THE SECURITIES ACT OF 1933
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X
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Post-Effective Amendment No. 20
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X
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THE INVESTMENT COMPANY ACT OF 1940
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X
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Amendment No. 22
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X
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(Check Appropriate Box or Boxes)
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Name and Address of Agent for Service:
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with a copy to:
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Adam U. Shaikh
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Veena K. Jain
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Principal Financial Group
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Drinker Biddle & Reath LLP
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Des Moines, IA 50392
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191 N. Wacker Drive, Suite 3700
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Chicago, IL 60606-1698
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____
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This post-effective amendment designates a new effective date for a previously filed post-effective amendment.
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Fund
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Ticker Symbol
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Principal U.S. Listing Exchange
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Principal EDGE Active Income ETF
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YLD
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NYSE Arca
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Principal Healthcare Innovators Index ETF
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BTEC
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The NASDAQ Stock Market LLC
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Principal Millennials Index ETF
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GENY
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The NASDAQ Stock Market LLC
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Principal Price Setters Index ETF
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PSET
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The NASDAQ Stock Market LLC
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Principal Shareholder Yield Index ETF
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PY
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The NASDAQ Stock Market LLC
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FUND SUMMARIES
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PRINCIPAL EDGE ACTIVE INCOME ETF
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PRINCIPAL HEALTHCARE INNOVATORS INDEX ETF
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PRINCIPAL MILLENNIALS INDEX ETF
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PRINCIPAL PRICE SETTERS INDEX ETF
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PRINCIPAL SHAREHOLDER YIELD INDEX ETF
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ADDITIONAL INFORMATION ABOUT INVESTMENT STRATEGIES AND RISKS
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PORTFOLIO HOLDINGS INFORMATION
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MANAGEMENT OF THE FUNDS
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DISTRIBUTOR AND OTHER FUND SERVICE PROVIDERS
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PRICING OF FUND SHARES
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PURCHASE AND SALE OF FUND SHARES
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DIVIDENDS AND DISTRIBUTIONS
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FREQUENT PURCHASES AND REDEMPTIONS
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TAX CONSIDERATIONS
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DISTRIBUTION PLANS AND INTERMEDIARY COMPENSATION
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FUND ACCOUNT INFORMATION
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FINANCIAL HIGHLIGHTS
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APPENDIX A - DESCRIPTION OF BOND RATINGS
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ADDITIONAL INFORMATION
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Management Fees
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0.75
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%
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Other Expenses
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0.59
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%
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Acquired Fund Fees and Expenses
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0.11
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%
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Total Annual Fund Operating Expenses
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1.45
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%
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Expense Reimbursement
(1)
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(0.49
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)%
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Total Annual Fund Operating Expenses After Expense Reimbursement
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0.96
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%
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(1)
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Principal Management Corporation ("PMC"), the investment advisor, has contractually agreed to limit the Fund’s expenses by paying, if necessary, expenses normally payable by the Fund, (excluding interest expense, expenses related to fund investments, acquired fund fees and expenses, and other extraordinary expenses) to maintain a total level of operating expenses (expressed as a percent of average net assets on an annualized basis) not to exceed 0.85%. It is expected that the expense limits will continue through the period ending October 31, 2017; however, Principal Exchange-Traded Funds and PMC, the parties to the agreement, may mutually agree to terminate the expense limits prior to the end of the period.
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1 year
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3 years
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5 years
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10 years
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Principal EDGE Active Income ETF
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$98
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$410
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$746
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$1,693
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•
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Medium Market Capitalization Companies
. Investments in medium-size companies may involve greater risk and price volatility than investments in larger, more mature companies.
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•
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Charles D. Averill (since 2015), Portfolio Manager
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•
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Jill R. Cuniff (since 2015), President and Portfolio Manager
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•
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Todd A. Jablonski (since 2015), Chief Investment Officer and Portfolio Manager
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•
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Paul S. Kim (since 2015), Portfolio Manager
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•
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Daniela Spassova (since 2016), Portfolio Manager
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Objective
:
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The Fund seeks to provide investment results that closely correspond, before expenses, to the performance of the Nasdaq Healthcare Innovators Index (the "Index").
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(1)
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The investment management agreement (the “Management Agreement”) between the Fund and Principal Management Corporation (“PMC”) provides that PMC 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.
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1 year
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3 years
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Principal Healthcare Innovators Index ETF
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$43
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$135
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•
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Growth Stock Risk.
If growth companies do not increase their earnings at a rate expected by investors, the market price of the stock may decline significantly, even if earnings show an absolute increase. Growth company stocks also typically lack the dividend yield that can lessen price declines in market downturns
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•
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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.
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•
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Value Stock Risk.
Value stocks may continue to be undervalued by the market for extended periods, including the entire period during which the stock is held by 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.
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•
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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 and 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.
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•
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Paul S. Kim (since 2016), Portfolio Manager
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•
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Mark R. Nebelung (since 2016), Portfolio Manager
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•
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Jeffrey A. Schwarte (since 2016), Portfolio Manager
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Objective
:
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The Fund seeks to provide investment results that closely correspond, before expenses, to the performance of the Nasdaq Global Millennial Opportunity Index (the "Index").
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(1)
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The investment management agreement (the “Management Agreement”) between the Fund and Principal Management Corporation (“PMC”) provides that PMC 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.
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1 year
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3 years
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Principal Millennials Index ETF
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$46
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$144
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•
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Growth Stock Risk.
If growth companies do not increase their earnings at a rate expected by investors, the market price of the stock may decline significantly, even if earnings show an absolute increase. Growth company stocks also typically lack the dividend yield that can lessen price declines in market downturns
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•
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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.
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•
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Value Stock Risk.
Value stocks may continue to be undervalued by the market for extended periods, including the entire period during which the stock is held by 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.
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•
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Paul S. Kim (since 2016), Portfolio Manager
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•
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Mark R. Nebelung (since 2016), Portfolio Manager
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•
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Jeffrey A. Schwarte (since 2016), Portfolio Manager
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Objective
:
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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").
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(1)
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The investment management agreement (the “Management Agreement”) between the Fund and Principal Management Corporation (“PMC”) provides that PMC 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.
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1 year
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3 years
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Principal Price Setters Index ETF
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$41
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$128
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•
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Medium Market Capitalization Companies
. Investments in medium-size companies may involve greater risk and price volatility than investments in larger, more mature companies.
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•
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Paul S. Kim (since 2016), Portfolio Manager
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•
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Mark R. Nebelung (since 2016), Portfolio Manager
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•
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Jeffrey A. Schwarte (since 2016), Portfolio Manager
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Objective
:
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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").
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(1)
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The investment management agreement (the “Management Agreement”) between the Fund and Principal Management Corporation (“PMC”) provides that PMC 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.
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1 year
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3 years
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Principal Shareholder Yield Index ETF
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$41
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$128
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•
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Medium Market Capitalization Companies
. Investments in medium-size companies may involve greater risk and price volatility than investments in larger, more mature companies.
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•
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Paul S. Kim (since 2016), Portfolio Manager
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•
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Mark R. Nebelung (since 2016), Portfolio Manager
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•
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Jeffrey A. Schwarte (since 2016), Portfolio Manager
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INVESTMENT STRATEGIES AND RISKS
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Principal
EDGE
Active Income ETF
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Principal
Healthcare Innovators
Index ETF
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Principal
Millennials
Index ETF
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Bank Loans (also known as Senior Floating Rate interests)
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Non-Principal
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Not Applicable
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Not Applicable
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Convertible Securities
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Principal
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Not Applicable
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Not Applicable
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Derivatives
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Non-Principal
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Not Applicable
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Not Applicable
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Emerging Markets
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Non-Principal
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Not Applicable
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Not Applicable
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Equity Securities
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Principal
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Principal
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Principal
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•
Growth Stock
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Non-Principal
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Principal
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Principal
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•
Small and Medium Capitalization Companies
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Principal
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Principal
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Principal
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•
Value Stock
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Non-Principal
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Principal
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Principal
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Exchange Traded Funds (ETFs)
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Non-Principal
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Not Applicable
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Not Applicable
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Fixed-Income Securities
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Principal
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Not Applicable
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Not Applicable
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Foreign Currency
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Principal
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Non-Principal
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Principal
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Foreign Securities
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Principal
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Non-Principal
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Principal
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Hedging
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Non-Principal
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Not Applicable
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Not Applicable
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High Yield Securities
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Principal
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Not Applicable
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Not Applicable
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Industry Concentration
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Not Applicable
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Principal
(1)
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Non-Principal
(1)
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Inverse Floating Rate Investments
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Principal
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Not Applicable
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Not Applicable
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Investment Company Risk
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Non-Principal
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Not Applicable
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Not Applicable
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Leverage
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Non-Principal
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Not Applicable
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Not Applicable
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Master Limited Partnerships (MLPs)
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Principal
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Not Applicable
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Not Applicable
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Municipal Obligations and AMT-Subject Bonds
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Non-Principal
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Not Applicable
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Not Applicable
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Portfolio Duration
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Principal
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Not Applicable
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Not Applicable
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Portfolio Turnover (Active Trading)
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Principal
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Not Applicable
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Not Applicable
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Preferred Securities
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Principal
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Not Applicable
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Not Applicable
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Real Estate Investment Trusts (REITs)
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Principal
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Non-Principal
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Non-Principal
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Real Estate Securities
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Principal
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Non-Principal
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Non-Principal
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Redemption Risk
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Principal
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Not Applicable
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Not Applicable
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Repurchase Agreements
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Non-Principal
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Not Applicable
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Not Applicable
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Securitized Products
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Principal
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Not Applicable
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Not Applicable
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Shares May Trade at Prices Different Than NAV
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Principal
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Principal
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Principal
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U.S. Government and U.S. Government-Sponsored Securities
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Principal
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Not Applicable
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Not Applicable
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(1)
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An index Fund using a replication strategy may concentrate (invest more than 25% of its assets) its investments in a particular industry only to the extent the relevant index is so concentrated.
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(1)
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An index Fund using a replication strategy may concentrate (invest more than 25% of its assets) its investments in a particular industry only to the extent the relevant index is so concentrated.
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•
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increased volatility of a fund;
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•
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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;
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•
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losses caused by unanticipated market movements, which may be substantially greater than a fund's initial investment and are potentially unlimited;
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•
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the possibility that there may be no liquid secondary market which may make it difficult or impossible to close out a position when desired;
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•
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the possibility that the counterparty may fail to perform its obligations; and
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•
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the inability to close out certain hedged positions to avoid adverse tax consequences.
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•
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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. Commodities are assets that have tangible properties, such as oil, coal, natural gas, agricultural products, industrial metals, livestock and precious metals. These notes expose a fund to movements in commodity prices. They are also subject to credit, counterparty, and interest rate risk. Commodity index-linked notes are often leveraged, increasing the volatility of each note's market value relative to changes in the underlying commodity index. At the maturity of the note, a fund may receive more or less principal than it originally invested. A fund may also receive interest payments on the note that are less than the stated coupon interest payments.
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Credit Default Swap Agreements may be entered into by a fund as a "buyer" or "seller" of credit protection. Credit default swap agreements involve special risks because they may be difficult to value, are highly susceptible to liquidity and credit risk, and generally pay a return to the party that has paid the premium only in the event of an actual default by the issuer of the underlying obligation (as opposed to a credit downgrade or other indication of financial difficulty). Credit default swaps can increase credit risk because a fund has exposure to both the issuer of the referenced obligation and the counterparty to the credit default swap.
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•
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Foreign Currency Contracts (such as foreign currency options and foreign currency forward and swap agreements) may be used by funds to increase exposure to a foreign currency or to shift exposure to foreign currency fluctuations from one country to another. A forward currency contract involves a privately negotiated obligation to purchase or sell a specific currency at a future date at a price set in the contract. For currency contracts, there is also a risk of government action through exchange controls that would restrict the ability of a fund to deliver or receive currency.
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•
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Forwards, futures contracts and options thereon (including commodities futures); options (including put or call options); and swap agreements and over-the-counter swap agreements (e.g., interest rate swaps, total return swaps and credit default swaps) may be used by funds for hedging purposes in an effort to protect a fund from loss due to changing interest rates, securities prices, asset values, currency exchange rates, or other market conditions; non-hedging purposes to seek to increase the fund’s income or otherwise enhance return; and as a low-cost method of gaining exposure to a particular market without investing directly in those securities or assets. These derivative investments are subject to special risk considerations, particularly the imperfect correlation between the change in market value of the instruments held by a fund and the price of the derivative instrument. If a fund has insufficient cash, it may have to sell securities from its portfolio to meet daily variation margin requirements, even when it may be disadvantageous to do so. Options and Swap Agreements also involve counterparty risk. With respect to options, there may be difference in trading hours for the options markets and the markets for the underlying securities (rate movements can take place in the underlying markets that cannot be reflected in the options markets) and an insufficient liquid secondary market for particular options.
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Index/structured securities. Certain derivative securities are described more accurately as index/structured securities, which are derivative securities whose value or performance is linked to other equity securities (such as depositary receipts), currencies, interest rates, indices, or other financial indicators (reference indices).
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companies with their principal place of business or principal office in emerging market countries or
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companies whose principal securities trading market is an emerging market country.
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•
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increased social, political, and economic instability;
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•
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a smaller market for these securities and low or nonexistent trading volume that results in a lack of liquidity and greater price volatility;
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•
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lack of publicly available information, including reports of payments of dividends or interest on outstanding securities;
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foreign government policies that may restrict opportunities, including restrictions on investment in issuers or industries deemed sensitive to national interests;
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•
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relatively new capital market structure or market-oriented economy;
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•
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the possibility that recent favorable economic developments may be slowed or reversed by unanticipated political or social events in these countries;
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•
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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
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•
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possible losses through the holding of securities in domestic and foreign custodial banks and depositories.
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•
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companies whose principal securities trading market is outside the U.S.
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Fund
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Total Percentage
of Outstanding
Shares Owned
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Principal EDGE Active Income ETF
|
94.42%
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•
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Mortgage-backed securities (“MBS”) represent an interest in a pool of underlying mortgage loans secured by real property. MBS are sensitive to changes in interest rates, but may respond to these changes differently from other fixed income securities due to the possibility of prepayment of the underlying mortgage loans. If interest rates fall and the underlying loans are prepaid faster than expected, the fund may have to reinvest the prepaid principal in lower yielding securities, thus reducing the fund’s income. Conversely, rising interest rates tend to discourage refinancings and the underlying loans may be prepaid more slowly than expected, reducing a fund’s potential to reinvest the principal in higher yielding securities and extending the duration of the underlying loans. In addition, when market conditions result in an increase in default rates on the underlying loans and the foreclosure values of the underlying real estate is less than the outstanding amount due on the underlying loan, collection of the full amount of accrued interest and principal on these investments may be doubtful. The risk of such defaults is generally higher in the case of underlying mortgage pools that include sub-prime mortgages (mortgages granted to borrowers whose credit histories would not support conventional mortgages).
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•
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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.
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•
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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.
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Sub-Advisor:
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Edge Asset Management, Inc. (“Edge”),
601 Union Street, Suite 2200, Seattle, WA 98101-1377, has been in the business of investment management since 1944.
|
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Sub-Advisor:
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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.
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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%
|
|
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 and Principal Millennials 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, PMC, any Sub-Advisor, or the Distributor.
|
•
|
monthly for the Principal EDGE Active Income 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.
|
•
|
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)
|
Financial Highlights
|
||||||
Principal Exchange-Traded Funds
|
||||||
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|
||||
Principal EDGE Active Income ETF
|
|
|
||||
|
2016
(a)
|
|
||||
For a share outstanding for the period ended June 30:
|
|
|||||
|
|
|||||
Net asset value, beginning of period
|
$
|
40.00
|
|
|
||
|
|
|||||
Investment Operations:
|
|
|||||
Net investment income (loss)
(b)
|
|
2.13
|
|
|
||
Net realized and change in unrealized loss
|
|
(1.39)
|
|
|
||
Total from investment operations
|
|
0.74
|
|
|
||
|
|
|||||
Dividends and Distributions to Shareholders from:
|
|
|||||
Net investment income
|
|
(1.62)
|
|
|
||
Total dividends and distributions to stockholders
|
|
(1.62)
|
|
|
||
Net asset value, end of period
|
$
|
39.12
|
|
|
||
Total Return:
(c)
|
|
2.13
|
%
|
|
||
|
|
|||||
Ratios/Supplemental Data:
|
|
|||||
Net assets, end of period (000s)
|
$
|
265,013
|
|
|
||
Ratio of expenses to average net assets
(d)(e)
|
|
0.85
|
%
|
|
||
Ratio of gross expenses to average net assets
(d)
|
|
1.34
|
%
|
|
||
Ratio of net investment income (loss) to average net assets
(d)
|
|
5.99
|
%
|
|
||
Portfolio turnover rate
(f)
|
|
34.3
|
%
|
|
||
|
|
|||||
(a)
|
Period from July 8, 2015, date operations commenced, through June 30, 2016.
|
|||||
(b)
|
Calculated on average shares outstanding during the period.
|
|||||
(c)
|
Total return amounts have not been annualized.
|
|||||
(d)
|
Computed on an annualized basis.
|
|||||
(e)
|
Includes reimbursements from the Manager.
|
|||||
(f)
|
Portfolio turnover rate excludes in-kind transactions.
|
Financial Highlights
|
||||||
Principal Exchange-Traded Funds
|
||||||
|
|
|||||
Principal Price Setters Index ETF
|
|
|
||||
|
2016
(a)
|
|
||||
For a share outstanding for the period ended June 30:
|
|
|||||
|
|
|||||
Net asset value, beginning of period
|
$
|
25.00
|
|
|
||
|
|
|||||
Investment Operations:
|
|
|||||
Net investment income (loss)
(b)
|
|
0.09
|
|
|
||
Net realized and change in unrealized gain (loss)
|
|
0.99
|
|
|
||
Total from investment operations
|
|
1.08
|
|
|
||
Net asset value, end of period
|
$
|
26.08
|
|
|
||
Total Return:
(c)
|
|
4.31
|
%
|
|
||
|
|
|||||
Ratios/Supplemental Data:
|
|
|||||
Net assets, end of period (000s)
|
$
|
6,519
|
|
|
||
Ratio of expenses to average net assets
(d)
|
|
0.40
|
%
|
|
||
Ratio of net investment income (loss) to average net assets
(d)
|
|
1.32
|
%
|
|
||
Portfolio turnover rate
(d)(e)
|
|
0.0
|
%
|
|
||
|
|
|||||
(a)
|
Period from March 21, 2016, date operations commenced, through June 30, 2016.
|
|||||
(b)
|
Calculated on average shares outstanding during the period.
|
|||||
(c)
|
Total return amounts have not been annualized.
|
|||||
(d)
|
Computed on an annualized basis.
|
|||||
(e)
|
Portfolio turnover rate excludes in-kind transactions.
|
Principal Shareholder Yield Index ETF
|
|
|
||||
|
2016
(a)
|
|
||||
For a share outstanding for the period ended June 30:
|
|
|||||
|
|
|||||
Net asset value, beginning of period
|
$
|
25.00
|
|
|
||
|
|
|||||
Investment Operations:
|
|
|||||
Net investment income (loss)
(b)
|
|
0.18
|
|
|
||
Net realized and change in unrealized loss
|
|
(0.53)
|
|
|
||
Total from investment operations
|
|
(0.35)
|
|
|
||
Net asset value, end of period
|
$
|
24.65
|
|
|
||
Total Return:
(c)
|
|
(1.39)
|
%
|
|
||
|
|
|||||
Ratios/Supplemental Data:
|
|
|||||
Net assets, end of period (000s)
|
$
|
6,163
|
|
|
||
Ratio of expenses to average net assets
(d)
|
|
0.40
|
%
|
|
||
Ratio of net investment income (loss) to average net assets
(d)
|
|
2.73
|
%
|
|
||
Portfolio turnover rate
(d)(e)
|
|
7.1
|
%
|
|
||
|
|
|||||
(a)
|
Period from March 21, 2016, date operations commenced, through June 30, 2016.
|
|||||
(b)
|
Calculated on average shares outstanding during the period.
|
|||||
(c)
|
Total return amounts have not been annualized.
|
|||||
(d)
|
Computed on an annualized basis.
|
|||||
(e)
|
Portfolio turnover rate excludes in-kind transactions.
|
1
|
For certain structured finance, preferred stock and hybrid securities in which payment default events are either not defined or do not match investor’s expectations for timely payment, the ratings reflect the likelihood of impairment and the expected financial loss in the event of impairment.
|
Aaa:
|
Obligations rated Aaa are judged to be of the highest quality, subject to the lowest level of credit risk.
|
Aa:
|
Obligations rated Aa are judged to be of high quality and are subject to very low credit risk.
|
A:
|
Obligations rated A are considered upper-medium grade and are subject to low credit risk.
|
Baa:
|
Obligations rated Baa are subject to moderate credit risk. They are considered medium-grade and as such may possess certain speculative characteristics.
|
Ba:
|
Obligations rated Ba are judged to be speculative and are subject to substantial credit risk.
|
B:
|
Obligations rated B are considered speculative and are subject to high credit risk.
|
Caa:
|
Obligations rated Caa are judged to be speculative of poor standing and are subject to very high credit risk.
|
Ca:
|
Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.
|
C:
|
Obligations rated C are the lowest rated class of bonds and are typically in default, with little prospect for recovery of principal or interest.
|
NOTE:
|
Moody's appends numerical modifiers, 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category, the modifier 2 indicates a mid-range ranking, and the modifier 3 indicates a ranking in the lower end of that generic rating category. Additionally, a “(hyb)” indicator is appended to all ratings of hybrid securities issued by banks, issuers, financial companies, and securities firms.*
|
*
|
By their terms, hybrid securities allow for the omission of scheduled dividends, interest, or principal payments, which can potentially result in impairment if such an omission occurs. Hybrid securities may also by subject to contractually allowable write-downs of principal that could result in impairment. Together the hybrid indicator, the long-term obligation rating assigned to a hybrid security is an expression of the relative credit risk associated with that security.
|
•
|
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 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 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 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.)
|
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)
|
126
|
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)
|
126
|
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 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 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
|
Karen ("Karrie") McMillan
|
$90
|
$264,300
|
Elizabeth Nickels
(2)
|
$95
|
$254,133
|
Daniel Pavelich
|
$98
|
$281,000
|
(1)
|
The Principal Healthcare Innovators Index ETF and Principal Millennials Index ETF were not in operation during the period ended June 30, 2016.
|
(2)
|
Trustee’s appointment effective September 16, 2015.
|
Sub-Advisor:
|
Edge Asset Management, Inc. ("Edge")
is an affiliate of PMC and a member of the Principal
®
.
|
Fund:
|
Principal EDGE Active Income ETF
|
Sub-Advisor:
|
Principal Global Investors, LLC (“PGI”)
is an indirect wholly owned subsidiary of Principal Life Insurance Company, an affiliate of PMC, and a member of the Principal
®
.
|
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 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%
|
10/31/2017
|
(1)
|
Period from June 8, 2015, date operations commenced, through June 30, 2016
|
(2)
|
Period from March 21, 2016, date operations commenced, through June 30, 2016
|
Fund
|
Sub-Advisor Employed by
the Fund Complex
|
Affiliated Broker
|
2016
Fund's Total
Commissions
Paid
|
% of Fund's Total
Commissions
|
% of Dollar Amount of Fund's Commissionable Transactions
|
||||
Principal EDGE Active Income ETF
|
|||||||||
|
Mellon Capital Management Corporation
|
ConvergEx Execution Solutions, LLC
|
$
|
44
|
|
0.05
|
%
|
0.08
|
%
|
|
Credit Suisse Asset Management , LLC
|
Credit Suisse Securities (USA), LLC
|
1,770
|
|
2.00
|
|
2.55
|
|
|
|
J.P. Morgan Investment Management, Inc.
|
J.P. Morgan Clearing Corporation
|
2,979
|
|
3.36
|
|
0.55
|
|
|
|
Macquarie Capital Investment Management LLC
|
Macquarie Capital (USA) Inc
|
10,494
|
|
11.85
|
|
14.06
|
|
|
|
Mellon Capital Management Corporation
|
Pershing LLC
|
596
|
|
0.67
|
|
0.21
|
|
|
Total
|
$
|
15,883
|
|
17.93
|
%
|
17.45
|
%
|
||
Principal Shareholder Yield Index ETF
|
|
|
|
|
|||||
|
Mellon Capital Management Corporation
|
Pershing LLC
|
$
|
5
|
|
3.44
|
%
|
1.90
|
%
|
Total
|
$
|
5
|
|
3.44
|
%
|
1.90
|
%
|
•
|
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%
|
$600
|
2.00%
|
Principal Millennials Index ETF
|
$1,000
|
3.00%
|
$1,000
|
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
|
95.16%
|
Bank of New York
|
One Wall Street
|
|
|
|
New York, NY 10286
|
|
|
|
|
Principal Healthcare Innovators Index ETF
|
80.02%
|
NFS LLC
|
200 Liberty St,
|
|
|
|
One World Financial Center
|
|
|
|
New York, NY 10281-1003
|
|
|
|
|
Principal Healthcare Innovators Index ETF
|
17.39%
|
KCG
|
545 Washington Boulevard, 3rd Floor
|
|
|
|
Jersey City, NJ 07310
|
|
|
|
|
Principal Millennials Index ETF
|
68.79%
|
NFS LLC
|
200 Liberty St,
|
|
|
|
One World Financial Center
|
|
|
|
New York, NY 10281-1003
|
|
|
|
|
Principal Millennials Index ETF
|
13.83%
|
Goldman Sachs Execution & Clearing
|
30 Hudson Street
|
|
|
|
Jersey City, NJ 07302
|
|
|
|
|
Principal Millennials Index ETF
|
13.25%
|
JPMS/JPMC
|
3 Metrotech Center
|
|
|
|
3rd Floor, Mutual Fund Department
|
|
|
|
Brooklyn, NY 11245-0001
|
|
|
|
|
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
|
13.43%
|
KCG
|
545 Washington Boulevard, 3rd Floor
|
|
|
|
Jersey City, NJ 07310
|
|
|
|
|
Principal Shareholder Yield Index ETF
|
81.61%
|
NFS LLC
|
200 Liberty St,
|
|
|
|
One World Financial Center
|
|
|
|
New York, NY 10281-1003
|
|
|
|
|
Principal Shareholder Yield Index ETF
|
11.74%
|
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
|
11
|
$15.5 billion
|
0
|
$0
|
Other pooled investment vehicles
|
0
|
$0
|
0
|
$0
|
Other accounts
|
0
|
$0
|
0
|
$0
|
|
|
|
|
|
Jill R. Cuniff:
Principal EDGE Active Income ETF
|
|
|
|
|
Registered investment companies
|
10
|
$15.3 billion
|
0
|
$0
|
Other pooled investment vehicles
|
0
|
$0
|
0
|
$0
|
Other accounts
|
0
|
$0
|
0
|
$0
|
|
|
|
|
|
Todd A. Jablonski:
Principal EDGE Active Income ETF
|
|
|
|
|
Registered investment companies
|
11
|
$15.5 billion
|
0
|
$0
|
Other pooled investment vehicles
|
0
|
$0
|
0
|
$0
|
Other accounts
|
0
|
$0
|
0
|
$0
|
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
|
$10,001 - $50,000
|
Jill R. Cuniff
|
Principal EDGE Active Income ETF
|
$100,001 - $500,000
|
Todd A. Jablonski
|
Principal EDGE Active Income ETF
|
None
|
|
|
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 Price Setters Index ETF, and Principal Shareholder Yield Index ETF
|
|
|
|
|
Registered investment companies
|
0
|
$0
|
0
|
$0
|
Other pooled investment vehicles
|
0
|
$0
|
0
|
$0
|
Other accounts
|
0
|
$0
|
0
|
$0
|
|
|
|
|
|
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
|
5
|
$992.5 million
|
0
|
$0
|
Other pooled investment vehicles
|
2
|
$193.3 million
|
0
|
$0
|
Other accounts
|
3
|
$332.3 million
|
0
|
$0
|
|
|
|
|
|
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
|
18
|
$13.6 billion
|
0
|
$0
|
Other pooled investment vehicles
|
6
|
$27.0 billion
|
0
|
$0
|
Other accounts
|
2
|
$96.7 million
|
0
|
$0
|
|
|
|
|
|
Daniela Spassova:
Principal EDGE Active Income ETF
|
|
|
|
|
Registered investment companies
|
0
|
$0
|
0
|
$0
|
Other pooled investment vehicles
|
0
|
$0
|
0
|
$0
|
Other accounts
|
0
|
$0
|
0
|
$0
|
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
|
$50,001 - $100,000
|
Paul S. Kim
|
Principal Healthcare Innovators Index ETF
|
None
|
Paul S. Kim
|
Principal Millennials Index ETF
|
None
|
Paul S. Kim
|
Principal Price Setters Index ETF
|
None
|
Paul S. Kim
|
Principal Shareholder Yield Index ETF
|
None
|
Mark R. Nebelung
|
Principal Healthcare Innovators Index ETF
|
None
|
Mark R. Nebelung
|
Principal Millennials Index ETF
|
$10,001 - $50,000
|
Mark R. Nebelung
|
Principal Price Setters Index ETF
|
$50,001 - $100,000
|
Mark R. Nebelung
|
Principal Shareholder Yield Index ETF
|
$50,001 - $100,000
|
Jeffrey A. Schwarte
|
Principal Healthcare Innovators Index ETF
|
$100,001 - $500,000
|
Jeffrey A. Schwarte
|
Principal Millennials Index ETF
|
$100,001 - $500,000
|
Jeffrey A. Schwarte
|
Principal Price Setters Index ETF
|
$100,001 - $500,000
|
Jeffrey A. Schwarte
|
Principal Shareholder Yield Index ETF
|
$100,001 - $500,000
|
Daniela Spassova
|
Principal EDGE Active Income ETF
|
None
|
*
|
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.
|
|
•
|
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)
|
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)
|
Amended and Restated Management Agreement with Principal Management Corporation dated 09/21/2016 *
|
|
|
(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)
|
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)
|
|
|
(v)
|
Amended and Restated Sub-Advisory Agreement with Principal Global Investors, LLC dated 09/21/2016 *
|
|
(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)
|
|
|
c.
|
Distribution Agreement Amendment No. 2 with ALPS Distributors, Inc. dated 08/15/2016 -- Filed as Exhibit 99.(e)(i)c on 09/19/2016 (Accession No. 0001572661-16-000207)
|
|
|
d.
|
Distribution Agreement Amendment No. 3 with ALPS Distributors, Inc. dated 09/21/2016 *
|
|
(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 -- Filed as Exhibit 99.(g)(ii) on 08/18/2016 (Accession No. 0001572661-16-000191)
|
|
|
(iii)
|
Custodian Agreement Amendment (letter) dated 08/11/2016 *
|
|
|
(iv)
|
Custodian Agreement Amendment (letter) dated 09/19/2016 *
|
|
(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 11/01/2016 *
|
|
(i)
|
Legal Opinion *
|
||
(j)
|
(i)
|
Consent of Independent Registered Public Accounting Firm *
|
|
|
(ii)
|
Rule 485(b) Opinion *
|
|
|
(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)
|
|
(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)
|
|
|
(iii)
|
Letter of Investment Intent dated August 19, 2016 -- Filed as Exhibit 99.(l)(iii) on 09/19/2016 (Accession No. 0001572661-16-000207)
|
|
|
(iv)
|
Letter of Investment Intent dated September 21, 2016 *
|
|
(m)
|
Form of Distribution Plan and Agreement Pursuant to Rule 12b-1 with respect to shares of the Registrant *
|
(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 Principal Global Investors, LLC dated 01/01/2015 -- Filed as Exhibit 99.(p)(iii) on 02/24/2016 (Accession No. 0001572661-16-000073)
|
|
|
(iv)
|
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
|
|
|
|
|
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 Fund certifies that it meets all of the requirement for effectiveness of this registration statement under rule 485(b) under the Securities Act and has duly caused this 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 27th day of October, 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)
|
October 27, 2016
|
|
|
|
||
/s/ T. W. Bollin
__________________________
T. W. Bollin
|
Chief Financial Officer
(Principal Financial Officer)
|
October 27, 2016
|
|
|
|
|
|
/s/ L. A. Rasmussen
__________________________
L. A. Rasmussen
|
Vice President and Controller
(Controller)
|
October 27, 2016
|
|
|
|
||
(E. Ballantine)*
__________________________
E. Ballantine
|
Trustee
|
October 27, 2016
|
|
|
|
||
(L. T. Barnes)*
__________________________
L. T. Barnes
|
Trustee
|
October 27, 2016
|
|
|
|
||
(C. Damos)*
__________________________
C. Damos
|
Trustee
|
October 27, 2016
|
|
|
|
||
(N. M. Everett)*
__________________________
N. M. Everett
|
Trustee
|
October 27, 2016
|
|
|
|
||
(M. A. Grimmett)*
__________________________
M. A. Grimmett
|
Trustee
|
October 27, 2016
|
|
|
|
||
(F. S. Hirsch)*
__________________________
F. S. Hirsch
|
Trustee
|
October 27, 2016
|
|
|
|
||
(T. Huang)*
__________________________
T. Huang
|
Trustee
|
October 27, 2016
|
|
|
|
||
(W. C. Kimball)*
__________________________
W. C. Kimball
|
Trustee
|
October 27, 2016
|
|
|
|
||
(K. McMillan)*
__________________________
K. McMillan
|
Trustee
|
October 27, 2016
|
|
|
|
||
(E. A. Nickels)*
__________________________
E. A. Nickels
|
Trustee
|
October 27, 2016
|
|
|
|
||
(D. Pavelich)*
__________________________
D. Pavelich
|
Trustee
|
October 27, 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)
|
(a)
|
Agreement and Declaration of Trust of the Fund;
|
(b)
|
Bylaws of the Fund as adopted by the Board of Trustees; and
|
(c)
|
Resolutions of the Board of Trustees of the Fund selecting the Manager as investment adviser for each Series and approving the form of this Agreement with respect to each such Series; and
|
(a)
|
Provide investment research, advice and supervision;
|
(b)
|
Provide investment advisory, research and statistical facilities and all clerical services relating to research, statistical and investment work;
|
(c)
|
Furnish to the Board of Trustees of the Fund (or any appropriate committee of such Board), and provide ongoing review, evaluation and revision from time to time as conditions require of, a recommended investment program for the portfolio of each Series of the Fund consistent with each Series' investment objective and policies, including any recommendation for any combination of liquidation of Series;
|
(d)
|
Where applicable, based on upon research, analysis and due diligence, recommend to the Board of Trustees of the Fund one or more sub-advisers for a Series of the Fund; regularly monitor and evaluate each sub-adviser’s performance and recommend changes to the sub-advisers in situations in which appropriate.
|
(e)
|
Implement such of its recommended investment program for each Series as the Fund shall approve, by placing orders for the purchase and sale of securities, subject always to the provisions of the Fund’s Agreement and Declaration of Trust and Bylaws and the requirements of the Investment Company Act of 1940, as amended (the “1940 Act”), and the Fund’s Registration Statement, current Prospectus and Statement of Additional Information, as each of the same shall be from time to time in effect;
|
(f)
|
Advise and assist the officers of the Fund in taking such steps as are necessary or appropriate to carry out the decisions of its Board of Trustees and any appropriate committees of such Board regarding the general conduct of the investment business of each Series; and
|
(g)
|
Report to the Board of Trustees of the Fund at such times and in such detail as the Board may deem appropriate in order to enable it to determine that the investment policies of each Serie are being observed.
|
(a)
|
Maintain fund general ledger and journal;
|
(b)
|
Prepare and record disbursements for direct expenses of each Series;
|
(c)
|
Prepare daily money transfer;
|
(d)
|
Reconcile all bank and custodian accounts of each Series;
|
(e)
|
Assist Fund independent auditors as appropriate;
|
(f)
|
Prepare daily projection of available cash balances;
|
(g)
|
Record trading activity for purposes of determining net asset values and daily dividend;
|
(h)
|
Prepare daily portfolio valuation report to value portfolio securities and determine daily accrued income;
|
(i)
|
Determine the net asset value per share if each Series daily or at such other intervals as the Fund may reasonably request or as may be required by law;
|
(j)
|
Prepare monthly, quarterly, semi-annual and annual financial statements;
|
(k)
|
Provide financial information for reports to the Securities and Exchange Commission (the “SEC”) in compliance with the provisions of the 1940 Act and the Securities Act of 1933, as amended the (the “Securities Act”), the Internal Revenue Service and any other regulatory or governmental agencies as required;
|
(l)
|
Provide financial, yield, net asset value, and similar information to National Association of Securities Dealers, Inc., and other survey and statistical agencies as instructed from time to time by the Fund;
|
(m)
|
Investigate, assist in the selection of and conduct relations with custodians, depositories, accountants, legal counsel, insurers, banks and persons in any other capacity deemed to be necessary or desirable for the operations of each Series; and
|
(n)
|
Obtain and keep in effect fidelity bonds and trustees and officers/errors and omissions insurance policies for the Fund in accordance with the requirements of the 1940 Act and the rules thereunder, as such bonds and policies are approved by the Fund's Board of Trustees.
|
3.
|
TRUST ADMINISTRATIVE SERVICES
|
(a)
|
furnish the services of such of the Manager's officers and employees as may be elected officers or trustees of the Fund, subject to their individual consent to serve and to any limitations imposed by law;
|
(b)
|
furnish office space, and all necessary office facilities and equipment, for the general trust functions of the Fund (i.e., functions other than (i) underwriting and distribution of the shares of each Series; (ii) custody of the assets of each Series, (iii) transfer and paying agency services; and (iv) corporate and portfolio accounting services);
|
(c)
|
furnish the services of executive and clerical personnel necessary to perform the general trust functions of the Fund.
|
(d)
|
design, develop, implement and regularly monitor appropriate compliance processes; and
|
(e)
|
prepare, or provide oversight and review of the preparation of, registration statements, shareholder reports and other disclosure materials and regulatory filings for each Series.
|
PRINCIPAL EXCHANGE-TRADED FUNDS
|
|
|
|
By
|
/s/ Beth C. Wilson
|
|
Beth C. Wilson, Vice President & Secretary
|
|
|
By
|
/s/ Adam U Shaikh
|
|
Adam U. Shaikh, Assistant Counsel
|
|
|
|
|
PRINCIPAL MANAGEMENT CORPORATION
|
|
|
|
By
|
/s/ Mike Beer
|
|
Michael J. Beer, President and Chief Executive Officer
|
|
|
By
|
/s/ Adam Shaikh
|
|
Adam Shaikh, Counsel
|
Series
|
Management Fee as a Percentage
of Average Daily Net Assets
|
|||
First $500 million
|
Next $500 million
|
Next $500 million
|
Over $1.5 billion
|
|
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%
|
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%
|
Series
|
Management Fee as a Percentage
of Average Daily Net Assets
All Assets
|
Principal U.S. Small Cap Index ETF
|
0.38%
|
Series
|
Effective Date
|
Initial Term
|
Principal Shareholder Yield Index ETF
|
03/21/2016
|
Two Years
|
Principal Price Setters Index ETF
|
03/21/2016
|
Two Years
|
Principal Healthcare Innovators Index ETF
|
08/19/2016
|
Two Years
|
Principal Millennials Index ETF
|
08/19/2016
|
Two Years
|
Principal U.S. Small Cap Index ETF
|
09/21/2016
|
Two Years
|
(a)
|
Management Agreement (the
"Management
Agreement") with the Fund
|
(b)
|
The Fund's registration statement and financial statements as filed with the Securities and Exchange Commission (the
"SEC'')';
|
(c)
|
The Fund's Agreement and Declaration of Trust and By-laws
|
(d)
|
Policies, procedures or instructions adopted or approved by the Board of Trustees of the Fund relating to obligations and services to be provided by the Sub-Advisor.
|
(a)
|
Appointment of Sub-Advisor
|
(b)
|
Obligations of and Services to be Provided by the Sub-Advisor
The Sub-Advisor will:
|
(a)
|
Provide investment advisory services, including but not limited to research, advice and supervision for the Allocated Assets of each Series
.
|
(b)
|
Furnish to the Board of Trustees of the Fund for approval (or any appropriate committee of such Board), and revise from time to time as conditions require, a recommended investment program for each Series consistent with each Series' respective investment objective(s) and policies and any specific criteria applicable to the Allocated Assets.
|
(c)
|
Implement the approved investment program for the Allocated Assets by placing orders for the purchase and sale of securities without prior consultation with the Manager and without regard to the length of time the securities have been held, the resulting rate of portfolio turnover or any tax considerations, subject always to the provisions of the Fund's registration statement, Articles of Incorporation and Bylaws and the requirements of the 1940 Act, as each of the same shall be from time to time in effect.
|
(d)
|
Advise and assist the officers of the Fund, as requested by the officers, in taking such steps as are necessary or appropriate to carry out the decisions of its Board of Trustees, and any appropriate committees of such Board, regarding the general conduct of the investment business of each Series.
|
(e)
|
Maintain, in connection with the Sub-Advisor's investment advisory services provided to the Allocated Assets, compliance with the 1940 Act and the regulations adopted by the SEC thereunder and the Series' investment strategies and restrictions as stated in the Fund's prospectus and statement of additional information and any specific criteria applicable to the Allocated Assets.
|
(f)
|
Report to the Board of Trustees of the Fund at such times and in such detail as the Board of Trustees may reasonably deem appropriate in order to enable it to determine that the investment policies, procedures and approved investment program of each Series (and any specific criteria applicable to the Allocated Assets) are being observed.
|
(g)
|
Upon request, provide assistance and recommendations for the determination of the fair value of certain securities when reliable market quotations are not readily available for purposes of calculating net asset value in accordance with procedures and methods established by the Fund's Board of Trustees.
|
(h)
|
Furnish, at its own expense, (i) all necessary investment and management facilities, including salaries of clerical and other personnel required for it to execute its duties faithfully, and (ii) administrative facilities, including bookkeeping, clerical personnel and equipment necessary for the efficient conduct of the investment advisory affairs of each Series.
|
(i)
|
Open accounts with Foreign Account Tax Compliance Act compliant broker-dealers and futures commission merchants ("broker-dealers"), select broker-dealers to
effect
all transactions for each Series, place all necessary orders with broker-dealers or issuers (including affiliated broker-dealers), and negotiate commissions, if applicable. To the extent consistent with applicable law, purchase or sell orders for each Series may be aggregated with contemporaneous purchase or sell orders of other clients of the Sub-Advisor. In such event allocation of securities so sold or purchased, as well as the expenses incurred in the transaction, will be made by the Sub-Advisor in the manner the Sub-Advisor considers to be the most equitable and consistent with its fiduciary obligations to the Fund and to other clients. The Sub-Advisor will report on such allocations at the request of the Manager, the Fund or the Fund's Board of Trustees providing such information as the number
of aggregated trades to which each Series was a party, the broker-dealers to whom such trades were directed and
the
basis for the allocation for the aggregated trades. The Sub-
|
(j)
|
Maintain all accounts, books and records with respect to the Allocated Assets as are required of an investment advisor of a registered investment company pursuant to the 1940 Act and Investment Advisers Act of 1940, as amended (the
"Advisers
Act"), and the rules thereunder, and furnish the Fund and the Manager with such periodic and special reports as the Fund or the Manager may reasonably request. In compliance with the requirements of Rule 31a-3 under the 1940 Act, the Sub-Advisor hereby agrees that all records that it maintains for each Series are the property of the Fund, agrees to preserve for the periods described by Rule 31a-2 under the 1940 Act any records that it maintains for the Series and that are required to be maintained by Rule 31a-1 under the 1940 Act, and further agrees to surrender promptly to the Fund any records that it maintains for a Series upon request by the Fund or the Manager. The Sub-Advisor has no responsibility for the maintenance of Fund records except insofar as is directly related to the services the Sub-Advisor provides to a Series.
|
(k)
|
Observe and comply with Rule 17j-1 under the 1940 Act and the Sub-Advisor's Code of Ethics adopted pursuant to that Rule as the same may be amended from time to time . The Manager acknowledges receipt of a copy of the Sub-Advisor's current Code of Ethics. The Sub-Advisor shall promptly forward to the Manager a copy of any material amendment to the Sub-Advisor's Code of Ethics along with certification that the Sub-Advisor has implemented procedures for administering the Sub Advisor's Code of Ethics.
|
(l)
|
From time to time as the Manager or the Fund may request, furnish the requesting party reports on portfolio transactions and reports on investments held by a Series, all in such detail as the Manager or the Fund may reasonably request. The Sub Advisor will make available its officers and employees to meet with the Fund's Board of Trustees at the Fund's principal place of business on due notice to review the investments of a Series.
|
(m)
|
Provide such information as is customarily provided by a sub-advisor, or as may be required or reasonably requested by the Manager, for the Fund or the Manager to comply with their respective obligations under applicable laws, including, without limitation, the Internal Revenue Code of 1986, as amended (the "Code"), the 1940Act, the Advisers Act, the Securities Act of 1933, as amended (the "Securities Act"), and any state securities laws, and any rule or regulation thereunder. Such information includes, but is not limited to: the Sub-Advisor's compliance manual and policies and procedures adopted to comply with Rule 206(4)-7 of the Advisers Act
; the Sub-Advisor's most recent annual compliance report or a detailed summary of such report; timely and complete responses to all Quarterly Compliance Questionnaires (including the identification of any material compliance matters
|
(n)
|
Vote proxies received on behalf of each Series (with respect to the portion thereof allocated to the Sub-Advisor) in a manner consistent with the Sub-Advisor's proxy voting policies and procedures and provide a record of votes cast containing all of the voting information required by Form N-PX in an electronic format to enable the Series to file Form N-PX as required by SEC rule.
|
(o)
|
Respond to tender offers, rights offerings and other voluntary corporate action requests affecting securities held by each Series (with respect to the portion thereof allocated to the Sub-Advisor.
|
(p)
|
Cooperate with the Manager in its performance of quarterly and annual tax compliance tests to monitor the Series' compliance with Subchapter M of the Code and Section 817(h) of the Code. If it is determined by the Manager or its tax advisors that the Series is not in compliance with the requirements imposed by the Code, the Sub-Advisor, in consultation with the Manager and its tax advisors, will take prompt action to bring the Series back into compliance with the time permitted under the Code.
|
3.
|
Prohibited Conduct
|
4.
|
Compensation
|
5.
|
Liability of Sub-Advisor
|
6.
|
Trade Errors
|
7.
|
Supplemental Arrangements
|
8.
|
Regulation
|
9.
|
Duration and Termination of This Agreement
|
10.
|
Amendment of this Agreement
|
11.
|
Additional Series
|
12.
|
General Provisions
|
(a)
|
Each party agrees to perform such further acts and execute such further documents as are necessary to effectuate the purposes hereof. This Agreement shall be construed and enforced in accordance with and governed by the laws of the State of Iowa. The captions in this Agreement are included for convenience only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect.
|
(b)
|
Any notice under this Agreement shall be in writing, addressed and delivered or mailed postage pre-paid to the other party at such address as such other party may designate for the receipt of such notices. Until further notice to the other party, it is agreed that the address of the Manager and Sub-Advisor for this purpose shall be Principal F
i
nancial Group, Des Moines, Iowa 50392-0200
.
|
(c)
|
The Sub-Advisor will promptly notify the Manager in writing of the occurrence of any of the following events:
|
1.
|
the Sub-Advisor fails to be registered as an investment adviser under the Advisers Act or under the laws of any jurisdiction in which the Sub-Advisor is required to be registered as an investment advisor in order to perform its obligations under this Agreement.
|
2.
|
the Sub-Advisor is served or otherwise receives notice of any action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public board or body, involving the affairs of a Series
.
|
3.
|
the Sub-Advisor becomes aware of any pending or threatened action, suit, proceeding, inquiry or investigation that is reasonably likely to result in a conviction, order, judgment or decree issued with respect to it or any affiliate that could reasonably be expected to result in the Sub-Advisor becoming ineligible to
serve as an investment adviser of a
registered
investment company under the 1940 Act.
|
4.
|
the Sub-Advisor becomes aware of a transaction or series of transactions that is reasonably likely to result in a change in the management or control of the Sub Advisor or a controlling person thereof or otherwise in the assignment (as defined in the 1940 Act) of this Agreement by the Sub-Advisor
.
|
(d)
|
The Manager shall provide (or cause the Series custodian to provide) timely information to the Sub-Advisor regarding such matters as the composition of the assets of a Series, cash requirements and cash available for investment in a Series, and all other reasonable information as may be necessary for the Sub-Advisor to perform its duties and responsibilities hereunder
.
|
(e)
|
The Sub-Advisor represents that it will not enter into any agreement, oral or written, or other understanding under which the Fund directs or is expected to direct portfolio securities transactions, or any remuneration, to a broker or dealer in consideration for the promotion or sale of Fund shares or shares issued by any other registered investment company. The Sub-Advisor further represents that it is contrary to the Sub-Advisor's policies to permit those who select brokers or dealers for execution of Fund portfolio securities transactions to take into account the broker's or dealer's promotion or sale of Fund shares or shares issued by any other registered investment company.
|
(f)
|
The Sub-Advisor agrees that neither it nor any of its affiliates will
in
any way refer to its relationship with the Fund, the Series, or the Manager or any of their respective affiliates in offering, marketing or other promotional materials without the express written consent of the Manager
|
(g)
|
This Agreement contains the entire understanding and agreement of the parties.
|
PRINCIPAL MANAGEMENT CORPORATION
|
|
|
|
By
|
/s/ Mike Beer
|
Name:
|
Mike Beer
|
Title:
|
President
|
|
|
By
|
/s/ Adam Shaikh
|
Name:
|
Adam Shaikh
|
Title:
|
Assistant Counsel
|
|
|
|
|
PRINCIPAL GLOBAL INVESTORS, LLC
|
|
|
|
By
|
/s/ Barbara A. McKenzie
|
Name:
|
Barbara A. McKenzie
|
Title:
|
Sr. Exec. Dir - CCO & Boutique Ops
|
|
|
By
|
/s/ Christopher J. Henderson
|
Name:
|
Christopher J. Henderson
|
Title:
|
Vice President and Associate General Counsel
|
Series
|
Effective Date
|
Initial Term
|
Principal Shareholder Yield Index ETF
|
03/21/2016
|
2 Years
|
Principal Price Setters Index ETF
|
03/21/2016
|
2 Years
|
Principal Healthcare Innovators Index ETF
|
08/19/2016
|
2 Years
|
Principal Millenn
i
als Index ETF
|
08/19/2016
|
2 Years
|
Principal U.S. Small Cap Index ETF
|
09/21/2016
|
2 Years
|
PRINCIPAL EXCHANGE-TRADED FUNDS
|
|
ALPS DISTRIBUTORS, INC.
|
||
|
|
|
|
|
By:
|
/s/ Layne A. Rasmussen
|
|
By:
|
/s/ Steven B. Price
|
Name:
|
Layne A. Rasmussen
|
|
Name:
|
Steven B. Price
|
Title:
|
VP, Controller
|
|
Title:
|
SVP & CCO
|
Principal Funds
711 High Street, Des Moines, IA 50392
515 247 5111 tel
www.principal.com
|
|
Sincerely,
|
|
|
|
PRINCIPAL EXCHANGE-TRADED FUNDS
|
|
|
on behalf of:
|
|
PRINCIPAL MILLENNIALS INDEX ET
|
|
PRINCIPAL HEALTHCARE INNOVATORS INDEX ETF
|
|
|
By:
|
/s/ Layne A. Rasmussen
|
Name:
|
Layne A. Rasmussen
|
Title:
|
VP and Controller, Duly Authorized
|
Agreed and Accepted:
|
|
|
|
STATE STREET BANK AND TRUST COMPANY
|
|
|
|
By:
|
/s/ Andrew Erickson
|
Name:
|
Andrew Erickson
|
Title:
|
Executive Vice President, Duly Authorized
|
|
|
Effective Date: August 19, 2016
|
Principal Funds
711 High Street, Des Moines, IA 50392
www.principal.com
|
|
Sincerely,
|
|
|
|
PRINCIPAL EXCHANGE-TRADED FUNDS
|
|
|
on behalf of: PRINCIPAL U.S. SMALL CAP INDEX ETF
|
|
|
By:
|
/s/ Layne Rasmussen
|
Name:
|
Layne Rasmussen
|
Title:
|
VP and Controller, Duly Authorized
|
Agreed and Accepted:
|
|
|
|
STATE STREET BANK AND TRUST COMPANY
|
|
|
|
By:
|
/s/ Andrew Erickson
|
Name:
|
Andrew Erickson
|
Title:
|
Executive Vice President, Duly Authorized
|
|
|
Effective Date: September 21, 2016
|
PRINCIPAL EXCHANGE-TRADED FUNDS, INC.
|
|
PRINCIPAL MANAGEMENT CORPORATION
|
|
|
|
/s/ Michael J. Beer
|
|
/s/ Michael J. Beer
|
By:
________________________________
|
|
By:
________________________________
|
Name: Michael J. Beer
|
|
Name: Michael J. Beer
|
Title: President and Chief Executive Officer
|
|
Title: President and Chief Executive Officer
|
|
|
|
|
|
|
/s/ Beth C. Wilson
|
|
/s/ Adam U. Shaikh
|
By:
________________________________
|
|
By:
________________________________
|
Name: Beth C. Wilson
|
|
Name: Adam U. Shaikh
|
Title: Secretary and Vice President
|
|
Title: Counsel
|
Series
|
|
Expiration
|
Principal Edge Active Income ETF
|
0.85%
|
10/31/2017
|
Principal Exchange-Traded Funds
711 High Street, Des Moines, IA 50392
515 247 5111 tel
|
|
Principal Exchange-Traded Funds
711 High Street, Des Moines, IA 50392
515 247 5111 tel
|
|
Principal Financial Services, Inc.
711 High Street, Des Moines, IA 50392
515 247 5111 tel
www.principal.com
|
|
Principal Exchange-Traded Funds
|
Purchase
Amount
|
Shares
Purchased
|
Principal U.S. Small Cap Index ETF
|
$25.00
|
1
|
PRINCIPAL FINANCIAL SERVICES, INC.
|
|
|
|
BY
|
/s/ Clint Woods
|
|
Clint Woods
|
|
Vice President and Associate General Counsel
|
1.
|
This Distribution and Service Plan (the “Plan”), when effective in accordance with its terms, shall be the written plan contemplated by Securities and Exchange Commission Rule 12b-1 under the Investment Company Act of 1940, as amended (the “Act”) for the shares of each Series identified in Appendix A, attached hereto (the “Series”)of the Principal Exchange-Traded Funds (the “Fund”).
|
2.
|
The Fund has entered into a Distribution Agreement on behalf of the Fund with the Distributor, under which the Distributor uses all reasonable efforts, consistent with its other business, to secure purchasers of shares of each Series of the Fund (the “Shares”). Such efforts may include, but neither are required to include nor are limited to, the following: (1) formulation and implementation of marketing and promotional activities, such as mail promotions and television, radio, newspaper, magazine and other mass media advertising; (2) preparation, printing and distribution of sales literature provided to the Fund’s shareholders and prospective shareholders; (3) preparation, printing and distribution of prospectuses and statements of additional information of the Fund and reports to recipients other than existing shareholders of the Fund; (4) obtaining such information, analyses and reports with respect to marketing and promotional activities as the Distributor may, from time to time, deem advisable; (5) making payment of sales commission, ongoing commissions and other payments to brokers, dealers, financial institutions or others who sell Shares pursuant to Selling Agreements; (6) paying compensation to registered representatives or other employees of the Distributor who engage in or support distribution of the Fund’s Shares; (7) paying compensation to, and expenses (including overhead and telephone expenses) of, the Distributor; (8) providing training, marketing and support to dealers and others with respect to the sale of Shares; (9) receiving and answering correspondence from prospective shareholders including distributing prospectuses, statements of additional information, and shareholder reports; (10) providing of facilities to answer questions from prospective investors about Shares; (11) complying with federal and state securities laws pertaining to the sale of Shares; (12) assisting investors in completing application forms and selecting dividend and other account options; (13) providing of other reasonable assistance in connection with the distribution of the Fund’s shares; (14) organizing and conducting of sales seminars and making payments in the form of transactional compensation or promotional incentives; and (15) such other distribution and services activities as the Fund determines may be paid for by the Fund pursuant to the terms of this Plan and in accordance with Rule 12b-1 of the Act.
|
3.
|
The Distribution Agreement also authorizes the Distributor to enter into Service Agreements with other selling dealers and with banks or other financial institutions to provide shareholder services to existing Fund shareholders, including without limitation, services such as furnishing information as to the status of shareholder accounts, responding to telephone and written inquiries of shareholders, and assisting Fund shareholders with tax information.
|
4.
|
In consideration for the services described above, and the expenses incurred by the Distributor pursuant to the Distribution Agreement and Paragraphs 2 and 3 hereof, all with respect to shares of a Series of the Fund, shares of each Series shall pay to the Distributor a fee at the annual rate as shown on Appendix A (or such lesser amount as the Fund Trustees may, from time to time, determine) of the average daily net assets of shares of such Series. This fee shall be accrued daily and paid monthly or at such other intervals, as the Fund Trustees shall determine. The determination of daily net assets shall be made at the close of business each day throughout the month and computed in the manner specified in the Fund’s then current Registration Statement for the determination of the net asset value of the Fund’s shares.
|
5.
|
The Fund presently pays, and will continue to pay, a management fee to Principal Management Corporation (the “Manager”) pursuant to a Management Agreement between the Fund and the Manager (the “Management Agreement”). It is recognized that the Manager may use its management fee revenue, as well as its past profits or its resources from any other source, to make payment to the Distributor with respect to any expenses incurred in connection with the distribution of shares, including the activities referred to in Paragraph 2 hereof. To the extent that the payment of management fees by the Fund to the Manager should be deemed to be indirect financing of any activity primarily intended to result in the sale of shares within the meaning of Rule 12b-1, then such payment shall be deemed to be authorized by this Plan.
|
6.
|
This Plan shall not take effect until it has been approved (a) by a vote of at least a majority (as defined in the Act) of the outstanding shares of the Series of the Fund and (b) by votes of the majority of both (i) the Board of Trustees of the Fund, and (ii) those Trustees of the Fund who are not "interested persons" (as defined in the Act) of the Fund and who have no direct or indirect financial interest in the operation of this Plan or any agreements related to this Plan (the "Disinterested Trustees"), cast in person at a meeting called for the purpose of voting on this Plan or such agreements.
|
7.
|
Unless sooner terminated pursuant to Paragraph 6, this Plan shall continue in effect for a period of twelve months from the date it takes effect and thereafter shall continue in effect so long as such continuance is specifically approved at least annually in the manner provided for approval of this Plan in Paragraph 6(b).
|
8.
|
A representative of the Distributor shall provide to the Board and the Board shall review at least quarterly a written report of the amounts so expended and the purposes for which such expenditures were made.
|
9.
|
This Plan may be terminated at any time by vote of a majority of the Disinterested Trustees, or by vote of a majority (as defined in the Act) of the outstanding shares of the Series of the Fund.
|
10.
|
Any agreement of the Fund related to this Plan shall be in writing and shall provide:
|
A.
|
That such agreement may be terminated at any time, without payment of any penalty, by vote of a majority of the Disinterested Trustees or by a vote of a majority (as defined in the Act) of the outstanding shares of the Series of the Fund on not more than sixty (60) days' written notice to any other party to the agreement); and
|
B.
|
That such agreement shall terminate automatically in the event of its assignment.
|
11.
|
While the Plan is in effect, the Fund’s Board of Trustees shall satisfy the fund governance standards as defined in Securities and Exchange Commission Rule 0-1(a)(7).
|
12.
|
This Plan does not require the Manager or Distributor to perform any specific type or level of distribution activities or to incur any specific level of expenses for activities primarily intended to result in the sale of shares.
|
13.
|
The Fund shall preserve copies of this Plan and any related agreements and all reports made pursuant to Paragraph 8, for a period of not less than six years from the date of the Plan, or the agreements or such report, as the case may be, the first two years in an easily accessible place.
|
14.
|
This Plan may not be amended to increase materially the amount of Fees provided for in Paragraph 4 hereof unless such amendment is approved in the manner provided for initial approval in Paragraph 6 hereof and no other material amendment to this Plan shall be made unless approved in the manner provided for initial approval in Paragraph 6(b) hereof.
|