
|
|
Assistant Secretary
|
|
|
|
|
|
|
|
Kelly A. Grossman
|
Principal Life Insurance Company (1)
|
Portfolio Investment Strategist
|
|
Vice President
|
|
|
|
|
|
|
|
Patrick A. Kirchner
|
Principal Life Insurance Company (1)
|
Assistant General Counsel
|
|
Assistant General Counsel
|
|
|
|
|
|
|
|
Julia M. Lawler
|
Principal Life Insurance Company (1)
|
Senior Executive Director -
|
|
Executive Vice President
|
|
Principal Portfolio Strategies
|
|
|
|
|
|
Brian S. Ness
|
Principal Global Investors, LLC (1)
|
Vice President and Chief Information
|
|
Senior Vice President and
|
|
Officer
|
|
Chief Information Officer
|
|
|
|
|
|
|
*
|
Layne A. Rasmussen
|
Principal Life Insurance Company (1)
|
See Part B
|
|
Vice President and Controller
|
|
|
|
|
|
|
*
|
Thomas Gregory Reymann
|
Principal Life Insurance Company (1)
|
See Part B
|
|
Assistant General Counsel
|
|
|
|
|
|
|
*
|
Teri Root
|
Principal Life Insurance Company (1)
|
Director - PMC Compliance
|
|
Vice President and Chief Compliance Officer
|
|
|
|
|
|
|
|
Michael Scholten
|
Delaware Charter Guarantee
|
Senior Vice President and
|
|
Chief Financial Officer
|
& Trust Company (1)
|
Chief Financial Officer
|
|
|
|
|
|
Karen E. Shaff
|
Principal Life Insurance Company (1)
|
Executive Vice President,
|
|
Executive Vice President,
|
|
General Counsel & Secretary
|
|
General Counsel and Secretary
|
|
|
|
|
|
|
*
|
Adam U. Shaikh
|
Principal Life Insurance Company (1)
|
See Part B
|
|
Counsel
|
|
|
|
|
|
|
NAME*
|
|
POSITIONS AND OFFICES
WITH PRINCIPAL UNDERWRITER (ALPS)
|
|
POSITIONS AND OFFICES
WITH THE FUND
|
Edmund J. Burke
|
|
Director
|
|
None
|
Jeremy O. May
|
|
President, Director
|
|
None
|
Thomas A. Carter
|
|
Executive Vice President, Director
|
|
None
|
Bradley J. Swenson
|
|
Senior Vice President, Chief Operating Officer
|
|
None
|
Robert J. Szydlowski
|
|
Senior Vice President, Chief Technology Officer
|
|
None
|
Aisha J. Hunt
|
|
Senior Vice President, General Counsel and Assistant Secretary
|
|
None
|
Eric T. Parsons
|
|
Vice President, Controller and Assistant Treasurer
|
|
None
|
Randall D. Young**
|
|
Secretary
|
|
None
|
Gregg Wm. Givens**
|
|
Vice President, Treasurer and Assistant Secretary
|
|
None
|
Douglas W. Fleming**
|
|
Assistant Treasurer
|
|
None
|
Steven Price
|
|
Senior Vice President, Chief Compliance Officer
|
|
None
|
Liza Orr
|
|
Vice President, Senior Counsel
|
|
None
|
Jed Stahl
|
|
Vice President, Senior Counsel
|
|
None
|
Taylor Ames
|
|
Vice President
|
|
None
|
Troy A. Duran
|
|
Senior Vice President, Chief Financial Officer
|
|
None
|
James Stegall
|
|
Vice President
|
|
None
|
Gary Ross
|
|
Senior Vice President
|
|
None
|
Kevin Ireland
|
|
Senior Vice President
|
|
None
|
Mark Kiniry
|
|
Senior Vice President
|
|
None
|
Tison Cory
|
|
Vice President, Intermediary Operations
|
|
None
|
Hilary Quinn
|
|
Vice President
|
|
None
|
Jennifer Craig
|
|
Assistant Vice President
|
|
None
|
*
|
Except as otherwise noted, the principal business address for each of the above directors and executive officers is 1290 Broadway, Suite 1100, Denver, Colorado 80203.
|
**
|
The principal business address for Messrs. Young, Givens and Fleming is 333 W. 11
th
Street, 5
th
Floor, Kansas City, Missouri 64105.
|
SIGNATURES
|
|
|
|
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has duly caused this Amendment to the Registration Statement to be signed on its behalf by the undersigned, duly authorized in the City of Des Moines and State of Iowa, on the 18th day of August, 2016.
|
|
|
|
|
Principal Exchange-Traded Funds
|
|
(Registrant)
|
|
/s/ M. J. Beer
_____________________________________
M. J. Beer
Director, President and Chief Executive Officer
|
|
|
Attest:
/s/ Beth Wilson
______________________________________
Beth Wilson
Vice President and Secretary
|
|
Pursuant to the requirements of the Securities Act of 1933, this Amendment to the Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
|
|||
Signature
|
Title
|
Date
|
|
|
|
|
|
/s/ M. J. Beer
__________________________
M. J. Beer
|
Director, President and
Chief Executive Officer
(Principal Executive Officer)
|
August 18, 2016
|
|
|
|
||
/s/ T. W. Bollin
__________________________
T. W. Bollin
|
Chief Financial Officer
(Principal Financial Officer)
|
August 18, 2016
|
|
|
|
|
|
/s/ L. A. Rasmussen
__________________________
L. A. Rasmussen
|
Vice President and Controller
(Controller)
|
August 18, 2016
|
|
|
|
||
(E. Ballantine)*
__________________________
E. Ballantine
|
Trustee
|
August 18, 2016
|
|
|
|
||
(L. T. Barnes)*
__________________________
L. T. Barnes
|
Trustee
|
August 18, 2016
|
|
|
|
||
(C. Damos)*
__________________________
C. Damos
|
Trustee
|
August 18, 2016
|
|
|
|
||
(N. M. Everett)*
__________________________
N. M. Everett
|
Trustee
|
August 18, 2016
|
|
|
|
||
(M. A. Grimmett)*
__________________________
M. A. Grimmett
|
Trustee
|
August 18, 2016
|
|
|
|
||
(F. S. Hirsch)*
__________________________
F. S. Hirsch
|
Trustee
|
August 18, 2016
|
|
|
|
||
(T. Huang)*
__________________________
T. Huang
|
Trustee
|
August 18, 2016
|
|
|
|
||
(W. C. Kimball)*
__________________________
W. C. Kimball
|
Trustee
|
August 18, 2016
|
|
|
|
||
(D. E. Lawton)*
__________________________
D. E. Lawton
|
Trustee
|
August 18, 2016
|
|
|
|
||
(K. McMillan)*
__________________________
K. McMillan
|
Trustee
|
August 18, 2016
|
|
|
|
||
(E. A. Nickels)*
__________________________
E. A. Nickels
|
Trustee
|
August 18, 2016
|
|
|
|
||
(D. Pavelich)*
__________________________
D. Pavelich
|
Trustee
|
August 18, 2016
|
|
|
|
||
*
Pursuant to Power of Attorney appointing M. J. Beer
Previously Filed as Ex-99(j)(ii) on February 6, 2015 (Accession No. 0001572661-15-000008), for E. A. Nickels on October 27, 2015 (Accession No. 0001572661-15-000049), and for D. E. Lawton on May 23, 2016 (Accession No. 0001572661-16-000136)
|
|
|
Sincerely,
|
|
|
|
|
|
|
|
Principal Exchange-Traded Funds
|
|
|
|
|
on behalf of
|
|
|
|
PRINCIPAL PRICE SETTERS INDEX ETF
|
|
|
|
PRINCIPAL SHAREHOLDER YIELD INDEX ETF
|
|
|
|
|
|
|
By:
|
/s/ Layne Rasmussen
|
|
|
Name:
|
Layne Rasmussen
|
|
|
Title:
|
VP, Controller, Duly Authorized
|
Agreed and Accepted:
|
|
|
|
|
|
|
|
STATE STREET AND TRUST COMPANY
|
|||
|
|
|
|
By:
|
/s/ Gunjan Kedia
|
|
|
Name:
|
Gunjan Kedia
|
|
|
Title:
|
Executive Vice President, Duly Authorized
|
|
|
|
|
|
|
Effective Date: _________________________
|
|
|
I.
|
Introduction
|
1.
|
To employ any device, scheme or artifice to defraud such Client;
|
2.
|
To make to the Client any untrue statement of a material fact or omit to state to a Client a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading;
|
3.
|
To engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon such Client; or
|
4.
|
To engage in a manipulative practice with respect to such Client.
|
(1)
|
Rule 17-j of the Investment Company Act of 1940. Rule 204A-1 of the Investment Advisers Act of 1940.
|
(2)
|
Client means: 1) Any investment company registered under the Act or any series of a registered investment companies for whom MCM acts as investment adviser or sub-adviser; or 2) Any separately managed investment account, commingled/collective investment trust fund, hedge fund, or other similar investment arrangement, which is advised by MCM.
|
(3)
|
Covered Security includes, but is not limited to: common and preferred stocks, fixed income securities, open-end mutual funds, exchange-traded funds, closed-end funds and unit investment trusts. Also included are derivatives, options or futures to purchase or sell, and security convertible into or exchangeable for such securities.
Certain Covered Securities are exempt from the provisions of this Code; these exemptions are detailed in Section V (B)(5).
|
II.
|
WHAT IS EXPECTED OF ME? CORE REQUIREMENTS OF THE CODE OF ETHICS
|
A.
|
Statement of General Principles and Standard of Conduct
|
1.
|
Conduct all personal Covered Securities transactions in a manner that is consistent with this Code;
|
2.
|
Avoid any actual or potential conflict of interest with Clients;
|
3.
|
Adhere to the fundamental standard to not take inappropriate advantage of positions of trust and responsibility;
|
4.
|
Safeguard material non-public information about Client transactions including the disclosure of portfolio holdings; and
|
5.
|
Comply with all federal securities laws.
|
B.
|
General prohibitions
|
1.
|
All Access Persons will keep information pertaining to Clients’ portfolio transactions and holdings confidential. No person with access to securities recommendations or pending securities transactions and Client portfolio holdings should disclose this information to any person, unless such disclosure is made in connection with his or her regular functions or duties. All possible care should be taken to avoid discussing confidential information in circumstances which would disclose this information to anyone who would not normally have access to such information.
|
2.
|
No Access Person will selectively disclose non-public information concerning the portfolio holdings of any Client to anyone who does not have a legitimate business need for such information that is consistent with the interests of the Fund and other Client accounts, and MCM’s Portfolio Holding Disclosure Policy.
|
3.
|
No Access Person will use information concerning prospective or actual portfolio transactions in any manner that could be detrimental to the interests of a Client.
|
4.
|
No Access Person will
purchase, sell, or exchange shares of any series of a Reportable Fund
while in possession of material non-public information concerning the portfolio holdings of any series of the Reportable Fund.
(4)
|
5.
|
No Access Person will engage in, or help others engage in, market timing in any shares of Reportable Funds. This prohibition does not apply to short-term transactions in money market funds, unless these transactions are part of a market timing strategy of other Reportable Funds. The market timing prohibition also does not apply to contributions to a 401(k) program or an automatic reinvestment program. However, this program does apply to internal transfers within a 401(k) program to the extent such transactions violate a Reportable Fund’s policy against market timing. Any profits derived by a Covered Person as a result of such impermissible market timing may be subject to disgorgement at the discretion of the Chief Compliance Officer (CCO).
(5)
|
6.
|
No Access Person will engage in, or help others engage in, late trading
(6)
of Reportable Funds for any purpose.
|
7.
|
No Access Person will use his or her position for his or her personal benefit or attempt to cause a Client to purchase, sell, or hold a particular Covered Security when that action may reasonably be expected to create a personal benefit for the Access Person. No Access Person will engage in any act, practice, or course of conduct which would violate applicable provisions of the Rules.
|
III.
|
Am I an Access person? definition, exempt access persons, and limited access persons
|
A.
|
Access Person Definition
|
(4)
|
Reportable Fund means any registered Investment Company, collective investment trust or separately managed portfolio for which MCM serves as an investment adviser or sub-adviser.
|
(5)
|
Chief Compliance Officer or CCO means the Chief Compliance Officer of MCM or the CCO’s designee, as applicable.
|
(6)
|
Late trading is defined as (1) entering or canceling any buy, sell, transfer, or change order after the close of the regular trading on the New York Stock Exchange (generally, 4:00 p.m., Eastern Time); or (2) trading shares in a Reportable Fund later than any time designated in the Reportable Fund’s prospectus as the timing of calculation of the Reportable Fund’s net asset value.
|
B.
|
Exempt Access Persons
|
C.
|
Limited Access Persons
|
1.
|
Limited Access Persons must submit an Annual Certification of Compliance which outlines that their status as a Limited Access Person is contingent upon adherence to their respective Codes of Ethics and that MCM will be provided any documentation required to be collected and maintain pursuant to regulatory requirements.
|
IV.
|
WHAT DO I NEED TO DO? REPORTING, DISCLOSURE INFORMATION AND CERTIFICATION REQUIREMENTS
|
A.
|
Gift, Meals & Entertainment
|
B.
|
Outside Business Activities
|
C.
|
Reporting Requirements
|
1.
|
Initial Holdings Reports
|
i.
|
The name of the security, security symbol or CUSIP, type of security, number of shares and principal amount of each Covered Security and type of interest (direct or indirect) the Access Person had beneficial ownership when the person became an Access Person;
|
ii.
|
The name of any broker, dealer, bank, plan administrator or other institution with which the Access Person maintained an account and the account number in which any Covered Securities were held for the direct or indirect benefit of the Access Person as of the date the person became an Access Person; and
|
iii.
|
The date the report is submitted and the date as of which the information is current.
|
2.
|
Quarterly Transactions Reports
|
i.
|
The date of the transaction, the name of the Covered Security, security symbol or CUSIP, the interest rate and maturity date (if applicable), the number of shares, and the principal amount of each Covered Security involved.
|
ii.
|
The nature of the transaction (i.e., purchase, sale or any other type of acquisition or disposition);
|
iii.
|
The price at which the transaction was effected;
|
iv.
|
The name of the broker, dealer, bank, plan administrator or other institution with or through which the transaction was effected, and the account number where security is held; and
|
v.
|
The date the report is submitted.
|
i.
|
The name of the broker, dealer, bank, plan administrator or other institution with which the Access Person established the account;
|
ii.
|
The date the account was established; and
|
iii.
|
The date the report is submitted.
|
(7)
|
Beneficial Ownership shall be interpreted in the same manner as it would be in determining whether a person is considered a beneficial owner as defined in Rule 16a-1(a)(2) under the Securities Exchange Act of 1934, as amended, which generally encompasses those situations where the beneficial owner has or shares the opportunity, directly or indirectly, to profit or share in any profit derived from a transaction in Covered Securities. A person is normally regarded as the beneficial owner of Covered Securities with respect to:
|
1.
|
Covered securities that are held by the individual or by members of the individual’s immediate family sharing the same household (including, but not limited to a husband, wife, domestic partner, minor child, or relative);
|
2.
|
The person’s interest in Covered Securities held in a discretionary or trust account; or
|
3.
|
The person’s right to acquire Covered Securities through the exercise or conversion of stock options, warrants or convertible debt, whether or not presently exercisable; or
|
4.
|
All other Covered Securities held in any other account for which the person has investment discretion or authority.
|
3.
|
Annual Holdings Reports
|
i.
|
The name of the security, security symbol or CUSIP, number of shares and principal amount of each Covered Security and type of interest (direct or indirect) in which the Access Person beneficial ownership;
|
ii.
|
The name of any broker, dealer, bank, plan administrator or other institution with which the Access Person maintains an account and the account number in which any Covered Securities are held for the direct or indirect benefit of the Access Person; and
|
iii.
|
The date that the report is submitted by the Access Person and the date as of which the information is current.
|
4.
|
Annual Certification of Compliance
|
i.
|
They have received, read and understand the Code and recognize that they are subject to its provisions;
|
ii.
|
They have complied with the requirements of the Code; and
|
iii.
|
They have reported all personal Covered Securities transactions required to be reported in accordance with the requirements of the Code.
|
5.
|
Personal Brokerage Accounts
|
6.
|
Non-Discretionary Accounts
|
i.
|
The Access Person must submit a written request to the CCO or designee prior to establishing the account.
|
ii.
|
The CCO or designee will evaluate the request and provide a written response to the Access Person. This evaluation will include obtaining information about the trustee or third-party manager’s relationship to the Access Person.
|
iii.
|
Once the approved account is established, the securities transactions executed within the account will be exempt from the prohibitions in Section V(A)(1-3) and Section V(B)(4) and the reporting requirements of Section IV(C), with the following exception: the account must be reported consistent with Section IV.(C)(1).
|
iv.
|
Annually, the Access Person must certify to not having direct or indirect influence or control over the account.
|
v.
|
On a sample basis, Compliance may request reports on holdings of and/or transactions made in the non-discretionary account.
|
vi.
|
If the non-discretionary nature of the account changes, the Access Person must notify the CCO or designee immediately. At that time, the account will become subject to the restrictions and reporting requirements noted in Section V(B) and Sections IV(C).
|
7.
|
PFG Employee Benefit Plans
|
i.
|
PFG Employee Stock Purchase Plan
|
ii.
|
PFG Excess Savings Plan
|
iii.
|
PFG 401(k) Plan
|
8.
|
Review of Reports and Notification
|
9.
|
Responsibility to Report
|
C.
|
Reporting Convictions or Injunctions
|
1.
|
Within the past ten years has been convicted of any felony or misdemeanor involving the purchase or sale of any security; or arising out of his or her conduct as an affiliated person, salesperson or employee of any investment company, bank, insurance company or entity or person required to be registered under the Securities Exchange Act; or as an affiliated person, salesperson, or employee of any investment company, bank, insurance company, or entity or person required to be registered under the Commodities Exchange Act.
|
2.
|
Is or becomes permanently or temporarily enjoined by any courts from:
|
i.
|
Acting as an underwriter, broker, dealer, investment adviser, municipal securities dealer, government securities broker, government securities dealer, bank, transfer agent, or entity or a person required to be registered under the Securities Exchange Act, or as an affiliated person, salesperson, or employee of any
|
ii.
|
Engaging in or continuing any conduct or practice in connection with any such activity, or in connection with the purchase or sale of any security.
|
V.
|
What DOES THE CODE OF ETHICS RESTRICT? PERSONAL TRADING AND MARKET TIMING
|
A.
|
Trading preclearance and other trading procedures
|
1.
|
Pre-clearance of Covered Securities Transactions
|
i.
|
Whether the requested security is currently held in any Client account; has been purchased or sold on behalf of a Client account in the past seven days; or is being considered for purchase or sale on behalf of a Client account.
|
ii.
|
Whether the Access Person will improperly benefit from the purchase or sale being considered by a Client account.
|
iii.
|
Whether the proposed transaction will be conducted in a manner that is consistent with the requirements of the Code.
|
iv.
|
Whether the proposed transaction would impact the price of the security.
|
2.
|
Thirty Day Holding Period
|
3.
|
Blackout Period
|
i.
|
Same Day
: Access Persons are prohibited from purchasing or selling a Covered Security on a day when a Client has a pending buy or sell order in that same Covered Security. Furthermore, Access Persons are prohibited from purchasing or selling a Covered Security, which to their knowledge at the time of purchase or sale is being considered for purchase or sale by a Client.
|
ii.
|
Seven Day
: Access Persons are prohibited from purchasing or selling a Covered Security within seven (7) calendar days before or after MCM trades in that Covered Security on behalf of a Client portfolio.
|
B.
|
Categories of Personal Trading Restrictions
|
1.
|
Investment Clubs
|
2.
|
Initial Public Offerings
|
3.
|
Private Placements
|
4.
|
Prohibited Securities
|
i.
|
Mortgage backed debt securities,
|
ii.
|
Commercial mortgage backed debt securities,
|
iii.
|
Corporate bonds,
|
iv.
|
Foreign bonds, and
|
v.
|
Asset backed debt securities.
|
5.
|
Exempt Securities
|
i.
|
Direct obligations of the United States government,
|
ii.
|
Bankers’ acceptances,
|
iii.
|
Bank certificates of deposit,
|
iv.
|
Commercial paper,
|
v.
|
Shares held in money market funds,
|
vi.
|
Shares held in open-end funds other than Reportable Funds,
|
vii.
|
Shares of unit investment trusts that are exclusively invested in one or more open-end Funds that are not Reportable Funds, and
|
viii.
|
Municipal securities available for purchase only through 529 College Savings Plans.
|
ix.
|
Any Covered Security type that MCM may not purchase on behalf of its clients including but not limited to equity securities, equity options, preferred securities, and high yield or junk bonds.
|
6.
|
Exempt Transactions
|
i.
|
Purchases or sales effected in any account over which the Access Person has no direct or indirect influence, control or investment discretion or authority
|
ii.
|
Purchases or sales which are non-volitional
(9)
on the part of the Access Person
|
iii.
|
Subsequent purchases which are made through an automatic dividend reinvestment or an approved automatic direct purchase plan
|
(9)
|
Non-volitional purchases or sales include those transactions that do not involve a willing act or conscious decision on the part of the director, officer or employee. For example, shares received or disposed of by Access Persons in a merger, recapitalization or similar transaction are considered non-volitional.
|
iv.
|
Purchases effected upon the exercise of rights issued by an issuer pro-rata to all holders of a class of its Covered Securities, to the extent such rights were acquired from such issuer, and sales of such rights so acquired
|
v.
|
Purchases or sales of exchange traded funds (ETFs)
|
vi.
|
Maturity of a fixed income security
|
7.
|
Reportable Funds
|
8.
|
Principal Financial Group Securities
|
VI.
|
WHAT HAPPENS WHEN A VIOLATION OCCURS? REPORTING A VILOATION, CONSEQUENCE OF PERSONAL VIOLATIONS
|
A.
|
Reporting a violation
|
1.
|
Code of Ethics Violations
|
2.
|
PFG Whistleblower Policy
|
i.
|
Suspected theft, embezzlement, or criminal activity
|
ii.
|
Failure to comply with company compliance policies and procedures
|
iii.
|
Administrative practices in conflict with our contractual obligations or ethical principles
|
iv.
|
Sharing confidential or proprietary company or customer information with someone who doesn’t have a legitimate business need to know
|
v.
|
Falsifying entries within the company’s accounting records
|
vi.
|
Violations of the Code of Business Conduct and Ethics, including the following:
|
a.
|
Gifts and entertainment
|
b.
|
Conflicts of interest
|
c.
|
Dishonesty
|
d.
|
Accepting unauthorized payments
|
e.
|
Insider trading
|
B.
|
Sanctions
|
VII.
|
Administrative Matters
|
A.
|
Board of approval
|
B.
|
Annual Reporting to Investment Company Clients
|
1.
|
Summarize existing procedures concerning personal investing and any material changes in the procedures made during the past year;
|
2.
|
Identify any material violations requiring significant remedial action during the past year;
|
3.
|
Identify any recommended changes in the existing restrictions or procedures based upon experience under its Code, evolving industry practices, and developments in applicable laws or regulations; and
|
4.
|
Certify that MCM has adopted procedures reasonably designed to prevent Access Persons from violating its Code.
|
C.
|
Retention of Records
|
1.
|
A copy of this Code or any Code which within the past five (5) years has been in effect;
|
2.
|
A record of any violation of this Code, and of any action taken as a result of such violation, shall be preserved in an easily accessible place for a period of not less than five (5) years following the end of the fiscal year in which the violation occurs;
|
3.
|
A copy of each report, certification, or acknowledgement made by an Access Person pursuant to this Code shall be preserved for a period of not less than five (5) years from the end of the fiscal year in which it is made;
|
4.
|
A list of all persons who are, or within the past five (5) years have been, required to make reports pursuant to this Code;
|
5.
|
A record of any decision, and the reasons supporting the decision, to approve the acquisition by Access Persons of Covered Securities in a private placement, as described in Section V(B)(3) of this Code, for at least five (5) years after the end of the fiscal year in which the approval is granted; and
|
6.
|
A copy of each annual report required under Section IV(C) for at least five (5) years after the end of the fiscal year in which it is made.
|