Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-23029
Principal Exchange-Traded Funds
(Exact name of registrant as specified in charter)
711 High Street, Des Moines, IA 50392
(Address of principal executive offices) (Zip code)
Principal Management Corporation, 711 High Street, Des Moines, IA 50392
(Name and address of agent for service)
Registrant’s telephone number, including area code: 515-248-0156
Date of fiscal year end: June 30, 2017
Date of reporting period: December 31, 2016
Table of Contents
ITEM 1 – REPORT TO STOCKHOLDERS
Table of Contents
Principal Exchange-Traded Funds
Semiannual Report
December 31, 2016
Table of Contents
PRIVACY NOTICE | ||
This Notice is provided on behalf of the following | ||
companies of the Principal Financial Group: | ||
Principal Life Insurance Company | ||
Principal National Life Insurance Company | ||
Principal Securities, Inc. | ||
Principal Trust Company | ||
Principal Global Investors, LLC | ||
Principal Global Investors Trust | ||
Principal Real Estate Investors, LLC | ||
Principal Commercial Acceptance, LLC | ||
Principal Commercial Funding, LLC | ||
Principal Green Fund I, LP / PGF GP, LLC | ||
Principal Green Property Fund Employees II, LLC | ||
Principal Real Estate Debt Fund I, LP | ||
Principal Real Estate Debt Fund, GP, LLC | ||
Edge Asset Management, Inc. / Spectrum Asset Management, Inc. | ||
Principal Variable Contracts Funds, Inc. | ||
Principal Life Insurance Company Variable Life Separate Account | ||
Principal National Life Insurance Company Variable Life Separate Account | ||
Principal Life Insurance Company Separate Account B | ||
Principal Funds, Inc. / Principal Funds Distributor, Inc. | ||
Employers Dental Services, Inc. / Principal Dental Services, Inc. | ||
First Dental Health |
PROTECTING YOUR PRIVACY
This Notice is required by law. It tells how we handle personal information.
This Notice applies to:
● | people who own or apply for our products or services for personal use. |
● | employee benefit plan participants and beneficiaries. |
Please note that in this Notice, “you” refers to only these people. The Notice does not apply to an employer plan sponsor or group policyholder.
WE PROTECT INFORMATION WE COLLECT ABOUT YOU
We follow strict standards to safeguard personal information. These standards include limiting access to data and regularly testing our security technology.
HOW WE COLLECT INFORMATION
We collect data about you as we do business with you. Some of the sources of this data are as follows:
● | Information we obtain when you apply or enroll for products or services. You may provide facts such as your name; address; Social Security number; financial status; and, when applicable, health history. |
● | Information we obtain from others. This may include claim reports, medical records, when applicable, credit reports, property values and similar data. |
● | Information we obtain through our transactions and experience with you. This includes your claims history, payment and investment records, and account values and balances. |
● | Information we obtain through the Internet. This includes data from online forms you complete. It also includes data we collect when you visit our websites. |
HOW WE SHARE INFORMATION
We may share personal information about you or about former customers, plan participants or beneficiaries among companies within the Principal Financial Group for several reasons, including:
● | to assist us in servicing your account; |
● | to help design and improve products; |
● | to protect against potential identity theft or unauthorized transactions; |
● | in response to a subpoena or for other legal purposes; |
● | to prevent fraud; |
● | to comply with inquiries from government agencies or other regulators; |
● | with others that service your account, or that perform services on our behalf; |
● | with others with whom we may have joint marketing agreements. These include financial services companies (such as other insurance companies, banks or mutual fund companies); and |
● | with your consent, at your request or as allowed by law. |
MEDICAL INFORMATION
We do not share medical information among companies of the Principal Financial Group or with others except:
● | when needed to service your policies, accounts, claims or contracts; |
● | when laws protecting your privacy permit it; or |
● | when you consent. |
MM 2458-14 04/2016 | Page 1 of 2 | F445PS-16 |
Table of Contents
ACCURACY OF INFORMATION
We strive for accurate records. Please tell us if you receive any incorrect materials from us. We will make the appropriate changes.
COMPANIES WITHIN THE PRINCIPAL FINANCIAL GROUP
Several companies within the Principal Financial Group are listed at the top of this Notice. The companies of the Principal Financial Group are leading providers of retirement savings, investment, and insurance products.
MORE INFORMATION
You may write to us if you have questions about our Privacy Notice. Contact our Privacy Officer at P.O. Box 14582, Des Moines, Iowa 50306-3582.
To contact us, please call 1-800-986-3343.
Receipt of this notice does not mean your application has been accepted.
We may change our privacy practices at times. We will give you a revised notice when required by law.
Our privacy practices comply with all applicable laws. If a state’s privacy laws are more restrictive than those stated in this Notice, we comply with those laws.
Your agent, broker, registered representative, consultant or advisor may have a different privacy policy.
MM 2458-14 04/2016 | Page 2 of 2 | F456PS-16 |
Table of Contents
CALIFORNIA PRIVACY NOTICE
| ||
This Notice is provided on behalf of the following | ||
companies of the Principal Financial Group: | ||
Principal Life Insurance Company | ||
Principal National Life Insurance Company | ||
Principal Securities, Inc. | ||
Principal Trust Company | ||
Principal Global Investors, LLC | ||
Principal Global Investors Trust | ||
Principal Real Estate Investors, LLC | ||
Principal Commercial Acceptance, LLC | ||
Principal Commercial Funding, LLC | ||
Principal Green Fund I, LP / PGF GP, LLC | ||
Principal Green Property Fund Employees II, LLC | ||
Principal Real Estate Debt Fund I, LP | ||
Principal Real Estate Debt Fund, GP, LLC | ||
Edge Asset Management, Inc. / Spectrum Asset Management, Inc. | ||
Principal Variable Contracts Funds, Inc. | ||
Principal Life Insurance Company Variable Life Separate Account | ||
Principal National Life Insurance Company Variable Life Separate Account | ||
Principal Life Insurance Company Separate Account B | ||
Principal Funds, Inc. / Principal Funds Distributor, Inc. | ||
Employers Dental Services, Inc. / Principal Dental Services, Inc. | ||
First Dental Health |
PROTECTING YOUR PRIVACY
This Notice is required by law. It tells how we handle personal information.
This Notice applies to individual residents of California who:
● | own or apply for our products or services for personal use. |
● | are employee benefit plan participants and beneficiaries. |
Please note that in this Notice, “you” refers to only these people. The Notice does not apply to an employer plan sponsor or group policyholder.
WE PROTECT INFORMATION WE COLLECT ABOUT YOU
We follow strict standards to protect personal information. These standards include limiting access to data and regularly testing our security technology.
HOW WE COLLECT INFORMATION
We collect data about you as we do business with you. Some of the sources of this data are as follows:
● | Information we obtain when you apply or enroll for products or services. You may provide facts such as your name; address; Social Security number; financial status; and, when applicable, health history. |
● | Information we obtain from others. This may include claim reports, medical records, credit reports and similar data. |
● | Information we obtain through our transactions and experience with you. This includes your claims history, payment and investment records, and account values. |
● | Information we obtain through the Internet. This includes data from online forms you complete. It also includes data we receive when you visit our websites. |
HOW WE SHARE INFORMATION
We may share personal information about you or about former customers, plan participants or beneficiaries among companies within the Principal Financial Group or with others for several reasons, including:
● | to assist us in servicing your account; |
● | to help design and improve products; |
● | to protect against potential identity theft or unauthorized transactions; |
● | in response to a subpoena or for other legal purposes; |
● | to prevent fraud; |
● | to comply with inquiries from government agencies or other regulators; |
● | with others that service your account, or that perform services on our behalf; or |
● | with your consent, at your request or as allowed by law. |
MEDICAL INFORMATION
We do not share medical information among companies of the Principal Financial Group or with others except:
● | when needed to service your policies, accounts, claims or contracts; |
● | when laws protecting your privacy permit it; or |
● | when you consent. |
BB 9338-13 04/2016 | Page 1 of 2 | F445CA-13 |
Table of Contents
ACCURACY OF INFORMATION
We strive for accurate records. Please tell us if you receive any incorrect materials from us. We will make the appropriate changes.
COMPANIES WITHIN THE PRINCIPAL FINANCIAL GROUP
Several companies within the Principal Financial Group are listed at the top of this Notice. The companies of the Principal Financial Group are leading providers of retirement savings, investment, and insurance products.
MORE INFORMATION
You may write to us if you have questions about our Privacy Notice. Contact our Privacy Officer at P.O. Box 14582, Des Moines, Iowa 50306-3582.
To contact us, please call 1-800-986-3343.
Receipt of this notice does not mean your application has been accepted.
We may change our privacy practices at times. We will give you a revised notice when required by law. Our privacy practices comply with all applicable laws.
Your agent, broker, registered representative, consultant or advisor may have a different privacy policy.
BB 9338-13 04/2016 | Page 2 of 2 | F445CA-13 |
Table of Contents
Not FDIC or NCUA insured |
May lose value • Not a deposit • No bank or credit union guarantee Not insured by any Federal government agency |
Table of Contents
Statements of Assets and Liabilities
Principal Exchange-Traded Funds
December 31, 2016 (unaudited)
Principal EDGE Active Income ETF | Principal Healthcare Innovators Index ETF | Principal Millennials Index ETF | ||||||||||
Investments in securities — at cost | $ | 262,412,508 | $ | 6,206,563 | $ | 6,274,951 | ||||||
|
|
|
|
|
| |||||||
Assets | ||||||||||||
Investments in securities — at value | $ | 271,682,356 | $ | 5,735,802 | $ | 6,136,252 | ||||||
Cash | 1,541,710 | 11,188 | 14,211 | |||||||||
Receivables: | ||||||||||||
Dividends and interest | 3,090,149 | 11 | 2,221 | |||||||||
Investment securities sold | 86,516 | — | — | |||||||||
Prepaid expenses | 5,168 | — | — | |||||||||
|
|
|
|
|
| |||||||
Total Assets | 276,405,899 | 5,747,001 | 6,152,684 | |||||||||
Liabilities | ||||||||||||
Accrued management and investment advisory fees | 185,549 | 2,258 | 2,511 | |||||||||
Accrued listing fees | 182 | — | — | |||||||||
Accrued transfer agent fees | 5,848 | — | — | |||||||||
Accrued custodian fees | 1,137 | — | — | |||||||||
Accrued professional fees | 19,336 | — | — | |||||||||
Accrued income distribution | 1,179,005 | — | 8,500 | |||||||||
Accrued other expenses | 4,597 | — | — | |||||||||
|
|
|
|
|
| |||||||
Total Liabilities | 1,395,654 | 2,258 | 11,011 | |||||||||
|
|
|
|
|
| |||||||
Net Assets Applicable to Outstanding Shares | $ | 275,010,245 | $ | 5,744,743 | $ | 6,141,673 | ||||||
|
|
|
|
|
| |||||||
Net Assets Consist of: | ||||||||||||
Capital shares and additional paid-in-capital | $ | 265,641,379 | $ | 6,233,232 | $ | 6,290,865 | ||||||
Accumulated undistributed (overdistributed) net investment income (loss) | (83,070 | ) | (8,740 | ) | (1,224 | ) | ||||||
Accumulated undistributed (overdistributed) net realized gain (loss) | 182,372 | (8,988 | ) | (9,254 | ) | |||||||
Net unrealized appreciation (depreciation) of investments | 9,269,848 | (470,761 | ) | (138,699 | ) | |||||||
Net unrealized appreciation (depreciation) of translation of asset and liabilities in foreign currency | (284 | ) | — | (15 | ) | |||||||
|
|
|
|
|
| |||||||
Total Net Assets | $ | 275,010,245 | $ | 5,744,743 | $ | 6,141,673 | ||||||
|
|
|
|
|
| |||||||
Net Asset Value Per Share: | ||||||||||||
Net Assets | $ | 275,010,245 | $ | 5,744,743 | $ | 6,141,673 | ||||||
Shares Issued and Outstanding | 6,825,000 | 250,001 | 250,001 | |||||||||
Net Asset Value per share | $ | 40.29 | $ | 22.98 | $ | 24.57 | ||||||
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|
|
|
|
|
See accompanying notes. | 1 |
Table of Contents
Statements of Assets and Liabilities
Principal Exchange-Traded Funds
December 31, 2016 (unaudited)
Principal Price Setters Index ETF | Principal Shareholder Yield Index ETF | Principal U.S. Small Cap Index ETF | ||||||||||
Investments in securities — at cost | $ | 6,313,343 | $ | 6,260,059 | $ | 217,667,313 | ||||||
|
|
|
|
|
| |||||||
Assets | ||||||||||||
Investments in securities — at value | $ | 6,523,655 | $ | 6,949,254 | $ | 244,092,215 | ||||||
Cash | 11,800 | 18,457 | 701,096 | |||||||||
Receivables: | ||||||||||||
Dividends and interest | 9,475 | 11,693 | 306,539 | |||||||||
|
|
|
|
|
| |||||||
Total Assets | 6,544,930 | 6,979,404 | 245,099,850 | |||||||||
Liabilities | ||||||||||||
Accrued management and investment advisory fees | 2,376 | 2,546 | 84,322 | |||||||||
Accrued income distribution | 27,500 | 39,500 | 845,007 | |||||||||
|
|
|
|
|
| |||||||
Total Liabilities | 29,876 | 42,046 | 929,329 | |||||||||
|
|
|
|
|
| |||||||
Net Assets Applicable to Outstanding Shares | $ | 6,515,054 | $ | 6,937,358 | $ | 244,170,521 | ||||||
|
|
|
|
|
| |||||||
Net Assets Consist of: | ||||||||||||
Capital shares and additional paid-in-capital | $ | 6,304,595 | $ | 6,250,025 | $ | 220,052,112 | ||||||
Accumulated undistributed (overdistributed) net investment income (loss) | 358 | 407 | 34,744 | |||||||||
Accumulated undistributed (overdistributed) net realized gain (loss) | (211 | ) | (2,269 | ) | (2,341,237 | ) | ||||||
Net unrealized appreciation (depreciation) of investments | 210,312 | 689,195 | 26,424,902 | |||||||||
|
|
|
|
|
| |||||||
Total Net Assets | $ | 6,515,054 | $ | 6,937,358 | $ | 244,170,521 | ||||||
|
|
|
|
|
| |||||||
Net Asset Value Per Share: | ||||||||||||
Net Assets | $ | 6,515,054 | $ | 6,937,358 | $ | 244,170,521 | ||||||
Shares Issued and Outstanding | 250,001 | 250,001 | 8,850,001 | |||||||||
Net Asset Value per share | $ | 26.06 | $ | 27.75 | $ | 27.59 | ||||||
|
|
|
|
|
|
See accompanying notes. | 2 |
Table of Contents
Statements of Operations
Principal Exchange-Traded Funds
Period ended December 31, 2016 (unaudited)
Principal EDGE Active Income ETF | Principal Healthcare Innovators Index ETF (a) | Principal Millennials Index ETF (a) | ||||||||||
Net Investment Income (Loss) | ||||||||||||
Income: | ||||||||||||
Dividend income | $ | 2,300,185 | $ | 552 | $ | 25,816 | ||||||
Withholding tax | (11,432 | ) | — | (505 | ) | |||||||
Interest | 5,668,549 | — | — | |||||||||
|
|
|
|
|
| |||||||
Total Income | 7,957,302 | 552 | 25,311 | |||||||||
Expenses: | ||||||||||||
Management and investment advisory fees | 1,037,329 | 9,292 | 11,035 | |||||||||
Listing fees | 3,798 | — | — | |||||||||
Registration fees | 378 | — | — | |||||||||
Transfer agent fees | 8,168 | — | — | |||||||||
Custodian fees | 2,372 | — | — | |||||||||
Audit fees | 11,126 | — | — | |||||||||
Trustee fees | 1,799 | — | — | |||||||||
Professional fees | 2,995 | — | — | |||||||||
Insurance | 48,484 | — | — | |||||||||
Shareholder reports | 1,579 | — | — | |||||||||
Other expenses | 284 | — | — | |||||||||
|
|
|
|
|
| |||||||
Total Expenses | 1,118,312 | 9,292 | 11,035 | |||||||||
|
|
|
|
|
| |||||||
Net Investment Income (Loss) | 6,838,990 | (8,740 | ) | 14,276 | ||||||||
Net Realized and Unrealized Gain (Loss) on Investments: | ||||||||||||
Net realized gain (loss) from: | ||||||||||||
Investment transactions | 1,235,114 | (8,988 | ) | (1,992 | ) | |||||||
Foreign currency transactions | (699 | ) | — | 819 | ||||||||
Change in unrealized appreciation/depreciation of: | ||||||||||||
Investments | 7,459,497 | (470,761 | ) | (138,699 | ) | |||||||
Foreign currency transactions | (308 | ) | — | (15 | ) | |||||||
|
|
|
|
|
| |||||||
Net Realized and Unrealized Gain (Loss) on Investments | 8,693,604 | (479,749 | ) | (139,887 | ) | |||||||
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|
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| |||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 15,532,594 | $ | (488,489 | ) | $ | (125,611 | ) | ||||
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|
|
|
|
(a) | Period from August 19, 2016, date operations commenced, through December 31, 2016. |
See accompanying notes. | 3 |
Table of Contents
Statements of Operations
Principal Exchange-Traded Funds
Period ended December 31, 2016 (unaudited)
Principal Price Setters Index ETF | Principal Shareholder Yield Index ETF | Principal U.S. Small Cap Index ETF (a) | ||||||||||
Net Investment Income (Loss) | ||||||||||||
Income: | ||||||||||||
Dividend income | $ | 58,964 | $ | 88,781 | $ | 1,081,896 | ||||||
Withholding tax | — | — | (163 | ) | ||||||||
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|
|
|
|
| |||||||
Total Income | 58,964 | 88,781 | 1,081,733 | |||||||||
Expenses: | ||||||||||||
Management and investment advisory fees | 13,293 | 13,295 | 201,982 | |||||||||
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|
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| |||||||
Total Expenses | 13,293 | 13,295 | 201,982 | |||||||||
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|
|
| |||||||
Net Investment Income (Loss) | 45,671 | 75,486 | 879,751 | |||||||||
Net Realized and Unrealized Gain (Loss) on Investments: | ||||||||||||
Net realized gain (loss) from: | ||||||||||||
Investment transactions | 14,742 | 7,068 | (2,341,237 | ) | ||||||||
Change in unrealized appreciation/depreciation of: | ||||||||||||
Investments | 17,792 | 821,041 | 26,424,902 | |||||||||
|
|
|
|
|
| |||||||
Net Realized and Unrealized Gain (Loss) on Investments | 32,534 | 828,109 | 24,083,665 | |||||||||
|
|
|
|
|
| |||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | $ | 78,205 | $ | 903,595 | $ | 24,963,416 | ||||||
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|
|
|
|
(a) | Period from September 21, 2016, date operations commenced, through December 31, 2016. |
See accompanying notes. | 4 |
Table of Contents
Statement of Changes in Net Assets
Principal Exchange-Traded Funds
(unaudited)
Principal EDGE Active Income ETF | ||||||||
Period ended December 31, 2016 | Year ended June 30, 2016 (a) | |||||||
Operations | ||||||||
Net investment income (loss) | $ | 6,838,990 | $ | 2,142,224 | ||||
Net realized gain (loss) on investments | 1,234,415 | (1,252,378 | ) | |||||
Change in unrealized appreciation/depreciation of investments and foreign currency | 7,459,189 | 1,810,375 | ||||||
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|
|
| |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 15,532,594 | 2,700,221 | ||||||
Dividends and Distributions to Shareholders | ||||||||
From net investment income | (7,583,025 | ) | (1,281,940 | ) | ||||
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|
|
| |||||
Total Dividends and Distributions | (7,583,025 | ) | (1,281,940 | ) | ||||
Capital Share Transactions | ||||||||
Net increase (decrease) in capital share transactions | 2,048,065 | 263,494,330 | ||||||
|
|
|
| |||||
Total Increase (Decrease) in Net Assets | 9,997,634 | 264,912,611 | ||||||
Net Assets | ||||||||
Beginning of period | 265,012,611 | 100,000 | ||||||
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|
|
| |||||
End of period (including undistributed net investment income as set forth below) | $ | 275,010,245 | $ | 265,012,611 | ||||
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|
|
| |||||
Undistributed (overdistributed) net investment income (loss) | $ | (83,070 | ) | $ | 660,965 | |||
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|
|
| |||||
Capital Share Transactions | ||||||||
Dollars: | ||||||||
Sold | $ | 4,041,893 | $ | 265,240,726 | ||||
Redeemed | (1,993,828 | ) | (1,746,396 | ) | ||||
|
|
|
| |||||
Net Increase (Decrease) | $ | 2,048,065 | $ | 263,494,330 | ||||
|
|
|
| |||||
Shares: | ||||||||
Sold | 100,000 | 6,822,500 | ||||||
Redeemed | (50,000 | ) | (50,000 | ) | ||||
|
|
|
| |||||
Net Increase (Decrease) | 50,000 | 6,772,500 | ||||||
|
|
|
|
(a) | Period from July 8, 2015, effective date of the fund, through June 30, 2016. |
See accompanying notes. | 5 |
Table of Contents
Statement of Changes in Net Assets
Principal Exchange-Traded Funds
(unaudited)
Principal Healthcare Innovators Index ETF | ||||
Period ended | ||||
Operations | ||||
Net investment income (loss) | $ | (8,740 | ) | |
Net realized gain (loss) on investments | (8,988 | ) | ||
Change in unrealized appreciation/depreciation of investments and foreign currency | (470,761 | ) | ||
|
| |||
Net Increase (Decrease) in Net Assets Resulting from Operations | (488,489 | ) | ||
Capital Share Transactions | ||||
Net increase (decrease) in capital share transactions | 6,233,232 | |||
|
| |||
Total Increase (Decrease) in Net Assets | 5,744,743 | |||
Net Assets | ||||
Beginning of period | — | |||
|
| |||
End of period (including undistributed net investment income as set forth below) | $ | 5,744,743 | ||
|
| |||
Undistributed (overdistributed) net investment income (loss) | $ | (8,740 | ) | |
|
| |||
Capital Share Transactions | ||||
Dollars: | ||||
Sold | $ | 6,233,232 | ||
|
| |||
Net Increase (Decrease) | $ | 6,233,232 | ||
|
| |||
Shares: | ||||
Sold | 250,001 | |||
|
| |||
Net Increase (Decrease) | 250,001 | |||
|
|
(a) | Period from August 19, 2016, date operations commenced, through December 31, 2016. |
See accompanying notes. | 6 |
Table of Contents
Statement of Changes in Net Assets
Principal Exchange-Traded Funds
(unaudited)
Principal Millennials Index ETF | ||||
Period ended December 31, 2016 (a) | ||||
Operations | ||||
Net investment income (loss) | $ | 14,276 | ||
Net realized gain (loss) on investments | (1,173 | ) | ||
Change in unrealized appreciation/depreciation of investments and foreign currency | (138,714 | ) | ||
|
| |||
Net Increase (Decrease) in Net Assets Resulting from Operations | (125,611 | ) | ||
Dividends and Distributions to Shareholders | ||||
From net investment income | (15,500 | ) | ||
From net realized gain on investments | (8,081 | ) | ||
|
| |||
Total Dividends and Distributions | (23,581 | ) | ||
Capital Share Transactions | ||||
Net increase (decrease) in capital share transactions | 6,290,865 | |||
|
| |||
Total Increase (Decrease) in Net Assets | 6,141,673 | |||
Net Assets | ||||
Beginning of period | — | |||
|
| |||
End of period (including undistributed net investment income as set forth below) | $ | 6,141,673 | ||
|
| |||
Undistributed (overdistributed) net investment income (loss) | $ | (1,224 | ) | |
|
| |||
Capital Share Transactions | ||||
Dollars: | ||||
Sold | $ | 7,503,206 | ||
Redeemed | (1,212,341 | ) | ||
|
| |||
Net Increase (Decrease) | $ | 6,290,865 | ||
|
| |||
Shares: | ||||
Sold | 300,001 | |||
Redeemed | (50,000 | ) | ||
|
| |||
Net Increase (Decrease) | 250,001 | |||
|
|
(a) | Period from August 19, 2016, date operations commenced, through December 31, 2016. |
See accompanying notes. | 7 |
Table of Contents
Statement of Changes in Net Assets
Principal Exchange-Traded Funds
(unaudited)
Principal Price Setters Index ETF | ||||||||
Period ended December 31, 2016 | Period ended June 30, 2016 (a) | |||||||
Operations | ||||||||
Net investment income (loss) | $ | 45,671 | $ | 21,987 | ||||
Net realized gain (loss) on investments | 14,742 | 12,865 | ||||||
Change in unrealized appreciation/depreciation of investments and foreign currency | 17,792 | 192,520 | ||||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 78,205 | 227,372 | ||||||
Dividends and Distributions to Shareholders | ||||||||
From net investment income | (67,300 | ) | — | |||||
From net realized gain on investments | (14,953 | ) | — | |||||
|
|
|
| |||||
Total Dividends and Distributions | (82,253 | ) | — | |||||
Capital Share Transactions | ||||||||
Net increase (decrease) in capital share transactions | — | 6,291,730 | ||||||
|
|
|
| |||||
Total Increase (Decrease) in Net Assets | (4,048 | ) | 6,519,102 | |||||
Net Assets | ||||||||
Beginning of period | 6,519,102 | — | ||||||
|
|
|
| |||||
End of period (including undistributed net investment income as set forth below) | $ | 6,515,054 | $ | 6,519,102 | ||||
|
|
|
| |||||
Undistributed (overdistributed) net investment income (loss) | $ | 358 | $ | 21,987 | ||||
|
|
|
| |||||
Capital Share Transactions | ||||||||
Dollars: | ||||||||
Sold | $ | — | $ | 7,551,384 | ||||
Redeemed | — | (1,259,654 | ) | |||||
|
|
|
| |||||
Net Increase (Decrease) | $ | — | $ | 6,291,730 | ||||
|
|
|
| |||||
Shares: | ||||||||
Sold | — | 300,001 | ||||||
Redeemed | — | (50,000 | ) | |||||
|
|
|
| |||||
Net Increase (Decrease) | — | 250,001 | ||||||
|
|
|
|
(a) | Period from March 21, 2016, date of operations commenced, through June 30, 2016. |
See accompanying notes. | 8 |
Table of Contents
Statement of Changes in Net Assets
Principal Exchange-Traded Funds
(unaudited)
Principal Shareholder Yield Index ETF | ||||||||
Period ended December 31, 2016 | Period ended June 30, 2016 (a) | |||||||
Operations | ||||||||
Net investment income (loss) | $ | 75,486 | $ | 46,221 | ||||
Net realized gain (loss) on investments | 7,068 | (1,277 | ) | |||||
Change in unrealized appreciation/depreciation of investments and foreign currency | 821,041 | (131,846 | ) | |||||
|
|
|
| |||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 903,595 | (86,902 | ) | |||||
Dividends and Distributions to Shareholders | ||||||||
From net investment income | (121,300 | ) | — | |||||
From net realized gain on investments | (8,060 | ) | — | |||||
|
|
|
| |||||
Total Dividends and Distributions | (129,360 | ) | — | |||||
Capital Share Transactions | ||||||||
Net increase (decrease) in capital share transactions | — | 6,250,025 | ||||||
|
|
|
| |||||
Total Increase (Decrease) in Net Assets | 774,235 | 6,163,123 | ||||||
Net Assets | ||||||||
Beginning of period | 6,163,123 | — | ||||||
|
|
|
| |||||
End of period (including undistributed net investment income as set forth below) | $ | 6,937,358 | $ | 6,163,123 | ||||
|
|
|
| |||||
Undistributed (overdistributed) net investment income (loss) | $ | 407 | $ | 46,221 | ||||
|
|
|
| |||||
Capital Share Transactions | ||||||||
Dollars: | ||||||||
Sold | $ | — | $ | 6,250,025 | ||||
|
|
|
| |||||
Net Increase (Decrease) | $ | — | $ | 6,250,025 | ||||
|
|
|
| |||||
Shares: | ||||||||
Sold | — | 250,001 | ||||||
|
|
|
| |||||
Net Increase (Decrease) | — | 250,001 | ||||||
|
|
|
|
(a) | Period from March 21, 2016, date of operations commenced, through June 30, 2016. |
See accompanying notes. | 9 |
Table of Contents
Statement of Changes in Net Assets
Principal Exchange-Traded Funds
(unaudited)
Principal U.S. Small Cap Index ETF | ||||
Period ended | ||||
Operations | ||||
Net investment income (loss) | $ | 879,751 | ||
Net realized gain (loss) on investments | (2,341,237 | ) | ||
Change in unrealized appreciation/depreciation of investments and foreign currency | 26,424,902 | |||
|
| |||
Net Increase (Decrease) in Net Assets Resulting from Operations | 24,963,416 | |||
Dividends and Distributions to Shareholders | ||||
From net investment income | (845,007 | ) | ||
|
| |||
Total Dividends and Distributions | (845,007 | ) | ||
Capital Share Transactions | ||||
Net increase (decrease) in capital share transactions | 220,052,112 | |||
|
| |||
Total Increase (Decrease) in Net Assets | 244,170,521 | |||
Net Assets | ||||
Beginning of period | — | |||
|
| |||
End of period (including undistributed net investment income as set forth below) | $ | 244,170,521 | ||
|
| |||
Undistributed (overdistributed) net investment income (loss) | $ | 34,744 | ||
|
| |||
Capital Share Transactions | ||||
Dollars: | ||||
Sold | $ | 220,052,112 | ||
|
| |||
Net Increase (Decrease) | $ | 220,052,112 | ||
|
| |||
Shares: | ||||
Sold | 8,850,001 | |||
|
| |||
Net Increase (Decrease) | 8,850,001 | |||
|
|
(a) | Period from September 21, 2016, date operations commenced, through December 31, 2016. |
See accompanying notes. | 10 |
Table of Contents
Principal Exchange-Traded Funds
December 31, 2016 (unaudited)
1. Organization
The Principal Exchange-Traded Funds (the “Trust”) is a statutory trust organized under the laws of the State of Delaware in 2013 and is authorized to have multiple series or portfolios. The Trust is an open-end management investment company, registered under the Investment Company Act of 1940, as amended (the “1940 Act”). The Trust currently consists of six series, the Principal EDGE Active Income ETF, Principal Healthcare Innovators Index ETF, Principal Millennials Index ETF, Principal Price Setters Index ETF, Principal Shareholder Yield Index ETF and Principal U.S. Small Cap Index ETF (the “Funds”). The Funds are “diversified,” and as such, the Funds’ investments are required to meet certain diversification requirements under the 1940 Act. The shares of the Funds are referred to herein as “Shares.”
Each of the Funds is an investment company and applies specialized accounting and reporting under Accounting Standards Codification Topic 946, Financial Services — Investment Companies. Each of the Funds was an investment company at all times during the year. The Funds have not provided financial support, and are not contractually required to provide financial support to any investee.
The Trust issues and redeems Shares at net asset value (“NAV”) only with Authorized Participants (“APs”) and only in aggregations of 50,000 Shares (each a “Creation Unit” or a “Creation Unit Aggregation”), which is subject to change. Each Fund issues and redeems Creation Units in exchange for portfolio securities and/or cash, plus a fixed and/or variable transaction fee.
Shares of the Principal EDGE Active Income ETF Fund are listed on the NYSE Arca, Inc. (“NYSE Arca” or the “Exchange”). Shares of the Principal Healthcare Innovators Index ETF, Principal Millennials Index ETF, Principal Price Setters Index ETF, Principal Shareholder Yield Index ETF, and Principal U.S. Small Cap Index ETF are listed on The National Association of Securities Dealers Automated Quotation System (“NASDAQ” or the “Exchange”). Shares trade on the Exchange at market prices that may be below, at, or above NAV.
Principal Healthcare Innovators Index ETF and Principal Millennials Index ETF initial investment and commencement of operations was on August 19, 2016. Principal U.S. Small Cap Index ETF initial investment and commencement of operations was on September 21, 2016.
2. Significant Accounting Policies
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following summarizes the significant accounting policies of the Funds:
Security Valuation. The Funds value securities for which market quotations are readily available at fair value, which is determined using the last reported sale price. If no sales are reported, as is regularly the case for some securities traded over-the-counter, securities are valued using the last reported bid price or an evaluated bid price provided by a pricing service. Pricing services use modeling techniques that incorporate security characteristics, market conditions and dealer-supplied valuations to determine an evaluated bid price. When reliable market quotations are not considered to be readily available, which may be the case, for example, with respect to restricted securities, certain debt securities, preferred stocks, and foreign securities, the investments are valued at their fair value as determined in good faith by Principal Management Corporation (“the Advisor”) under procedures established and periodically reviewed by the Trust’s Board of Trustees.
The value of foreign securities used in computing the net asset value per share is generally determined as of the close of the foreign exchange where the security is principally traded. Significant events that occur after the close of the applicable foreign market or exchange but prior to the calculation of the Funds’ net asset values are reflected in the Funds’ net asset values and these securities are valued at fair value as determined in good faith by the Advisor under procedures established and periodically reviewed by the Trust’s Board of Trustees. Many factors, provided by independent pricing services, are reviewed in the course of making a good faith determination of a security’s fair value, including, but not limited to, price movements in American Depository Receipts (“ADRs”), futures contracts, industry indices, general indices, and foreign currencies.
To the extent the Funds invest in foreign securities listed on foreign exchanges which trade on days on which the Funds do not determine net asset values, for example weekends and other customary national U.S. holidays, the Funds’ net asset values could be significantly affected on days when shareholders cannot purchase or redeem shares.
11
Table of Contents
Notes to Financial Statements
Principal Exchange-Traded Funds
December 31, 2016 (unaudited)
2. Significant Accounting Policies (continued)
Certain securities issued by companies in emerging market countries may have more than one quoted valuation at any given point in time, sometimes referred to as a “local” price and a “premium” price. The premium price is often a negotiated price, which may not consistently represent a price at which a specific transaction can be effected. It is the policy of the Funds to value such securities at prices at which it is expected those shares may be sold, and the Advisor or any sub-advisor is authorized to make such determinations subject to such oversight by the Trust’s Board of Trustees as may occasionally be necessary.
Income and Investment Transactions. The Funds record investment transactions on a trade date basis. The identified cost basis has been used in determining the net realized gain or loss from investment transactions and unrealized appreciation or depreciation of investments. The Funds record dividend income on the ex-dividend date, except dividend income from foreign securities whereby the ex-dividend date has passed; such dividends are recorded as soon as the Funds are informed of the ex-dividend date. Interest income is recognized on an accrual basis. Discounts and premiums on securities are accreted/amortized over the lives of the respective securities.
Capital Share Transactions. Capital shares are issued and redeemed by the Funds only in Creation Units or multiples thereof. Except when aggregated in Creation Units, shares of the Funds are not redeemable. Transactions in capital shares for the Funds are disclosed in detail in the statements of changes in net assets.
The consideration for the purchase of Creation Units of a Fund generally consists of a basket of cash and/or securities that the Fund specifies each business day. To offset transfer and other transaction costs associated with the issuance and redemption of Creation Units, Authorized Participants are subject to standard creation and redemption transaction fees.
Expenses. Expenses directly attributed to Principal EDGE Active Income ETF are charged to Principal EDGE Active Income ETF. Other expenses not directly attributed to a particular fund are apportioned among the registered investment companies managed by the Advisor.
Distributions to Shareholders. Dividends and distributions to shareholders of the Funds are recorded on the ex-dividend date. Dividends and distributions to shareholders from net investment income and net realized gain from investments and foreign currency transactions are determined in accordance with federal tax regulations, which may differ from U.S. generally accepted accounting principles. These differences are primarily due to differing treatments for foreign currency transactions, losses deferred due to wash sales, tax straddles, mortgage-backed securities, certain preferred securities, redemptions-in-kind, REITs, utilization of earnings and profits distributed to shareholders on redemption of shares, and limitations imposed by Sections 381-384 of the Internal Revenue Code. Permanent book and tax basis differences are reclassified within the capital accounts based on federal tax-basis treatment; temporary differences do not require reclassification. To the extent dividends and distributions exceed current and accumulated earnings and profits for federal income tax purposes, they are reported as return of capital distributions.
Federal Income Taxes. No provision for federal income taxes is considered necessary because the Funds intend to qualify as a “regulated investment company” under the Internal Revenue Code and they intend to distribute each year substantially all of their net investment income and realized capital gains to shareholders.
Management evaluates tax positions taken or expected to be taken in the course of preparing the Funds’ tax returns to determine whether it is “more likely than not” that each tax position would be sustained upon examination by a taxing authority based on the technical merits of their position. Tax positions not deemed to meet the more likely than not threshold would be recorded as a tax benefit or expense in the current year. During the year ended June 30, 2016, the Funds did not record any such tax benefit or expense in the accompanying financial statements. The statute of limitations remains open for the fiscal year 2015. No examinations are in progress at this time.
Foreign Taxes. Certain of the Funds are subject to foreign income taxes imposed by certain countries in which they invest. Foreign income taxes are accrued by the Funds as a reduction of income. These amounts are shown as withholding tax on foreign dividends on the statement of operations.
Investment Company Reporting Modernization. Effective October 13, 2016, the U.S. Securities and Exchange Commission (“SEC”) approved a final rule, Investment Company Reporting Modernization. The SEC adopted new rules and forms as well as amendments to its rules and forms to modernize the reporting and disclosure of information by registered investment companies. The new rules and forms will be effective beginning in 2017. At this time, management is evaluating the implications of these changes on the financial statements.
12
Table of Contents
Notes to Financial Statements
Principal Exchange-Traded Funds
December 31, 2016 (unaudited)
3. Operating Policies
Indemnifications. In a normal course of business, the Funds enter into contracts that contain a variety of indemnifications. The Funds’ maximum exposure under these arrangements is unknown as this would involve potential future claims against the Funds that have not yet occurred. Based on management’s experience, the risk of loss would be remote.
Restricted Securities. The Funds may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult.
Underlying Funds. SAM Balanced Portfolio, SAM Conservative Balanced Portfolio, SAM Flexible Income Portfolio, SAM Strategic Growth Portfolio, PVC SAM Balanced Portfolio, PVC SAM Conservative Balanced Portfolio, PVC SAM Flexible Income Portfolio, PVC SAM Strategic Growth Portfolio (collectively the “SAM Portfolios”) invest in Principal EDGE Active Income ETF and Principal U.S. Small Cap Index ETF (the “underlying funds”).
An underlying fund to the SAM Portfolios may experience relatively large redemptions or purchases as the SAM Portfolios periodically reallocate or rebalance their assets. These transactions may accelerate the realization of taxable income if sales of portfolio securities result in gains and could increase transaction costs. In addition, when the SAM Portfolios reallocate or redeem significant assets away from an underlying fund, the loss of assets to the underlying fund could result in increased expense ratios for that fund.
The Advisor is the advisor to the SAM Portfolios, Principal EDGE Active Income ETF, and Principal U.S. Small Cap Index ETF. Edge Asset Management, Inc. (“Edge”) is the Sub-Advisor to the SAM Portfolios. Edge and Principal Global Investors, LLC (“PGI”) are the Sub-Advisors to Principal EDGE Active Income ETF and PGI is the Sub-Advisor to Principal U.S. Small Cap Index ETF. The Advisor, EDGE, and PGI are committed to minimizing the potential impact of underlying fund risk on underlying funds to the extent consistent with pursuing the investment objectives of the SAM Portfolios which it manages. Each may face conflicts of interest in fulfilling its responsibilities to all such funds.
As of December 31, 2016, the SAM Portfolios owned 94.46%, in the aggregate, of the outstanding shares of Principal EDGE Active Income ETF and 99.44% of Principal U.S. Small Cap Index ETF.
U.S. Government Agencies or Government-Sponsored Enterprises. Certain of the Funds may invest in U.S. Government agencies or government-sponsored enterprises. U.S. Government securities are obligations of, and in certain cases, guaranteed by, the U.S. Government or its agencies. The U.S. Government does not guarantee the net asset value of the Funds’ shares. Some U.S. Government securities such as treasury bills, notes and bonds, and securities guaranteed by the Government National Mortgage Association (“GNMA”) are supported by the full faith and credit of the U.S. Government. Other securities, such as those of the Federal Home Loan Bank are supported by the right of the issuer to borrow from the U.S. Department of the Treasury. Still other securities, such as those of the Federal National Mortgage Association (“FNMA”) are supported by the discretionary authority of the U.S. Government to purchase the agency’s obligations.
Government related guarantors (those not backed by the full faith and credit of the United States Government) include FNMA and the Federal Home Loan Mortgage Corporation (“FHLMC”). FNMA is a government sponsored corporation, the common stock of which is owned entirely by private stockholders. FNMA purchases conventional residential mortgages from a list of approved seller/servicers which include state and federally chartered savings and loan associations, mutual savings banks, commercial banks, credit unions, and mortgage bankers. Pass-through securities issued by FNMA are guaranteed as to the timely payment of principal and interest by FNMA, but are not backed by the full faith and credit of the U.S. Government. FHLMC issues Participation Certificates which are pass-through securities, each representing an undivided interest in a pool of residential mortgages. FHLMC guarantees the timely payment of interest and ultimate collection of principal, but Participation Certificates are not backed by the full faith and credit of the U.S. Government.
13
Table of Contents
Notes to Financial Statements
Principal Exchange-Traded Funds
December 31, 2016 (unaudited)
4. Fair Valuation
Fair value is defined as the price that the Funds would receive upon selling a security in a timely transaction to an independent buyer in the principal or most advantageous market of the security at the measurement date. In determining fair value, the Funds use various valuation approaches, including market, income and/or cost approaches. A hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.
Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Funds. Unobservable inputs are inputs that reflect the Funds’ own estimates about the estimates market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
The three-tier hierarchy of inputs is summarized in the three broad levels listed below.
Level 1 — Quoted prices are available in active markets for identical securities as of the reporting date. The type of securities included in Level 1 includes listed equities and listed derivatives.
Level 2 — Other significant observable inputs (including quoted prices for similar investments, interest rates, prepayments speeds, credit risk, etc.) Investments which are generally included in this category include corporate bonds and municipal bonds.
Level 3 — Significant unobservable inputs (including the Funds’ assumptions in determining the fair value of investments). Investments which are generally included in this category include certain corporate bonds and certain mortgage backed securities.
The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the market place, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Funds in determining fair value is greatest for instruments categorized in Level 3.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
Fair value is a market based measure considered from the perspective of a market participant who holds the asset rather than an entity specific measure. Therefore, even when market assumptions are not readily available, the Funds’ own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. The Funds uses prices and inputs that are current as of the measurement date.
Investments which are generally included in the Level 3 category are primarily valued using quoted prices from brokers and dealers participating in the market for these investments. These investments are classified as Level 3 investments due to the lack of market transparency and market corroboration to support these quoted prices. Valuation models may be used as the pricing source for other investments classified as Level 3. Valuation models rely on one or more significant unobservable inputs such as prepayment rates, probability of default, or loss severity in the event of default. Significant increases in any of those inputs in isolation would result in a significantly lower fair value measurement.
The fair values of these entities are dependent on economic, political and other considerations. The values of the underlying investee entities may be affected by significant changes in the economic conditions, changes in government policies, and other factors (e.g., natural disasters, accidents, conflicts, etc.).
Fair value of these investments is determined in good faith by the Advisor under procedures established and periodically reviewed by the Fund’s Board of Trustees. The Advisor has established a Valuation Committee of senior officers and employees, with the responsibility of overseeing the pricing and valuation of all securities, including securities where market quotations are not readily available. The Valuation Committee meets monthly and reports directly to the Board of Trustees. The Pricing Group who reports to the Valuation Committee relies on the established Pricing Policies to determine fair valuation. Included in the Pricing Policies is an overview of the approved valuation technique established for each asset class. The Pricing Group will consider all appropriate information when determining fair valuation.
14
Table of Contents
Notes to Financial Statements
Principal Exchange-Traded Funds
December 31, 2016 (unaudited)
4. Fair Valuation (continued)
The Pricing Group relies on externally provided valuation inputs to determine the value of Level 3 securities. Security values are updated as new information becomes available. Valuation data and changes in valuation amounts are reviewed on a daily basis based on specified criteria for the security, asset class, and other factors.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those instruments.
The beginning of the period timing recognition has been adopted for the transfers between levels of the Funds’ assets and liabilities. During the period, there were no transfers between Level 1 and Level 2 or into/out of Level 3. In addition, at the end of the period, the Funds did not have a Level 3 balance.
The following is a summary of the inputs used as of December 31, 2016 in valuing the Funds’ securities carried at value:
Fund* | Level 1 — Prices | Level 2 — Other Significant Observable Inputs | Level 3 — Significant Unobservable Inputs | Totals (Level 1,2,3) | ||||||||||||
Principal EDGE Active Income ETF |
| |||||||||||||||
Bonds | $ | — | $ | 165,970,237 | $ | — | $ | 165,970,237 | ||||||||
Common Stocks | 71,624,745 | — | — | 71,624,745 | ||||||||||||
Investment Companies | 736,600 | — | — | 736,600 | ||||||||||||
Preferred Stocks | 15,527,780 | — | — | 15,527,780 | ||||||||||||
U.S. Government & Government Agency Obligations | — | 17,822,994 | — | 17,822,994 | ||||||||||||
|
| |||||||||||||||
Total investments in securities | $ | 87,889,125 | $ | 183,793,231 | $ | — | $ | 271,682,356 | ||||||||
Principal Healthcare Innovators Index ETF | ||||||||||||||||
Common Stocks | $ | 5,735,802 | $ | — | $ | — | $ | 5,735,802 | ||||||||
|
| |||||||||||||||
Total investments in securities | $ | 5,735,802 | $ | — | $ | — | $ | 5,735,802 | ||||||||
Principal Millennials Index ETF | ||||||||||||||||
Common Stocks | $ | 6,136,252 | $ | — | $ | — | $ | 6,136,252 | ||||||||
|
| |||||||||||||||
Total investments in securities | $ | 6,136,252 | $ | — | $ | — | $ | 6,136,252 | ||||||||
Principal Price Setters Index ETF | ||||||||||||||||
Common Stocks | $ | 6,523,655 | $ | — | $ | — | $ | 6,523,655 | ||||||||
|
| |||||||||||||||
Total investments in securities | $ | 6,523,655 | $ | — | $ | — | $ | 6,523,655 | ||||||||
Principal Shareholder Yield Index ETF | ||||||||||||||||
Common Stocks | $ | 6,949,254 | $ | — | $ | — | $ | 6,949,254 | ||||||||
|
| |||||||||||||||
Total investments in securities | $ | 6,949,254 | $ | — | $ | — | $ | 6,949,254 | ||||||||
Principal U.S. Small Cap Index ETF | ||||||||||||||||
Common Stocks | $ | 242,794,714 | $ | — | $ | — | $ | 242,794,714 | ||||||||
Investment Companies | 1,297,501 | — | — | 1,297,501 | ||||||||||||
|
| |||||||||||||||
Total investments in securities | $ | 244,092,215 | $ | — | $ | — | $ | 244,092,215 |
* | For additional detail regarding sector classifications, please see the Schedules of Investments. |
5. Management Agreement and Transactions with Affiliates
Management Services. The Funds have agreed to pay investment advisory and management fees to the Advisor computed at an annual percentage rate of each of the Funds’ average daily net assets. A portion of the management fee is paid by the Advisor to the sub-advisor of the Funds. The management fee schedule for the Funds is as follows:
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 | % | ||||||||
Principal U.S. Small Cap Index ETF | 0.38 | % | 0.38 | % | 0.38 | % | 0.38 | % |
15
Table of Contents
Notes to Financial Statements
Principal Exchange-Traded Funds
December 31, 2016 (unaudited)
5. Management Agreement and Transactions with Affiliates (continued)
The Advisor has contractually agreed to limit the expenses (excluding interest expense, expenses related to fund investments, and other extraordinary expenses) of the Principal EDGE Active Income ETF to maintain a total level of operating expense (expressed as percent of average net assets on an annualized basis) not to exceed 0.85%. It is expected that the expense limit will continue through the period ending October 31, 2017.
Affiliated Ownership. At December 31, 2016, Principal Financial Services, Inc. (an affiliate of the Advisor) owned shares of the Funds as follows:
Fund | Shares | |||
Principal Healthcare Innovators Index ETF | 200,001 | |||
Principal Millennials Index ETF | 200,001 | |||
Principal Price Setters Index ETF | 200,001 | |||
Principal Shareholder Yield Index ETF | 200,001 |
6. Investment Transactions
For the period ended December 31, 2016, the cost of investment securities purchased and proceeds from investment securities sold (not including short-term investments and in-kind transactions) by the Funds were as follows:
Non-U.S. Government | ||||||||
Fund | Purchases | Sales | ||||||
Principal EDGE Active Income ETF | $ | 49,364,078 | $ | 54,889,468 | ||||
Principal Healthcare Innovators Index ETF | 975,066 | 858,112 | ||||||
Principal Millennials Index ETF | 5,076,654 | 93,592 | ||||||
Principal Price Setters Index ETF | 85,785 | 87,407 | ||||||
Principal Shareholder Yield Index ETF | 70,098 | 64,764 | ||||||
Principal U.S. Small Cap Index ETF | 85,461,396 | 85,410,752 |
For the period ended December 31, 2016, in-kind transactions were as follows:
Fund | Purchases | Sales | ||||||
Principal Healthcare Innovators Index ETF | $ | 6,098,597 | — | |||||
Principal Millennials Index ETF | 2,595,767 | $ | 1,223,850 | |||||
Principal U.S. Small Cap Index ETF | 219,957,897 | — |
7. Federal Tax Information
Distributions to Shareholders. The federal income tax character of distributions paid to shareholders during the period ended December 31, 2016 was as follows:
Ordinary Income | Long-Term Capital Gain | |||||||||||||||
Period ended December 31, 2016 | Period ended June 30, 2016 | Period ended December 31, 2016 | Period ended June 30, 2016* | |||||||||||||
Principal EDGE Active Income ETF | $ 7,583,025 | $ 1,281,940 | $ — | $ — | ||||||||||||
Principal Millennials Index ETF | 15,500 | — | 8,081 | — | ||||||||||||
Principal Price Setters Index ETF | 67,300 | — | 14,953 | — | ||||||||||||
Principal Shareholder Yield Index ETF | 121,300 | — | 8,060 | — | ||||||||||||
Principal U.S. Small Cap Index ETF | 845,007 | — | — | — |
* | The funds designate these distributions as long-term capital gain dividends per IRC Sec. 852(b)(3)(c) in the 20-percent group (which may be taxed at a 20-percent rate, a 15-percent rate or a 0-percent rate, depending on the shareholder’s taxable income) |
For U.S. federal income tax purposes, short-term capital gain distributions are considered ordinary income distributions.
16
Table of Contents
Notes to Financial Statements
Principal Exchange-Traded Funds
December 31, 2016 (unaudited)
7. Federal Tax Information (continued)
Distributable Earnings. As of June 30, 2016, the components of distributable earnings on a federal income tax basis were:
Fund | Undistributed Ordinary Income | Undistributed Long-Term Capital Gains | Unrealized (Depreciation) | Post Late Year | Capital Loss Carryforward | |||||||||||||||
Principal EDGE Active Income ETF | $ | 682,895 | $ | — | $ | 1,768,749 | $ | — | $ | (1,032,347) | ||||||||||
Principal Price Setters Index ETF | 21,987 | — | 192,520 | — | — | |||||||||||||||
Principal Shareholder Yield Index ETF | 46,634 | 281 | (133,817 | ) | — | — |
Capital Loss Carryforwards. As of June 30, 2016, the following Fund had net realized capital loss carryforwards, for U.S. federal income tax purposes, available to be used to offset future realized capital gains:
Fund | Unlimited Losses Short-Term | Unlimited Losses Long-Term | Total | Annual Limitations* | ||||||||||||
Principal EDGE Active Income ETF | $ | 1,032,347 | $ | — | $ | 1,032,347 | $ | 767,198 |
* | In accordance with Sections 381-384 of the Internal Revenue Code, a portion of certain Fund’s losses have been subjected to an annual limitation. |
Late-Year Losses. A regulated investment company may elect to treat any portion of its qualified late-year loss as arising on the first day of the next taxable year. Qualified late-year losses are certain capital and ordinary losses which occur during the portion of the Fund’s taxable year subsequent to October 31 and December 31, respectively. For the taxable year ended June 30, 2016, the Funds do not plan to defer any late-year losses.
Reclassification of Capital Accounts. The Funds may record reclassifications in their capital accounts. These reclassifications have no impact on the total net assets of the Funds. The reclassifications are a result of permanent differences between GAAP and tax accounting. Adjustments are made to reflect the impact these items have on current and future distributions to shareholders. Therefore, the source of the Funds’ distributions may be shown in the accompanying Statement of Changes in Net Assets as from net investment income, from net realized gains on investments or from capital depending on the type of book and tax differences that exist. For the year ended June 30, 2016, the Funds recorded reclassifications as follows:
Fund | Accumulated Undistributed Net Investment Income | Accumulated Net Realized Gain on Investment | Paid In Capital | |||||||||
Principal EDGE Active Income ETF | $ | (199,319 | ) | $ | 200,335 | $ | (1,016 | ) | ||||
Principal Price Setters Index ETF | — | (12,865 | ) | �� | 12,865 |
Federal Income Tax Basis. As of December 31, 2016, the net federal income tax unrealized appreciation (depreciation) and federal tax cost of investments held by each Fund was as follows:
Fund | Unrealized Appreciation | Unrealized Depreciation | Net Apprec(Deprec) | Cost for Income Tax | ||||||||||||
Principal EDGE Active Income ETF | $ | 13,367,693 | $ | (4,297,180 | ) | $ | 9,070,513 | $ | 262,611,843 | |||||||
Principal Healthcare Innovators Index ETF | 523,152 | (993,913 | ) | (470,761 | ) | 6,206,563 | ||||||||||
Principal Millennials Index ETF | 286,144 | (424,843 | ) | (138,699 | ) | 6,274,951 | ||||||||||
Principal Price Setters Index ETF | 385,238 | (174,982 | ) | 210,256 | 6,313,399 | |||||||||||
Principal Shareholder Yield Index ETF | 937,334 | (248,517 | ) | 688,817 | 6,260,437 | |||||||||||
Principal U.S. Small Cap Index ETF | 30,335,702 | (3,910,800 | ) | 26,424,902 | 217,667,313 |
8. Subsequent Events
Management has evaluated events or transactions that have occurred through the date the financial statements were issued that would merit recognition or disclosure in the financial statements. There were no items requiring adjustment of the financial statements or additional disclosure.
17
Table of Contents
Principal EDGE Active Income ETF
December 31, 2016 (unaudited)
COMMON STOCKS — 26.04% | Shares Held | Value | ||||||
Aerospace & Defense — 0.46% | ||||||||
Lockheed Martin Corp | 5,050 | $ | 1,262,197 | |||||
Banks — 6.18% | ||||||||
Bank of Hawaii Corp | 21,255 | 1,885,106 | ||||||
Bank of Nova Scotia/The | 34,488 | 1,920,292 | ||||||
Columbia Banking System Inc | 45,092 | 2,014,711 | ||||||
Cullen / Frost Bankers Inc | 21,143 | 1,865,447 | ||||||
East West Bancorp Inc | 37,492 | 1,905,718 | ||||||
JPMorgan Chase & Co | 21,257 | 1,834,266 | ||||||
PacWest Bancorp | 34,553 | 1,881,065 | ||||||
US Bancorp | 35,942 | 1,846,341 | ||||||
Washington Trust Bancorp Inc | 32,681 | 1,831,770 | ||||||
|
| |||||||
$ | 16,984,716 | |||||||
|
| |||||||
Chemicals — 0.57% | ||||||||
EI du Pont de Nemours & Co | 21,480 | 1,576,632 | ||||||
Computers — 0.54% | ||||||||
Apple Inc | 12,768 | 1,478,790 | ||||||
Diversified Financial Services — 0.65% | ||||||||
BGC Partners Inc, Class A | 174,295 | 1,783,038 | ||||||
Electric — 1.65% | ||||||||
ALLETE Inc | 23,402 | 1,502,174 | ||||||
WEC Energy Group Inc | 26,298 | 1,542,378 | ||||||
Xcel Energy Inc | 36,801 | 1,497,801 | ||||||
|
| |||||||
$ | 4,542,353 | |||||||
|
| |||||||
Electronics — 0.23% | ||||||||
Garmin Ltd | 12,918 | 626,394 | ||||||
Food — 0.81% | ||||||||
B&G Foods Inc | 25,952 | 1,136,698 | ||||||
Kraft Heinz Co/The | 12,641 | 1,103,812 | ||||||
|
| |||||||
$ | 2,240,510 | |||||||
|
| |||||||
Housewares — 0.22% | ||||||||
Tupperware Brands Corp | 11,414 | 600,605 | ||||||
Machinery — Diversified — 0.52% | ||||||||
Deere & Co | 13,895 | 1,431,741 | ||||||
Oil & Gas — 3.47% | ||||||||
Chevron Corp | 13,941 | 1,640,856 | ||||||
Exxon Mobil Corp | 21,762 | 1,964,238 | ||||||
HollyFrontier Corp | 56,406 | 1,847,860 | ||||||
Marathon Petroleum Corp | 42,576 | 2,143,702 | ||||||
Occidental Petroleum Corp | 27,467 | 1,956,474 | ||||||
|
| |||||||
$ | 9,553,130 | |||||||
|
| |||||||
Pharmaceuticals — 1.43% | ||||||||
Abbott Laboratories | 25,824 | 991,900 | ||||||
Johnson & Johnson | 8,681 | 1,000,138 | ||||||
Merck & Co Inc | 15,934 | 938,034 | ||||||
Pfizer Inc | 31,263 | 1,015,422 | ||||||
|
| |||||||
$ | 3,945,494 | |||||||
|
| |||||||
Pipelines — 2.31% | ||||||||
EnLink Midstream LLC | 104,793 | 1,996,306 | ||||||
Plains GP Holdings LP, Class A | 56,613 | 1,963,339 | ||||||
Targa Resources Corp | 42,472 | 2,381,405 | ||||||
|
| |||||||
$ | 6,341,050 | |||||||
|
| |||||||
REITS — 5.62% | ||||||||
AGNC Investment Corp | 79,584 | 1,442,858 | ||||||
Annaly Capital Management Inc | 151,543 | 1,510,884 | ||||||
Colony Capital Inc, Class A | 90,936 | 1,841,454 | ||||||
CYS Investments Inc | 168,507 | 1,302,559 | ||||||
Digital Realty Trust Inc | 17,051 | 1,675,431 | ||||||
EPR Properties | 19,681 | 1,412,505 | ||||||
Gramercy Property Trust | 178,014 | 1,634,169 | ||||||
Medical Properties Trust Inc | 115,128 | 1,416,074 | ||||||
Omega Healthcare Investors Inc | 51,842 | 1,620,581 | ||||||
Pebblebrook Hotel Trust | 54,057 | 1,608,196 | ||||||
|
| |||||||
$ | 15,464,711 | |||||||
|
| |||||||
Semiconductors — 0.50% | ||||||||
Microchip Technology Inc | 21,245 | 1,362,867 |
COMMON STOCKS (continued) | Shares Held | Value | ||||||
Telecommunications — 0.55% | ||||||||
BCE Inc | 35,325 | $ | 1,527,453 | |||||
Toys, Games & Hobbies — 0.33% | ||||||||
Hasbro Inc | 11,609 | 903,064 | ||||||
TOTAL COMMON STOCKS | $ | 71,624,745 | ||||||
INVESTMENT COMPANIES — 0.27% | Shares Held | Value | ||||||
Exchange Traded Funds — 0.27% | ||||||||
iShares US Preferred Stock ETF | 10,000 | 372,100 | ||||||
SPDR Bloomberg Barclays High Yield Bond ETF | 10,000 | 364,500 | ||||||
TOTAL INVESTMENT COMPANIES | $ | 736,600 | ||||||
PREFERRED STOCKS — 5.65% | Shares Held | Value | ||||||
Banks — 1.32% | ||||||||
Bank of America Corp 6.00%; Series EE (a) | 10,000 | 249,000 | ||||||
Bank of America Corp 6.50%; Series Y (a) | 15,000 | 382,800 | ||||||
Goldman Sachs Group Inc/The 6.20%; | 40,000 | 1,017,200 | ||||||
Merrill Lynch Capital Trust I 6.45%; Series K (b) | 15,000 | 376,650 | ||||||
Merrill Lynch Capital Trust III 7.375% (b) | 15,000 | 385,650 | ||||||
Morgan Stanley 6.375%; Series I (a),(b) | 20,000 | 514,600 | ||||||
Morgan Stanley 7.125%; Series E (a),(b) | 25,000 | 703,250 | ||||||
|
| |||||||
$ | 3,629,150 | |||||||
|
| |||||||
Diversified Financial Services — 0.15% | ||||||||
General Electric Co 4.875% | 17,000 | 418,030 | ||||||
Electric — 0.93% | ||||||||
Alabama Power Co 6.45% (a) | 35,000 | 892,500 | ||||||
BGE Capital Trust II 6.20% | 30,000 | 765,000 | ||||||
Duke Energy Corp 5.13% | 15,000 | 358,950 | ||||||
Entergy Mississippi Inc | 10,000 | 211,300 | ||||||
NextEra Energy Capital Holdings Inc 5.13%; Series I | 15,000 | 329,700 | ||||||
|
| |||||||
$ | 2,557,450 | |||||||
|
| |||||||
Insurance — 0.14% | ||||||||
Prudential Financial Inc 5.75% | 15,000 | 371,400 | ||||||
Media — 0.14% | ||||||||
Comcast Corp 5.00% | 15,000 | 376,200 | ||||||
REITS — 2.85% | ||||||||
Boston Properties Inc 5.25% (a) | 20,000 | 480,800 | ||||||
Digital Realty Trust Inc 7.38%; Series H (a) | 50,000 | 1,357,500 | ||||||
Hospitality Properties Trust 7.13%; Series D (a) | 50,000 | 1,261,000 | ||||||
Kimco Realty Corp 6.00%; Series I (a) | 30,000 | 730,500 | ||||||
PS Business Parks Inc 5.20%; Series W (a) | 20,000 | 431,200 | ||||||
PS Business Parks Inc 6.00%; Series T (a) | 30,000 | 729,300 | ||||||
Public Storage 4.90%; Series E (a) | 15,000 | 316,500 | ||||||
Public Storage 6.38%; Series Y (a) | 35,000 | 915,250 | ||||||
Ventas Realty LP / Ventas Capital Corp 5.45% | 15,000 | 360,150 | ||||||
Vornado Realty Trust 6.63%; Series I (a) | 50,000 | 1,253,000 | ||||||
|
| |||||||
$ | 7,835,200 | |||||||
|
| |||||||
Telecommunications — 0.12% | ||||||||
Qwest Corp 6.13% | 15,000 | 340,350 | ||||||
TOTAL PREFERRED STOCKS | $ | 15,527,780 | ||||||
BONDS — 60.35% | Principal Amount | Value | ||||||
Banks — 3.81% | ||||||||
Bank of America Corp, | ||||||||
8.00%, 07/29/2049 (a),(b) | $ | 4,000,000 | $ | 4,110,000 | ||||
Citigroup Inc | ||||||||
6.68%, 09/13/2043 | 2,000,000 | 2,535,014 | ||||||
JPMorgan Chase & Co, | ||||||||
5.15%, 12/29/2049 (a),(b) | 4,000,000 | 3,825,600 | ||||||
|
| |||||||
$ | 10,470,614 | |||||||
|
| |||||||
Chemicals — 1.13% | ||||||||
Westlake Chemical Corp | ||||||||
4.88%, 05/15/2023 (c) | 3,000,000 | 3,112,500 |
See accompanying notes. | 18 |
Table of Contents
Schedule of Investments
Principal EDGE Active Income ETF
December 31, 2016 (unaudited)
BONDS (continued) | Principal Amount | Value | ||||||
Commercial Services — 1.07% | ||||||||
Avis Budget Car Rental LLC / Avis Budget Finance Inc | ||||||||
5.50%, 04/01/2023 | $ | 3,000,000 | $ | 2,947,500 | ||||
Computers — 1.18% | ||||||||
Diamond 1 Finance Corp / Diamond 2 Finance Corp | ||||||||
6.02%, 06/15/2026 (c) | 3,000,000 | 3,249,888 | ||||||
Diversified Financial Services — 0.37% | ||||||||
Jefferies Group LLC | ||||||||
6.25%, 01/15/2036 | 1,000,000 | 1,019,859 | ||||||
Electric — 3.12% | ||||||||
GenOn Energy Inc | ||||||||
9.88%, 10/15/2020 | 3,100,000 | 2,115,750 | ||||||
NRG Energy Inc | ||||||||
6.25%, 07/15/2022 | 1,000,000 | 1,002,500 | ||||||
6.25%, 05/01/2024 | 2,000,000 | 1,945,000 | ||||||
PPL Capital Funding Inc, | ||||||||
6.70%, 03/30/2067 (b) | 4,000,000 | 3,510,000 | ||||||
|
| |||||||
$ | 8,573,250 | |||||||
|
| |||||||
Environmental Control — 2.47% | ||||||||
Advanced Disposal Services Inc | ||||||||
5.63%, 11/15/2024 (c) | 2,000,000 | 1,990,000 | ||||||
Covanta Holding Corp | ||||||||
5.88%, 03/01/2024 | 5,000,000 | 4,812,500 | ||||||
|
| |||||||
$ | 6,802,500 | |||||||
|
| |||||||
Food — 1.88% | ||||||||
B&G Foods Inc | ||||||||
4.63%, 06/01/2021 | 3,000,000 | 3,060,000 | ||||||
Pinnacle Foods Finance LLC / Pinnacle Foods Finance Corp | ||||||||
5.88%, 01/15/2024 | 2,000,000 | 2,120,000 | ||||||
|
| |||||||
$ | 5,180,000 | |||||||
|
| |||||||
Healthcare — Services — 4.00% | ||||||||
HCA Inc | ||||||||
5.88%, 05/01/2023 | 2,000,000 | 2,125,000 | ||||||
HealthSouth Corp | ||||||||
5.75%, 09/15/2025 | 3,000,000 | 2,985,000 | ||||||
Surgery Center Holdings Inc | ||||||||
8.88%, 04/15/2021 (c) | 2,000,000 | 2,130,000 | ||||||
Tenet Healthcare Corp | ||||||||
8.13%, 04/01/2022 | 4,000,000 | 3,774,000 | ||||||
|
| |||||||
$ | 11,014,000 | |||||||
|
| |||||||
Home Builders — 1.85% | ||||||||
KB Home | ||||||||
7.50%, 09/15/2022 | 2,000,000 | 2,110,000 | ||||||
PulteGroup Inc | ||||||||
6.38%, 05/15/2033 | 3,000,000 | 2,992,500 | ||||||
|
| |||||||
$ | 5,102,500 | |||||||
|
| |||||||
Insurance — 1.48% | ||||||||
MetLife Capital Trust X | ||||||||
9.25%, 04/08/2068 (c) | 3,000,000 | 4,080,000 | ||||||
Internet — 0.37% | ||||||||
VeriSign Inc | ||||||||
5.25%, 04/01/2025 | 1,000,000 | 1,025,000 | ||||||
Iron & Steel — 2.30% | ||||||||
Allegheny Technologies Inc | ||||||||
7.88%, 08/15/2023 | 3,000,000 | 2,940,000 | ||||||
ArcelorMittal | ||||||||
7.25%, 02/25/2022 | 3,000,000 | 3,382,500 | ||||||
|
| |||||||
$ | 6,322,500 | |||||||
|
| |||||||
Lodging — 1.17% | ||||||||
Boyd Gaming Corp | ||||||||
6.88%, 05/15/2023 | 3,000,000 | 3,225,000 |
BONDS (continued) | Principal Amount | Value | ||||||
Media — 5.27% | ||||||||
CCO Holdings LLC / CCO Holdings Capital Corp | ||||||||
5.75%, 01/15/2024 | $ | 2,000,000 | $ | 2,090,000 | ||||
CSC Holdings LLC | ||||||||
6.75%, 11/15/2021 | 4,000,000 | 4,300,000 | ||||||
DISH DBS Corp | ||||||||
5.88%, 11/15/2024 | 4,000,000 | 4,116,000 | ||||||
Sirius XM Radio Inc | ||||||||
5.38%, 04/15/2025 (c) | 4,000,000 | 3,980,000 | ||||||
|
| |||||||
$ | 14,486,000 | |||||||
|
| |||||||
Mining — 2.80% | ||||||||
Freeport-McMoRan Inc | ||||||||
3.88%, 03/15/2023 | 4,000,000 | 3,670,000 | ||||||
Teck Resources Ltd | ||||||||
4.50%, 01/15/2021 | 4,000,000 | 4,020,000 | ||||||
|
| |||||||
$ | 7,690,000 | |||||||
|
| |||||||
Mortgage Backed Securities — 6.32% | ||||||||
Citigroup Commercial Mortgage Trust 2015-GC29 | ||||||||
4.16%, 04/10/2048 (b) | 750,000 | 713,625 | ||||||
COMM 2014-UBS3 Mortgage Trust | ||||||||
4.78%, 06/10/2047 (b) | 2,000,000 | 1,925,060 | ||||||
COMM 2015-CCRE22 Mortgage Trust | ||||||||
4.13%, 03/10/2048 (b) | 500,000 | 478,381 | ||||||
GS Mortgage Securities Trust 2013-GC13 | ||||||||
4.07%, 07/10/2046 (b),(c) | 500,000 | 507,235 | ||||||
GS Mortgage Securities Trust 2013-GCJ12 | ||||||||
4.18%, 06/10/2046 (b) | 2,000,000 | 1,963,523 | ||||||
GS Mortgage Securities Trust 2014-GC20 | ||||||||
4.87%, 04/10/2047 (b) | 2,000,000 | 1,929,913 | ||||||
GS Mortgage Securities Trust 2015-GC32 | ||||||||
4.41%, 07/10/2048 (b) | 1,241,000 | 1,225,573 | ||||||
JP Morgan Chase Commercial Mortgage Securities Trust | ||||||||
4.42%, 12/15/2047 (b),(c) | 1,750,000 | 1,623,769 | ||||||
JP Morgan Chase Commercial Mortgage Securities Trust 2015-JP1 | ||||||||
4.24%, 01/15/2049 (b),(c) | 1,000,000 | 751,711 | ||||||
JPMBB Commercial Mortgage Securities Trust 2014-C19 | ||||||||
4.67%, 04/15/2047 (b) | 2,000,000 | 2,005,031 | ||||||
Wells Fargo Commercial Mortgage Trust 2015-C26 | ||||||||
3.59%, 02/15/2048 (c) | 1,425,000 | 1,005,942 | ||||||
Wells Fargo Commercial Mortgage Trust 2015-SG1 | ||||||||
4.47%, 12/15/2047 (b) | 1,600,000 | 1,515,658 | ||||||
WFRBS Commercial Mortgage Trust 2013-C14 | ||||||||
4.00%, 06/15/2046 (b),(c) | 500,000 | 440,240 | ||||||
WFRBS Commercial Mortgage Trust 2014-C22 | ||||||||
3.77%, 09/15/2057 (b) | 1,000,000 | 916,008 | ||||||
3.91%, 09/15/2057 (b),(c) | 500,000 | 373,290 | ||||||
|
| |||||||
$ | 17,374,959 | |||||||
|
| |||||||
Office & Business Equipment — 1.12% | ||||||||
CDW LLC / CDW Finance Corp | ||||||||
5.50%, 12/01/2024 | 3,000,000 | 3,067,500 | ||||||
Oil & Gas — 2.41% | ||||||||
Nabors Industries Inc | ||||||||
5.00%, 09/15/2020 | 1,000,000 | 1,027,500 | ||||||
Rowan Cos Inc | ||||||||
4.75%, 01/15/2024 | 3,000,000 | 2,707,500 | ||||||
4.88%, 06/01/2022 | 2,000,000 | 1,890,000 | ||||||
Whiting Petroleum Corp | ||||||||
5.75%, 03/15/2021 | 1,000,000 | 995,840 | ||||||
|
| |||||||
$ | 6,620,840 | |||||||
|
| |||||||
Oil & Gas Services — 1.97% | ||||||||
Archrock Partners LP / Archrock Partners Finance Corp | ||||||||
6.00%, 04/01/2021 | 2,000,000 | 1,940,000 |
See accompanying notes. | 19 |
Table of Contents
Schedule of Investments
Principal EDGE Active Income ETF
December 31, 2016 (unaudited)
BONDS (continued) | Principal Amount | Value | ||||||
Oil & Gas Services (continued) | ||||||||
Weatherford International Ltd | ||||||||
4.50%, 04/15/2022 | $ | 4,000,000 | $ | 3,470,000 | ||||
|
| |||||||
$ | 5,410,000 | |||||||
|
| |||||||
Packaging & Containers — 1.49% | ||||||||
Reynolds Group Issuer Inc / Reynolds Group Issuer LLC / Reynolds Group Issuer (Luxembourg) S.A. | ||||||||
5.13%, 07/15/2023 (c) | 4,000,000 | 4,085,000 | ||||||
Pipelines — 2.53% | ||||||||
EnLink Midstream Partners LP | ||||||||
4.15%, 06/01/2025 | 3,000,000 | 2,911,992 | ||||||
Transcanada Trust | ||||||||
5.63%, 05/20/2075 (b) | 4,000,000 | 4,040,000 | ||||||
|
| |||||||
$ | 6,951,992 | |||||||
|
| |||||||
Retail — 1.89% | ||||||||
JC Penney Corp Inc | ||||||||
5.65%, 06/01/2020 | 1,000,000 | 986,250 | ||||||
Rite Aid Corp | ||||||||
6.75%, 06/15/2021 | 4,000,000 | 4,200,000 | ||||||
|
| |||||||
$ | 5,186,250 | |||||||
|
| |||||||
Software — 1.55% | ||||||||
First Data Corp | ||||||||
7.00%, 12/01/2023 (c) | 4,000,000 | 4,260,000 | ||||||
Storage/Warehousing — 1.25% | ||||||||
Mobile Mini Inc | ||||||||
5.88%, 07/01/2024 | 3,331,000 | 3,447,585 | ||||||
Telecommunications — 4.02% | ||||||||
Intelsat Jackson Holdings SA | ||||||||
7.25%, 04/01/2019 | 3,000,000 | 2,520,000 | ||||||
Sprint Corp | ||||||||
7.88%, 09/15/2023 | 4,000,000 | 4,270,000 | ||||||
T-Mobile USA Inc | ||||||||
6.38%, 03/01/2025 | 4,000,000 | 4,275,000 | ||||||
|
| |||||||
$ | 11,065,000 | |||||||
|
| |||||||
Transportation — 1.53% | ||||||||
XPO Logistics Inc | ||||||||
6.50%, 06/15/2022 (c) | 4,000,000 | 4,200,000 | ||||||
TOTAL BONDS | $ | 165,970,237 | ||||||
U.S. GOVERNMENT & GOVERNMENT AGENCY OBLIGATIONS — 6.48% | Principal Amount | Value | ||||||
Federal Home Loan Mortgage Corp (FHLMC) — 1.35% | ||||||||
1.86%, 09/15/2040 (b),(d) | $ | 29,607,170 | $ | 1,681,006 | ||||
2.13%, 02/15/2038 (b),(d) | 27,753,564 | 2,030,956 | ||||||
|
| |||||||
$ | 3,711,962 | |||||||
|
| |||||||
Federal National Mortgage Association (FNMA) — 3.82% | ||||||||
1.95%, 12/25/2034 (b),(d) | 21,812,129 | 1,271,983 | ||||||
1.95%, 07/25/2044 (b),(d) | 25,232,256 | 1,489,031 | ||||||
1.95%, 07/25/2056 (b),(d) | 17,526,763 | 1,159,304 | ||||||
2.00%, 12/25/2045 (b),(d) | 25,294,075 | 1,638,861 | ||||||
2.13%, 08/25/2044 (b),(d) | 28,176,390 | 1,943,650 | ||||||
2.21%, 12/25/2044 (b),(d) | 19,972,050 | 1,517,690 | ||||||
3.50%, 02/25/2036 (d) | 9,051,201 | 1,488,191 | ||||||
|
| |||||||
$ | 10,508,710 | |||||||
|
|
U.S. GOVERNMENT & GOVERNMENT AGENCY OBLIGATIONS (continued) | Principal Amount | Value | ||||||
Government National Mortgage Association (GNMA) — 1.31% | ||||||||
4.00%, 04/20/2046 (d) | $ | 6,837,638 | $ | 1,264,398 | ||||
4.00%, 09/20/2046 (d) | 11,865,353 | 2,337,924 | ||||||
|
| |||||||
$ | 3,602,322 | |||||||
TOTAL U.S. GOVERNMENT & GOVERNMENT AGENCY OBLIGATIONS | $ | 17,822,994 | ||||||
Total Investments | $ | 271,682,356 | ||||||
Other Assets and Liabilities — 1.21% | $ | 3,327,889 | ||||||
|
| |||||||
TOTAL NET ASSETS — 100% | $ | 275,010,245 | ||||||
|
|
(a) | Perpetual security. Perpetual securities pay an indefinite stream of interest, but they may be called by the issuer at an earlier date. |
(b) | Variable Rate. Rate shown is in effect at December 31, 2016. |
(c) | Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the end of the period, the value of these securities totaled $35,789,575 or 13.01% of net assets. |
(d) | Security is an Interest Only Strip. |
Portfolio Summary (unaudited) | ||||
Sector | Percent | |||
Financial | 22.41 | % | ||
Mortgage Securities | 12.80 | % | ||
Energy | 12.68 | % | ||
Communications | 10.48 | % | ||
Consumer, Non-cyclical | 9.21 | % | ||
Industrial | 6.85 | % | ||
Basic Materials | 6.80 | % | ||
Consumer, Cyclical | 6.71 | % | ||
Utilities | 5.70 | % | ||
Technology | 4.88 | % | ||
Investment Companies | 0.27 | % | ||
Other Assets and Liabilities | 1.21 | % | ||
TOTAL NET ASSETS | 100.00 | % |
See accompanying notes. | 20 |
Table of Contents
Schedule of Investments
Principal Healthcare Innovators Index ETF
December 31, 2016 (unaudited)
COMMON STOCKS — 99.84% | Shares Held | Value | ||||||
Biotechnology — 47.17% | ||||||||
Acceleron Pharma Inc (a) | 1,020 | $ | 26,030 | |||||
Achillion Pharmaceuticals Inc (a) | 3,712 | 15,331 | ||||||
Acorda Therapeutics Inc (a) | 1,252 | 23,538 | ||||||
Aduro Biotech Inc (a) | 1,758 | 20,041 | ||||||
Advaxis Inc (a) | 925 | 6,623 | ||||||
Agenus Inc (a) | 2,359 | 9,719 | ||||||
Alder Biopharmaceuticals Inc (a) | 1,363 | 28,350 | ||||||
Alnylam Pharmaceuticals Inc (a) | 2,348 | 87,909 | ||||||
AMAG Pharmaceuticals Inc (a) | 927 | 32,260 | ||||||
Aratana Therapeutics Inc (a) | 961 | 6,900 | ||||||
Arena Pharmaceuticals Inc (a) | 6,606 | 9,381 | ||||||
ARIAD Pharmaceuticals Inc (a) | 5,233 | 65,099 | ||||||
Arrowhead Pharmaceuticals Inc (a) | 1,670 | 2,588 | ||||||
Atara Biotherapeutics Inc (a) | 782 | 11,104 | ||||||
Bellicum Pharmaceuticals Inc (a) | 735 | 10,011 | ||||||
BioCryst Pharmaceuticals Inc (a) | 2,063 | 13,059 | ||||||
BioMarin Pharmaceutical Inc (a) | 2,188 | 181,254 | ||||||
Bluebird Bio Inc (a) | 1,009 | 62,255 | ||||||
Blueprint Medicines Corp (a) | 741 | 20,785 | ||||||
Celldex Therapeutics Inc (a) | 2,767 | 9,795 | ||||||
Cytokinetics Inc (a) | 1,078 | 13,098 | ||||||
Dermira Inc (a) | 960 | 29,117 | ||||||
Dynavax Technologies Corp (a) | 1,045 | 4,128 | ||||||
Editas Medicine Inc (a) | 994 | 16,133 | ||||||
Emergent BioSolutions Inc (a) | 1,098 | 36,058 | ||||||
Epizyme Inc (a) | 1,573 | 19,033 | ||||||
Esperion Therapeutics Inc (a) | 633 | 7,925 | ||||||
Exact Sciences Corp (a) | 2,655 | 35,471 | ||||||
Exelixis Inc (a) | 6,255 | 93,262 | ||||||
FibroGen Inc (a) | 1,704 | 36,466 | ||||||
Five Prime Therapeutics Inc (a) | 769 | 38,535 | ||||||
Foundation Medicine Inc (a) | 948 | 16,780 | ||||||
Geron Corp (a) | 4,321 | 8,944 | ||||||
Halozyme Therapeutics Inc (a) | 3,515 | 34,728 | ||||||
ImmunoGen Inc (a) | 2,440 | 4,978 | ||||||
Incyte Corp (a) | 2,147 | 215,280 | ||||||
Innoviva Inc (a) | 3,019 | 32,303 | ||||||
Inovio Pharmaceuticals Inc (a) | 1,997 | 13,859 | ||||||
Insmed Inc (a) | 1,679 | 22,213 | ||||||
Intellia Therapeutics Inc (a) | 977 | 12,808 | ||||||
Intercept Pharmaceuticals Inc (a) | 677 | 73,556 | ||||||
Intrexon Corp (a) | 3,236 | 78,635 | ||||||
Ionis Pharmaceuticals Inc (a) | 3,312 | 158,413 | ||||||
Juno Therapeutics Inc (a) | 2,872 | 54,137 | ||||||
Karyopharm Therapeutics Inc (a) | 1,001 | 9,409 | ||||||
Kite Pharma Inc (a) | 1,347 | 60,399 | ||||||
Lexicon Pharmaceuticals Inc (a) | 2,820 | 39,001 | ||||||
MacroGenics Inc (a) | 942 | 19,254 | ||||||
Medicines Co/The (a) | 1,915 | 64,995 | ||||||
Merrimack Pharmaceuticals Inc (a) | 3,510 | 14,321 | ||||||
Momenta Pharmaceuticals Inc (a) | 1,920 | 28,896 | ||||||
NewLink Genetics Corp (a) | 785 | 8,070 | ||||||
Novavax Inc (a) | 7,364 | 9,279 | ||||||
Omeros Corp (a) | 1,162 | 11,527 | ||||||
Organovo Holdings Inc (a) | 2,516 | 8,529 | ||||||
Otonomy Inc (a) | 819 | 13,022 | ||||||
OvaScience Inc (a) | 965 | 1,476 | ||||||
Pacific Biosciences of California Inc (a) | 2,495 | 9,481 | ||||||
Prothena Corp PLC (a) | 933 | 45,894 | ||||||
PTC Therapeutics Inc (a) | 961 | 10,484 | ||||||
Puma Biotechnology Inc (a) | 881 | 27,047 | ||||||
Retrophin Inc (a) | 997 | 18,873 | ||||||
Rigel Pharmaceuticals Inc (a) | 2,568 | 6,112 | ||||||
Sage Therapeutics Inc (a) | 870 | 44,422 | ||||||
Sangamo BioSciences Inc (a) | 1,972 | 6,015 | ||||||
Seattle Genetics Inc (a) | 3,748 | 197,782 | ||||||
Spark Therapeutics Inc (a) | 831 | 41,467 | ||||||
Spectrum Pharmaceuticals Inc (a) | 2,178 | 9,649 | ||||||
Theravance Biopharma Inc (a) | 1,299 | 41,412 | ||||||
Ultragenyx Pharmaceutical Inc (a) | 1,071 | 75,302 | ||||||
Vertex Pharmaceuticals Inc (a) | 2,322 | 171,062 | ||||||
ZIOPHARM Oncology Inc (a) | 3,581 | 19,158 | ||||||
|
| |||||||
$ | 2,710,230 | |||||||
|
|
COMMON STOCKS (continued) | Shares Held | Value | ||||||
Commercial Services — 0.38% | ||||||||
Albany Molecular Research Inc (a) | 1,164 | $ | 21,837 | |||||
Healthcare — Products — 14.33% | ||||||||
Accelerate Diagnostics Inc (a) | 1,391 | 28,863 | ||||||
Accuray Inc (a) | 2,198 | 10,111 | ||||||
AngioDynamics Inc (a) | 999 | 16,853 | ||||||
AtriCure Inc (a) | 898 | 17,574 | ||||||
Cardiovascular Systems Inc (a) | 886 | 21,450 | ||||||
Cerus Corp (a) | 2,796 | 12,163 | ||||||
ConforMIS Inc (a) | 1,142 | 9,250 | ||||||
Endologix Inc (a) | 2,222 | 12,710 | ||||||
Genomic Health Inc (a) | 906 | 26,627 | ||||||
Glaukos Corp (a) | 896 | 30,733 | ||||||
Haemonetics Corp (a) | 1,381 | 55,516 | ||||||
Insulet Corp (a) | 1,552 | 58,479 | ||||||
Intersect ENT Inc (a) | 769 | 9,305 | ||||||
Invacare Corp | 861 | 11,236 | ||||||
K2M Group Holdings Inc (a) | 1,126 | 22,565 | ||||||
Nevro Corp (a) | 769 | 55,876 | ||||||
NxStage Medical Inc (a) | 1,748 | 45,815 | ||||||
OPKO Health Inc (a) | 14,924 | 138,793 | ||||||
Orthofix International NV (a) | 495 | 17,909 | ||||||
Penumbra Inc (a) | 843 | 53,783 | ||||||
Quidel Corp (a) | 877 | 18,785 | ||||||
Rockwell Medical Inc (a) | 1,444 | 9,458 | ||||||
Spectranetics Corp/The (a) | 1,163 | 28,494 | ||||||
Wright Medical Group NV (a) | 2,789 | 64,091 | ||||||
Zeltiq Aesthetics Inc (a) | 1,076 | 46,828 | ||||||
|
| |||||||
$ | 823,267 | |||||||
|
| |||||||
Healthcare — Services — 3.06% | ||||||||
Brookdale Senior Living Inc (a) | 5,045 | 62,659 | ||||||
Capital Senior Living Corp (a) | 813 | 13,049 | ||||||
Community Health Systems Inc (a) | 3,085 | 17,245 | ||||||
Healthways Inc (a) | 981 | 22,318 | ||||||
Teladoc Inc (a) | 1,240 | 20,460 | ||||||
Tenet Healthcare Corp (a) | 2,696 | 40,008 | ||||||
|
| |||||||
$ | 175,739 | |||||||
|
| |||||||
Pharmaceuticals — 34.32% | ||||||||
ACADIA Pharmaceuticals Inc (a) | 3,275 | 94,451 | ||||||
Adamas Pharmaceuticals Inc (a) | 599 | 10,123 | ||||||
Aerie Pharmaceuticals Inc (a) | 757 | 28,652 | ||||||
Agios Pharmaceuticals Inc (a) | 1,033 | 43,107 | ||||||
Alkermes PLC (a) | 4,143 | 230,268 | ||||||
Amicus Therapeutics Inc (a) | 3,859 | 19,179 | ||||||
Amphastar Pharmaceuticals Inc (a) | 1,225 | 22,564 | ||||||
Array BioPharma Inc (a) | 3,938 | 34,615 | ||||||
Avexis Inc (a) | 625 | 29,831 | ||||||
Axovant Sciences Ltd (a) | 2,691 | 33,422 | ||||||
Cara Therapeutics Inc (a) | 764 | 7,098 | ||||||
Cempra Inc (a) | 1,412 | 3,954 | ||||||
Chimerix Inc (a) | 1,293 | 5,948 | ||||||
Clovis Oncology Inc (a) | 1,045 | 46,419 | ||||||
Coherus Biosciences Inc (a) | 1,178 | 33,161 | ||||||
Collegium Pharmaceutical Inc (a) | 638 | 9,934 | ||||||
Depomed Inc (a) | 1,667 | 30,039 | ||||||
DexCom Inc (a) | 2,294 | 136,952 | ||||||
Eagle Pharmaceuticals Inc (a) | 425 | 33,719 | ||||||
Enanta Pharmaceuticals Inc (a) | 517 | 17,320 | ||||||
Endo International PLC (a) | 6,073 | 100,022 | ||||||
Flexion Therapeutics Inc (a) | 747 | 14,208 | ||||||
Global Blood Therapeutics Inc (a) | 829 | 11,979 | ||||||
Heron Therapeutics Inc (a) | 995 | 13,035 | ||||||
Impax Laboratories Inc (a) | 2,005 | 26,566 | ||||||
Intra-Cellular Therapies Inc (a) | 1,174 | 17,716 | ||||||
Ironwood Pharmaceuticals Inc (a) | 3,529 | 53,958 | ||||||
Keryx Biopharmaceuticals Inc (a) | 2,873 | 16,836 | ||||||
La Jolla Pharmaceutical Co (a) | 496 | 8,695 | ||||||
MannKind Corp (a) | 12,982 | 8,266 | ||||||
Minerva Neurosciences Inc (a) | 944 | 11,092 | ||||||
Nektar Therapeutics (a) | 3,713 | 45,559 | ||||||
Neurocrine Biosciences Inc (a) | 2,375 | 91,912 | ||||||
Ophthotech Corp (a) | 966 | 4,666 |
See accompanying notes. | 21 |
Table of Contents
Schedule of Investments
Principal Healthcare Innovators Index ETF
December 31, 2016 (unaudited)
COMMON STOCKS (continued) | Shares Held | Value | ||||||
Pharmaceuticals (continued) | ||||||||
Pacira Pharmaceuticals Inc (a) | 1,012 | $ | 32,688 | |||||
Perrigo Co PLC | 2,186 | 181,941 | ||||||
Portola Pharmaceuticals Inc (a) | 1,535 | 34,445 | ||||||
Progenics Pharmaceuticals Inc (a) | 1,899 | 16,407 | ||||||
Radius Health Inc (a) | 1,170 | 44,495 | ||||||
Revance Therapeutics Inc (a) | 773 | 16,001 | ||||||
Sarepta Therapeutics Inc (a) | 1,300 | 35,659 | ||||||
Seres Therapeutics Inc (a) | 1,093 | 10,821 | ||||||
Synergy Pharmaceuticals Inc (a) | 4,872 | 29,670 | ||||||
TESARO Inc (a) | 1,400 | 188,272 | ||||||
TG Therapeutics Inc (a) | 1,515 | 7,045 | ||||||
TherapeuticsMD Inc (a) | 5,330 | 30,754 | ||||||
Vanda Pharmaceuticals Inc (a) | 1,175 | 18,741 | ||||||
Xencor Inc (a) | 1,112 | 29,268 | ||||||
|
| |||||||
$ | 1,971,473 | |||||||
|
| |||||||
Software — 0.58% | ||||||||
Omnicell Inc (a) | 981 | 33,256 | ||||||
TOTAL COMMON STOCKS | $ | 5,735,802 | ||||||
Total Investments | $ | 5,735,802 | ||||||
Other Assets and Liabilities — 0.16% | $ | 8,941 | ||||||
|
| |||||||
TOTAL NET ASSETS — 100% | $ | 5,744,743 | ||||||
|
|
(a) | Non-Income Producing Security |
Portfolio Summary (unaudited) | ||||
Sector | Percent | |||
Consumer, Non-cyclical | 99.26 | % | ||
Technology | 0.58 | % | ||
Other Assets and Liabilities | 0.16 | % | ||
TOTAL NET ASSETS | 100.00 | % |
See accompanying notes. | 22 |
Table of Contents
Schedule of Investments
Principal Millennials Index ETF
December 31, 2016 (unaudited)
COMMON STOCKS — 99.91% | Shares Held | Value | ||||||
Apparel — 5.41% | ||||||||
adidas AG | 285 | $ | 45,046 | |||||
Carter’s Inc | 319 | 27,558 | ||||||
Columbia Sportswear Co | 276 | 16,091 | ||||||
Michael Kors Holdings Ltd (a) | 1,642 | 70,573 | ||||||
NIKE Inc, Class B | 2,040 | 103,693 | ||||||
Under Armour Inc, Class A (a) | 1,423 | 41,338 | ||||||
VF Corp | 522 | 27,849 | ||||||
|
| |||||||
$ | 332,148 | |||||||
|
| |||||||
Beverages — 3.97% | ||||||||
Brown-Forman Corp, Class B | 681 | 30,591 | ||||||
Constellation Brands Inc, Class A | 550 | 84,320 | ||||||
Davide Campari-Milano SpA | 1,660 | 16,233 | ||||||
Diageo PLC | 1,250 | 32,505 | ||||||
Treasury Wine Estates Ltd | 8,415 | 64,856 | ||||||
Tsingtao Brewery Co Ltd, Class H | 4,000 | 15,114 | ||||||
|
| |||||||
$ | 243,619 | |||||||
|
| |||||||
Chemicals — 0.51% | ||||||||
Givaudan SA | 17 | 31,152 | ||||||
Commercial Services — 6.62% | ||||||||
Advisory Board Co/The (a) | 514 | 17,090 | ||||||
Bright Horizons Family Solutions Inc (a) | 1,444 | 101,109 | ||||||
Capella Education Co | 315 | 27,657 | ||||||
EVERTEC Inc | 1,189 | 21,105 | ||||||
G8 Education Ltd | 5,735 | 14,858 | ||||||
PayPal Holdings Inc (a) | 2,156 | 85,097 | ||||||
RELX PLC | 6,767 | 120,842 | ||||||
Wirecard AG | 438 | 18,853 | ||||||
|
| |||||||
$ | 406,611 | |||||||
|
| |||||||
Computers — 1.62% | ||||||||
Apple Inc | 309 | 35,788 | ||||||
HP Inc | 2,730 | 40,513 | ||||||
Ingenico Group SA | 289 | 23,081 | ||||||
|
| |||||||
$ | 99,382 | |||||||
|
| |||||||
Diversified Financial Services — 6.77% | ||||||||
American Express Co | 551 | 40,818 | ||||||
Discover Financial Services | 2,469 | 177,990 | ||||||
Mastercard Inc, Class A | 358 | 36,964 | ||||||
TD Ameritrade Holding Corp | 1,072 | 46,739 | ||||||
Visa Inc, Class A | 442 | 34,485 | ||||||
Worldpay Group PLC (b) | 23,672 | 78,739 | ||||||
|
| |||||||
$ | 415,735 | |||||||
|
| |||||||
Food — 0.92% | ||||||||
Hain Celestial Group Inc/The (a) | 405 | 15,807 | ||||||
Kroger Co/The | 869 | 29,989 | ||||||
Sprouts Farmers Market Inc (a) | 572 | 10,823 | ||||||
|
| |||||||
$ | 56,619 | |||||||
|
| |||||||
Home Builders — 0.54% | ||||||||
NVR Inc (a) | 20 | 33,380 | ||||||
Home Furnishings — 0.86% | ||||||||
Tempur Sealy International Inc (a) | 272 | 18,572 | ||||||
Whirlpool Corp | 187 | 33,991 | ||||||
|
| |||||||
$ | 52,563 | |||||||
|
| |||||||
Internet — 24.44% | ||||||||
Alibaba Group Holding Ltd ADR (a) | 1,053 | 92,464 | ||||||
Alphabet Inc, Class A (a) | 44 | 34,868 | ||||||
Alphabet Inc, Class C (a) | 168 | 129,666 | ||||||
Amazon.com Inc (a) | 140 | 104,982 | ||||||
ASOS PLC (a) | 1,335 | 81,670 | ||||||
Baidu Inc ADR (a) | 654 | 107,524 | ||||||
Ctrip.com International Ltd ADR (a) | 1,408 | 56,320 | ||||||
eBay Inc (a) | 1,409 | 41,833 | ||||||
Facebook Inc, Class A (a) | 1,094 | 125,865 | ||||||
Groupon Inc (a) | 4,168 | 13,838 | ||||||
GrubHub Inc (a) | 2,495 | 93,862 | ||||||
IAC/InterActiveCorp (a) | 1,324 | 85,782 | ||||||
Just Eat PLC (a) | 11,507 | 82,747 | ||||||
Match Group Inc (a) | 1,504 | 25,718 | ||||||
Netflix Inc (a) | 813 | 100,649 |
COMMON STOCKS (continued) | Shares Held | Value | ||||||
Internet (continued) | ||||||||
Priceline Group Inc/The (a) | 97 | $ | 142,208 | |||||
Rightmove PLC | 275 | 13,228 | ||||||
Tencent Holdings Ltd | 6,100 | 149,225 | ||||||
Trade Me Group Ltd | 5,430 | 18,899 | ||||||
|
| |||||||
$ | 1,501,348 | |||||||
|
| |||||||
Leisure Products & Services — 0.38% | ||||||||
Planet Fitness Inc, Class A | 1,156 | 23,236 | ||||||
Media — 7.58% | ||||||||
AMC Networks Inc, Class A (a) | 256 | 13,399 | ||||||
CBS Corp NVDR, Class B | 614 | 39,063 | ||||||
Comcast Corp, Class A | 550 | 37,977 | ||||||
Informa PLC | 9,384 | 78,641 | ||||||
MSG Networks Inc, Class A (a) | 961 | 20,661 | ||||||
Naspers Ltd, Class N | 593 | 86,965 | ||||||
Time Warner Inc | 466 | 44,983 | ||||||
Twenty-First Century Fox Inc, Class A | 1,193 | 33,452 | ||||||
Vivendi SA | 3,950 | 75,072 | ||||||
Walt Disney Co/The | 341 | 35,539 | ||||||
|
| |||||||
$ | 465,752 | |||||||
|
| |||||||
Real Estate — 0.26% | ||||||||
REA Group Ltd | 400 | 15,943 | ||||||
Retail — 27.96% | ||||||||
ANTA Sports Products Ltd | 29,000 | 86,576 | ||||||
Bed Bath & Beyond Inc | 671 | 27,269 | ||||||
Best Buy Co Inc | 1,042 | 44,462 | ||||||
Burlington Stores Inc (a) | 295 | 25,001 | ||||||
Children’s Place Inc/The | 198 | 19,988 | ||||||
Chipotle Mexican Grill Inc (a) | 71 | 26,790 | ||||||
Dick’s Sporting Goods Inc | 356 | 18,904 | ||||||
Domino’s Pizza Inc | 255 | 40,606 | ||||||
Fast Retailing Co Ltd | 300 | 107,371 | ||||||
Finish Line Inc/The, Class A | 788 | 14,822 | ||||||
Foot Locker Inc | 520 | 36,863 | ||||||
GameStop Corp, Class A | 523 | 13,211 | ||||||
GNC Holdings Inc, Class A | 522 | 5,763 | ||||||
Hennes & Mauritz AB, Class B | 2,492 | 69,312 | ||||||
Hibbett Sports Inc (a) | 463 | 17,270 | ||||||
Home Depot Inc/The | 943 | 126,438 | ||||||
Industria de Diseno Textil SA | 2,494 | 85,139 | ||||||
JB Hi-Fi Ltd | 916 | 18,535 | ||||||
Kate Spade & Co (a) | 2,445 | 45,648 | ||||||
L Brands Inc | 379 | 24,953 | ||||||
Lowe’s Cos Inc | 447 | 31,791 | ||||||
Mr Price Group Ltd | 7,760 | 90,151 | ||||||
Next PLC | 429 | 26,345 | ||||||
OVS SpA (b) | 10,633 | 53,502 | ||||||
Panera Bread Co, Class A (a) | 457 | 93,726 | ||||||
PVH Corp | 339 | 30,591 | ||||||
Sports Direct International PLC (a) | 3,060 | 10,506 | ||||||
Starbucks Corp | 2,091 | 116,092 | ||||||
SuperGroup PLC | 4,644 | 94,319 | ||||||
TJX Cos Inc/The | 432 | 32,456 | ||||||
Truworths International Ltd | 14,372 | 83,373 | ||||||
Urban Outfitters Inc (a) | 2,827 | 80,513 | ||||||
Vitamin Shoppe Inc (a) | 537 | 12,754 | ||||||
Williams-Sonoma Inc | 304 | 14,711 | ||||||
Yamada Denki Co Ltd | 3,500 | 18,866 | ||||||
Zalando SE (a),(b) | 1,897 | 72,467 | ||||||
|
| |||||||
$ | 1,717,084 | |||||||
|
| |||||||
Semiconductors — 4.60% | ||||||||
NVIDIA Corp | 2,645 | 282,327 | ||||||
Software — 6.89% | ||||||||
Activision Blizzard Inc | 2,470 | 89,192 | ||||||
Changyou.com Ltd ADR (a) | 885 | 18,780 | ||||||
Electronic Arts Inc (a) | 1,902 | 149,801 | ||||||
Konami Holdings Corp | 600 | 24,231 | ||||||
NetEase Inc ADR | 657 | 141,478 | ||||||
|
| |||||||
$ | 423,482 | |||||||
|
|
See accompanying notes. | 23 |
Table of Contents
Schedule of Investments
Principal Millennials Index ETF
December 31, 2016 (unaudited)
COMMON STOCKS (continued) | Shares Held | Value | ||||||
Telecommunications — 0.58% | ||||||||
Cisco Systems Inc | 1,187 | $ | 35,871 | |||||
TOTAL COMMON STOCKS | $ | 6,136,252 | ||||||
Total Investments | $ | 6,136,252 | ||||||
Other Assets and Liabilities — 0.09% | $ | 5,421 | ||||||
|
| |||||||
TOTAL NET ASSETS — 100% | $ | 6,141,673 | ||||||
|
|
(a) | Non-Income Producing Security |
(b) | Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the end of the period, the value of these securities totaled $204,708 or 3.33% of net assets. |
Portfolio Summary (unaudited) | ||||
Sector | Percent | |||
Consumer, Cyclical | 35.14 | % | ||
Communications | 32.61 | % | ||
Technology | 13.11 | % | ||
Consumer, Non-cyclical | 11.51 | % | ||
Financial | 7.03 | % | ||
Basic Materials | 0.51 | % | ||
Other Assets and Liabilities | 0.09 | % | ||
TOTAL NET ASSETS | 100.00 | % |
See accompanying notes. | 24 |
Table of Contents
Schedule of Investments
Principal Price Setters Index ETF
December 31, 2016 (unaudited)
COMMON STOCKS — 100.13% | Shares Held | Value | ||||||
Advertising — 1.01% | ||||||||
Omnicom Group Inc | 774 | $ | 65,875 | |||||
Aerospace & Defense — 3.63% | ||||||||
General Dynamics Corp | 439 | 75,798 | ||||||
Lockheed Martin Corp | 82 | 20,495 | ||||||
Rockwell Collins Inc | 690 | 64,005 | ||||||
Spirit AeroSystems Holdings Inc, Class A | 921 | 53,740 | ||||||
TransDigm Group Inc | 91 | 22,655 | ||||||
|
| |||||||
$ | 236,693 | |||||||
|
| |||||||
Agriculture — 2.05% | ||||||||
Altria Group Inc | 981 | 66,335 | ||||||
Reynolds American Inc | 1,198 | 67,136 | ||||||
|
| |||||||
$ | 133,471 | |||||||
|
| |||||||
Airlines — 0.33% | ||||||||
Alaska Air Group Inc | 240 | 21,295 | ||||||
Apparel — 0.23% | ||||||||
NIKE Inc, Class B | 290 | 14,741 | ||||||
Banks — 1.73% | ||||||||
Northern Trust Corp | 712 | 63,404 | ||||||
Signature Bank (a) | 327 | 49,115 | ||||||
|
| |||||||
$ | 112,519 | |||||||
|
| |||||||
Beverages — 3.76% | ||||||||
Brown-Forman Corp, Class B | 1,228 | 55,162 | ||||||
Constellation Brands Inc, Class A | 427 | 65,463 | ||||||
Dr Pepper Snapple Group Inc | 660 | 59,842 | ||||||
PepsiCo Inc | 617 | 64,557 | ||||||
|
| |||||||
$ | 245,024 | |||||||
|
| |||||||
Biotechnology — 2.26% | ||||||||
Amgen Inc | 424 | 61,993 | ||||||
Gilead Sciences Inc | 692 | 49,554 | ||||||
Illumina Inc (a) | 279 | 35,723 | ||||||
|
| |||||||
$ | 147,270 | |||||||
|
| |||||||
Chemicals — 4.42% | ||||||||
Air Products & Chemicals Inc | 493 | 70,903 | ||||||
Ecolab Inc | 408 | 47,826 | ||||||
International Flavors & Fragrances Inc | 409 | 48,192 | ||||||
PPG Industries Inc | 438 | 41,505 | ||||||
Praxair Inc | 174 | 20,391 | ||||||
Sherwin-Williams Co/The | 221 | 59,392 | ||||||
|
| |||||||
$ | 288,209 | |||||||
|
| |||||||
Commercial Services — 8.92% | ||||||||
Automatic Data Processing Inc | 209 | 21,481 | ||||||
Cintas Corp | 719 | 83,088 | ||||||
Equifax Inc | 575 | 67,982 | ||||||
FleetCor Technologies Inc (a) | 138 | 19,530 | ||||||
Gartner Inc (a) | 514 | 51,950 | ||||||
Global Payments Inc | 292 | 20,268 | ||||||
Moody’s Corp | 680 | 64,104 | ||||||
Nielsen Holdings PLC | 353 | 14,808 | ||||||
SEI Investments Co | 1,108 | 54,691 | ||||||
Total System Services Inc | 1,386 | 67,955 | ||||||
Vantiv Inc, Class A (a) | 1,161 | 69,219 | ||||||
Verisk Analytics Inc (a) | 571 | 46,348 | ||||||
|
| |||||||
$ | 581,424 | |||||||
|
| |||||||
Computers — 1.35% | ||||||||
Accenture PLC, Class A | 422 | 49,429 | ||||||
Apple Inc | 184 | 21,311 | ||||||
Cognizant Technology Solutions Corp, Class A (a) | 312 | 17,481 | ||||||
|
| |||||||
$ | 88,221 | |||||||
|
| |||||||
Distribution/Wholesale — 0.58% | ||||||||
Fastenal Co | 393 | 18,463 | ||||||
Genuine Parts Co | 199 | 19,013 | ||||||
|
| |||||||
$ | 37,476 | |||||||
|
| |||||||
Diversified Financial Services — 6.42% | ||||||||
Affiliated Managers Group Inc (a) | 435 | 63,205 | ||||||
Alliance Data Systems Corp | 86 | 19,651 | ||||||
American Express Co | 321 | 23,780 |
COMMON STOCKS (continued) | Shares Held | Value | ||||||
Diversified Financial Services (continued) | ||||||||
CME Group Inc | 200 | $ | 23,070 | |||||
Intercontinental Exchange Inc | 885 | 49,932 | ||||||
Mastercard Inc, Class A | 480 | 49,560 | ||||||
S&P Global Inc | 471 | 50,651 | ||||||
T Rowe Price Group Inc | 614 | 46,210 | ||||||
TD Ameritrade Holding Corp | 622 | 27,119 | ||||||
Visa Inc, Class A | 834 | 65,069 | ||||||
|
| |||||||
$ | 418,247 | |||||||
|
| |||||||
Electric — 4.91% | ||||||||
CMS Energy Corp | 449 | 18,687 | ||||||
Consolidated Edison Inc | 605 | 44,577 | ||||||
Dominion Resources Inc | 600 | 45,954 | ||||||
Duke Energy Corp | 561 | 43,545 | ||||||
Eversource Energy | 765 | 42,251 | ||||||
Pinnacle West Capital Corp | 260 | 20,288 | ||||||
SCANA Corp | 929 | 68,077 | ||||||
Southern Co/The | 368 | 18,102 | ||||||
Xcel Energy Inc | 449 | 18,274 | ||||||
|
| |||||||
$ | 319,755 | |||||||
|
| |||||||
Electrical Components & Equipment — 2.04% | ||||||||
Acuity Brands Inc | 285 | 65,795 | ||||||
AMETEK Inc | 383 | 18,614 | ||||||
Emerson Electric Co | 868 | 48,391 | ||||||
|
| |||||||
$ | 132,800 | |||||||
|
| |||||||
Electronics — 4.17% | ||||||||
Amphenol Corp, Class A | 1,136 | 76,339 | ||||||
Honeywell International Inc | 413 | 47,846 | ||||||
Mettler-Toledo International Inc (a) | 191 | 79,945 | ||||||
Waters Corp (a) | 501 | 67,329 | ||||||
|
| |||||||
$ | 271,459 | |||||||
|
| |||||||
Environmental Control — 0.81% | ||||||||
Republic Services Inc | 926 | 52,828 | ||||||
Food — 3.85% | ||||||||
Campbell Soup Co | 674 | 40,757 | ||||||
General Mills Inc | 1,027 | 63,438 | ||||||
Hershey Co/The | 194 | 20,065 | ||||||
Hormel Foods Corp | 1,422 | 49,500 | ||||||
Kroger Co/The | 444 | 15,322 | ||||||
McCormick & Co Inc | 454 | 42,372 | ||||||
Mondelez International Inc, Class A | 439 | 19,461 | ||||||
|
| |||||||
$ | 250,915 | |||||||
|
| |||||||
Gas — 1.37% | ||||||||
Atmos Energy Corp | 610 | 45,232 | ||||||
Sempra Energy | 435 | 43,778 | ||||||
|
| |||||||
$ | 89,010 | |||||||
|
| |||||||
Hand/Machine Tools — 1.10% | ||||||||
Snap-on Inc | 292 | 50,011 | ||||||
Stanley Black & Decker Inc | 189 | 21,676 | ||||||
|
| |||||||
$ | 71,687 | |||||||
|
| |||||||
Healthcare — Products — 2.42% | ||||||||
Henry Schein Inc (a) | 256 | 38,838 | ||||||
Hologic Inc (a) | 515 | 20,662 | ||||||
IDEXX Laboratories Inc (a) | 245 | 28,731 | ||||||
Stryker Corp | 418 | 50,080 | ||||||
Thermo Fisher Scientific Inc | 138 | 19,472 | ||||||
|
| |||||||
$ | 157,783 | |||||||
|
| |||||||
Healthcare — Services — 2.29% | ||||||||
Aetna Inc | 390 | 48,364 | ||||||
MEDNAX Inc (a) | 901 | 60,061 | ||||||
UnitedHealth Group Inc | 148 | 23,686 | ||||||
Universal Health Services Inc, Class B | 162 | 17,233 | ||||||
|
| |||||||
$ | 149,344 | |||||||
|
| |||||||
Home Builders — 0.95% | ||||||||
NVR Inc (a) | 37 | 61,753 | ||||||
Household Products — 1.43% | ||||||||
Colgate-Palmolive Co | 912 | 59,681 | ||||||
Estee Lauder Cos Inc/The, Class A | 194 | 14,839 |
See accompanying notes. | 25 |
Table of Contents
Schedule of Investments
Principal Price Setters Index ETF
December 31, 2016 (unaudited)
COMMON STOCKS (continued) | Shares Held | Value | ||||||
Household Products (continued) | ||||||||
Procter & Gamble Co/The | 219 | $ | 18,414 | |||||
|
| |||||||
$ | 92,934 | |||||||
|
| |||||||
Household Products/Wares — 2.01% | ||||||||
Church & Dwight Co Inc | 1,319 | 58,287 | ||||||
Clorox Co/The | 478 | 57,370 | ||||||
Kimberly-Clark Corp | 137 | 15,634 | ||||||
|
| |||||||
$ | 131,291 | |||||||
|
| |||||||
Insurance — 3.49% | ||||||||
Berkshire Hathaway Inc, Class B (a) | 311 | 50,687 | ||||||
Cincinnati Financial Corp | 280 | 21,210 | ||||||
Markel Corp (a) | 21 | 18,994 | ||||||
Marsh & McLennan Cos Inc | 742 | 50,152 | ||||||
Torchmark Corp | 1,170 | 86,299 | ||||||
|
| |||||||
$ | 227,342 | |||||||
|
| |||||||
Internet — 0.77% | ||||||||
CDW Corp | 449 | 23,388 | ||||||
F5 Networks Inc (a) | 184 | 26,629 | ||||||
|
| |||||||
$ | 50,017 | |||||||
|
| |||||||
Lodging — 0.67% | ||||||||
Wyndham Worldwide Corp | 571 | 43,607 | ||||||
Machinery — Diversified — 1.46% | ||||||||
Roper Technologies Inc | 249 | 45,587 | ||||||
Wabtec Corp | 599 | 49,729 | ||||||
|
| |||||||
$ | 95,316 | |||||||
|
| |||||||
Media — 2.33% | ||||||||
Comcast Corp, Class A | 307 | 21,198 | ||||||
FactSet Research Systems Inc | 398 | 65,045 | ||||||
Walt Disney Co/The | 632 | 65,867 | ||||||
|
| |||||||
$ | 152,110 | |||||||
|
| |||||||
Miscellaneous Manufacture — 1.40% | ||||||||
3M Co | 382 | 68,214 | ||||||
Illinois Tool Works Inc | 189 | 23,145 | ||||||
|
| |||||||
$ | 91,359 | |||||||
|
| |||||||
Packaging & Containers — 0.63% | ||||||||
Sealed Air Corp | 908 | 41,169 | ||||||
Pharmaceuticals — 4.32% | ||||||||
AbbVie Inc | 775 | 48,531 | ||||||
Cardinal Health Inc | 510 | 36,705 | ||||||
Express Scripts Holding Co (a) | 851 | 58,540 | ||||||
Johnson & Johnson | 573 | 66,015 | ||||||
McKesson Corp | 388 | 54,495 | ||||||
Mead Johnson Nutrition Co | 240 | 16,982 | ||||||
|
| |||||||
$ | 281,268 | |||||||
|
| |||||||
REITS — 2.90% | ||||||||
Boston Properties Inc | 157 | 19,747 | ||||||
Federal Realty Investment Trust | 286 | 40,644 | ||||||
Public Storage | 240 | 53,640 | ||||||
Realty Income Corp | 306 | 17,589 | ||||||
Simon Property Group Inc | 219 | 38,910 | ||||||
Welltower Inc | 280 | 18,740 | ||||||
|
| |||||||
$ | 189,270 | |||||||
|
| |||||||
Retail — 5.02% | ||||||||
CVS Health Corp | 429 | 33,853 | ||||||
Dollar General Corp | 240 | 17,777 | ||||||
Home Depot Inc/The | 487 | 65,297 | ||||||
Lowe’s Cos Inc | 617 | 43,881 | ||||||
McDonald’s Corp | 361 | 43,941 | ||||||
O’Reilly Automotive Inc (a) | 230 | 64,034 | ||||||
Starbucks Corp | 714 | 39,641 | ||||||
Walgreens Boots Alliance Inc | 224 | 18,538 | ||||||
|
| |||||||
$ | 326,962 | |||||||
|
| |||||||
Semiconductors — 1.42% | ||||||||
Skyworks Solutions Inc | 909 | 67,866 | ||||||
Texas Instruments Inc | 336 | 24,518 | ||||||
|
| |||||||
$ | 92,384 | |||||||
|
|
COMMON STOCKS (continued) | Shares Held | Value | ||||||
Software — 5.57% | ||||||||
ANSYS Inc (a) | 721 | $ | 66,685 | |||||
Broadridge Financial Solutions Inc | 1,076 | 71,339 | ||||||
Citrix Systems Inc (a) | 250 | 22,327 | ||||||
Fiserv Inc (a) | 632 | 67,169 | ||||||
MSCI Inc | 251 | 19,774 | ||||||
Paychex Inc | 1,166 | 70,986 | ||||||
Red Hat Inc (a) | 637 | 44,399 | ||||||
|
| |||||||
$ | 362,679 | |||||||
|
| |||||||
Telecommunications — 2.46% | ||||||||
AT&T Inc | 1,146 | 48,739 | ||||||
Cisco Systems Inc | 1,616 | 48,836 | ||||||
Verizon Communications Inc | 1,180 | 62,988 | ||||||
|
| |||||||
$ | 160,563 | |||||||
|
| |||||||
Transportation — 3.65% | ||||||||
CH Robinson Worldwide Inc | 596 | 43,663 | ||||||
Expeditors International of Washington Inc | 1,308 | 69,272 | ||||||
JB Hunt Transport Services Inc | 546 | 53,000 | ||||||
United Parcel Service Inc, Class B | 625 | 71,650 | ||||||
|
| |||||||
$ | 237,585 | |||||||
TOTAL COMMON STOCKS | $ | 6,523,655 | ||||||
Total Investments | $ | 6,523,655 | ||||||
Other Assets and Liabilities — (0.13)% | $ | (8,601 | ) | |||||
|
| |||||||
TOTAL NET ASSETS — 100% | $ | 6,515,054 | ||||||
|
|
(a) | Non-Income Producing Security |
Portfolio Summary (unaudited) | ||||
Sector | Percent | |||
Consumer, Non-cyclical | 33.99 | % | ||
Industrial | 18.89 | % | ||
Financial | 14.60 | % | ||
Technology | 8.34 | % | ||
Consumer, Cyclical | 7.76 | % | ||
Communications | 6.58 | % | ||
Utilities | 6.28 | % | ||
Basic Materials | 3.69 | % | ||
Other Assets and Liabilities | (0.13 | )% | ||
TOTAL NET ASSETS | 100.00 | % |
See accompanying notes. | 26 |
Table of Contents
Schedule of Investments
Principal Shareholder Yield Index ETF
December 31, 2016 (unaudited)
COMMON STOCKS — 100.17% | Shares Held | Value | ||||||
Advertising — 1.35% | ||||||||
Interpublic Group of Cos Inc/The | 1,380 | $ | 32,306 | |||||
Omnicom Group Inc | 719 | 61,194 | ||||||
|
| |||||||
$ | 93,500 | |||||||
|
| |||||||
Aerospace & Defense — 0.57% | ||||||||
Boeing Co/The | 254 | 39,543 | ||||||
Airlines — 2.30% | ||||||||
Alaska Air Group Inc | 399 | 35,403 | ||||||
Delta Air Lines Inc | 1,169 | 57,503 | ||||||
Southwest Airlines Co | 1,334 | 66,487 | ||||||
|
| |||||||
$ | 159,393 | |||||||
|
| |||||||
Apparel — 0.36% | ||||||||
Carter’s Inc | 290 | 25,053 | ||||||
Auto Manufacturers — 0.79% | ||||||||
Ford Motor Co | 4,508 | 54,682 | ||||||
Auto Parts & Equipment — 2.85% | ||||||||
Allison Transmission Holdings Inc | 2,365 | 79,677 | ||||||
Dana Inc | 2,373 | 45,040 | ||||||
Lear Corp | 552 | 73,068 | ||||||
|
| |||||||
$ | 197,785 | |||||||
|
| |||||||
Banks — 5.18% | ||||||||
Capital One Financial Corp | 852 | 74,329 | ||||||
Fifth Third Bancorp | 1,962 | 52,915 | ||||||
Goldman Sachs Group Inc/The | 374 | 89,554 | ||||||
PacWest Bancorp | 917 | 49,921 | ||||||
SunTrust Banks Inc | 1,687 | 92,532 | ||||||
|
| |||||||
$ | 359,251 | |||||||
|
| |||||||
Biotechnology — 1.49% | ||||||||
Amgen Inc | 393 | 57,461 | ||||||
Gilead Sciences Inc | 641 | 45,902 | ||||||
|
| |||||||
$ | 103,363 | |||||||
|
| |||||||
Chemicals — 4.13% | ||||||||
Dow Chemical Co/The | 1,152 | 65,917 | ||||||
Eastman Chemical Co | 460 | 34,597 | ||||||
LyondellBasell Industries NV, Class A | 698 | 59,874 | ||||||
Mosaic Co/The | 2,101 | 61,622 | ||||||
PolyOne Corp | 1,097 | 35,148 | ||||||
Sherwin-Williams Co/The | 109 | 29,293 | ||||||
|
| |||||||
$ | 286,451 | |||||||
|
| |||||||
Commercial Services — 1.89% | ||||||||
ManpowerGroup Inc | 728 | 64,697 | ||||||
Moody’s Corp | 332 | 31,298 | ||||||
Western Union Co/The | 1,616 | 35,100 | ||||||
|
| |||||||
$ | 131,095 | |||||||
|
| |||||||
Computers — 2.92% | ||||||||
Apple Inc | 579 | 67,060 | ||||||
Computer Sciences Corp | 1,039 | 61,737 | ||||||
International Business Machines Corp | 226 | 37,514 | ||||||
Seagate Technology PLC | 941 | 35,918 | ||||||
|
| |||||||
$ | 202,229 | |||||||
|
| |||||||
Distribution/Wholesale — 0.46% | ||||||||
WW Grainger Inc | 137 | 31,818 | ||||||
Diversified Financial Services — 8.89% | ||||||||
American Express Co | 531 | 39,336 | ||||||
Ameriprise Financial Inc | 667 | 73,997 | ||||||
CIT Group Inc | 990 | 42,253 | ||||||
Discover Financial Services | 1,206 | 86,941 | ||||||
Invesco Ltd | 2,094 | 63,532 | ||||||
Janus Capital Group Inc | 2,283 | 30,295 | ||||||
Mastercard Inc, Class A | 339 | 35,002 | ||||||
Navient Corp | 5,171 | 84,960 | ||||||
T Rowe Price Group Inc | 810 | 60,961 | ||||||
Waddell & Reed Financial Inc, Class A | 2,375 | 46,336 | ||||||
WisdomTree Investments Inc | 4,760 | 53,026 | ||||||
|
| |||||||
$ | 616,639 | |||||||
|
|
COMMON STOCKS (continued) | Shares Held | Value | ||||||
Electric — 0.50% | ||||||||
AES Corp | 3,012 | $ | 34,999 | |||||
Electronics — 1.54% | ||||||||
Amphenol Corp, Class A | 1,055 | 70,896 | ||||||
TE Connectivity Ltd | 518 | 35,887 | ||||||
|
| |||||||
$ | 106,783 | |||||||
|
| |||||||
Engineering & Construction — 0.49% | ||||||||
Fluor Corp | 641 | 33,665 | ||||||
Entertainment — 1.04% | ||||||||
Six Flags Entertainment Corp | 580 | 34,777 | ||||||
Vail Resorts Inc | 231 | 37,262 | ||||||
|
| |||||||
$ | 72,039 | |||||||
|
| |||||||
Food — 1.47% | ||||||||
Pilgrim’s Pride Corp | 2,557 | 48,557 | ||||||
Tyson Foods Inc, Class A | 864 | 53,292 | ||||||
|
| |||||||
$ | 101,849 | |||||||
|
| |||||||
Gas — 0.53% | ||||||||
UGI Corp | 798 | 36,772 | ||||||
Hand/Machine Tools — 0.60% | ||||||||
Lincoln Electric Holdings Inc | 541 | 41,478 | ||||||
Healthcare — Products — 0.46% | ||||||||
ResMed Inc | 518 | 32,142 | ||||||
Healthcare — Services — 3.39% | ||||||||
Aetna Inc | 515 | 63,865 | ||||||
Anthem Inc | 428 | 61,534 | ||||||
HealthSouth Corp | 838 | 34,559 | ||||||
UnitedHealth Group Inc | 470 | 75,219 | ||||||
|
| |||||||
$ | 235,177 | |||||||
|
| |||||||
Household Products — 0.36% | ||||||||
Estee Lauder Cos Inc/The, Class A | 323 | 24,706 | ||||||
Insurance — 9.78% | ||||||||
Allied World Assurance Co Holdings AG | 911 | 48,930 | ||||||
Allstate Corp/The | 465 | 34,466 | ||||||
American Financial Group Inc | 844 | 74,373 | ||||||
CNO Financial Group Inc | 3,235 | 61,950 | ||||||
Everest Re Group Ltd | 300 | 64,920 | ||||||
First American Financial Corp | 1,512 | 55,385 | ||||||
Hanover Insurance Group Inc/The | 355 | 32,309 | ||||||
Lincoln National Corp | 1,533 | 101,592 | ||||||
Prudential Financial Inc | 453 | 47,139 | ||||||
Reinsurance Group of America Inc | 621 | 78,140 | ||||||
Travelers Cos Inc/The | 274 | 33,543 | ||||||
Unum Group | 1,034 | 45,424 | ||||||
|
| |||||||
$ | 678,171 | |||||||
|
| |||||||
Iron & Steel — 1.05% | ||||||||
Reliance Steel & Aluminum Co | 919 | 73,097 | ||||||
Leisure Products & Services — 1.09% | ||||||||
Harley-Davidson Inc | 1,297 | 75,667 | ||||||
Lodging — 1.82% | ||||||||
Marriott International Inc, Class A | 821 | 67,880 | ||||||
Wyndham Worldwide Corp | 768 | 58,652 | ||||||
|
| |||||||
$ | 126,532 | |||||||
|
| |||||||
Machinery — Construction & Mining — 0.58% | ||||||||
Caterpillar Inc | 436 | 40,435 | ||||||
Machinery — Diversified — 2.58% | ||||||||
AGCO Corp | 596 | 34,484 | ||||||
Cummins Inc | 573 | 78,312 | ||||||
Wabtec Corp | 793 | 65,835 | ||||||
|
| |||||||
$ | 178,631 | |||||||
|
| |||||||
Media — 4.09% | ||||||||
Comcast Corp, Class A | 511 | 35,284 | ||||||
Scripps Networks Interactive Inc, Class A | 951 | 67,873 | ||||||
Time Warner Inc | 449 | 43,342 | ||||||
Viacom Inc, Class A | 1,350 | 51,975 | ||||||
Viacom Inc, Class B | 1,519 | 53,317 |
See accompanying notes. | 27 |
Table of Contents
Schedule of Investments
Principal Shareholder Yield Index ETF
December 31, 2016 (unaudited)
COMMON STOCKS (continued) | Shares Held | Value | ||||||
Media (continued) | ||||||||
Walt Disney Co/The | 309 | $ | 32,204 | |||||
|
| |||||||
$ | 283,995 | |||||||
|
| |||||||
Miscellaneous Manufacture — 2.66% | ||||||||
3M Co | 189 | 33,749 | ||||||
Carlisle Cos Inc | 327 | 36,065 | ||||||
Eaton Corp PLC | 520 | 34,887 | ||||||
Illinois Tool Works Inc | 313 | 38,330 | ||||||
Parker-Hannifin Corp | 296 | 41,440 | ||||||
|
| |||||||
$ | 184,471 | |||||||
|
| |||||||
Oil & Gas — 4.11% | ||||||||
Hess Corp | 1,284 | 79,980 | ||||||
Tesoro Corp | 699 | 61,128 | ||||||
Valero Energy Corp | 938 | 64,084 | ||||||
Western Refining Inc | 2,112 | 79,939 | ||||||
|
| |||||||
$ | 285,131 | |||||||
|
| |||||||
Oil & Gas Services — 2.36% | ||||||||
National Oilwell Varco Inc | 1,913 | 71,623 | ||||||
Oceaneering International Inc | 2,041 | 57,577 | ||||||
Schlumberger Ltd | 411 | 34,503 | ||||||
|
| |||||||
$ | 163,703 | |||||||
|
| |||||||
Packaging & Containers — 1.47% | ||||||||
Packaging Corp of America | 617 | 52,334 | ||||||
WestRock Co | 984 | 49,958 | ||||||
|
| |||||||
$ | 102,292 | |||||||
|
| |||||||
Pharmaceuticals — 2.07% | ||||||||
AbbVie Inc | 1,025 | 64,186 | ||||||
Cardinal Health Inc | 361 | 25,981 | ||||||
Mead Johnson Nutrition Co | 759 | 53,707 | ||||||
|
| |||||||
$ | 143,874 | |||||||
|
| |||||||
REITS — 4.03% | ||||||||
Apple Hospitality REIT Inc | 1,553 | 31,029 | ||||||
Communications Sales & Leasing Inc | 2,971 | 75,493 | ||||||
Host Hotels & Resorts Inc | 3,658 | 68,917 | ||||||
LaSalle Hotel Properties | 1,212 | 36,930 | ||||||
New Residential Investment Corp | 2,521 | 39,630 | ||||||
Simon Property Group Inc | 156 | 27,716 | ||||||
|
| |||||||
$ | 279,715 | |||||||
|
| |||||||
Retail — 10.62% | ||||||||
Brinker International Inc | 1,132 | 56,068 | ||||||
Cracker Barrel Old Country Store Inc | 386 | 64,454 | ||||||
CVS Health Corp | 303 | 23,910 | ||||||
Dick’s Sporting Goods Inc | 695 | 36,904 | ||||||
Dollar General Corp | 397 | 29,406 | ||||||
Dunkin’ Brands Group Inc | 633 | 33,195 | ||||||
GameStop Corp, Class A | 1,804 | 45,569 | ||||||
Gap Inc/The | 2,011 | 45,127 | ||||||
GNC Holdings Inc, Class A | 1,953 | 21,561 | ||||||
Home Depot Inc/The | 237 | 31,777 | ||||||
HSN Inc | 1,047 | 35,912 | ||||||
Jack in the Box Inc | 436 | 48,675 | ||||||
Lowe’s Cos Inc | 445 | 31,648 | ||||||
Macy’s Inc | 1,287 | 46,087 | ||||||
Nordstrom Inc | 1,091 | 52,292 | ||||||
Papa John’s International Inc | 963 | 82,414 | ||||||
Target Corp | 719 | 51,933 | ||||||
|
| |||||||
$ | 736,932 | |||||||
|
| |||||||
Semiconductors — 3.19% | ||||||||
Lam Research Corp | 409 | 43,244 | ||||||
NVIDIA Corp | 947 | 101,083 | ||||||
Texas Instruments Inc | 1,056 | 77,056 | ||||||
|
| |||||||
$ | 221,383 | |||||||
|
| |||||||
Shipbuilding — 1.13% | ||||||||
Huntington Ingalls Industries Inc | 427 | 78,649 | ||||||
Software — 0.46% | ||||||||
Jack Henry & Associates Inc | 359 | 31,872 |
COMMON STOCKS (continued) | Shares Held | Value | ||||||
Telecommunications — 1.42% | ||||||||
Cisco Systems Inc | 1,127 | $ | 34,058 | |||||
Juniper Networks Inc | 2,283 | 64,518 | ||||||
|
| |||||||
$ | 98,576 | |||||||
|
| |||||||
Transportation — 2.10% | ||||||||
CH Robinson Worldwide Inc | 422 | 30,916 | ||||||
Expeditors International of Washington Inc | 644 | 34,106 | ||||||
Landstar System Inc | 946 | 80,694 | ||||||
|
| |||||||
$ | 145,716 | |||||||
TOTAL COMMON STOCKS | $ | 6,949,254 | ||||||
Total Investments | $ | 6,949,254 | ||||||
Other Assets and Liabilities — (0.17)% | $ | (11,896 | ) | |||||
|
| |||||||
TOTAL NET ASSETS — 100% | $ | 6,937,358 | ||||||
|
|
Portfolio Summary (unaudited) |
| |||
Sector | Percent | |||
Financial | 27.88 | % | ||
Consumer, Cyclical | 21.33 | % | ||
Industrial | 13.72 | % | ||
Consumer, Non-cyclical | 11.13 | % | ||
Communications | 6.86 | % | ||
Technology | 6.57 | % | ||
Energy | 6.47 | % | ||
Basic Materials | 5.18 | % | ||
Utilities | 1.03 | % | ||
Other Assets and Liabilities | (0.17 | )% | ||
TOTAL NET ASSETS | 100.00 | % |
See accompanying notes. | 28 |
Table of Contents
Schedule of Investments
Principal U.S. Small Cap Index ETF
December 31, 2016 (unaudited)
COMMON STOCKS — 99.44% | Shares Held | Value | ||||||
Aerospace & Defense — 0.27% | ||||||||
Kaman Corp | 10,418 | $ | 509,753 | |||||
National Presto Industries Inc | 1,444 | 153,641 | ||||||
|
| |||||||
$ | 663,394 | |||||||
|
| |||||||
Airlines — 0.60% | ||||||||
Hawaiian Holdings Inc (a) | 19,206 | 1,094,742 | ||||||
SkyWest Inc | 10,492 | 382,433 | ||||||
|
| |||||||
$ | 1,477,175 | |||||||
|
| |||||||
Apparel — 0.44% | ||||||||
Oxford Industries Inc | 5,310 | 319,290 | ||||||
Steven Madden Ltd (a) | 20,866 | 745,960 | ||||||
|
| |||||||
$ | 1,065,250 | |||||||
|
| |||||||
Auto Manufacturers — 0.29% | ||||||||
Wabash National Corp (a) | 45,552 | 720,633 | ||||||
Auto Parts & Equipment — 1.10% | ||||||||
Cooper-Standard Holdings Inc (a) | 12,041 | 1,244,799 | ||||||
Dorman Products Inc (a) | 7,977 | 582,800 | ||||||
Douglas Dynamics Inc | 4,112 | 138,369 | ||||||
Horizon Global Corp (a) | 3,167 | 76,008 | ||||||
Standard Motor Products Inc | 5,920 | 315,062 | ||||||
Superior Industries International Inc | 8,184 | 215,648 | ||||||
Supreme Industries Inc, Class A | 7,899 | 124,014 | ||||||
|
| |||||||
$ | 2,696,700 | |||||||
|
| |||||||
Banks — 11.26% | ||||||||
Ameris Bancorp | 21,477 | 936,397 | ||||||
BancFirst Corp | 2,587 | 240,720 | ||||||
Cathay General Bancorp | 43,352 | 1,648,677 | ||||||
CenterState Banks Inc | 18,055 | 454,444 | ||||||
Central Pacific Financial Corp | 15,006 | 471,489 | ||||||
Chemical Financial Corp | 35,756 | 1,936,903 | ||||||
City Holding Co | 9,012 | 609,211 | ||||||
Columbia Banking System Inc | 25,724 | 1,149,348 | ||||||
Community Bank System Inc | 18,639 | 1,151,704 | ||||||
Enterprise Financial Services Corp | 8,238 | 354,234 | ||||||
FCB Financial Holdings Inc, Class A (a) | 22,439 | 1,070,340 | ||||||
First Financial Bankshares Inc | 16,425 | 742,410 | ||||||
First Financial Corp | 4,071 | 214,949 | ||||||
First Interstate BancSystem Inc, Class A | 9,127 | 388,354 | ||||||
Franklin Financial Network Inc (a) | 4,515 | 188,953 | ||||||
Great Western Bancorp Inc | 37,163 | 1,619,935 | ||||||
Hanmi Financial Corp | 14,279 | 498,337 | ||||||
Heartland Financial USA Inc | 7,530 | 361,440 | ||||||
Heritage Financial Corp | 7,893 | 203,245 | ||||||
Horizon Bancorp | 6,934 | 194,152 | ||||||
Independent Bank Corp | 7,525 | 530,136 | ||||||
Lakeland Financial Corp | 9,202 | 435,807 | ||||||
LegacyTexas Financial Group Inc | 23,506 | 1,012,168 | ||||||
MB Financial Inc | 41,479 | 1,959,053 | ||||||
NBT Bancorp Inc | 12,221 | 511,815 | ||||||
Opus Bank | 10,701 | 321,565 | ||||||
Park Sterling Corp | 17,158 | 185,135 | ||||||
People’s Utah Bancorp | 4,986 | 133,874 | ||||||
ServisFirst Bancshares Inc | 12,984 | 486,121 | ||||||
Simmons First National Corp, Class A | 9,113 | 566,373 | ||||||
Southside Bancshares Inc | 6,372 | 240,033 | ||||||
State Bank Financial Corp | 6,365 | 170,964 | ||||||
Stock Yards Bancorp Inc | 4,843 | 227,379 | ||||||
Stonegate Bank | 6,864 | 286,435 | ||||||
TCF Financial Corp | 103,786 | 2,033,168 | ||||||
Tompkins Financial Corp | 3,502 | 331,079 | ||||||
Towne Bank | 21,094 | 701,376 | ||||||
TriCo Bancshares | 6,712 | 229,416 | ||||||
Trustmark Corp | 51,637 | 1,840,859 | ||||||
Union Bankshares Corp | 15,131 | 540,782 | ||||||
Univest Corp of Pennsylvania | 10,367 | 320,340 | ||||||
|
| |||||||
$ | 27,499,120 | |||||||
|
| |||||||
Beverages — 0.46% | ||||||||
MGP Ingredients Inc | 5,303 | 265,044 | ||||||
National Beverage Corp | 16,733 | 854,722 | ||||||
|
| |||||||
$ | 1,119,766 | |||||||
|
|
COMMON STOCKS (continued) | Shares Held | Value | ||||||
Biotechnology — 2.92% | ||||||||
ANI Pharmaceuticals Inc (a) | 7,398 | $ | 448,467 | |||||
ARIAD Pharmaceuticals Inc (a) | 104,858 | 1,304,434 | ||||||
Emergent BioSolutions Inc (a) | 13,026 | 427,774 | ||||||
Exelixis Inc (a) | 107,355 | 1,600,663 | ||||||
Five Prime Therapeutics Inc (a) | 10,085 | 505,359 | ||||||
Innoviva Inc (a) | 20,354 | 217,788 | ||||||
Inovio Pharmaceuticals Inc (a) | 31,321 | 217,368 | ||||||
Lexicon Pharmaceuticals Inc (a) | 19,794 | 273,751 | ||||||
Ligand Pharmaceuticals Inc (a) | 13,821 | 1,404,352 | ||||||
Momenta Pharmaceuticals Inc (a) | 12,623 | 189,976 | ||||||
NeoGenomics Inc (a) | 11,276 | 96,635 | ||||||
PDL BioPharma Inc | 31,612 | 67,017 | ||||||
Retrophin Inc (a) | 11,741 | 222,257 | ||||||
Theravance Biopharma Inc (a) | 4,506 | 143,651 | ||||||
|
| |||||||
$ | 7,119,492 | |||||||
|
| |||||||
Chemicals — 2.29% | ||||||||
Balchem Corp | 6,290 | 527,857 | ||||||
HB Fuller Co | 15,619 | 754,554 | ||||||
Innophos Holdings Inc | 9,982 | 521,659 | ||||||
Innospec Inc | 8,492 | 581,702 | ||||||
KMG Chemicals Inc | 3,188 | 123,981 | ||||||
Kraton Corp (a) | 21,679 | 617,418 | ||||||
Minerals Technologies Inc | 9,709 | 750,020 | ||||||
Quaker Chemical Corp | 5,244 | 670,917 | ||||||
Rayonier Advanced Materials Inc | 24,917 | 385,217 | ||||||
Stepan Co | 8,178 | 666,344 | ||||||
|
| |||||||
$ | 5,599,669 | |||||||
|
| |||||||
Commercial Services — 4.74% | ||||||||
Aaron’s Inc | 16,796 | 537,304 | ||||||
ABM Industries Inc | 15,815 | 645,885 | ||||||
AMN Healthcare Services Inc (a) | 42,364 | 1,628,896 | ||||||
Barrett Business Services Inc | 2,939 | 188,390 | ||||||
BG Staffing Inc | 5,332 | 83,179 | ||||||
Capella Education Co | 2,508 | 220,202 | ||||||
Carriage Services Inc | 3,297 | 94,426 | ||||||
CBIZ Inc (a) | 8,203 | 112,381 | ||||||
CEB Inc | 9,893 | 599,516 | ||||||
CorVel Corp (a) | 2,032 | 74,371 | ||||||
EVERTEC Inc | 14,607 | 259,274 | ||||||
Forrester Research Inc | 2,507 | 107,676 | ||||||
Grand Canyon Education Inc (a) | 8,923 | 521,549 | ||||||
Hackett Group Inc/The | 4,431 | 78,251 | ||||||
Healthcare Services Group Inc | 21,344 | 836,045 | ||||||
HMS Holdings Corp (a) | 20,701 | 375,930 | ||||||
ICF International Inc (a) | 5,542 | 305,918 | ||||||
INC Research Holdings Inc, Class A (a) | 34,607 | 1,820,328 | ||||||
Insperity Inc | 7,609 | 539,859 | ||||||
Kforce Inc | 6,191 | 143,012 | ||||||
Matthews International Corp, Class A | 4,958 | 381,022 | ||||||
Medifast Inc | 6,701 | 278,963 | ||||||
Monro Muffler Brake Inc | 7,659 | 438,095 | ||||||
Navigant Consulting Inc (a) | 7,694 | 201,429 | ||||||
Nutrisystem Inc | 8,249 | 285,828 | ||||||
Resources Connection Inc | 8,479 | 163,221 | ||||||
SP Plus Corp (a) | 1,973 | 55,540 | ||||||
TriNet Group Inc (a) | 23,097 | 591,745 | ||||||
|
| |||||||
$ | 11,568,235 | |||||||
|
| |||||||
Computers — 2.62% | ||||||||
Barracuda Networks Inc (a) | 12,486 | 267,575 | ||||||
CACI International Inc, Class A (a) | 9,408 | 1,169,414 | ||||||
Convergys Corp | 29,380 | 721,573 | ||||||
ExlService Holdings Inc (a) | 13,255 | 668,582 | ||||||
Insight Enterprises Inc (a) | 5,103 | 206,365 | ||||||
Lumentum Holdings Inc (a) | 24,550 | 948,858 | ||||||
Mercury Systems Inc (a) | 10,435 | 315,346 | ||||||
Mitek Systems Inc (a) | 13,616 | 83,738 | ||||||
Science Applications International Corp | 12,271 | 1,040,581 | ||||||
TeleTech Holdings Inc | 5,894 | 179,767 | ||||||
Tessera Holding Corp | 17,856 | 789,235 | ||||||
|
| |||||||
$ | 6,391,034 | |||||||
|
|
See accompanying notes. | 29 |
Table of Contents
Schedule of Investments
Principal U.S. Small Cap Index ETF
December 31, 2016 (unaudited)
COMMON STOCKS (continued) | Shares Held | Value | ||||||
Construction Materials — 1.82% | ||||||||
AAON Inc | 6,779 | $ | 224,046 | |||||
Apogee Enterprises Inc | 14,554 | 779,512 | ||||||
Gibraltar Industries Inc (a) | 9,874 | 411,252 | ||||||
NCI Building Systems Inc (a) | 27,098 | 424,084 | ||||||
Patrick Industries Inc (a) | 9,155 | 698,526 | ||||||
Simpson Manufacturing Co Inc | 11,966 | 523,513 | ||||||
Trex Co Inc (a) | 8,280 | 533,232 | ||||||
Universal Forest Products Inc | 8,257 | 843,700 | ||||||
|
| |||||||
$ | 4,437,865 | |||||||
|
| |||||||
Distribution/Wholesale — 1.27% | ||||||||
Beacon Roofing Supply Inc (a) | 21,615 | 995,803 | ||||||
ScanSource Inc (a) | 4,615 | 186,215 | ||||||
Veritiv Corp (a) | 3,900 | 209,625 | ||||||
WESCO International Inc (a) | 25,661 | 1,707,740 | ||||||
|
| |||||||
$ | 3,099,383 | |||||||
|
| |||||||
Diversified Financial Services — 2.13% | ||||||||
Artisan Partners Asset Management Inc, Class A | 42,340 | 1,259,615 | ||||||
Cohen & Steers Inc | 9,494 | 318,998 | ||||||
Ellie Mae Inc (a) | 14,984 | 1,253,861 | ||||||
Federal Agricultural Mortgage Corp, Class C | 5,225 | 299,236 | ||||||
INTL. FCStone Inc (a) | 5,567 | 220,453 | ||||||
Moelis & Co, Class A | 8,385 | 284,251 | ||||||
Nelnet Inc, Class A | 4,230 | 214,673 | ||||||
Newtek Business Services Corp | 4,813 | 76,527 | ||||||
PJT Partners Inc, Class A | 7,912 | 244,323 | ||||||
Regional Management Corp (a) | 5,096 | 133,923 | ||||||
WageWorks Inc (a) | 12,340 | 894,650 | ||||||
|
| |||||||
$ | 5,200,510 | |||||||
|
| |||||||
Electric — 1.18% | ||||||||
Avista Corp | 27,555 | 1,101,924 | ||||||
MGE Energy Inc | 6,545 | 427,389 | ||||||
NRG Yield Inc, Class C | 47,274 | 746,929 | ||||||
Ormat Technologies Inc | 11,098 | 595,075 | ||||||
|
| |||||||
$ | 2,871,317 | |||||||
|
| |||||||
Electrical Components & Equipment — 1.37% | ||||||||
Advanced Energy Industries Inc (a) | 15,163 | 830,174 | ||||||
EnerSys | 16,841 | 1,315,282 | ||||||
Insteel Industries Inc | 6,904 | 246,059 | ||||||
Littelfuse Inc | 6,268 | 951,294 | ||||||
|
| |||||||
$ | 3,342,809 | |||||||
|
| |||||||
Electronics — 2.55% | ||||||||
Badger Meter Inc | 11,416 | 421,821 | ||||||
Brady Corp, Class A | 14,737 | 553,374 | ||||||
Coherent Inc (a) | 9,106 | 1,251,028 | ||||||
ESCO Technologies Inc | 6,767 | 383,351 | ||||||
II-VI Inc (a) | 8,996 | 266,731 | ||||||
Itron Inc (a) | 8,233 | 517,444 | ||||||
Plexus Corp (a) | 9,297 | 502,410 | ||||||
Sanmina Corp (a) | 16,936 | 620,704 | ||||||
Stoneridge Inc (a) | 9,908 | 175,273 | ||||||
Tech Data Corp (a) | 12,519 | 1,060,109 | ||||||
TTM Technologies Inc (a) | 34,020 | 463,693 | ||||||
|
| |||||||
$ | 6,215,938 | |||||||
|
| |||||||
Energy-Alternate Sources — 0.58% | ||||||||
Green Plains Inc | 15,103 | 420,619 | ||||||
Pattern Energy Group Inc | 32,843 | 623,689 | ||||||
Renewable Energy Group Inc (a) | 10,615 | 102,965 | ||||||
REX American Resources Corp (a) | 2,842 | 280,647 | ||||||
|
| |||||||
$ | 1,427,920 | |||||||
|
| |||||||
Engineering & Construction — 1.19% | ||||||||
Argan Inc | 7,809 | 550,925 | ||||||
Comfort Systems USA Inc | 11,037 | 367,532 | ||||||
Exponent Inc | 7,094 | 427,768 | ||||||
IES Holdings Inc (a) | 1,542 | 29,529 | ||||||
KBR Inc | 47,912 | 799,651 | ||||||
Mistras Group Inc (a) | 3,323 | 85,335 | ||||||
NV5 Global Inc (a) | 2,636 | 88,043 |
COMMON STOCKS (continued) | Shares Held | Value | ||||||
Engineering & Construction (continued) | ||||||||
TopBuild Corp (a) | 15,713 | $ | 559,383 | |||||
|
| |||||||
$ | 2,908,166 | |||||||
|
| |||||||
Entertainment — 1.03% | ||||||||
Churchill Downs Inc | 3,975 | 598,039 | ||||||
Dolby Laboratories Inc, Class A | 19,844 | 896,750 | ||||||
Eldorado Resorts Inc (a) | 10,489 | 177,789 | ||||||
Golden Entertainment Inc | 2,819 | 34,138 | ||||||
International Speedway Corp, Class A | 4,131 | 152,021 | ||||||
Marriott Vacations Worldwide Corp | 7,703 | 653,599 | ||||||
|
| |||||||
$ | 2,512,336 | |||||||
|
| |||||||
Environmental Control — 0.42% | ||||||||
Tetra Tech Inc | 23,615 | 1,018,987 | ||||||
Food — 1.12% | ||||||||
Calavo Growers Inc | 6,014 | 369,260 | ||||||
Fresh Del Monte Produce Inc | 19,220 | 1,165,308 | ||||||
J&J Snack Foods Corp | 5,419 | 723,057 | ||||||
SpartanNash Co | 5,213 | 206,122 | ||||||
Tootsie Roll Industries Inc | 6,696 | 266,166 | ||||||
|
| |||||||
$ | 2,729,913 | |||||||
|
| |||||||
Forest Products & Paper — 0.65% | ||||||||
Clearwater Paper Corp (a) | 7,200 | 471,960 | ||||||
Neenah Paper Inc | 8,799 | 749,675 | ||||||
Schweitzer-Mauduit International Inc | 7,774 | 353,950 | ||||||
|
| |||||||
$ | 1,575,585 | |||||||
|
| |||||||
Gas — 0.70% | ||||||||
Northwest Natural Gas Co | 9,913 | 592,798 | ||||||
South Jersey Industries Inc | 32,983 | 1,111,197 | ||||||
|
| |||||||
$ | 1,703,995 | |||||||
|
| |||||||
Hand/Machine Tools — 0.64% | ||||||||
Franklin Electric Co Inc | 7,014 | 272,845 | ||||||
Regal Beloit Corp | 18,544 | 1,284,172 | ||||||
|
| |||||||
$ | 1,557,017 | |||||||
|
| |||||||
Healthcare — Products — 4.45% | ||||||||
Abaxis Inc | 4,328 | 228,389 | ||||||
Analogic Corp | 5,113 | 424,123 | ||||||
AngioDynamics Inc (a) | 7,884 | 133,003 | ||||||
Atrion Corp | 432 | 219,110 | ||||||
AxoGen Inc (a) | 3,516 | 31,644 | ||||||
BioTelemetry Inc (a) | 13,853 | 309,614 | ||||||
Cantel Medical Corp | 9,268 | 729,855 | ||||||
CONMED Corp | 5,572 | 246,115 | ||||||
CryoLife Inc | 7,180 | 137,497 | ||||||
Cynosure Inc, Class A (a) | 10,127 | 461,791 | ||||||
Exactech Inc (a) | 1,812 | 49,468 | ||||||
Glaukos Corp (a) | 14,941 | 512,476 | ||||||
Globus Medical Inc, Class A (a) | 21,452 | 532,224 | ||||||
ICU Medical Inc (a) | 5,062 | 745,886 | ||||||
Inogen Inc (a) | 8,269 | 555,429 | ||||||
Invacare Corp | 10,439 | 136,229 | ||||||
iRadimed Corp (a) | 1,821 | 20,213 | ||||||
LeMaitre Vascular Inc | 3,009 | 76,248 | ||||||
Luminex Corp (a) | 10,481 | 212,031 | ||||||
Masimo Corp (a) | 16,240 | 1,094,576 | ||||||
Meridian Bioscience Inc | 14,516 | 256,933 | ||||||
Merit Medical Systems Inc (a) | 12,572 | 333,158 | ||||||
Nevro Corp (a) | 11,310 | 821,785 | ||||||
NxStage Medical Inc (a) | 17,318 | 453,905 | ||||||
OraSure Technologies Inc (a) | 19,736 | 173,282 | ||||||
Orthofix International NV (a) | 4,481 | 162,123 | ||||||
Penumbra Inc (a) | 8,510 | 542,938 | ||||||
Surmodics Inc (a) | 1,965 | 49,911 | ||||||
Vascular Solutions Inc (a) | 4,747 | 266,307 | ||||||
Zeltiq Aesthetics Inc (a) | 21,591 | 939,640 | ||||||
|
| |||||||
$ | 10,855,903 | |||||||
|
| |||||||
Healthcare — Services — 1.90% | ||||||||
Amedisys Inc (a) | 13,490 | 575,079 | ||||||
Chemed Corp | 4,248 | 681,422 | ||||||
Civitas Solutions Inc (a) | 2,826 | 56,237 |
See accompanying notes. | 30 |
Table of Contents
Schedule of Investments
Principal U.S. Small Cap Index ETF
December 31, 2016 (unaudited)
COMMON STOCKS (continued) | Shares Held | Value | ||||||
Healthcare — Services (continued) | ||||||||
Community Health Systems Inc (a) | 96,678 | $ | 540,430 | |||||
Ensign Group Inc/The | 9,912 | 220,145 | ||||||
Healthways Inc (a) | 8,967 | 203,999 | ||||||
Kindred Healthcare Inc | 24,496 | 192,294 | ||||||
Magellan Health Inc (a) | 11,493 | 864,848 | ||||||
National HealthCare Corp | 1,638 | 124,144 | ||||||
Select Medical Holdings Corp (a) | 19,102 | 253,101 | ||||||
Surgery Partners Inc (a) | 3,753 | 59,485 | ||||||
Surgical Care Affiliates Inc (a) | 9,155 | 423,602 | ||||||
Triple-S Management Corp, Class B (a) | 4,718 | 97,663 | ||||||
US Physical Therapy Inc | 5,038 | 353,668 | ||||||
|
| |||||||
$ | 4,646,117 | |||||||
|
| |||||||
Home Builders — 0.60% | ||||||||
Cavco Industries Inc (a) | 5,352 | 534,397 | ||||||
Century Communities Inc (a) | 2,473 | 51,933 | ||||||
Installed Building Products Inc (a) | 9,921 | 409,737 | ||||||
LGI Homes Inc (a) | 16,721 | 480,395 | ||||||
|
| |||||||
$ | 1,476,462 | |||||||
|
| |||||||
Home Furnishings — 0.90% | ||||||||
Ethan Allen Interiors Inc | 8,868 | 326,786 | ||||||
iRobot Corp (a) | 16,911 | 988,448 | ||||||
La-Z-Boy Inc | 17,701 | 549,616 | ||||||
Universal Electronics Inc (a) | 5,045 | 325,655 | ||||||
|
| |||||||
$ | 2,190,505 | |||||||
|
| |||||||
Household Products/Wares — 0.62% | ||||||||
Central Garden & Pet Co (a) | 8,645 | 286,063 | ||||||
Central Garden & Pet Co, Class A (a) | 12,441 | 384,427 | ||||||
WD-40 Co | 7,260 | 848,694 | ||||||
|
| |||||||
$ | 1,519,184 | |||||||
|
| |||||||
Insurance — 4.61% | ||||||||
AMERISAFE Inc | 10,984 | 684,852 | ||||||
Argo Group International Holdings Ltd | 18,025 | 1,187,847 | ||||||
Employers Holdings Inc | 15,065 | 596,574 | ||||||
Essent Group Ltd (a) | 47,267 | 1,530,033 | ||||||
FBL Financial Group Inc, Class A | 3,152 | 246,329 | ||||||
Horace Mann Educators Corp | 19,499 | 834,557 | ||||||
James River Group Holdings Ltd | 8,065 | 335,101 | ||||||
National General Holdings Corp | 20,155 | 503,673 | ||||||
Navigators Group Inc/The | 5,105 | 601,114 | ||||||
Primerica Inc | 29,754 | 2,057,489 | ||||||
Safety Insurance Group Inc | 9,660 | 711,942 | ||||||
Selective Insurance Group Inc | 23,594 | 1,015,722 | ||||||
United Fire Group Inc | 7,122 | 350,189 | ||||||
Universal Insurance Holdings Inc | 21,354 | 606,454 | ||||||
|
| |||||||
$ | 11,261,876 | |||||||
|
| |||||||
Internet — 1.68% | ||||||||
Blue Nile Inc | 2,708 | 110,026 | ||||||
Cogent Communications Holdings Inc | 16,286 | 673,426 | ||||||
Match Group Inc (a) | 35,594 | 608,657 | ||||||
MeetMe Inc (a) | 56,056 | 276,356 | ||||||
New Media Investment Group Inc | 7,757 | 124,035 | ||||||
NIC Inc | 19,577 | 467,890 | ||||||
Perficient Inc (a) | 6,942 | 121,416 | ||||||
Shutterstock Inc (a) | 13,839 | 657,629 | ||||||
WebMD Health Corp (a) | 20,311 | 1,006,816 | ||||||
XO Group Inc (a) | 3,155 | 61,365 | ||||||
|
| |||||||
$ | 4,107,616 | |||||||
|
| |||||||
Leisure Products & Services — 0.77% | ||||||||
Fox Factory Holding Corp (a) | 11,917 | 330,697 | ||||||
Intrawest Resorts Holdings Inc (a) | 2,831 | 50,533 | ||||||
Johnson Outdoors Inc, Class A | 1,099 | 43,619 | ||||||
LCI Industries | 10,644 | 1,146,891 | ||||||
Planet Fitness Inc, Class A | 14,838 | 298,244 | ||||||
|
| |||||||
$ | 1,869,984 | |||||||
|
| |||||||
Lodging — 0.68% | ||||||||
Choice Hotels International Inc | 12,193 | 683,417 | ||||||
ILG Inc | 51,287 | 931,885 |
COMMON STOCKS (continued) | Shares Held | Value | ||||||
Lodging (continued) | ||||||||
Monarch Casino & Resort Inc (a) | 1,368 | $ | 35,267 | |||||
|
| |||||||
$ | 1,650,569 | |||||||
|
| |||||||
Machinery — Diversified — 0.74% | ||||||||
Alamo Group Inc | 3,434 | 261,327 | ||||||
Albany International Corp, Class A | 4,909 | 227,287 | ||||||
Altra Industrial Motion Corp | 6,164 | 227,452 | ||||||
Applied Industrial Technologies Inc | 11,429 | 678,882 | ||||||
Chart Industries Inc (a) | 5,779 | 208,159 | ||||||
Kadant Inc | 3,253 | 199,084 | ||||||
|
| |||||||
$ | 1,802,191 | |||||||
|
| |||||||
Media — 1.10% | ||||||||
Gannett Co Inc | 30,069 | 291,970 | ||||||
John Wiley & Sons Inc, Class A | 8,923 | 486,304 | ||||||
Meredith Corp | 14,676 | 868,085 | ||||||
Nexstar Broadcasting Group Inc, Class A | 12,677 | 802,454 | ||||||
World Wrestling Entertainment Inc, Class A | 12,833 | 236,127 | ||||||
|
| |||||||
$ | 2,684,940 | |||||||
|
| |||||||
Metal Fabrication & Hardware — 1.65% | ||||||||
Global Brass & Copper Holdings Inc | 4,905 | 168,241 | ||||||
Mueller Industries Inc | 9,127 | 364,715 | ||||||
Mueller Water Products Inc, Class A | 57,094 | 759,921 | ||||||
RBC Bearings Inc (a) | 6,037 | 560,294 | ||||||
Timken Co/The | 32,324 | 1,283,263 | ||||||
Worthington Industries Inc | 18,675 | 885,942 | ||||||
|
| |||||||
$ | 4,022,376 | |||||||
|
| |||||||
Mining — 0.33% | ||||||||
Kaiser Aluminum Corp | 10,471 | 813,492 | ||||||
Miscellaneous Manufacture — 2.86% | ||||||||
American Outdoor Brands Corp (a) | 59,341 | 1,250,908 | ||||||
AZZ Inc | 8,715 | 556,889 | ||||||
Barnes Group Inc | 10,865 | 515,218 | ||||||
Chase Corp | 1,764 | 147,382 | ||||||
Fabrinet (a) | 14,277 | 575,363 | ||||||
Hillenbrand Inc | 8,496 | 325,822 | ||||||
John Bean Technologies Corp | 8,296 | 713,041 | ||||||
Lydall Inc (a) | 4,061 | 251,173 | ||||||
Standex International Corp | 2,981 | 261,881 | ||||||
Sturm Ruger & Co Inc | 14,095 | 742,807 | ||||||
Trinseo SA | 27,897 | 1,654,292 | ||||||
|
| |||||||
$ | 6,994,776 | |||||||
|
| |||||||
Office Furnishings — 0.88% | ||||||||
Herman Miller Inc | 20,970 | 717,174 | ||||||
Interface Inc | 25,953 | 481,428 | ||||||
Knoll Inc | 16,347 | 456,572 | ||||||
Steelcase Inc, Class A | 27,724 | 496,259 | ||||||
|
| |||||||
$ | 2,151,433 | |||||||
|
| |||||||
Oil & Gas — 2.75% | ||||||||
Atwood Oceanics Inc | 52,272 | 686,331 | ||||||
Callon Petroleum Co (a) | 59,250 | 910,672 | ||||||
Delek US Holdings Inc | 18,581 | 447,245 | ||||||
Nabors Industries Ltd | 82,997 | 1,361,151 | ||||||
Patterson-UTI Energy Inc | 59,152 | 1,592,372 | ||||||
PDC Energy Inc (a) | 23,529 | 1,707,735 | ||||||
|
| |||||||
$ | 6,705,506 | |||||||
|
| |||||||
Oil & Gas Services — 1.45% | ||||||||
Archrock Inc | 6,644 | 87,701 | ||||||
Bristow Group Inc | 9,911 | 202,977 | ||||||
Dawson Geophysical Co (a) | 1,739 | 13,982 | ||||||
Dril-Quip Inc (a) | 11,247 | 675,382 | ||||||
Forum Energy Technologies Inc (a) | 11,091 | 244,002 | ||||||
Frank’s International NV | 14,445 | 177,818 | ||||||
McDermott International Inc (a) | 47,660 | 352,207 | ||||||
MRC Global Inc (a) | 16,806 | 340,490 | ||||||
Natural Gas Services Group Inc (a) | 741 | 23,823 | ||||||
NOW Inc (a) | 20,701 | 423,750 | ||||||
Oceaneering International Inc | 35,553 | 1,002,950 | ||||||
|
| |||||||
$ | 3,545,082 | |||||||
|
|
See accompanying notes. | 31 |
Table of Contents
Schedule of Investments
Principal U.S. Small Cap Index ETF
December 31, 2016 (unaudited)
COMMON STOCKS (continued) | Shares Held | Value | ||||||
Packaging & Containers — 0.22% | ||||||||
Greif Inc, Class A | 9,613 | $ | 493,243 | |||||
Greif Inc, Class B | 711 | 48,028 | ||||||
|
| |||||||
$ | 541,271 | |||||||
|
| |||||||
Pharmaceuticals — 2.12% | ||||||||
AcelRx Pharmaceuticals Inc (a) | 5,917 | 15,384 | ||||||
Amphastar Pharmaceuticals Inc (a) | 13,728 | 252,870 | ||||||
Anika Therapeutics Inc (a) | 5,664 | 277,309 | ||||||
BioSpecifics Technologies Corp (a) | 1,377 | 76,699 | ||||||
Corcept Therapeutics Inc (a) | 7,689 | 55,822 | ||||||
Heska Corp (a) | 2,478 | 177,425 | ||||||
Natural Health Trends Corp | 2,150 | 53,427 | ||||||
Neogen Corp (a) | 6,980 | 460,680 | ||||||
Owens & Minor Inc | 44,448 | 1,568,570 | ||||||
PRA Health Sciences Inc (a) | 20,299 | 1,118,881 | ||||||
SciClone Pharmaceuticals Inc (a) | 11,250 | 121,500 | ||||||
Supernus Pharmaceuticals Inc (a) | 15,355 | 387,714 | ||||||
USANA Health Sciences Inc (a) | 7,224 | 442,109 | ||||||
Xencor Inc (a) | 5,957 | 156,788 | ||||||
|
| |||||||
$ | 5,165,178 | |||||||
|
| |||||||
Pipelines — 0.22% | ||||||||
SemGroup Corp, Class A | 13,124 | �� | 547,927 | |||||
Real Estate — 0.41% | ||||||||
Monmouth Real Estate Investment Corp | 40,334 | 614,690 | ||||||
RE/MAX Holdings Inc, Class A | 7,043 | 394,408 | ||||||
|
| |||||||
$ | 1,009,098 | |||||||
|
| |||||||
REITS — 6.03% | ||||||||
Agree Realty Corp | 22,400 | 1,031,520 | ||||||
Alexander’s Inc | 883 | 376,926 | ||||||
Ares Commercial Real Estate Corp | 21,173 | 290,705 | ||||||
Blackstone Mortgage Trust Inc, Class A | 53,578 | 1,611,091 | ||||||
Care Capital Properties Inc | 55,365 | 1,384,125 | ||||||
CoreSite Realty Corp | 21,311 | 1,691,454 | ||||||
CYS Investments Inc | 180,951 | 1,398,751 | ||||||
EastGroup Properties Inc | 21,450 | 1,583,868 | ||||||
Getty Realty Corp | 21,939 | 559,225 | ||||||
LTC Properties Inc | 23,396 | 1,099,144 | ||||||
MFA Financial Inc | 210,948 | 1,609,533 | ||||||
Saul Centers Inc | 3,483 | 232,003 | ||||||
Select Income REIT | 42,947 | 1,082,264 | ||||||
Urstadt Biddle Properties Inc, Class A | 20,532 | 495,027 | ||||||
Whitestone REIT | 19,220 | 276,384 | ||||||
|
| |||||||
$ | 14,722,020 | |||||||
|
| |||||||
Retail — 6.24% | ||||||||
Big Lots Inc | 33,045 | 1,659,189 | ||||||
BJ’s Restaurants Inc (a) | 9,955 | 391,232 | ||||||
Bloomin’ Brands Inc | 38,282 | 690,224 | ||||||
Cheesecake Factory Inc/The | 26,911 | 1,611,431 | ||||||
Children’s Place Inc/The | 15,085 | 1,522,831 | ||||||
Chuy’s Holdings Inc (a) | 6,607 | 214,397 | ||||||
DSW Inc, Class A | 50,386 | 1,141,243 | ||||||
Duluth Holdings Inc, Class B (a) | 5,826 | 147,980 | ||||||
Express Inc (a) | 38,473 | 413,969 | ||||||
Five Below Inc (a) | 31,441 | 1,256,382 | ||||||
Francesca’s Holdings Corp (a) | 18,585 | 335,088 | ||||||
GNC Holdings Inc, Class A | 26,899 | 296,965 | ||||||
Hibbett Sports Inc (a) | 10,420 | 388,666 | ||||||
Jack in the Box Inc | 15,203 | 1,697,263 | ||||||
MarineMax Inc (a) | 7,154 | 138,430 | ||||||
Ollie’s Bargain Outlet Holdings Inc (a) | 19,555 | 556,340 | ||||||
Papa John’s International Inc | 10,764 | 921,183 | ||||||
PC Connection Inc | 2,124 | 59,663 | ||||||
PetMed Express Inc | 9,192 | 212,059 | ||||||
Ruth’s Hospitality Group Inc | 9,752 | 178,462 | ||||||
Shoe Carnival Inc | 3,712 | 100,150 | ||||||
Sonic Corp | 31,886 | 845,298 | ||||||
Tile Shop Holdings Inc (a) | 13,356 | 261,110 | ||||||
Wingstop Inc | 6,669 | 197,336 | ||||||
|
| |||||||
$ | 15,236,891 | |||||||
|
|
COMMON STOCKS (continued) | Shares Held | Value | ||||||
Savings&Loans — 3.67% | ||||||||
Brookline Bancorp Inc | 24,940 | $ | 409,016 | |||||
First Defiance Financial Corp | 3,717 | 188,600 | ||||||
Flagstar Bancorp Inc (a) | 26,517 | 714,368 | ||||||
Meridian Bancorp Inc | 23,890 | 451,521 | ||||||
Meta Financial Group Inc | 5,864 | 603,406 | ||||||
Northfield Bancorp Inc | 16,470 | 328,906 | ||||||
Northwest Bancshares Inc | 77,104 | 1,390,185 | ||||||
Pacific Premier Bancorp Inc (a) | 12,554 | 443,784 | ||||||
Sterling Bancorp | 90,165 | 2,109,861 | ||||||
Washington Federal Inc | 50,978 | 1,751,094 | ||||||
WSFS Financial Corp | 12,143 | 562,828 | ||||||
|
| |||||||
$ | 8,953,569 | |||||||
|
| |||||||
Semiconductors — 1.49% | ||||||||
Alpha & Omega Semiconductor Ltd (a) | 3,032 | 64,491 | ||||||
Axcelis Technologies Inc (a) | 4,618 | 67,192 | ||||||
Cabot Microelectronics Corp | 6,076 | 383,821 | ||||||
CEVA Inc (a) | 4,015 | 134,703 | ||||||
Entegris Inc (a) | 21,346 | 382,093 | ||||||
Inphi Corp (a) | 16,254 | 725,254 | ||||||
MKS Instruments Inc | 20,646 | 1,226,372 | ||||||
Nanometrics Inc (a) | 4,954 | 124,147 | ||||||
Power Integrations Inc | 7,913 | 536,897 | ||||||
|
| |||||||
$ | 3,644,970 | |||||||
|
| |||||||
Software — 1.95% | ||||||||
Black Knight Financial Services Inc, Class A (a) | 21,344 | 806,803 | ||||||
Brightcove Inc (a) | 10,978 | 88,373 | ||||||
Computer Programs & Systems Inc | 6,042 | 142,591 | ||||||
CSG Systems International Inc | 9,877 | 478,047 | ||||||
Ebix Inc | 10,354 | 590,696 | ||||||
Monotype Imaging Holdings Inc | 8,846 | 175,593 | ||||||
Omnicell Inc (a) | 6,876 | 233,096 | ||||||
Paycom Software Inc (a) | 27,187 | 1,236,737 | ||||||
Pegasystems Inc | 13,136 | 472,896 | ||||||
SPS Commerce Inc (a) | 7,590 | 530,465 | ||||||
|
| |||||||
$ | 4,755,297 | |||||||
|
| |||||||
Telecommunications — 3.52% | ||||||||
ADTRAN Inc | 17,003 | 380,017 | ||||||
Consolidated Communications Holdings Inc | 26,446 | 710,075 | ||||||
Finisar Corp (a) | 42,050 | 1,272,854 | ||||||
Gigamon Inc (a) | 18,570 | 845,864 | ||||||
GTT Communications Inc (a) | 15,154 | 435,678 | ||||||
IDT Corp, Class B | 7,210 | 133,673 | ||||||
InterDigital Inc | 17,712 | 1,617,991 | ||||||
LogMeIn Inc | 9,209 | 889,129 | ||||||
NETGEAR Inc (a) | 16,871 | 916,939 | ||||||
Plantronics Inc | 9,183 | 502,861 | ||||||
Shenandoah Telecommunications Co | 26,211 | 715,560 | ||||||
Spok Holdings Inc | 8,607 | 178,595 | ||||||
|
| |||||||
$ | 8,599,236 | |||||||
|
| |||||||
Textiles — 0.56% | ||||||||
UniFirst Corp | 9,580 | 1,376,167 | ||||||
Transportation — 0.68% | ||||||||
Forward Air Corp | 10,967 | 519,617 | ||||||
Hub Group Inc, Class A (a) | 13,246 | 579,513 | ||||||
Marten Transport Ltd | 6,626 | 154,386 | ||||||
Matson Inc | 9,496 | 336,063 | ||||||
Tidewater Inc | 18,101 | 61,724 | ||||||
|
| |||||||
$ | 1,651,303 | |||||||
|
| |||||||
Trucking & Leasing — 0.63% | ||||||||
GATX Corp | 15,941 | 981,647 | ||||||
Greenbrier Cos Inc/The | 13,442 | 558,515 | ||||||
|
| |||||||
$ | 1,540,162 | |||||||
|
| |||||||
Water — 0.09% | ||||||||
Middlesex Water Co | 5,389 | 231,404 | ||||||
TOTAL COMMON STOCKS | $ | 242,794,714 |
See accompanying notes. | 32 |
Table of Contents
Schedule of Investments
Principal U.S. Small Cap Index ETF
December 31, 2016 (unaudited)
INVESTMENT COMPANIES — 0.53% | Shares Held | Value | ||||||
Exchange Traded Funds — 0.53% | ||||||||
iShares Core S&P Small-Cap ETF | 9,435 | $ | 1,297,501 | |||||
TOTAL INVESTMENT COMPANIES | $ | 1,297,501 | ||||||
Total Investments | $ | 244,092,215 | ||||||
Other Assets and Liabilities — 0.03% | $ | 78,306 | ||||||
|
| |||||||
TOTAL NET ASSETS — 100% | $ | 244,170,521 | ||||||
|
|
(a) | Non-Income Producing Security |
Portfolio Summary (unaudited) |
| |||
Sector | Percent | |||
Financial | 28.11 | % | ||
Consumer, Non-cyclical | 18.32 | % | ||
Consumer, Cyclical | 15.37 | % | ||
Industrial | 15.03 | % | ||
Communications | 6.30 | % | ||
Technology | 6.06 | % | ||
Energy | 5.01 | % | ||
Basic Materials | 3.27 | % | ||
Utilities | 1.97 | % | ||
Investment Companies | 0.53 | % | ||
Other Assets and Liabilities | 0.03 | % | ||
TOTAL NET ASSETS | 100.00 | % |
See accompanying notes. | 33 |
Table of Contents
Principal Exchange-Traded Funds
(unaudited)
Principal EDGE Active Income ETF
For a share outstanding for the year ended June 30 (except as noted):
Period ended December 31, 2016 (g) | Year ended June 30, 2016 (a) | |||||||
Net asset value, beginning of period | $ | 39.12 | $ | 40.00 | ||||
Investment Operations: | ||||||||
Net investment income (loss) (b) | 1.01 | 2.13 | ||||||
Net realized and change in unrealized gain (loss) | 1.28 | (1.39 | ) | |||||
|
|
|
| |||||
Total from investment operations | 2.29 | 0.74 | ||||||
|
|
|
| |||||
Dividends and Distributions to Shareholders from: | ||||||||
Net investment income | (1.12 | ) | (1.62 | ) | ||||
|
|
|
| |||||
Total dividends and distributions to stockholders | (1.12 | ) | (1.62 | ) | ||||
|
|
|
| |||||
Net asset value, end of period | $ | 40.29 | $ | 39.12 | ||||
|
|
|
| |||||
Total Return: (c) | 6.00 | % | 2.13 | % | ||||
Ratios/Supplemental Data: | ||||||||
Net assets, end of period (000s) | $ | 275,010 | $ | 265,013 | ||||
Ratio of expenses to average net assets (d) | 0.82 | % | 0.85 | % (e) | ||||
Ratio of gross expenses to average net assets (d) | 0.82 | % | 1.34 | % | ||||
Ratio of net investment income (loss) to average net assets (d) | 5.00 | % | 5.99 | % | ||||
Portfolio turnover rate (f) | 36.9 | % (d) | 34.3 | % |
(a) | Period from July 8, 2015, effective date of the fund, 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. |
(g) | Six months ended December 31, 2016. |
See accompanying notes. | 34 |
Table of Contents
Financial Highlights
Principal Exchange-Traded Funds
(unaudited)
Principal Healthcare Innovators Index ETF
For a share outstanding for the year ended June 30 (except as noted):
Period ended December 31, 2016 (a) | ||||
Net asset value, beginning of period | $ | 25.00 | ||
Investment Operations: | ||||
Net investment (loss) (b) | (0.04 | ) | ||
Net realized and change in unrealized loss | (1.98 | ) | ||
|
| |||
Total from investment operations | (2.02 | ) | ||
|
| |||
Net asset value, end of period | $ | 22.98 | ||
|
| |||
Total Return: (c) | (8.08 | )% | ||
Ratios/Supplemental Data: | ||||
Net assets, end of period (000s) | $ | 5,745 | ||
Ratio of expenses to average net assets (d) | 0.42 | % | ||
Ratio of net investment loss to average net assets (d) | (0.39 | )% | ||
Portfolio turnover rate (d)(e) | 34.3 | % |
(a) | Period from August 19, 2016, date operations commenced, through December 31, 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. |
See accompanying notes. | 35 |
Table of Contents
Financial Highlights
Principal Exchange-Traded Funds
(unaudited)
Principal Millennials Index ETF
For a share outstanding for the year ended June 30 (except as noted):
Period ended December 31, 2016 (a) | ||||
Net asset value, beginning of period | $ | 25.00 | ||
Investment Operations: | ||||
Net investment income (loss) (b) | 0.06 | |||
Net realized and change in unrealized loss | (0.40 | ) | ||
|
| |||
Total from investment operations | (0.34 | ) | ||
|
| |||
Dividends and Distributions to Shareholders from: | ||||
Net investment income | (0.06 | ) | ||
Net realized gains | (0.03 | ) | ||
|
| |||
Total dividends and distributions to stockholders | (0.09 | ) | ||
|
| |||
Net asset value, end of period | $ | 24.57 | ||
|
| |||
Total Return: (c) | (1.38 | )% | ||
Ratios/Supplemental Data: | ||||
Net assets, end of period (000s) | $ | 6,142 | ||
Ratio of expenses to average net assets (d) | 0.45 | % | ||
Ratio of net investment income (loss) to average net assets (d) | 0.58 | % | ||
Portfolio turnover rate (d)(e) | 4.1 | % |
(a) | Period from August 19, 2016, date operations commenced, through December 31, 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. |
See accompanying notes. | 36 |
Table of Contents
Financial Highlights
Principal Exchange-Traded Funds
(unaudited)
Principal Price Setters Index ETF
For a share outstanding for the year ended June 30 (except as noted):
Period ended December 31, 2016 (f) | Period ended June 30, 2016 (a) | |||||||
Net asset value, beginning of period | $ | 26.08 | $ | 25.00 | ||||
Investment Operations: | ||||||||
Net investment income (loss) (b) | 0.18 | 0.09 | ||||||
Net realized and change in unrealized gain (loss) | 0.13 | 0.99 | ||||||
|
|
|
| |||||
Total from investment operations | 0.31 | 1.08 | ||||||
|
|
|
| |||||
Dividends and Distributions to Shareholders from: | ||||||||
Net investment income | (0.27 | ) | — | |||||
Net realized gains | (0.06 | ) | — | |||||
|
|
|
| |||||
Total dividends and distributions to stockholders | (0.33 | ) | — | |||||
|
|
|
| |||||
Net asset value, end of period | $ | 26.06 | $ | 26.08 | ||||
|
|
|
| |||||
Total Return: (c) | 1.20 | % | 4.31 | % | ||||
Ratios/Supplemental Data: | ||||||||
Net assets, end of period (000s) | $ | 6,515 | $ | 6,519 | ||||
Ratio of expenses to average net assets (d) | 0.40 | % | 0.40 | % | ||||
Ratio of net investment income (loss) to average net assets (d) | 1.39 | % | 1.32 | % | ||||
Portfolio turnover rate (d)(e) | 2.6 | % | 0.0 | % |
(a) | Period from March 21, 2016, date of the initial investment in the fund, 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. |
(f) | Six months ended December 31, 2016. |
See accompanying notes. | 37 |
Table of Contents
Financial Highlights
Principal Exchange-Traded Funds
(unaudited)
Principal Shareholder Yield Index ETF
For a share outstanding for the year ended June 30 (except as noted):
Period ended December 31, 2016 (f) | Period ended June 30, 2016 (a) | |||||||
Net asset value, beginning of period | $ | 24.65 | $ | 25.00 | ||||
Investment Operations: | ||||||||
Net investment income (loss) (b) | 0.30 | 0.18 | ||||||
Net realized and change in unrealized gain (loss) | 3.32 | (0.53 | ) | |||||
|
|
|
| |||||
Total from investment operations | 3.62 | (0.35 | ) | |||||
|
|
|
| |||||
Dividends and Distributions to Shareholders from: | ||||||||
Net investment income | (0.49 | ) | — | |||||
Net realized gains | (0.03 | ) | — | |||||
|
|
|
| |||||
Total dividends and distributions to stockholders | (0.52 | ) | — | |||||
|
|
|
| |||||
Net asset value, end of period | $ | 27.75 | $ | 24.65 | ||||
|
|
|
| |||||
Total Return: (c) | 14.81 | % | (1.39 | )% | ||||
Ratios/Supplemental Data: | ||||||||
Net assets, end of period (000s) | $ | 6,937 | $ | 6,163 | ||||
Ratio of expenses to average net assets (d) | 0.40 | % | 0.40 | % | ||||
Ratio of net investment income (loss) to average net assets (d) | 2.30 | % | 2.73 | % | ||||
Portfolio turnover rate (d)(e) | 2.0 | % | 7.1 | % |
(a) | Period from March 21, 2016, date of 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. |
(f) | Six months ended December 31, 2016. |
See accompanying notes. | 38 |
Table of Contents
Financial Highlights
Principal Exchange-Traded Funds
(unaudited)
Principal U.S. Small Cap Index ETF
For a share outstanding for the year ended June 30 (except as noted):
Period ended December 31, 2016 (a) | ||||
Net asset value, beginning of period | $ | 25.00 | ||
Investment Operations: | ||||
Net investment income (loss) (b) | 0.12 | |||
Net realized and change in unrealized gain (loss) | 2.57 | |||
|
| |||
Total from investment operations | 2.69 | |||
|
| |||
Dividends and Distributions to Shareholders from: | ||||
Net investment income | (0.10 | ) | ||
|
| |||
Total dividends and distributions to stockholders | (0.10 | ) | ||
|
| |||
Net asset value, end of period | $ | 27.59 | ||
|
| |||
Total Return: (c) | 10.74 | % | ||
Ratios/Supplemental Data: | ||||
Net assets, end of period (000s) | $ | 244,171 | ||
Ratio of expenses to average net assets (d) | 0.38 | % | ||
Ratio of net investment income (loss) to average net assets (d) | 1.70 | % | ||
Portfolio turnover rate (d)(e) | 171.6 | % |
(a) | Period from September 21, 2016, date operations commenced, through December 31, 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. |
See accompanying notes. | 39 |
Table of Contents
Principal Exchange-Traded Funds
December 31, 2016 (unaudited)
As a shareholder of a Fund, you incur two types of costs: (1) transaction costs, including brokerage commissions paid on purchases and sales of Fund shares and (2) ongoing costs, including management fees; in the case of Principal EDGE Active Income ETF, other fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other exchange-traded funds.
The Examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period, July 1, 2016 through December 31, 2016, except as footnoted in the table below.
Actual Expenses
The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Funds’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as contingent deferred sales charges, redemption fees or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
Beginning Account Value | Ending Account Value | Annualized Expense Ratio | Expenses Paid During Period | |||||||||||||
Principal EDGE Active Income ETF | ||||||||||||||||
Actual Fund Return | $ | 1,000 | $ | 1,060.00 | 0.82 | % | $ | 4.26 | ||||||||
Hypothetical 5% Annual Return | $ | 1,000 | $ | 1,021.07 | 0.82 | % | $ | 4.18 | ||||||||
Principal Healthcare Innovators Index ETF | ||||||||||||||||
Actual Fund Return | $ | 1,000 | $ | 919.20 | 0.42 | % | $ | 1.48 | ||||||||
Hypothetical 5% Annual Return | $ | 1,000 | $ | 1,016.81 | 0.42 | % | $ | 1.55 | ||||||||
Principal Millennials Index ETF | ||||||||||||||||
Actual Fund Return | $ | 1,000 | $ | 1,000.00 | 0.45 | % | $ | 1.65 | ||||||||
Hypothetical 5% Annual Return | $ | 1,000 | $ | 1,016.70 | 0.45 | % | $ | 1.67 | ||||||||
Principal Price Setters Index ETF | ||||||||||||||||
Actual Fund Return | $ | 1,000 | $ | 1,012.00 | 0.40 | % | $ | 2.03 | ||||||||
Hypothetical 5% Annual Return | $ | 1,000 | $ | 1,023.19 | 0.40 | % | $ | 2.04 | ||||||||
Principal Shareholder Yield Index ETF | ||||||||||||||||
Actual Fund Return | $ | 1,000 | $ | 1,148.10 | 0.40 | % | $ | 2.17 | ||||||||
Hypothetical 5% Annual Return | $ | 1,000 | $ | 1,023.19 | 0.40 | % | $ | 2.04 | ||||||||
Principal U.S. Small Cap Index ETF | ||||||||||||||||
Actual Fund Return | $ | 1,000 | $ | 1,107.40 | 0.38 | % | $ | 1.14 | ||||||||
Hypothetical 5% Annual Return | $ | 1,000 | $ | 1,012.76 | 0.38 | % | $ | 1.09 |
* | The Funds commenced operations on August 19, 2016. Expenses are equal to the Funds’ annualized expense ratio for the period, multiplied by the average account value over the period, multiplied by the number of days since inception (134), then divided by the number of days in the year (365) to reflect the period. |
** | The Fund commenced operations on September 21, 2016. Expenses are equal to the Fund’s annualized expense ratio for the period, multiplied by the average account value over the period, multiplied by the number of days since inception (101), then divided by the number of days in the year (365) to reflect the period. |
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Trustees and officers
Under Delaware law, a Board of Trustees oversees the Trust. The Trustees have financial or other relevant experience and meet several times during the year to review contracts, Trust activities and the quality of services provided to the Trust. Each trustee also has the same position with Principal Funds, Inc. and Principal Variable Contracts Funds, Inc. which are also sponsored by Principal Life Insurance Company. Each trustee holds office for an indefinite term or until reaching age 72. Trustees considered to be “interested persons” as defined in the Investment Company Act of 1940, as shown below are considered to be interested because of an affiliation with the Manager and Principal Life Insurance Company.
The following Trustees are considered not to be “interested persons” as defined in the 1940 Act
Name, Position Held with the Trust, Year of Birth | Principal Occupation(s) During past 5 years | Number of | Other Directorships Held by Trustee During Past 5 Years | |||
Elizabeth Ballantine Director since 2004 Member, Nominating and Governance Committee 1948 | Principal, EBA Associates | 126 | Durango Herald, Inc; McClatchy Newspapers, Inc. | |||
Leroy T. Barnes, Jr. Director since March 2012 Member, Audit Committee 1951 | Retired. | 126 | McClatchy Newspapers, Inc.; Herbalife Ltd.; Frontier Communications, Inc. | |||
Craig Damos Director since 2008 Member, Audit Committee Member, 15(c) Committee 1954 | President, The Damos Company | 126 | Hardin Construction Company | |||
Mark A. Grimmett Director since 2004 Member, Nominating and Governance Committee Member, 15(c) Committee Member, Executive Committee 1960 | Formerly, Executive Vice President and CFO, Merle Norman Cosmetics, Inc. | 126 | None | |||
Fritz S. Hirsch Director since 2005 Member, Operations Committee Member, 15(c) Committee 1951 | CEO, MAM USA | 126 | Focus Products Group | |||
Tao Huang Director since March 2012 Member, Operations Committee Member, 15(c) Committee 1962 | Formerly, Chief Operating Officer, Morningstar, Inc. | 126 | Armstrong World Industries, Inc. | |||
Karen (“Karrie”) McMillan Director since 2014 Member, Operations Committee 1961 | Managing Director, Patomak Global Partners, LLC. Formerly, General Counsel, Investment Company Institute | 126 | None | |||
Elizabeth A. Nickels Director since September 2015 Member, Audit Committee 1962 | Formerly, Executive Director, Herman Miller Foundation; Formerly President, Herman Miller Healthcare | 126 | Charlotte Russe; Follet Corporation; Herman Miller, Inc.; PetSmart; SpartanNash; Spectrum Health Systems |
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The following Trustees are considered to be “interested persons” as defined in the 1940 Act, because of an affiliation with the Manager and Principal Life.
Name, Position Held with the Trust, Year of Birth | Principal Occupation(s) During past 5 years | Number of Portfolios in Fund by Trustee | Other Directorships Held by Trustee During Past 5 Years | |||
Michael J. Beer Director since 2012 President, Chief Executive Officer Member, Executive Committee 1961 | Chief Executive Officer, Principal Funds Distributor, Inc. (“PFD”) since 2015 Director, PFD since 2015 Vice President/Mutual Funds and Broker Dealer, Principal Life Insurance Company (“PLIC”) (2001-2014) Vice President/Chief Operating Officer, Principal Funds, PLIC (2014-2015) Executive Director, Principal Funds & Trust, PLIC since 2015 Director, Principal Management Corporation, (the “Manager”) (2006-2015) President & Chief Executive Officer, the Manager since 2015 Executive Vice President/Chief Operating Officer, the Manager (2008-2015) Chair, the Manager since 2015 Director, Principal Securities, Inc. (“PSI”) (2005-2015) President, PSI (2005-2015) Director, Principal Shareholder Services (“PSS”) (2007-2015) Chairman, PSS since 2015 President, PSS (2007-2015) Executive Vice President, PSS since 2015 | 126 | None | |||
Nora M. Everett Director since 2008 Chair Member, Executive Committee 1959 | Director, Finisterre Capital LLP since 2011 Director, Origin Asset Management LLP since 2011 Chairman, Principal Financial Advisors, Inc. (“PFA”) (2010-2015) Chairman, PFD (2011-2015) Director, PFD (2008-2011) Senior Vice President/Retirement and Investor Services, PLIC (2008-2015) President/Retirement and Investor Services, PLIC since 2015 Chairman, the Manager (2011-2015) President, the Manager (2008-2015) Director, the Manager (2008-2011) Director, PSI (2008-2011, and since 2015) Chairman, PSI (2011-2015) Chief Executive Officer, PSI (2009-2015) Chairman, PSS (2011-2015) Director, PSS (2008-2011) | 126 | None |
Correspondence intended for each Trustee who is other than an Interested Trustee may be sent to 655 9th Street, Des Moines, IA 50392.
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The following table presents officers of the Trust.
Name, Address, and Year of Birth | Principal Occupation(s) During past 5 years | |
Randy L. Bergstrom Assistant Tax Counsel Des Moines, IA 50392 1955 | Counsel, Principal Global Investors, LLC (“PGI”) Counsel, PLIC | |
Jennifer A. Block Assistant Counsel and Assistant Secretary Des Moines, IA 50392 1973 | Counsel, PFD (2009-2013) Counsel, PLIC Counsel, the Manager (2009-2013, 2014-present) Counsel, PSI (2009-2013) Counsel, PSS (2009-2013) | |
Tracy Bollin Chief Financial Officer Des Moines, IA 50392 1970 | Chief Financial Officer, PFA (2010-2015) Senior Vice President, PFD since 2015 Chief Financial Officer, PFD since 2010 Senior Vice President, the Manager since 2015 Chief Financial Officer, the Manager (2010-2015) Director, the Manager since 2015 Chief Financial Officer, PSI (2010-2015) Director, PSS since 2015 President, PSS since 2015 Chief Financial Officer, PSS (2010-2015) | |
David J. Brown Chief Compliance Officer Des Moines, IA 50392 1960 | Senior Vice President, PFD Chief Compliance Officer-Funds, PLIC since 2016 Vice President/Compliance, PLIC (2004-2016) Senior Vice President, the Manager Senior Vice President, PSI Senior Vice President, PSS | |
Gina L. Graham Treasurer Des Moines, IA 50392 1965 | Vice President/Treasurer, PFA since 2016 Vice President/Treasurer, PFD since 2016 Vice President/Treasurer, PGI since 2016 Vice President/Treasurer, PLIC since 2016 Vice President/Treasurer, the Manager since 2016 Vice President/Treasurer, Principal Real Estate Investors, LLC since 2016 Vice President/Treasurer, PSI since 2016 Vice President/Treasurer, PSS since 2016 | |
Carolyn F. Kolks Assistant Tax Counsel Des Moines, IA 50392 1962 | Counsel, PGI Counsel, PLIC | |
Sara L. Reece Vice President and Controller Des Moines, IA 50392 1975 | Financial Controller, PLIC since 2015 Assistant Financial Controller, PLIC prior to 2015 | |
Greg Reymann Assistant Counsel Des Moines, IA 50392 1958 | Assistant General Counsel, PLIC since 2014 Assistant General Counsel, the Manager since 2015 VP, Chief Compliance Officer and Chief Risk Officer, Transamerica Asset Management, Inc. (“TAM”) (2010-2012) Assistant General Counsel, Transamerica Asset Management Group (2013-2014) Vice President/CFTC Principal, TAM (2013-2014) | |
Teri R. Root Deputy Chief Compliance Officer Des Moines, IA 50392 1979 | Vice President and Chief Compliance Officer, the Manager since 2015 Compliance Officer, the Manager (2010-2013) Vice President, PSS since 2015 |
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Name, Address, and Year of Birth | Principal Occupation(s) During past 5 years | |
Britney L. Schnathorst Assistant Counsel Des Moines, IA 50392 1981 | Counsel, PLIC since 2013 Prior thereto, Attorney in Private Practice | |
Adam U. Shaikh Assistant Counsel Des Moines, IA 50392 1972 | Counsel, PFD (2006-2013) Counsel, PLIC Counsel, the Manager (2007-2013, 2014-present) Counsel, PSI (2007-2013) Counsel, PSS (2007-2013) | |
Dan Westholm Assistant Treasurer Des Moines, IA 50392 1966 | 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, the Manager (2003-2013) Assistant Vice President/Treasury, the Manager 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 Wilson Vice President and Secretary Des Moines, IA 50392 1956 | Director and Secretary — Funds, PLIC Vice President, the Manager (2007-2013) | |
Clint Woods Vice President and Counsel Des Moines, IA 50392 1961 | 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 15(c) Committee assists the Board in performing the annual review of the Trust’s advisory and sub-advisory agreements pursuant to Section 15(c) of the 1940 Act.
The Audit Committee selects the independent auditors for the Trust and oversees the activities of the independent auditors as well as the internal auditors. The committee also receives reports about accounting and financial matters affecting the Trust.
The Executive Committee is selected by the Board. It may exercise all the powers of the Board, with certain exceptions, when the Board is not in session. The Committee must report its actions to the Board.
The Nominating and Governance Committee selects and nominates all candidates who are not “interested persons” of the Trust for election to the Board. The committee also oversees the structure and efficiency of the Board of Trustees and the committees the Board establishes.
The Operations Committee oversees the provision of administrative and distribution services to the Trust, communications with the Trusts’ shareholders, and provides review and oversight of the Trusts’ operations.
Additional information about the Trust is available in the Prospectus dated November 1, 2016, and the Statement of Additional Information dated November 1, 2016. These documents may be obtained free of charge by writing Principal Exchange-Traded Funds, c/o ALPS Distributors, Inc., 1290 Broadway, Suite 1100, Denver, CO 80203 or telephoning 1-800-787-1621. The Prospectus and Statement of Additional Information may be viewed at www.PrincipalETFs.com.
PROXY VOTING POLICIES
A description of the policies and procedures the Trust uses to determine how to vote proxies relating to portfolio securities and the results of the proxy votes for the most recent twelve months ended June 30 may be obtained free of charge by telephoning 1-800-787-1621, or on the SEC website at www.sec.gov.
SCHEDULES OF INVESTMENTS
The Trust files complete schedules of investments with the Securities and Exchange Commission as of March 31 and September 30 of each year on Form N-Q. The Trust’s Form N-Q can be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. or on the Commission’s website at www.sec.gov. Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-202-551-8090.
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Board Consideration of Investment Advisory Contracts
During the period covered by this report, the Board of Trustees of Principal Exchange-Traded Funds (“PETF”) approved: (1) an amended and restated subadvisory agreement with Principal Global Investors LLC (“PGI”) and an amended and restated management agreement with Principal Management Corporation (the “Manager”) related to the addition of the Principal Healthcare Innovators Index Exchange-Traded Fund; (2) an amended and restated subadvisory agreement with PGI and an amended and restated management agreement with the Manager related to the addition of the Principal Millennials Index ETF; (3) an amended and restated subadvisory agreement with PGI and an amended and restated management agreement with the Manager related to the addition of the Principal U.S. Small Cap Index ETF; and (4) ) the annual review and renewal of the Management Agreement and various subadvisory agreements for all series of the PETF Funds.
Management Agreement and Subadvisory Agreement for Principal Healthcare Innovators Index ETF
On March 15, 2016, the Board considered, on behalf of the newly established Principal Healthcare Innovators Index ETF series of PETF (the “Fund”), the approval of: (1) a management agreement (the “Management Agreement”) between PETF, for the Fund, and Manager and (2) a subadvisory agreement (the “Subadvisory Agreement”) between the Manager and PGI (the “Subadviser”). (The Management Agreement and the Subadvisory Agreement are together referred to as the “Advisory Agreements.”)
Based upon their review, the Board concluded that it was in the best interests of the Fund to approve the Advisory Agreements and, accordingly, recommended to the Board of Trustees the approval of each of the Advisory Agreements. In reaching this conclusion, no single factor was determinative in the Board’s analysis, but rather the Board considered a variety of factors.
With respect to the Management Agreement, the Board considered, among other factors, that the Manager serves as the investment adviser to the existing PETF series, has had a long-term relationship with Principal Funds, Inc. (“PFI”) and Principal Variable Contracts Funds, Inc. (“PVC” and together with PETF and PFI, the “Principal Funds”), which are also overseen by the Trustees, and has demonstrated a commitment to support the Principal Funds. The Board concluded that a long-term relationship with a capable, conscientious adviser is in the best interests of the Fund. The Board considered various factors, including the following, and made certain findings and conclusions with regard thereto, in approving the Advisory Agreements.
Nature, Quality and Extent of Services
The Board considered the nature, quality and extent of the services to be provided under the Management Agreement, including administrative services. The Board noted that, in connection with the 2015 annual renewal of the management agreements for the Principal Funds, the Board had: (1) reviewed the services provided by the Manager to the other series of Principal Funds under the management agreements; (2) considered the experience and skills of senior management leading fund operations, the experience and skills of the personnel performing the functions under the management agreements and the resources made available to such personnel, the ability of the Manager to attract and retain high-quality personnel, and the organizational depth and stability of the Manager and concluded that appropriate resources were provided under the management agreements for the Principal Funds; (3) noted that the Manager’s process emphasizes the selection of Principal-affiliated subadvisers that are determined to be qualified under the Manager’s due diligence process and concluded that this due diligence process was working well; and (4) considered the compliance program established by the Manager for the Principal Funds and their respective series and the level of compliance attained by the Principal Funds. Based upon all relevant factors, the Board concluded that the nature, quality and extent of the services to be provided by the Manager to the Fund under the Management Agreement are expected to be satisfactory.
The Board considered the nature, quality and extent of the services to be provided under the Subadvisory Agreement. The Board considered the reputation, qualifications and background of the Subadviser, the investment approach of the Subadviser, the experience and skills of the Subadviser’s investment personnel who would be responsible for the day-to-day management of the Fund, and the resources made available to such personnel. The Board noted that the Subadviser currently provides subadvisory services for other series of Principal Funds, and that the Board had reviewed and had approved for renewal those subadvisory agreements at its September 2015 Board meeting. In addition, the Board considered the Manager’s program for recommending, monitoring and replacing subadvisers and that the Manager recommended the Subadviser based upon that program. Based upon all relevant factors, the Board concluded that the nature, quality and extent of the services to be provided by the Subadviser to the Fund under the Subadvisory Agreement are expected to be satisfactory.
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Investment Performance
As the Fund was a newly created series, the Board did not review performance of the Fund as no track record was available. The Board reviewed a preliminary calculation of the constructed historical one-year, three-year, five-year, ten-year and since inception (December 31, 2004) performance as of December 31, 2015 of the proprietary index that the Fund’s performance is intended to track, as compared to a relevant benchmark index and to a relevant Morningstar category. The Board concluded, based on the information provided, that the Subadviser is well qualified.
Fees, Economies of Scale and Profitability.
The Board considered the Fund’s proposed management and subadvisory fees. The Board noted that the Manager proposed a unitary management fee for the Fund, and considered the Manager’s statement that a unitary fee structure is consistent with the fee structures of a majority of other index exchange-traded funds. The Board also received information from the Manager, based on data supplied by Broadridge, comparing the proposed unitary management fee to the total expense ratios of funds in the same asset category. The Board also considered whether there are economies of scale with respect to the services to be provided to the Fund under the Management Agreement. The Board noted that the proposed management fee schedule includes breakpoints, and concluded that the proposed management fee schedule reflects an appropriate recognition of economies of scale at currently anticipated asset levels.
With respect to the subadvisory fee proposed to be paid to the Subadviser, the Board noted that the Manager compensates the Subadviser, an affiliated company, from its own management fee so that shareholders pay only the management fee. The Board considered whether there are economies of scale with respect to the subadvisory services to be provided under the Subadvisory Agreement. The Board concluded that, although the proposed subadvisory fee schedule does not include breakpoints, the Subadviser’s fee schedule is appropriate at currently anticipated asset levels. The Board considered the Subadviser’s representation that it does not offer other clients a lower fee for comparable strategies and services and the Manager’s statement that it found the proposed subadvisory fee schedule to be competitive.
In addition, in evaluating the management and subadvisory fees, the Board considered the Manager’s statement that the profitability for the Fund is forecasted to be negative in the first year. On the basis of the information provided, the Board concluded that the proposed management and subadvisory fees were reasonable.
Other Benefits
The Board also considered the character and amount of other incidental benefits to be received by the Manager and Subadviser. The Board noted that the Subadviser did not intend to use soft dollars. The Board concluded that, on the basis of the information provided, the proposed management and subadvisory fees were reasonable.
Overall Conclusions
Based upon all of the information considered and the conclusions reached, the Board determined that the terms of each Advisory Agreement are fair and reasonable and that approval of each of the Advisory Agreements is in the best interests of the Fund.
Management Agreement and Subadvisory Agreement for Principal Millennials Index ETF
On March 15, 2016, the Board considered, on behalf of the newly established Principal Millennials Index ETF series of PETF (the “Fund”), the approval of: (1) a management agreement (the “Management Agreement”) between PETF, for the Fund, and Manager and (2) a subadvisory agreement (the “Subadvisory Agreement”) between the Manager and PGI (the “Subadviser”). (The Management Agreement and the Subadvisory Agreement are together referred to as the “Advisory Agreements.”)
Based upon their review, the Board concluded that it was in the best interests of the Fund to approve the Advisory Agreements and, accordingly, recommended to the Board of Trustees the approval of each of the Advisory Agreements. In reaching this conclusion, no single factor was determinative in the Board’s analysis, but rather the Board considered a variety of factors.
With respect to the Management Agreement, the Board considered, among other factors, that the Manager serves as the investment adviser to the existing PETF series, has had a long-term relationship with Principal Funds, Inc. (“PFI”) and Principal Variable Contracts Funds, Inc. (“PVC” and together with PETF and PFI, the “Principal Funds”), which are also overseen by the Trustees, and has demonstrated a commitment to support the Principal Funds. The Board concluded that a long-term relationship with a capable, conscientious adviser is in the best interests of the Fund. The Board considered various factors, including the following, and made certain findings and conclusions with regard thereto, in approving the Advisory Agreements.
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Nature, Quality and Extent of Services
The Board considered the nature, quality and extent of the services to be provided under the Management Agreement, including administrative services. The Board noted that, in connection with the 2015 annual renewal of the management agreements for the Principal Funds, the Board had: (1) reviewed the services provided by the Manager to the other series of Principal Funds under the management agreements; (2) considered the experience and skills of senior management leading fund operations, the experience and skills of the personnel performing the functions under the management agreements and the resources made available to such personnel, the ability of the Manager to attract and retain high-quality personnel, and the organizational depth and stability of the Manager and concluded that appropriate resources were provided under the management agreements for the Principal Funds; (3) noted that the Manager’s process emphasizes the selection of Principal-affiliated subadvisers that are determined to be qualified under the Manager’s due diligence process and concluded that this due diligence process was working well; and (4) considered the compliance program established by the Manager for the Principal Funds and their respective series and the level of compliance attained by the Principal Funds. Based upon all relevant factors, the Board concluded that the nature, quality and extent of the services to be provided by the Manager to the Fund under the Management Agreement are expected to be satisfactory.
The Board considered the nature, quality and extent of the services to be provided under the Subadvisory Agreement. The Board considered the reputation, qualifications and background of the Subadviser, the investment approach of the Subadviser, the experience and skills of the Subadviser’s investment personnel who would be responsible for the day-to-day management of the Fund, and the resources made available to such personnel. The Board noted that the Subadviser currently provides subadvisory services for other series of Principal Funds, and that the Board had reviewed and had approved for renewal those subadvisory agreements at its September 2015 Board meeting. In addition, the Board considered the Manager’s program for recommending, monitoring and replacing subadvisers and that the Manager recommended the Subadviser based upon that program. Based upon all relevant factors, the Board concluded that the nature, quality and extent of the services to be provided by the Subadviser to the Fund under the Subadvisory Agreement are expected to be satisfactory.
Investment Performance
As the Fund was a newly created series, the Board did not review performance of the Fund as no track record was available. The Board reviewed a preliminary calculation of the constructed historical one-year, three-year and since inception (December 31, 2012) performance as of December 31, 2015 of the proprietary index that the Fund’s performance is intended to track, as compared to a relevant benchmark index and to a relevant Morningstar category. The Board concluded based on the information provided, that the Subadviser is well qualified.
Fees, Economies of Scale and Profitability.
The Board considered the Fund’s proposed management and subadvisory fees. The Board noted that the Manager proposed a unitary management fee for the Fund, and considered the Manager’s statement that a unitary fee structure is consistent with the fee structures of a majority of other index exchange-traded funds. The Board also received information from the Manager, based on data supplied by Broadridge, comparing the proposed unitary management fee to the total expense ratios of funds in the same asset category. The Board also considered whether there are economies of scale with respect to the services to be provided to the Fund under the Management Agreement. The Board noted that the proposed management fee schedule includes breakpoints, and concluded that the proposed management fee schedule reflects an appropriate recognition of economies of scale at currently anticipated asset levels.
With respect to the subadvisory fee proposed to be paid to the Subadviser, the Board noted that the Manager compensates the Subadviser, an affiliated company, from its own management fee so that shareholders pay only the management fee. The Board considered whether there are economies of scale with respect to the subadvisory services to be provided under the Subadvisory Agreement. The Board concluded that, although the proposed subadvisory fee schedule does not include breakpoints, the Subadviser’s fee schedule is appropriate at currently anticipated asset levels. The Board considered the Subadviser’s representation that it does not offer other clients a lower fee for comparable strategies and services and the Manager’s statement that it found the proposed subadvisory fee schedule to be competitive.
In addition, in evaluating the management and subadvisory fees, the Board considered the Manager’s statement that the profitability for the Fund is forecasted to be negative in the first year. On the basis of the information provided, the Board concluded that the proposed management and subadvisory fees were reasonable.
Other Benefits
The Board also considered the character and amount of other incidental benefits to be received by the Manager and Subadviser. The Board noted that the Subadviser did not intend to use soft dollars. The Board concluded that, on the basis of the information provided, the proposed management and subadvisory fees were reasonable.
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Overall Conclusions
Based upon all of the information considered and the conclusions reached, the Board determined that the terms of each Advisory Agreement are fair and reasonable and that approval of each of the Advisory Agreements is in the best interests of the Fund.
Management Agreement and Subadvisory Agreement for Principal U.S. Small Cap Index ETF
On June 14, 2016, the Board considered, on behalf of the newly established Principal U.S. Small Cap Index ETF series of PETF (the “Fund”), the approval of: (1) a management agreement (the “Management Agreement”) between PETF, for the Fund, and Manager and (2) a subadvisory agreement (the “Subadvisory Agreement”) between the Manager and PGI (the “Subadviser”). (The Management Agreement and the Subadvisory Agreement are together referred to as the “Advisory Agreements.”)
Based upon their review, the Board concluded that it was in the best interests of the Fund to approve the Advisory Agreements and, accordingly, recommended to the Board of Trustees the approval of each of the Advisory Agreements. In reaching this conclusion, no single factor was determinative in the Board’s analysis, but rather the Board considered a variety of factors.
With respect to the Management Agreement, the Board considered, among other factors, that the Manager serves as the investment adviser to the existing PETF series, has had a long-term relationship with Principal Funds, Inc. (“PFI”) and Principal Variable Contracts Funds, Inc. (“PVC” and together with PETF and PFI, the “Principal Funds”), which are also overseen by the Trustees, and has demonstrated a commitment to support the Principal Funds. The Board concluded that a long-term relationship with a capable, conscientious adviser is in the best interests of the Fund. The Board considered various factors, including the following, and made certain findings and conclusions with regard thereto, in approving the Advisory Agreements.
Nature, Quality and Extent of Services
The Board considered the nature, quality and extent of the services to be provided under the Management Agreement, including administrative services. The Board noted that, in connection with the 2015 annual renewal of the management agreements for the Principal Funds, the Board had: (1) reviewed the services provided by the Manager to the other series of Principal Funds under the management agreements; (2) considered the experience and skills of senior management leading fund operations, the experience and skills of the personnel performing the functions under the management agreements and the resources made available to such personnel, the ability of the Manager to attract and retain high-quality personnel, and the organizational depth and stability of the Manager and concluded that appropriate resources were provided under the management agreements for the Principal Funds; (3) noted that the Manager’s process emphasizes the selection of Principal-affiliated subadvisers that are determined to be qualified under the Manager’s due diligence process and concluded that this due diligence process was working well; and (4) considered the compliance program established by the Manager for the Principal Funds and their respective series and the level of compliance attained by the Principal Funds. Based upon all relevant factors, the Board concluded that the nature, quality and extent of the services to be provided by the Manager to the Fund under the Management Agreement are expected to be satisfactory.
The Board considered the nature, quality and extent of the services to be provided under the Subadvisory Agreement. The Board considered the reputation, qualifications and background of the Subadviser, the investment approach of the Subadviser, the experience and skills of the Subadviser’s investment personnel who would be responsible for the day-to-day management of the Fund, and the resources made available to such personnel. The Board noted that the Subadviser currently provides subadvisory services for other series of Principal Funds, and that the Board had reviewed and had approved for renewal those subadvisory agreements at its September 2015 Board meeting. In addition, the Board considered the Manager’s program for recommending, monitoring and replacing subadvisers and that the Manager recommended the Subadviser based upon that program. Based upon all relevant factors, the Board concluded that the nature, quality and extent of the services to be provided by the Subadviser to the Fund under the Subadvisory Agreement are expected to be satisfactory.
Investment Performance
As the Fund is a newly created series, the Board did not review performance of the Fund since no track record was available.
Fees, Economies of Scale and Profitability.
The Board considered the Fund’s proposed management and subadvisory fees. The Board noted that the Manager proposed a unitary management fee for the Fund, and considered the Manager’s statement that a unitary fee structure is consistent with the fee structures of a majority of other index exchange-traded funds. The Board also received information from the Manager, based upon data supplied by Broadridge, comparing the proposed unitary management fee to the total expense ratios of funds in the same asset category. The Board also considered whether there are economies of scale with respect to the services to be provided to the Fund under the Management Agreement. The Board concluded that, although the proposed management fee schedule does not include breakpoints, the management fee schedule is appropriate at currently anticipated asset levels.
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With respect to the subadvisory fee proposed to be paid to the Subadviser, the Board noted that the Manager compensates the Subadviser, an affiliated company, from its own management fee so that shareholders pay only the management fee. The Board considered whether there are economies of scale with respect to the subadvisory services to be provided under the Subadvisory Agreement. The Board concluded that, although the proposed subadvisory fee schedule does not include breakpoints, the Subadviser’s fee schedule is appropriate at currently anticipated asset levels. The Board considered the Subadviser’s representation that it does not offer other clients a lower fee for comparable strategies and services and the Manager’s statement that it found the proposed subadvisory fee schedule to be competitive.
In addition, in evaluating the management and subadvisory fees, the Board considered the Manager’s statement that the Fund is expected to break even within its first year of operation. On the basis of the information provided, the Board concluded that the proposed management and subadvisory fees were reasonable.
Other Benefits
The Board also considered the character and amount of other incidental benefits to be received by the Manager and Subadviser. The Board noted that the Subadviser did not intend to use soft dollars in connection with the Fund. The Board concluded that, on the basis of the information provided, the proposed management and subadvisory fees were reasonable.
Annual Review and Renewal of Management Agreement and Subadvisory Agreements
At its September 13, 2016 meeting, the Board of Trustees (the “Board”) of Principal Exchange-Traded Funds (“PETF”) approved the annual review and renewal of the management agreement and subadvisory agreements for the six (6) series of PETF Funds (referred to herein as “Fund” and collectively as the “Funds”).
Section 15(c) of the Investment Company Act of 1940 (the “1940 Act”) requires the Board, including a majority of the Trustees who have no direct or indirect interest in the investment advisory agreements and who are not “interested persons” of PETF, as defined in the 1940 Act annually to review and to consider the continuation of: (1) the Management Agreement between Principal Management Corporation (the “Manager”) and PETF, on behalf of the Fund; and (2) the Subadvisory Agreement between the Manager and each of Edge Asset Management, Inc. and Principal Global Investors, LLC (collectively, the “Subadvisers”). The Management Agreement and the Subadvisory Agreements are collectively referred to as the “Advisory Agreements.”
The Board considered the factors and reached the conclusions described below relating to the continuation of the Advisory Agreements. In evaluating the Advisory Agreements, the Board, reviewed a broad range of information requested for this purpose by the Board, including, among other information, information regarding advisory fees, total expenses, profitability from the Advisory Agreements to the Manager and information about economies of scale. The Board reviewed the materials provided and concluded that it was provided all information reasonably necessary to evaluate the Advisory Agreements.
Nature, Extent and Quality of Services
The Board considered the nature, quality and extent of the services provided under the Management Agreements, including administrative services. The Board considered the experience and skills of senior management leading Fund operations, the experience and skills of the personnel performing the functions under the Management Agreements and the resources made available to such personnel; the ability of the Manager to attract and retain high-quality personnel; and the organizational depth and stability of the Manager. The Board concluded that appropriate resources were provided under the Management Agreements. The Board also considered that, during the periods reviewed, the Manager had delegated day-to-day portfolio management responsibility to the Subadvisers. The Board noted that the Manager’s process emphasizes the selection of Principal-affiliated subadvisers that are determined to be qualified under the Manager’s due diligence process. The Board considered the Manager’s due diligence process for monitoring and replacing Subadvisers. The Board also considered the compliance program established by the Manager and the level of compliance attained by the Funds. The Board noted that they had previously reviewed the annual best execution and soft dollar reports and included those findings in their consideration of the renewal of the Advisory Agreements. Based upon all relevant factors, the Board concluded that the nature, quality and extent of the services provided by the Manager to the Funds under each Management Agreement were satisfactory.
The Board considered the nature, quality and extent of the services provided under each Subadvisory Agreement. The Board considered the reputation, qualifications and background of the Subadviser, the investment approach of the Subadviser, the experience and skills of investment personnel responsible for the day-to-day management of each Fund and the resources made available to such personnel. The Board also considered the Subadvisers’ compliance with investment policies and general legal compliance. Based upon all relevant factors, the Board concluded that the nature, quality and extent of the services provided by the Subadvisers to the Funds under the Subadvisory Agreements are satisfactory.
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Investment Performance
The Board reviewed the investment performance of the Principal Edge Active Income ETF over the one-year period ended March 31, 2016 to a relevant benchmark index. The Board noted that the Principal Price Setters Index ETF, Principal Shareholder Yield Index ETF, Principal Healthcare Innovators Index ETF, Principal Millennials Index ETF, and U.S. Small Cap Index ETF had commenced operations recently and, accordingly, no performance information was considered. The Board also considered whether investment results were consistent with a Fund’s investment objective(s) and policies. The Board found the performance of the Funds to be satisfactory.
Investment Management Fees
The Board considered each Fund’s management fee. For the Principal Edge Active Income ETF, the Board received information, based on data supplied by Broadridge, comparing the Fund’s (1) contractual management fee at current asset levels and at theoretical asset levels, (2) actual (after any fee waivers) management fee at average fiscal-year asset levels, (3) actual non-management fees at average fiscal-year asset levels, and (4) actual total expense ratio (including, as applicable, acquired fund fees and expenses) at average fiscal-year asset levels of its common shares to advisory fees and expense ratios of funds in a peer group selected by Broadridge. For the ETFs with unitary fees, the Board received similar information comparing the contractual management fee and total expense ratio for the Fund’s common shares to advisory fees and expense ratios of funds in an appropriate Broadridge peer group.
In evaluating the management fees, the Board considered a variety of factors, including the amount of the fees, breakpoints, comparison to fees of peer group funds as well as other funds managed by the Manager, subadvisory fees paid, services provided, investment performance, total net expense ratios, profitability and expense caps and fee waivers. For most Funds, actual management fees were within the third quartile or better when compared to their Expense Group.
Considering all factors they deemed relevant, the Board concluded that the management fee payable by each Fund was reasonable in light of the nature, quality and extent of the services provided by the Manager and other relevant factors.
Profitability
The Board reviewed detailed information regarding revenues the Manager receives under the Management Agreements, as well as the estimated direct and indirect costs the Manager incurs in providing to each Fund the services described in the applicable Advisory Agreements, for the year ended December 31, 2015. The Board also considered the returns on revenue generated in connection with the payment of subadvisory fees to affiliated Subadvisers (PGI and Edge), and the aggregated return on revenue to the Manager and its affiliates. The Board concluded that the management fee for each Fund was reasonable, taking into account the profitability information presented by the Manager.
Economies of Scale
The Board considered whether there are economies of scale with respect to the management of each Fund and whether the Funds benefit from any such economies of scale. The Board then reviewed the levels at which breakpoints occur and the amount of the reductions. The Board considered whether the effective management fee rate for each Fund under the applicable Management Agreement is reasonable in relation to the asset size of such Fund. The Board also noted management’s explanation of efficiencies in the Manager’s cost structure and the impact on the Manager’s profitability. The Board concluded that the fee schedule for each Fund reflects an appropriate level of sharing of any economies of scale.
The Board noted that the management fees for the Principal Healthcare Innovators Index ETF, the Principal Millennials Index ETF, the Principal Shareholder Yield Index ETF and the Principal Price Setters Index ETF do not include breakpoints. Although their management fee schedules do not include breakpoints, the Board noted that each of these Funds, other than the Principal Healthcare Innovators Index ETF, the Principal Millennials Index ETF, the Principal Shareholder Yield Index ETF and the Principal Price Setters Index ETF, has a relatively low basis point fee (25 basis points or less) on all Fund assets. The Board determined that no breakpoints are necessary, at this time, for the Principal Healthcare Innovators Index ETF, the Principal Millennials Index ETF, the Principal Shareholder Yield Index ETF or the Principal Price Setters Index ETF due, among other factors, to their current asset levels and levels of profitability to the Manager.
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Subadvisory Fees, Economies of Scale and Profitability
For each Fund, the Board considered the subadvisory fees, noting that the Manager compensates each Subadviser from its own management fee, so that shareholders pay only the management fee. The Board also received industry data supplied by Broadridge. The Board considered whether there are economies of scale with respect to the subadvisory services provided to each Fund and, if so, whether the subadvisory fees reflect such economies of scale through breakpoints in fees. The Board considered the profitability of the affiliated Subadvisers in conjunction with their review of the profitability of the Manager. On the basis of the information provided, the Board concluded that the subadvisory fees were reasonable.
Other Benefits to the Manager and Subadvisers
The Board also considered the character and amount of other incidental benefits received by the Manager and its affiliates from their relationships with the Funds. The Board concluded that the management and subadvisory fees for each Fund were reasonable in light of these fall-out benefits.
The Board also considered the character and amount of other incidental benefits received by each Subadviser when evaluating the subadvisory fees. The Board considered as a part of this analysis each Subadviser’s soft dollar practices and brokerage practices. The Board concluded that taking into account these fall-out benefits, the subadvisory fees were reasonable.
Overall Conclusions
Based upon all of the information considered and the conclusions reached, the Board determined that the terms of each Advisory Agreement continue to be fair and reasonable and that the continuation of each Advisory Agreement, with the actions proposed by the Manager, is in the best interests of each Fund.
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Principal Financial Group ®, Des Moines, Iowa 50392-0001, www.PrincipalETFs.com
ALPS Distributors, Inc. is the distributor of the Principal ETFs. ALPS Distributors, Inc. and the
Principal Funds are not affiliated.
ETF4SAR-01 | © 2016 Principal Financial Group Services, Inc. | 12/2016 | t16121908e3
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ITEM 2 – CODE OF ETHICS
Not applicable to semi-annual reports.
ITEM 3 – AUDIT COMMITTEE FINANCIAL EXPERT
Not applicable to semi-annual reports.
ITEM 4 – PRINCIPAL ACCOUNTANT FEES AND SERVICES
Not applicable to semi-annual reports.
ITEM 5 – AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable.
ITEM 6 – SCHEDULE OF INVESTMENTS
Schedule of Investments is included as part of the Report to Shareholders filed under Item 1 of this form.
ITEM 7 – DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not applicable.
ITEM 8 – PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not applicable.
ITEM 9 – PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS
Not applicable.
ITEM 10 – SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 11 – CONTROLS AND PROCEDURES
a) The registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended) are effective (such disclosure controls and procedures having been evaluated within 90 days of the date of this filing).
(b) There have been no changes in the registrant’s internal controls over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d)) that occurred during the registrant’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
ITEM 12 – EXHIBITS
(a)(1) Code of Ethics - Not applicable to semi-annual reports.
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 attached hereto as Exhibit 99.CERT.
(b) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 attached hereto as Exhibit 99.906CERT.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) | Principal Exchange-Traded Funds |
By | /s/ Michael J. Beer | |
Michael J. Beer, President and CEO | ||
Date | 2/14/2017 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By | /s/ Michael J. Beer | |
Michael J. Beer, President and CEO | ||
Date | 2/14/2017 | |
By | /s/ Tracy W. Bollin | |
Tracy W. Bollin, Chief Financial Officer | ||
Date | 2/14/2017 |