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 | 811-23403 |
Principal Diversified Select Real Asset Fund |
(Exact name of registrant as specified in charter)
801 Grand Avenue, Des Moines, IA 50309 |
(Address of principal executive offices) (Zip code)
Principal Global Investors, LLC, 801 Grand Avenue, Des Moines, IA 50309 |
(Name and address of agent for service)
Registrant’s telephone number, including area code: | 515-235-1719 |
Date of fiscal year end: | March 31, 2023 |
Date of reporting period: | March 31, 2023 |
ITEM 1 – REPORT TO STOCKHOLDERS
Principal
Diversified
Select
Real
Asset
Fund
Annual
Report
March
31,
2023
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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
Economic
&
Financial
Market
Overview
1
Important
Fund
Information
3
Principal
Diversified
Select
Real
Asset
Fund
(unaudited)
4
Financial
Statements
5
Notes
to
Financial
Statements
9
Schedule
of
Investments
18
Financial
Highlights
(includes
performance
information)
22
Report
of
Independent
Registered
Public
Accounting
Firm
24
Shareholder
Expense
Example
25
Supplemental
Information
26
1
Economic
&
Financial
Market
Overview
Global
economic
growth
continued
to
normalize
lower,
but
showed
signs
of
resiliency
particularly
after
China’s
post-COVID
reopen.
Geopolitical
disruptions,
continued
supply
constraints
and
wage
pressures
were
among
the
key
factors
keeping
global
inflation
elevated.
Notably,
global
inflation
decreased
from
6.4%
in
March
2022
to
6.1%
in
February
2023—oil
and
goods
prices
finally
rolled
over
and
appear
to
have
halted
headline
and
core
inflation’s
march
higher.
While
still
well
above
central
bank
targets,
the
downward
trending
inflation
readings
are
a
welcome
sign
for
investors.
However,
services
inflation,
particularly
shelter—a
key
component
of
the
Consumer
Price
Index
(CPI)—remains
elevated.
Aggressive
global
central
bank
tightening
paths
weighed
heavily
on
global
financial
conditions,
with
global
policy
rates
rising
by
230
basis
points
(bps)
in
the
twelve
months
ending
March
2023.
The
United
States
Federal
Reserve
(Fed)
alone
hiked
interest
rates
eight
times
for
a
450
bps
total
increase.
Notably,
that
pace
has
slowed
with
two
consecutive
25
bps
hikes
at
its
February
and
March
meetings.
Despite
U.S.
real
gross
domestic
product
(GDP)
growing
at
an
average
quarter-over-quarter
annualized
rate
of
2.1%
in
2022
and
the
global
manufacturing
Purchasing
Manager’s
Index
(PMI)
reading
averaging
above
50
for
the
last
twelve
months,
economic
activity
has
slowed
since
October
2022
1
.
Emerging
markets,
on
the
other
hand,
experienced
a
recent
increase
in
PMIs,
driven
by
China’s
lifting
of
restrictive
COVID
policies
in
late
2022,
bringing
growth
to
the
region
after
a
tumultuous
2022.
Despite
recent
signs
of
resiliency,
global
earnings
growth
slowed
further
in
the
last-twelve-months,
finishing
barely
positive
as
of
March
31,
2023.
Compared
to
the
same
time
last
year,
the
MSCI
All
Country
World
Index
(ACWI)
trailing
twelve-months
earnings-per-share
(TTM
EPS)
grew
by
2%.
The
MSCI
World
Index
TTM
EPS
increased
by
5%,
much
higher
than
the
MSCI
Emerging
Market
Index’s
-13%.
In
developed
markets,
the
MSCI
Europe
Index
(14%)
earnings
grew
at
a
faster
pace
than
the
MSCI
U.S.
Index
(3%).
U.S.
mid-cap
(17%)
stocks
delivered
much
higher
earnings
growth
than
large-cap
(5%)
and
small-cap
(4%)
stocks,
while
value
(9%)
and
growth
(10%)
stocks
delivered
similar
earnings
growth.
Large
tech,
represented
by
the
NASDAQ
100
Index,
delivered
-9%
earnings
growth.
Global
bonds
slightly
outperformed
global
equities
in
last
twelve
months,
but
both
experienced
losses.
In
the
U.S.,
the
MSCI
ACWI
recorded
a
-7.4%
year-over-year
loss
while
the
Bloomberg
Global
Aggregate
Corporate
Index
fell
-6.9%.
Within
equities,
developed
markets
(MSCI
World
Index)
outperformed
emerging
markets
(MSCI
Emerging
Markets
Index)
by
4%,
and
the
U.S.
(MSCI
U.S.
Index)
underperformed
developed
markets
ex-U.S.
(MSCI
World
ex-U.S.
Index)
by
6%.
Among
major
markets,
U.S.
growth
stocks
and
emerging
market
stocks
were
the
worst
performers,
down
-11%
each.
Europe
was
the
top
outperformer,
gaining
1%.
The
Bloomberg
U.S.
Treasury
Index
recorded
a
-5%
loss
as
the
U.S.
10-year
Treasury
yield
rose
from
2.34%
to
3.47%.
Global
high
yield
bonds
outperformed
investment
grade
corporate
bonds
and
global
treasury
bonds
by
2%
and
5%
respectively.
The
DXY
Index,
a
proxy
for
U.S.
dollar
strength,
increased
by
4%.
Commodity
prices,
represented
by
the
S&P
GSCI
Total
Return
Index,
fell
-10%,
and
Nymex
crude
oil
dropped
significantly
from
100.3
to
75.7
USD/
barrel,
as
the
demand-supply
balance
improved.
Looking
forward,
the
recent
U.S.
banking
failures
and
threatened
collapse
of
a
major
European
bank
have
finally
underscored
the
tensions
between
central
banks’
efforts
to
tame
inflation
and
growing
concerns
that
further
policy
tightening
will
spark
a
crisis.
With
inflation
still
elevated
but
markets
increasingly
alert
to
the
vulnerabilities
within
the
financial
system,
central
banks
face
a
difficult
balancing
act—continue
to
target
price
stability
or
focus
on
maintaining
financial
stability.
The
risk
of
central
bank
driven
financial
stress,
resulting
in
bank
deposit
outflows,
rising
bank
funding
costs,
and
sharp
retrenching
of
lending
has
raised
the
odds
of
a
hard
landing.
Yet,
if
financial
stress
fears
prompt
central
banks
to
end
their
tightening
cycles
prematurely,
there
will
be
higher
risk
of
an
inflation
resurgence
and
even
more
aggressive
rate
hikes
later
down
the
line,
also
raising
the
odds
of
a
hard
landing.
Ultimately,
financial
conditions
are
likely
to
tighten
further—either
via
additional
central
bank
tightening
as
they
try
to
tame
inflation,
or
via
tightening
credit
conditions.
Unless
otherwise
stated,
data
sources
are
Bloomberg,
FactSet,
and
Principal
Asset
Allocation.
Data
as
of
March
31,
2023.
1
In
global
PMI
readings,
a
number
above
50
means
that
manufacturing
activity
is
expanding,
and
a
number
below
50
indicates
contraction.
2
Economic
&
Financial
Market
Overview
Index
descriptions:
MSCI
All
Country
World
Index
(ACWI)
includes
large
and
mid-cap
stocks
across
developed
and
emerging
market
countries.
MSCI
World
Index captures
large
and
mid-cap
representation
across
23
Developed
Markets
(DM)
countries.
MSCI
World
ex-U.S.
Index
captures
large
and
mid-cap
representation
across
22
of
23
Developed
Markets
(DM)
countries--
excluding
the
United
States.
MSCI
Europe
Index captures
large
and
mid-cap
representation
across
15
Developed
Markets
(DM)
countries
in Europe.
MSCI
Emerging
Markets
Index
consists
of
large
and
mid-cap
companies
across
24
countries
and
represents
10%
of
the
world
market
capitalization.
The
index
covers
approximately
85%
of
the
free
float-adjusted
market
capitalization
in
each
of
the
24
countries.
MSCI
U.S.
Index
is
designed
to
measure
the
performance
of
the
large
and
mid-cap
segments
of
the
U.S.
market.
NASDAQ
100
Index
is
a
basket
of
the
100
largest,
most
actively
traded
U.S.
companies
listed
on
the
NASDAQ
stock
exchange.
The
index
includes
companies
from
various
industries
except
for
the
financial
industry,
like
commercial
and
investment
banks.
Russell
1000
Growth
Index measures
the
performance
of
the
large-cap
growth
segment
of
the
U.S.
equity
universe.
Russell
1000
Value
Index measures
the
performance
of
the
large-cap
value
segment
of
the
U.S.
equity
universe.
Bloomberg
Global
Aggregate
Index
is a
flagship
measure
of
global
investment
grade
debt
from
24
local
currency
markets.
This
multi-currency
benchmark
includes
treasury,
government-related,
corporate,
and
securitized
fixed-rate
bonds
from
both
developed
and
emerging
markets
issuers.
Bloomberg
U.S.
Treasury
Index
measures
U.S.
dollar-denominated,
fixed-rate,
nominal
debt
issued
by
the
U.S.
Treasury.
U.S.
Dollar
Index
(USDX,
DXY,
DX)
is
an
index
(or
measure)
of
the
value
of
the
United
States
dollar
relative
to
a
basket
of
foreign
currencies,
often
referred
to
as
a
basket
of
U.S.
trade
partners'
currencies.
S&P
GSCI
Total
Return
Index
is
an
index
of
24
exchange-traded
futures
contracts
that
represent
a
large
portion
of
the
global
commodities
market.
3
Important
Fund
Information
Securities
described
in
the
fund
commentary
may
no
longer
be
held
in
the
fund.
The
line
graph
on
the
following
page
illustrates
the
growth
of
a
hypothetical
$10,000
investment.
The
illustration
is
based
on
performance
of
Class
Y
shares.
The
performance
of
other
share
classes
will
differ.
Investment
results
shown
represent
historical
performance
and
do
not
guarantee
future
results.
Your
investment’s
returns
and
principal
values
will
fluctuate
with
changes
in
interest
rates
and
other
market
conditions
so
the
value,
when
redeemed,
may
be
worth
more
or
less
than
original
costs.
Current
performance
may
be
lower
or
higher
than
the
performance
shown.
For
more
information,
including
the
most
recent
month-end
performance,
call
your
financial
professional,
or
call
800-222-5852.
A
sales
charge
may
apply
as
follows:
Class
A
shares:
maximum
up-front
sales
charges
on
sales
based
on
declining
rates
which
begin
at
5.75%.
Institutional
and
Class
Y
Shares
do
not
have
a
sales
charge.
See
the
prospectus
for
details.
Performance
listed
with
sales
charge
reflects
the
maximum
sales
charge.
.
4
Principal
Diversified
Select
Real
Asset
Fund
Investment
Advisor:
Principal
Global
Investors,
LLC
Sub-Advisors:
Clearbridge
Investments
(North
America)
Pty
Limited;
Principal
Real
Estate
Investors,
LLC
Average
Annual
Total
Returns*
as
of
March
31,
2023
What
contributed
to
or
detracted
from
Fund
performance
during
the
fiscal
year?
The
Fund
seeks
to
provide
long-term
total
return
(after
Fund
fees
and
expenses)
in
excess
of
inflation.
Under
normal
circumstances,
the
Fund
invests
at
least
80%
of
its
net
assets,
plus
any
borrowings
for
investment
purposes,
in
real
assets
and
real
asset
companies.
Real
assets
include,
without
limitation,
investments
related
to
real
estate,
agriculture,
infrastructure,
energy,
natural
resources,
and
timber.
Real
asset
companies
include
companies
that
primarily
own,
explore,
mine,
process
or
otherwise
develop
real
assets.
The
Fund
invests
in
real
assets
and
real
asset
companies
directly,
and
indirectly
through
other
entities,
including
private
institutional
investment
funds
("Private
Funds")
that
pursue
these
strategies.
The
market
environment
for
the
year
ending
March
31,
2023
saw
sharply
higher
interest
rates
as
central
banks
globally
attempt
to
slow
inflation.
In
the
face
of
these
higher
interest
rates,
there
was
significant
divergence
between
performance
of
the
Fund’s
private
investments
and
the
Fund’s
listed
investment
sleeves.
The
Fund’s
private
real
asset
investments
generally
held
up
well,
driven
by
attractive
income
and
appreciation
in
the
infrastructure
and
natural
resource
portfolios.
Within
the
private
infrastructure
portfolio,
positive
returns
were
primarily
driven
by
our
investments
in
the
data
and
renewable
energy
sectors.
Within
the
natural
resource
portfolio,
positive
returns
have
primarily
come
from
our
investments
in
U.S.
row
crop
farmland
and
softwood
timberland
in
the
U.S.
south.
The
Fund’s
private
real
estate
investments
delivered
modest
positive
returns,
primarily
from
income.
The
largest
detractors
from
performance
came
from
the
Fund’s
public
investment
sleeves
focused
on
real
estate.
Both
the
global
real
estate
equity
sleeve,
sub-advised
by
Principal
Real
Estate
Investors,
and
the
commercial
mortgage-backed
securities
sleeve,
also
sub-advised
by
Principal
Real
Estate
Investors,
delivered
negative
absolute
returns
for
the
fiscal
year.
The
Fund’s
global
listed
infrastructure
sleeve,
sub-
advised
by
ClearBridge
also
produced
negative
absolute
returns,
as
listed
infrastructure
companies
-
and
especially
utilities
-
were
out
of
favor
with
investors.
Value
of
a
$10,000
Investment*
June
25,
2019
-
March
31,
2023
1-Year
Since
Inception
Inception
Date
Class
A
Shares
Excluding
Sales
Charge
-2.13%
5.22%
6/25/19
Including
Sales
Charge
-7.75%
3.57%
Class
Y
Shares
-1.62%
5.75%
6/25/19
Institutional
Shares
-1.82%
5.54%
6/25/19
*Performance
assumes
reinvestment
of
all
dividends
and
capital
gains.
Performance
does
not
reflect
the
impact
of
federal,
state,
or
municipal
taxes.
If
it
did,
performance
would
be
lower.
**Performance
shown
for
the
benchmark
assumes
reinvestment
of
all
dividends
and
distributions.
Indices
are
unmanaged,
and
individuals
cannot
invest
directly
in
an
index.
Statement
of
Assets
and
Liabilities
March
31,
2023
5
See
accompanying
notes.
Amounts
in
thousands,
except
per
share
amounts
Principal
Diversified
Select
Real
Asset
Fund
Investment
in
securities--at
cost
......................................................................................................................
$
152,900
Foreign
currency--at
cost
..............................................................................................................................
$
55
Assets
Investment
in
securities--at
value
......................................................................................................................
$
159,478
Foreign
currency--at
value
..............................................................................................................................
55
Receivables:
Dividends
and
interest
.............................................................................................................................
335
Expense
reimbursement
from
Manager
...........................................................................................................
149
Investment
securities
sold
.........................................................................................................................
491
Total
Assets
160,508
Liabilities
Accrued
management
and
investment
advisory
fees
....................................................................................................
227
Accrued
transfer
agent
fees
.............................................................................................................................
44
Accrued
directors'
expenses
.............................................................................................................................
1
Accrued
professional
fees
...............................................................................................................................
232
Accrued
other
expenses
.................................................................................................................................
24
Cash
overdraft
...........................................................................................................................................
9
Payables:
Investment
securities
purchased
..................................................................................................................
241
Total
Liabilities
778
Net
Assets
Applicable
to
Outstanding
Shares
........................................................................................................
$
159,730
Net
Assets
Consist
of:
Capital
shares
and
additional
paid-in-capital
...........................................................................................................
$
150,976
Total
distributable
earnings
(accumulated
loss)
.........................................................................................................
8,754
Total
Net
Assets
$
159,730
Capital
Stock
(par
value:
$.01
per
share):
Net
Asset
Value
Per
Share:
Class
A
:
Net
Assets
......................................................................................................................................
$
754
Shares
Issued
and
Outstanding
....................................................................................................................
30
Net
Asset
Value
per
share
.........................................................................................................................
$
25
.40
(a)
Maximum
Offering
Price
..........................................................................................................................
$
26
.95
Class
Y
:
Net
Assets
......................................................................................................................................
$
148,223
Shares
Issued
and
Outstanding
....................................................................................................................
5,771
Net
Asset
Value
per
share
.........................................................................................................................
$
25
.68
Institutional
:
Net
Assets
.................................................................................................................................
$
10,753
Shares
Issued
and
Outstanding
....................................................................................................................
422
Net
Asset
Value
per
share
.........................................................................................................................
$
25
.48
(a)
Redemption
price
per
share
is
equal
to
net
asset
value
per
share
less
any
applicable
contingent
deferred
sales
charge.
Statement
of
Operations
Year
ended
March
31,
2023
6
See
accompanying
notes.
Amounts
in
thousands
Principal
Diversified
Select
Real
Asset
Fund
Net
Investment
Income
(Loss)
Income:
Dividends
..............................................................................................................................................
$
6,657
Withholding
tax
.......................................................................................................................................
(
254
)
Interest
.................................................................................................................................................
366
Total
Income
6,769
Expenses:
Management
and
investment
advisory
fees
...........................................................................................................
2,833
Distribution
f
ees
-
Class
A
............................................................................................................................
1
Registration
fees
-
Class
A
............................................................................................................................
16
Registration
fees
-
Class
Y
............................................................................................................................
16
Registration
fees
-
Institutional
.......................................................................................................................
16
Shareholder
meeting
expense
.........................................................................................................................
4
Shareholder
reports
-
Class
A
.........................................................................................................................
14
Shareholder
reports
-
Institutional
....................................................................................................................
1
Transfer agent
fees
-
Class
A
..........................................................................................................................
50
Transfer agent
fees
-
Class
Y
..........................................................................................................................
46
Transfer agent
fees
-
Institutional
.....................................................................................................................
69
Custodian
fees
.........................................................................................................................................
24
Directors'
expenses
....................................................................................................................................
7
Professional fees
......................................................................................................................................
360
Other
expenses
........................................................................................................................................
80
Total
Gross
Expenses
3,537
Less: Reimbursement
from
Manager
.................................................................................................................
871
Less:
Reimbursement
from
Manager
-
Class
A
.......................................................................................................
81
Less:
Reimbursement
from
Manager
-
Class
Y
.......................................................................................................
431
Less:
Reimbursement
from
Manager
-
Institutional
..................................................................................................
91
Total
Net
Expenses
2,063
Net
Investment
Income
(Loss)
4,706
Net
Realized
and
Unrealized
Gain
(Loss)
on
investments
and
foreign
currencies
Net
realized
gain
(loss)
from:
Investment
transactions
...............................................................................................................................
5,454
Foreign
currency
transactions
.........................................................................................................................
(
51
)
Net
change
in
unrealized
appreciation/(depreciation)
of:
Investments
............................................................................................................................................
(
15,115
)
Translation
of
assets
and
liabilities
in
foreign
currencies
.............................................................................................
1
Net
Realized
and
Unrealized
Gain
(Loss)
on
investments
and
foreign
currencies
(
9,711
)
Net
Increase
(Decrease)
in
Net
Assets
Resulting
from
Operations
$
(
5,005
)
Statement
of
Changes
in
Net
Assets
7
See
accompanying
notes.
Amounts
in
thousands
Principal
Diversified
Select
Real
Asset
Fund
Year
Ended
March
31,
2023
Year
Ended
March
31,
2022
Operations
Net
investment
income
(loss)
..........................................................................................................
$
4,706
$
2,963
Net
realized
gain
(loss)
on
investments
and
foreign
currencies
.......................................................................
5,403
11,513
Net
change
in
unrealized
appreciation/(depreciation)
of
investments
and
foreign
currencies
.........................................
(
15,114
)
9,832
Net
Increase
(Decrease)
in
Net
Assets
Resulting
from
Operations
(
5,005
)
24,308
Dividends
and
Distributions
to
Shareholders
From
net
investment
income
and
net
realized
gain
on
investments
...................................................................
(
11,314
)
(
12,169
)
Total
Dividends
and
Distributions
(
11,314
)
(
12,169
)
Capital
Share
Transactions
Net
increase
(decrease)
in
capital
share
transactions
..................................................................................
(
12,013
)
12,515
Total
Increase
(Decrease)
in
Net
Assets
(
28,332
)
24,654
Net
Assets
Beginning
of
period
....................................................................................................................
188,062
163,408
End
of
period
..........................................................................................................................
$
159,730
$
188,062
Class
A
Class
Y
Institutional
Capital
Share
Transactions:
Year
Ended
March
31,
2023
Dollars:
Sold
.....................................................................................
$
416
–
$
10,422
Reinvested
................................................................................
24
10,698
21
Redeemed
.................................................................................
–
(
33,566
)
(
28
)
Net
Increase
(Decrease)
$
440
$
(
22,868
)
$
10,415
Shares:
Sold
.....................................................................................
16
–
400
Reinvested
................................................................................
1
418
1
Redeemed
.................................................................................
–
(
1,254
)
(
1
)
Net
Increase
(Decrease)
17
(
836
)
400
Year
Ended
March
31,
2022
Dollars:
Sold
.....................................................................................
$
50
–
$
301
Reinvested
................................................................................
23
12,120
26
Redeemed
.................................................................................
–
–
(
5
)
Net
Increase
(Decrease)
$
73
$
12,120
$
322
Shares:
Sold
.....................................................................................
2
–
10
Reinvested
................................................................................
1
443
1
Redeemed
.................................................................................
–
–
–
Net
Increase
(Decrease)
3
443
11
Dividends
and
Distributions
to
Shareholders:
Year
Ended
March
31,
2023
From
net
investment
income
and
net
realized
gain
on
investments
.........................................
$
(
43
)
$
(
10,698
)
$
(
573
)
Total
Dividends
and
Distributions
$
(
43
)
$
(
10,698
)
$
(
573
)
Year
Ended
March
31,
2022
From
net
investment
income
and
net
realized
gain
on
investments
.........................................
$
(
23
)
$
(
12,120
)
$
(
26
)
Total
Dividends
and
Distributions
$
(
23
)
$
(
12,120
)
$
(
26
)
Statement
of
Cash
Flows
Year
Ended
March
31,
2023
8
See
accompanying
notes.
Amounts
in
thousands
Principal
Diversified
Select
Real
Asset
Fund
Cash
Flows
from
Operating
Activities:
Net decrease
in
net
assets
from
operations
.............................................................................
$
(5,005
)
Adjustments
to
reconcile
net
decrease
in
net
assets
from
operations
to
net
cash
provided
by
operating
activities:
Purchase
of
investment
securities
...............................................................................
(64,262)
Proceeds
from
sale
of
investment
securities
........................................................................
86,896
Net
sales
or
(purchases)
of
short
term
securities
.....................................................................
(4,386)
Net
accretion
of
bond
discounts
and
amortization
of
premiums
..........................................................
541
Net
realized
(
gain
)
loss
from
investments
..........................................................................
(5,454)
Change
in
unrealized
(appreciation)
depreciation
on
investments
.........................................................
15,115
(Increase)
decrease
in
dividends
and
interest
receivable
................................................................
142
(Increase)
decrease
in
investment
securities
sold
.....................................................................
663
Increase
(decrease)
in
accrued
fees,
expenses,
and
expense
reimbursement
from
Manager
.......................................
(79)
Increase
(decrease)
in
investment
securities
purchased
................................................................
(691)
Net
cash provided
by
operating
activities
23,480
Cash
Flows
from
Financing
Activities:
Increase
(decrease)
in
cash
overdraft
.............................................................................
(98)
Proceeds
from
shares
sold
.....................................................................................
10,838
Payment
s
on
shares
redeemed
..................................................................................
(33,594)
Dividends
and
distributions
paid
to
shareholders
.....................................................................
(571)
Net
cash used
in
financing
activities
(23,425)
Net
increase
(decrease)
in
cash
.................................................................................
55
Cash
and
foreign
currency:
Beginning
of
year
..........................................................................................
$
–
End
of
year
...............................................................................................
$
55
Supplemental
disclosure
of
cash
flow
information:
Reinvestment
of
dividends
and
distributions
.......................................................................
$
10,743
Notes
to
Financial
Statements
Principal
Diversified
Select
Real
Asset
Fund
March
31,
2023
9
1.
Organization
Principal
Diversified
Select
Real
Asset
Fund
(the
"Fund")
is
registered
under
the
Investment
Company
Act
of
1940,
as
amended,
(the
“1940
Act”)
as
a
diversified,
closed-end
management
investment
company.
The
Fund
continuously
offers
three
classes
of
shares:
Class
A,
Class
Y,
and
Institutional
Class.
The
Fund
was
organized
as
a
Delaware
statutory
trust
on
September
21,
2018
pursuant
to
an
Agreement
and
Declaration
of
Trust
governed
by
the
State
of
Delaware.
Principal
Global
Investors,
LLC
(the
“Manager”)
serves
as
the
Fund’s
manager
and
advisor.
The
Fund
is
structured
as
an
interval
fund,
meaning
it
conducts
quarterly
repurchase
offers
of
no
less
than
5%
and
no
more
than
25%
of
the
Fund’s
outstanding
shares
at
net
asset
value.
Repurchase
offers
of
more
than
5%
are
made
solely
at
the
discretion
of
the
Fund’s
Board
of
Trustees
(the
“Board”),
and
shareholders
should
not
rely
on
any
expectation
of
repurchase
offers
being
made
in
excess
of
5%.
Shareholders
should
consider
the
Fund’s
shares
illiquid.
The
Fund’s
shares
are
not
listed
on
any
national
securities
exchange
and
are
not
publicly
traded.
There
is
currently
no
secondary
market
for
the
shares,
and
the
Fund
expects
that
no
secondary
market
will
develop.
An
unlimited
number
of
shares
has
been
authorized
under
the
Agreement
and
Declaration
of
Trust.
Only
eligible
purchasers
can
buy
shares
of
the
Fund
in
that
share
class.
The
Manager
and
Principal
Funds
Distributor,
Inc.
(the
“Distributor”)
(an
affiliate
of
the
Manager),
the
principal
distributor
of
the
Fund,
reserve
the
right
to
broaden,
limit,
and
change
the
designation
of
eligible
purchasers
without
notice.
Shares
of
the
Fund
are
only
sold
in
U.S.
jurisdictions.
Subject
to
eligibility
and
minimum
initial
investment
requirements,
shares
of
the
Fund
may
be
purchased
directly
or
through
intermediary
organizations,
such
as
broker-dealers,
insurance
companies,
plan
sponsors,
third
party
administrators,
and
retirement
plans.
Minimum
initial
investment
requirements
are
$25,000
for
Class
A
shares
and
$100,000
for
Class
Y
and
Institutional
Class
shares.
The
Fund
is
an
investment
company
and
applies
specialized
accounting
and
reporting
under
Accounting
Standards
Codification
Topic
946,
Financial
Services
-
Investment
Companies
.
The
Fund
has
not
provided
financial
support
and
is
not
contractually
required
to
provide
financial
support
to
any
investee.
All
classes
of
shares
of
the
Fund
represent
interests
in
the
same
portfolio
of
investments
and
will
vote
together
as
a
single
class
except
where
otherwise
required
by
law
or
as
determined
by
the
Board.
In
addition,
the
Board
declares
separate
dividends
on
each
class
of
shares.
The
Fund
may
offer
additional
classes
of
shares
in
the
future.
2.
Significant
Accounting
Policies
The
preparation
of
financial
statements
in
conformity
with
U.S.
generally
accepted
accounting
principles
(“U.S.
GAAP”)
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
Fund:
Security
Valuation.
The
Fund
values
securities,
including
exchange-traded
funds,
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
such
as
current
quotations
by
broker/dealers,
coupon,
maturity,
quality,
type
of
issue,
trading
characteristics,
other
yield
and
risk
factors,
and
other
market
conditions
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
the
Manager
under
procedures
established
and
periodically
reviewed
by
the
Board.
The
Fund
invests
in
other
publicly
traded
investment
funds
which
are
valued
at
the
respective
fund’s
net
asset
value.
In
addition,
the
Fund
invests
a
portion
of
its
assets
in
private
investment
funds
which
are
valued
at
fair
value
based
upon
the
net
asset
value
reported
on
a
periodic
basis.
In
the
event
that
a
net
asset
value
is
not
provided
by
a
private
investment
fund
following
the
end
of
the
period,
the
Fund’s
fair
valuation
procedures
will
be
followed,
which
includes
reviewing
investor
statements
and
trade
activity.
The
appropriateness
of
the
fair
value
of
these
securities
is
monitored
by
the
Manager.
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.
Events
that
occur
after
the
close
of
the
applicable
foreign
market
or
exchange
but
prior
to
the
calculation
of
the
Fund’s
net
asset
values
are
reflected
in
the
Fund’s
net
asset
values
and
these
securities
are
valued
at
fair
value
as
determined
in
good
faith
by
the
Manager
under
procedures
established
and
periodically
reviewed
by
the
Board.
Many
factors,
provided
by
independent
Notes
to
Financial
Statements
Principal
Diversified
Select
Real
Asset
Fund
March
31,
2023
10
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
Fund
invests
in
foreign
securities
listed
on
foreign
exchanges
which
trade
on
days
on
which
the
Fund
does
not
determine
net
asset
values,
for
example
weekends
and
other
customary
national
U.S.
holidays,
the
Fund’s
net
asset
values
could
be
significantly
affected
on
days
when
shareholders
cannot
purchase
or
redeem
shares.
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
Fund
to
value
such
securities
at
prices
at
which
it
is
expected
those
shares
may
be
sold,
and
the
Manager
or
any
sub-advisor
is
authorized
to
make
such
determinations
subject
to
such
oversight
by
the
Board
as
may
occasionally
be
necessary.
Currency
Translation.
Foreign
holdings
are
translated
to
U.S.
dollars
using
the
exchange
rate
at
the
daily
close
of
the
New
York
Stock
Exchange.
The
identified
cost
of
the
Fund’s
holdings
is
translated
at
approximate
rates
prevailing
when
acquired.
Income
and
expense
amounts
are
translated
at
approximate
rates
prevailing
when
received
or
paid,
with
daily
accruals
of
such
amounts
reported
at
approximate
rates
prevailing
at
the
date
of
valuation.
Since
the
carrying
amount
of
the
foreign
securities
is
determined
based
on
the
exchange
rate
and
market
values
at
the
close
of
the
period,
it
is
not
practicable
to
isolate
that
portion
of
the
results
of
operations
arising
as
a
result
of
changes
in
the
foreign
exchange
rates
from
the
fluctuations
arising
from
changes
in
the
market
prices
of
securities
during
the
period.
Net
realized
foreign
exchange
gains
or
losses
arise
from
sales
of
foreign
currencies,
currency
gains
or
losses
realized
between
trade
and
settlement
dates
on
security
transactions,
and
the
difference
between
the
amount
of
dividends,
interest
income,
interest
expense,
and
foreign
withholding
taxes
recorded
on
the
books
and
the
U.S.
dollar
equivalent
of
the
amounts
actually
received
or
paid.
Net
unrealized
appreciation
(depreciation)
on
translation
of
assets
and
liabilities
in
foreign
currencies
arise
from
changes
in
the
exchange
rate
relating
to
assets
and
liabilities,
other
than
investments
in
securities,
purchased
and
held
in
non-U.S.
denominated
currencies.
As
of
March
31,
2023,
the
Fund
held
securities
denominated
in
foreign
currencies.
None
of
the
individual
foreign
currencies
exceeded
5%
of
the
Fund’s
net
assets.
Income
and
Investment
Transactions.
The
Fund
records
investment
transactions
on
a
trade
date
basis.
Trade
date
for
senior
floating
rate
interests
purchased
in
the
primary
market
is
considered
the
date
on
which
the
loan
allocations
are
determined.
Trade
date
for
senior
floating
rate
interests
purchased
in
the
secondary
market
is
the
date
on
which
the
transaction
is
entered
into.
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
Fund
records
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
Fund
is
informed
of
the
ex-dividend
date.
Interest
income
is
recognized
on
an
accrual
basis.
Discounts
and
premiums
on
securities
are
accreted/amortized,
respectively,
on
the
level
yield
method
over
the
expected
lives
of
the
respective
securities.
Callable
debt
securities
purchased
at
a
premium
are
amortized
to
the
earliest
call
date
and
to
the
callable
amount,
if
other
than
par.
The
Fund
allocates
all
income
and
realized
and
unrealized
gains
or
losses
on
a
daily
basis
to
each
class
of
shares
based
upon
the
relative
proportion
of
the
value
of
shares
outstanding
of
each
class.
Distributions
from
Real
Estate
Investment
Trusts
(“REITs”)
may
be
characterized
as
ordinary
income,
net
capital
gain,
or
a
return
of
capital
to
the
Fund.
The
proper
characterization
of
distributions
from
REITs
is
generally
not
known
until
after
the
end
of
each
calendar
year.
As
such,
estimates
are
used
in
reporting
the
character
of
income
and
distributions
for
financial
statement
purposes.
Distributions
from
private
investment
funds
are
recorded
as
ordinary
income
and
are
included
in
dividend
income
on
the
statement
of
operations.
Expenses.
Expenses
directly
attributed
to
the
Fund
are
charged
to
the
Fund.
Other
expenses
not
directly
attributed
to
the
Fund
are
apportioned
among
the
registered
investment
companies
managed
by
the
Manager.
Management
fees
are
allocated
daily
to
each
class
of
shares
based
upon
the
relative
proportion
of
the
value
of
shares
outstanding
of
each
class.
Expenses
specifically
attributable
to
a
particular
class
are
charged
directly
to
such
class
and
are
included
separately
in
the
statement
of
operations.
Dividends
and
Distributions
to
Shareholders.
Dividends
and
distributions
to
shareholders
of
the
Fund
are
recorded
on
the
ex-dividend
date.
Dividends
and
distributions
to
shareholders
from
net
investment
income
and
net
realized
gain
from
investments
are
determined
in
accordance
with
federal
tax
regulations,
which
may
differ
from
U.S.
GAAP.
These
differences
are
primarily
due
to
differing
treatments
for
foreign
currency
transactions,
REITs,
passive
foreign
investment
companies,
partnership
investments,
and
losses
deferred
due
to
wash
Principal
Diversified
Select
Real
Asset
Fund
Euro
7
.0%
2.
Significant
Accounting
Policies
(continued)
Notes
to
Financial
Statements
Principal
Diversified
Select
Real
Asset
Fund
March
31,
2023
11
sales.
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
Fund
intends
to
qualify
as
a
“regulated
investment
company”
under
the
Internal
Revenue
Code
and
intends
to
distribute
each
year
substantially
all
of
its
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
Fund’s
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
the
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.
The
Fund
recognizes
interest
and
penalties,
if
any,
related
to
unrecognized
tax
positions
as
tax
expense
on
the
statements
of
operations.
During
the
year
ended
March
31,
2023,
the
Fund
did
not
record
any
such
tax
benefit
or
expense
in
the
accompanying
financial
statements.
The
statute
of
limitations
remains
open
for
the
last
three
years,
once
a
return
is
filed.
No
examinations
are
in
progress
at
this
time.
Foreign
Taxes.
The
Fund
may
be
subject
to
foreign
income
taxes
imposed
by
certain
countries
in
which
it
invests.
Foreign
income
taxes
are
accrued
by
the
Fund
as
a
reduction
of
income.
This
amount
is
shown
as
withholding
tax
on
the
statement
of
operations.
In
consideration
of
recent
decisions
rendered
by
European
court,
the
Fund
may
file
tax
reclaims
for
taxes
withheld
in
prior
years.
Due
to
the
uncertainty
regarding
collectability
and
timing
of
the
reclaims,
among
other
factors,
a
corresponding
receivable
will
only
be
recognized
when
the
tax
position
meets
the
“more
likely
than
not”
threshold.
Any
tax
reclaims
received
are
included
in
dividends
income
on
the
statement
of
operations.
Recent
Accounting
Pronouncements.
In
March
2020,
the
Financial
Accounting
Standards
Board
("FASB")
issued
Accounting
Standards
Update
("ASU")
No.
2020-04
Reference
Rate
Reform
(Topic
848);
Facilitation
of
the
Effects
of
Reference
Rate
Reform
on
Financial
Reporting,
which
provides
optional
guidance
for
a
limited
period
of
time
to
ease
the
potential
burden
in
accounting
for
(or
recognizing
the
effects
of)
reference
rate
reform.
The
guidance
is
applicable
to
contracts
referencing
London
Interbank
Offered
Rate
("LIBOR")
or
another
reference
rate
that
is
expected
to
be
discontinued
due
to
reference
rate
reform. The
ASU
is
effective
as
of
March
12,
2020
and
generally
can
be
applied
through
December
31,
2022.
In
December
2022,
the
FASB
issued
ASU
No.
2022-06
Reference
Rate
Reform
(Topic
848):
Deferral
of
the
Sunset
Date
of
Topic
848
which
updates
and
clarifies
ASU
No.
2020-04.
The amendments
in
this ASU
defer
the
sunset
date
of
Topic
848
from
December
31,
2022,
to
December
31,
2024. Management expects
the impact
of
these
ASUs will
not
have
a
material
impact
on
the
Fund’s
financial
statements.
In
June
2022,
the
FASB
issued
ASU
No.
2022-03
Fair
Value
Measurement
(Topic
820);
Fair
Value
Measurement
of
Equity
Securities
Subject
to
Contractual
Sale
Restrictions,
which
provides
clarifying
guidance
that
a
contractual
restriction
on
the
sale
of
an
equity
security
is
not
considered
part
of
the
unit
of
account
of
the
equity
security
and,
therefore,
is
not
considered
in
measuring
fair
value.
The
ASU
is
effective
for
fiscal
years
beginning
after
December
15,
2023,
and
interim
periods
within
those
fiscal
years.
Management
expects
the
ASU
will
not
have
a
material
impact
on
the
Fund’s
financial
statements.
3.
Operating
Policies
Borrowings.
T
he
Fund
participates
in
a
line
of
credit
with
a
bank
which
allows
a
borrowing
commitment
amount
of
up
to
$15
million.
Borrowings
may
be
used
for
investment
purposes,
to
meet
repurchase
requests
and/or
to
facilitate
the
handling
of
unusual
or
unanticipated
short-term
cash
requirements.
The
Fund
will
pledge
securities
as
collateral
for
borrowing
on
the
line
of
credit
and
maintain
an
aggregate
collateral
value
not
less
than
the
outstanding
borrowing
amount
at
all
times.
Interest
is
charged
at
an
annual
rate
equal
to
the
Overnight
Bank
Funding
Rate
(“OBFR”)
plus
0.90%.
Additionally,
a
commitment
fee
is
charged
at
an
annual
rate
of
0.40%
on
any
day
when
the
outstanding
borrowing
amount
is
less
than
90%
of
the
borrowing
commitment
amount.
The
interest
expense
and
commitment
fee
associated
with
these
borrowings
is
included
in
other
expenses
on
the
statement
of
operations.
There
were
no
outstanding
borrowings
as
of
March
31,
2023
.
During
the
period
ended
March
31,
2023
,
the
Fund
did
not
borrow
against
the
line
of
credit.
Cross
Trades.
The
Fund
may
engage
in
cross
trades.
A
cross
trade
is
a
purchase
or
sale
transaction
between
affiliated
portfolios
executed
directly
or
through
an
intermediary
.
Mutual
funds
and
other
managed
portfolios
may
be
considered
affiliated
if
they
have
a
common
investment
advisor,
so
a
fund
may
be
considered
affiliated
with
any
portfolio
for
which
the
Fund's
sub-advisor
acts
as
an
investment
advisor.
Such
transactions
are
permissible
provided
that
the
conditions
of
Rule
17a-7
under
the
1940
Act
are
satisfied.
For
the
year
ended
March
31,
2023
,
the
Fund
did
not
engage
in
cross
trades.
2.
Significant
Accounting
Policies
(continued)
Notes
to
Financial
Statements
Principal
Diversified
Select
Real
Asset
Fund
March
31,
2023
12
Foreign
Currency
Contracts.
The
Fund
may
be
subject
to
foreign
currency
exchange
rate
risk
in
the
normal
course
of
pursuing
the
Fund's
investment
objectives.
The
Fund
may
use
foreign
currency
contracts
to
gain
exposure
to,
or
hedge
against
changes
in
the
value
of
foreign
currencies. The
Fund enters
into
forward
contracts
to
purchase
and
sell
foreign
currencies
at
a
specified
future
date
at
a
fixed
exchange
rate.
Forward
foreign
currency
contracts
are
valued
at
the
forward
rate,
and
are
marked-to-market
daily.
The
change
in
fair
value
is
recorded
by
the
Fund
as
an
unrealized
gain
or
loss.
When
the
contract
is
closed,
the
Fund
records
a
realized
gain
or
loss
equal
to
the
difference
between
the
value
of
the
contract
at
the
time
it
was
opened
and
the
value
at
the
time
it
was
closed.
The
use
of
forward
foreign
currency
contracts
does
not
eliminate
the
fluctuations
in
underlying
prices
of
the
Fund's
portfolio
securities,
but
it
does
establish
a
rate
of
exchange
that
can
be
achieved
in
the
future.
Although
forward
foreign
currency
contracts
limit
the
risk
of
loss
due
to
a
decline
in
the
value
of
the
hedged
currency,
they
also
limit
any
potential
gain
that
might
result
should
the
value
of
the
currency
increase.
In
addition,
the
Fund
could
be
exposed
to
risks
if
the
counterparties
to
the
contracts
are
unable
to
meet
the
terms
of
their
contracts
or
if
the
value
of
the
currency
changes
unfavorably
to
the
U.S.
dollar
or
other
respective
currency.
Illiquid
Securities.
Illiquid
securities
generally
cannot
be
sold
or
disposed
of
in
the
ordinary
course
of
business
(within
seven
calendar
days)
at
approximately
the
value
at
which
the
Fund
has
valued
the
investments.
This
may
have
an
adverse
effect
on
the
Fund’s
ability
to
dispose
of
particular
illiquid
securities
at
fair
value
and
may
limit
the
Fund’s
ability
to
obtain
accurate
market
quotations
for
purposes
of
valuing
the
securities.
Indemnification.
Under
the
Fund’s
by-laws,
present
and
past
officers,
trustees,
and
employees
are
indemnified
against
certain
liabilities
arising
out
of
the
performance
of
their
duties.
In
addition,
in
the
normal
course
of
business,
the
Fund
may
enter
into
a
variety
of
contracts
that
may
contain
representations
and
warranties
which
provide
general
indemnifications.
The
Fund’s
maximum
exposure
under
these
arrangements
is
unknown,
as
this
would
involve
future
claims
that
may
be
made
against
the
Fund.
Private
Investments
in
Public
Equity.
The
Fund
may
invest
in
private
investments
in
public
equity
(“PIPEs”)
which
are
issued
by
a
company
in
the
secondary
market
as
a
means
of
raising
capital.
In
connection
with
PIPEs,
the
Fund
may
enter
into
unfunded
commitments.
Commitments
may
be
subject
to
various
contingencies
and
are
recognized
as
a
financial
instrument
when
the
commitment
is
legally
binding.
These
contingencies
are
considered
in
the
valuation
of
the
commitments.
The
Fund
is
obligated
to
fund
these
commitments
when
the
contingencies
are
met
and
therefore,
the
Fund
must
have
funds
sufficient
to
cover
its
obligation.
Commitments
are
marked
to
market
daily
and
the
unrealized
gain
or
loss
is
shown
as
a
separate
line
item
called
unrealized
gain
or
loss
on
unfunded
commitments
on
the
statement
of
assets
and
liabilities
and
included
in
the
net
change
in
unrealized
appreciation/(depreciation)
of
investments
on
the
statement
of
operations,
as
applicable.
Commitments
are
typically
categorized
as
Level
2
within
the
disclosure
hierarchy.
As
of
March
31,
2023
,
the
Fund
had
no
unfunded
commitments
in
connection
with
PIPEs.
Private
and
Other
Underlying
Funds.
The
Fund
may
invest
in
private
investment
funds
and
other
publicly
traded
investment
funds.
The
shares
of
publicly
traded
investment
funds
and
private
investment
funds
are
collectively
referred
to
as
the
“Underlying
Funds”.
The
Fund
may
indirectly
bear
a
pro
rata
share
of
the
fees
and
expenses
of
the
Underlying
Funds
in
which
it
invests.
Because
the
Underlying
Funds
have
varied
expense
levels
and
the
Fund
may
own
different
proportions
of
Underlying
Funds
at
different
times,
the
amount
of
expense
incurred
indirectly
by
the
Fund
will
vary.
Expenses
included
in
the
statement
of
operations
and
financial
highlights
of
the
Fund
do
not
include
any
expenses
associated
with
the
Underlying
Funds.
Private
investment
funds
are
not
registered
as
investment
companies
under
the
1940
Act
and
therefore
the
Fund
will
not
be
able
to
avail
itself
of
the
protection
of
the
1940
Act
with
respect
to
such
private
investment
funds,
including
certain
corporate
governance
protections,
such
as
the
requirement
of
having
a
majority
or
50%
of
the
directors
serving
on
a
board
as
independent
directors,
statutory
protections
against
self-
dealings
by
the
institutional
asset
managers,
and
leverage
limitations.
The
Fund
will
hold
liquid
assets
while
it
waits
for
such
Underlying
Funds
to
call
capital,
which
may
negatively
impact
its
performance.
Restricted
Securities.
The
Fund
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.
Senior
Floating
Rate
Interests.
The
Fund
may
invest
in
senior
floating
rate
interests
(bank
loans).
Senior
floating
rate
interests
typically
hold
the
most
senior
position
in
the
capital
structure
of
a
business
entity
(the
“Borrower”),
and
are
secured
by
specific
collateral
and
have
a
claim
on
the
assets
and/or
stock
of
the
Borrower
that
is
senior
to
that
held
by
subordinated
debtholders
and
stockholders
of
the
Borrower.
Senior
floating
rate
interests
are
typically
structured
and
administered
by
a
financial
institution
that
acts
as
the
agent
of
the
lenders
participating
in
the
senior
floating
rate
interest.
Borrowers
of
senior
floating
rate
interests
are
typically
rated
below-investment-grade,
which
means
they
3.
Operating
Policies
(continued)
Notes
to
Financial
Statements
Principal
Diversified
Select
Real
Asset
Fund
March
31,
2023
13
are
more
likely
to
default
than
investment-grade
loans.
A
default
could
lead
to
non-payment
of
income
which
would
result
in
a
reduction
of
income
to
the
Fund
and
there
can
be
no
assurance
that
the
liquidation
of
any
collateral
would
satisfy
the
Borrower’s
obligation
in
the
event
of
non-payment
of
scheduled
interest
or
principal
payments,
or
that
such
collateral
could
be
readily
liquidated.
Senior
floating
rate
interests
pay
interest
at
rates
which
are
periodically
reset
by
reference
to
a
base
lending
rate
plus
a
spread.
These
base
lending
rates
are
generally
the
prime
rate
offered
by
a
designated
U.S.
bank
or
the
LIBOR
rate
(or
such
successor
if
no
longer
available).
Senior
floating
rate
interests
generally
are
subject
to
mandatory
and/or
optional
prepayment.
Because
of
these
mandatory
prepayment
conditions
and
because
there
may
be
significant
economic
incentives
for
the
Borrower
to
repay,
prepayments
of
senior
floating
rate
interests
may
occur.
As
a
result,
the
actual
remaining
maturity
of
senior
floating
rate
interests
may
be
substantially
less
than
stated
maturities
shown
in
the
schedule
of
investments.
Unfunded
Commitments.
In
connection
with
the
senior
floating
rate
interests,
the
Fund
may
enter
into
unfunded
loan
commitments
(“commitments”).
All
or
a
portion
of
the
commitments
may
be
unfunded.
The
Fund
is
obligated
to
fund
these
commitments
at
the
Borrower’s
discretion.
Therefore,
the
Fund
must
have
funds
sufficient
to
cover
its
contractual
obligation.
Commitments
are
marked
to
market
daily
and
the
unrealized
gain
or
loss
is
shown
as
a
separate
line
item
called
unrealized
gain
or
loss
on
unfunded
commitments
on
the
statement
of
assets
and
liabilities
and
included
in
the
net
change
in
unrealized
appreciation/(depreciation)
of
investments
on
the
statement
of
operations,
as
applicable.
As
of
March
31,
2023,
the
Fund
had
no
unfunded
commitments
relating
to
senior
floating
rate
interests.
The
Fund
may
also
enter
into
unfunded
commitments
relating
to
potential
future
investments
in
private
investment
funds,
which
are
not
marked
to
market
daily.
As
of
March
31,
2023,
the
Fund
had
unfunded
commitments
relating
to
potential
future
investments,
as
follows
(amounts
in
thousands):
4.
Fair
Valuation
Fair
value
is
defined
as
the
price
that
the
Fund
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
Fund
may
use
one
or
more
of
the
following
approaches:
market,
income,
net
asset
value
and/or
cost.
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
Fund.
Unobservable
inputs
are
inputs
that
reflect
the
Fund’s
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.
Investments
which
are
generally
included
in
this
category
include
listed
equities
and
listed
derivatives.
Level
2
–
Other
significant
observable
inputs
(including
quoted
prices
for
similar
investments,
interest
rates,
prepayment
speeds,
credit
risk,
etc.).
Investments
which
are
generally
included
in
this
category
include
certain
foreign
equities,
corporate
bonds,
senior
floating
rate
interests,
municipal
bonds,
and
U.S.
Government
and
Government
Agency
Obligations.
Level
3
–
Significant
unobservable
inputs
(including
the
Fund’s
assumptions
in
determining
the
fair
value
of
investments).
Investments
which
are
generally
included
in
this
category
include
certain
common
stocks,
corporate
bonds,
or
senior
floating
rate
interests.
In
accordance
with
Accounting
Standards
Codification
820
–
Fair
Value
Measurement
,
the
Fund
has
elected
to
apply
the
practical
expedient
to
value
its
investments
in
private
investment
funds
at
their
respective
net
asset
value
each
calendar
month
or
quarter.
Private
investment
funds
valued
at
net
asset
value
are
excluded
from
the
fair
value
hierarchy.
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
Private
Investment
Fund
Unfunded
Commitment
ACIP
Parallel
Fund
A,
LP
$
1,900
CBRE
Caledon
Global
Infrastructure
Fund
(International),
LP
703
Hancock
Timberland
and
Farmland
Fund,
LP
998
3.
Operating
Policies
(continued)
Notes
to
Financial
Statements
Principal
Diversified
Select
Real
Asset
Fund
March
31,
2023
14
requires
more
judgment.
Accordingly,
the
degree
of
judgment
exercised
by
the
Fund
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
Fund’s
own
assumptions
are
set
to
reflect
those
that
market
participants
would
use
in
pricing
the
asset
or
liability
at
the
measurement
date.
The
Fund
uses
prices
and
inputs
that
are
current
as
of
the
measurement
date,
when
available.
Investments
which
are
included
in
the
Level
3
category
may
be
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.
Benchmark
pricing
procedures
set
the
base
price
of
a
security
based
on
current
market
data.
The
base
price
may
be
a
broker-dealer
quote,
transaction
price,
or
internal
value
based
on
relevant
market
data.
The
fair
values
of
these
securities
are
dependent
on
economic,
political,
and
other
considerations.
The
values
of
such
securities
may
be
affected
by
significant
changes
in
the
economic
conditions,
changes
in
government
policies,
and
other
factors
(e.g.,
natural
disasters,
pandemics,
accidents,
conflicts,
etc.).
The
following
is
a
summary
of
the
inputs
used
as
of
March
31,
2023
in
valuing
the
Fund’s
securities
carried
at
value
(amounts
in
thousands):
*For
additional
detail
regarding
sector
classifications,
please
see
the
schedule
of
investments.
5.
Management
Agreement
and
Transactions
with
Affiliates
Management
Services.
The
Fund
has
agreed
to
pay
management
and
investment
advisory
fees
to
the
Manager
computed
at
an
annual
percentage
rate
of
the
Fund’s
average
daily
net
assets.
A
portion
of
the
management
fee
is
paid
by
the
Manager
to
the
sub-advisors
of
the
Fund,
which
may
be
affiliates
of
the
Manager.
The
annual
rate
paid
by
the
Fund
is
based
upon
the
aggregate
average
daily
net
assets
(“aggregate
net
assets”)
of
the
Fund.
The
management
and
investment
advisory
fees
schedule
for
the
Fund
is
1.70%
of
aggregate
net
assets
up
to
$1.5
billion
and
1.65%
of
aggregate
net
assets
over
$1.5
billion.
The
Manager
has
contractually
agreed
to
waive
0.67%
of
the
Fund’s
management
and
investment
advisory
fees
effective
August
1,
2022.
Prior
to
August
1,
2022,
the
contractual
fee
waiver
was
0.25%.
It
is
expected
that
the
fee
waiver
will
continue
through
the
period
ending
Fund
Level
1
-
Quoted
Prices
Level
2
-
Other
Significant
Observable
Inputs
Level
3
-
Significant
Unobservable
Inputs
Totals
(Level
1,2,3)
Principal
Diversified
Select
Real
Asset
Fund
Bonds*
$
—
$
5,166
$
—
$
5,166
Common
Stocks
Basic
Materials
—
—
—
—
Consumer,
Non-cyclical
308
977
—
1,285
Energy
2,285
745
—
3,030
Financial
10,095
4,876
—
14,971
Industrial
292
1,117
—
1,409
Utilities
4,398
6,965
—
11,363
Convertible
Preferred
Stocks
79
—
—
79
Investment
Companies
20,478
—
—
20,478
Preferred
Stocks
266
—
—
266
Total
$
38,201
$
19,846
$
—
$
58,047
Investments
Using
NAV
as
practical
expedient
Private
Investment
Funds
101,431
Total
investments
in
securities
$
—
$
—
$
—
$
159,478
4.
Fair
Valuation
(continued)
Notes
to
Financial
Statements
Principal
Diversified
Select
Real
Asset
Fund
March
31,
2023
15
July
31,
2023;
however,
the
Fund
and
the
Manager,
the
parties
to
the
agreement,
may
mutually
agree
to
terminate
the
fee
waiver
prior
to
the
end
of
the
period.
The
Manager
has
contractually
agreed
to
limit
the
Fund’s
expenses
(excluding
interest
expense,
expenses
related
to
fund
investments,
acquired
fund
fees
and
expenses,
and
tax
reclaim
recovery
expenses
and
other
extraordinary
expenses).
The
reductions
and
reimbursements
are
in
amounts
that
maintain
total
operating
expenses
at
or
below
certain
limits.
The
limits
are
expressed
as
a
percentage
of
average
daily
net
assets
attributable
to
each
class
of
shares
on
an
annualized
basis
during
the
reporting
period.
The
expenses
borne
by
the
Manager
are
subject
to
reimbursement
by
the
Fund
through
the
fiscal
year
end,
provided
no
reimbursement
will
be
made
if
it
would
result
in
the
Fund
exceeding
the
total
operating
expense
limits.
Any
amounts
outstanding
at
the
end
of
the
year
are
shown
as
an
expense
reimbursement
from
Manager
or
expense
reimbursement
to
Manager
on
the
statement
of
assets
and
liabilities
and
are
settled
monthly.
It
is
expected
that
the
operating
expense
limits
will
continue
through
the
period
ending
July
31,
2023,
the
contractual
expiration
date;
however,
the
Fund
and
the
Manager,
the
parties
to
the
agreement,
may
mutually
agree
to
terminate
the
operating
expense
limits
prior
to
the
end
of
the
period.
The
operating
expense
limits
are
as
follows:
*Prior
to
August
1,
2022,
the
contractual
expense
limit
was
1.98%.
**Prior
to
August
1,
2022,
the
contractual
expense
limit
was
1.48%.
^Prior
to
August
1,
2022,
the
contractual
expense
limit
was
1.68%.
Distribution
Fees.
The
Class
A
shares
of
the
Fund
bear
distribution
fees.
The
fees
are
computed
at
an
annual
rate
of
0.25%
of
the
average
daily
net
assets
attributable
to
Class
A
shares
of
the
Fund.
Distribution
fees
are
paid
to
the
Distributor
of
the
Fund.
A
portion
of
the
distribution
fees
may
be
paid
to
other
selling
dealers
for
providing
certain
services.
Chief
Compliance
Officer
Expenses.
The
Fund
pays
certain
expenses
associated
with
the
Chief
Compliance
Officer
(“CCO”).
This
expense
is
allocated
among
the
registered
investment
companies
managed
by
the
Manager
based
on
the
relative
net
assets
of
each
fund
and
is
shown
on
the
statement
of
operations.
For
the
year
ended
March
31,
2023,
the
Fund’s
CCO
expenses
were
less
than
$500.
Sales
Charges.
The
Distributor
retains
sales
charges
on
certain
sales
of
Class
A
shares
based
on
declining
rates
which
begin
at
5.75%.
For
the
year
ended
March
31,
2023,
sales
charges
retained
by
the
Distributor
were
as
follows:
Affiliated
Ownership
.
As
of
March
31,
2023,
Principal
Financial
Services
Inc.
and
Principal
Life
Insurance
Company
(each
an
affiliate
of
the
Manager)
owned
shares
of
the
Fund
as
follows
(amounts
of
shares
in
thousands):
6.
Investment
Transactions
For
the
year
ended
March
31,
2023,
the
cost
of
investment
securities
purchased
and
proceeds
from
investment
securities
sold
(not
including
short-term
investments,
return
of
capital,
and
mergers)
by
the
Fund
were
as
follows
(amounts
in
thousands):
7.
Repurchase
Offers
The
Fund
has
a
fundamental
policy
to
make
quarterly
repurchase
offers
for
no
less
than
5%
and
not
more
than
25%
of
its
shares
at
a
price
equal
to
net
asset
value
per
share,
unless
suspended
or
postponed
in
accordance
with
regulatory
requirements,
and
that
each
quarterly
repurchase
pricing
share
occur
on
the
Repurchase
Pricing
Date,
the
date
that
will
be
used
to
determine
the
Fund’s
net
asset
value
per
share
applicable
to
the
repurchase.
The
Fund
will
make
quarterly
repurchase
offers
every
three
months,
in
the
following
months:
March,
June,
September,
and
December.
Share
Class
Operating
Expense
Limit
Expiration
Class
A
1.54%*
July
31,
2023
Class
Y
1.04**
%
July
31,
2023
Institutional
1.24^
%
July
31,
2023
Class
A
Principal
Diversified
Select
Real
Asset
Fund
$
3
Class
A
Class
Y
Institutional
Principal
Diversified
Select
Real
Asset
Fund
12
5,771
12
Purchases
Sales
Principal
Diversified
Select
Real
Asset
Fund
$
64,246
$
86,896
5.
Management
Agreement
and
Transactions
with
Affiliates
(continued)
Notes
to
Financial
Statements
Principal
Diversified
Select
Real
Asset
Fund
March
31,
2023
16
The
Fund
will
repurchase
shares
that
are
tendered
by
a
specific
date
(the
“Repurchase
Request
Deadline”),
which
will
be
established
by
the
Board
in
accordance
with
Rule
23c-3,
as
amended
from
time
to
time.
Rule
23c-3
requires
the
Repurchase
Request
Deadline
to
be
no
less
than
21
and
no
more
than
42
days
after
the
Fund
sends
notification
to
shareholders
of
the
repurchase
offer.
There
will
be
a
maximum
14
calendar
day
period,
or
the
next
business
day
if
the
14th
calendar
day
is
not
a
business
day,
between
the
Repurchase
Request
Deadline
and
the
Repurchase
Pricing
Date.
If
a
repurchase
offer
by
the
Fund
is
oversubscribed,
the
Fund
may
repurchase,
but
is
not
required
to
repurchase,
additional
shares
up
to
a
maximum
amount
of
2%
of
the
outstanding
shares
of
the
Fund.
If
the
Fund
determines
not
to
repurchase
additional
shares
beyond
the
repurchase
offer
amount,
or
if
shareholders
tender
an
amount
of
shares
greater
than
that
which
the
Fund
is
entitled
to
repurchase,
the
Fund
will
repurchase
the
shares
tendered
on
a
pro
rata
basis.
For
the
year
ended
March
31,
2023,
shares
of
the
Fund
were
repurchased
during
the
repurchase
offer
windows
as
follows
(amounts
in
thousands):
8.
Federal
Tax
Information
Distributions
to
Shareholders
.
The
federal
income
tax
character
of
distributions
paid
for
the
year
ended
March
31,
2023
and
year
ended
March
31,
2022,
were
as
follows
(amounts
in
thousands):
*The
Fund
designates
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.
Distributable
Earnings.
As
of
March
31,
2023,
the
components
of
distributable
earnings
(accumulated
loss)
on
a
federal
tax
basis
were
as
follows
(amounts
in
thousands):
Capital
Loss
Carryforwards.
For
federal
income
tax
purposes,
capital
loss
carryforwards
are
losses
that
can
be
used
to
offset
future
capital
gains
of
the
Fund.
As
of
March
31,
2023
,
the
Fund
had
no
capital
loss
carryforwards.
For
the
year
ended
March
31,
2023
,
the
Fund
did
not
utilize
capital
loss
carryforwards.
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.
As
of
March
31,
2023
,
the
Fund
does
not
plan
to
defer
any
late-year
losses.
Reclassification
of
Capital
Accounts.
The
Fund
may
record
reclassifications
in
its
capital
accounts.
These
reclassifications
have
no
impact
on
the
total
net
assets
of
the
Fund.
The
reclassifications
are
a
result
of
permanent
differences
between
U.S.
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
Fund’s
distributions
may
be
shown
in
the
accompanying
statement
of
changes
in
net
assets
as
from
net
investment
income
and
net
realized
Repurchase
Offer
#1
Repurchase
Offer
#2
Repurchase
Offer
#3
Repurchase
Offer
#4
Commencement
Date
March
28,
2022
June
27,
2022
September
26,
2022
December
27,
2022
Repurchase
Request
Deadline
April
27,
2022
July
27,
2022
October
26,
2022
January
25,
2023
Repurchase
Pricing
Date
April
27,
2022
July
27,
2022
October
26,
2022
January
25,
2023
Amount
Repurchased
$
9,220
$
8,000
$
8,374
$
8,000
Shares
Repurchased
332
296
317
310
Ordinary
Income
Long
Term
Capital
Gain*
2023
2022
2023
2022
Principal
Diversified
Select
Real
Asset
Fund
$
2,965
$
6,371
$
8,349
$
5,798
Undistributed
Ordinary
Income
Undistributed
Long-Term
Capital
Gains
Accumulated
Losses
Net
Unrealized
Appreciation
(Depreciation)
Other
Temporary
Differences
*
Total
Accumulated
Earnings
(Deficit)
Principal
Diversified
Select
Real
Asset
Fund
$
—
$
777
$
—
$
7,977
$
—
$
8,754
7.
Repurchase
Offers
(continued)
Notes
to
Financial
Statements
Principal
Diversified
Select
Real
Asset
Fund
March
31,
2023
17
gain
on
investments
or
from
tax
return
of
capital
depending
on
the
type
of
book
and
tax
differences
that
exist.
For
the
year
ended
March
31,
2023,
the
Fund
recorded
reclassifications
as
follows
(amounts
in
thousands):
Federal
Income
Tax
Basis.
As
of
March
31,
2023
,
the
net
federal
income
tax
unrealized
appreciation
(depreciation)
and
federal
tax
cost
of
investments
held
by
the
Fund
were
as
follows
(amounts
in
thousands):
9.
Subsequent
Events
Management
has
evaluated
events
and
transactions
that
have
occurred
through
the
date
the
financial
statements
were
issued
that
would
merit
recognition
or
disclosure
in
the
financial
statements.
On
April
27,
2023,
the
Board
of
the
Fund
approved
a
change
to
the
Fund’s
name
from
Principal
Diversified
Select
Real
Asset
Fund
to
Principal
Real
Asset
Fund.
The
Board
also
approved
a
change
in
the
Fund’s
diversification
classification
from
“diversified”
to
“non-diversified”
and
a
change
to
the
related
fundamental
policy
(together,
the
“Proposed
Changes”).
Fund
shareholders
of
record
on
July
14,
2023,
are
entitled
to
vote
on
the
Proposed
Changes
at
a
Special
Meeting
of
Shareholders
of
the
Fund
tentatively
scheduled
for
August
31,
2023.
The
Proposed
Changes,
if
approved
by
Fund
shareholders,
are
expected
to
be
effective
on
or
about
September
1,
2023.
Also,
the
Fund
completed
a
quarterly
repurchase
offer
on
April
27,
2023
which
resulted
in
4,050
shares
being
repurchased
for
$102,000.
There
were
no
additional
items
requiring
adjustment
of
the
financial
statements
or
additional
disclosure.
Total
Distributable
Earnings
(Accumulated
Loss)
Capital
Shares
and
Additional
Paid-in-Capital
Principal
Diversified
Select
Real
Asset
Fund
$
(665)
$
665
Unrealized
Appreciation
Unrealized
(Depreciation)
Net
Unrealized
Appreciation/
(Depreciation)
Cost
for
Federal
Income
Tax
Purposes
Principal
Diversified
Select
Real
Asset
Fund
$
14,345
$
(6,368)
$
7,977
$
151,501
8.
Federal
Tax
Information
(continued)
Schedule
of
Investments
Principal
Diversified
Select
Real
Asset
Fund
March
31,
2023
See
accompanying
notes.
18
INVESTMENT
COMPANIES
-
12.82%
Shares
Held
Value
(000's)
Exchange-Traded
Funds
-
8.46%
iShares
North
American
Natural
Resources
ETF
113,925
$
4,463
SPDR
S&P
Global
Natural
Resources
ETF
158,667
9,058
$
13,521
Money
Market
Funds
-
4.36%
Morgan
Stanley
Institutional
Liquidity
Funds
-
Government
Portfolio
-
Institutional
Class
4.72%
(a)
6,957,052
6,957
TOTAL
INVESTMENT
COMPANIES
$
20,478
PRIVATE
INVESTMENT
FUNDS
-
63.50%
Shares
Held
Value
(000's)
Agriculture
-
18.75%
Ceres
Farmland
Holdings,
LP
(b)
N/A
$
10,068
Hancock
Timberland
and
Farmland
Fund,
LP
(b)
N/A
12,249
UBS
AgriVest
Farmland
Fund
(b)
N/A
7,637
$
29,954
Energy
-
Alternate
Sources
-
10.51%
ACIP
Parallel
Fund
A,
LP
(b)
N/A
3,369
Brookfield
Super-Core
Infrastructure
Partners
Fund,
LP
(b)
N/A
8,261
CBRE
Caledon
Global
Infrastructure
Fund
(International),
LP
(b)
N/A
5,148
$
16,778
Forest
Products
&
Paper
-
7.49%
BTG
Pactual
Open
Ended
Core
US
Timberland
Fund,
LP
(b)
N/A
11,968
Private
Equity
-
11.60%
GDIF
US
Hedged
Feeder
Fund,
LP
(b)
N/A
8,853
HarbourVest
Infrastructure
Income
Delaware
Parallel
Partnership,
LP
(b),(c)
N/A
9,676
$
18,529
Real
Estate
-
15.15%
Brookfield
Senior
Mezzanine
Real
Estate
Finance
Fund,
LP
(b)
N/A
4,400
FDR
PELF
SCA,
SICAV-RAIF
(b)
N/A
5,955
PGIM
Real
Estate
US
Debt
Fund,
LP
(b)
N/A
5,289
UBS
Trumbull
Property
Growth
&
Income
Fund
(b)
N/A
8,558
$
24,202
TOTAL
PRIVATE
INVESTMENT
FUNDS
$
101,431
COMMON
STOCKS
-
20.07%
Shares
Held
Value
(000's)
Commercial
Services
-
0.75%
Atlas
Arteria
Ltd
106,695
$
450
CCR
SA
89,509
225
Transurban
Group
55,205
527
$
1,202
Diversified
Financial
Services
-
0.03%
RAM
Essential
Services
Property
Fund
106,090
52
Electric
-
5.25%
Brookfield
Renewable
Corp
9,882
345
Clearway
Energy
Inc
-
Class
C
2,340
73
Constellation
Energy
Corp
2,896
227
CPFL
Energia
SA
60,665
380
Edison
International
7,370
520
EDP
-
Energias
de
Portugal
SA
189,260
1,031
Entergy
Corp
4,453
480
Iberdrola
SA
77,285
963
National
Grid
PLC
57,837
782
OGE
Energy
Corp
17,116
645
Public
Service
Enterprise
Group
Inc
13,729
858
Red
Electrica
Corp
SA
19,033
335
Southern
Co/The
11,068
770
SSE
PLC
43,571
972
$
8,381
Energy
-
Alternate
Sources
-
0.21%
NextEra
Energy
Partners
LP
5,476
333
Engineering
&
Construction
-
0.28%
Ferrovial
SA
15,057
443
COMMON
STOCKS
(continued)
Shares
Held
Value
(000’s)
Gas
-
1.24%
China
Resources
Gas
Group
Ltd
91,350
$
336
Enagas
SA
31,065
597
Italgas
SpA
55,339
338
Snam
SpA
114,890
609
Southwest
Gas
Holdings
Inc
1,606
100
$
1,980
Healthcare
-
Services
-
0.05%
Chartwell
Retirement
Residences
13,200
83
Iron
&
Steel
-
0.00%
Novolipetsk
Steel
PJSC
(c)
36,800
—
Severstal
PAO
(c)
4,878
—
$
—
Mining
-
0.00%
Polyus
PJSC
407
—
Pipelines
-
1.69%
APA
Group
109,687
745
Enbridge
Inc
5,165
197
Gibson
Energy
Inc
20,645
330
Pembina
Pipeline
Corp
14,326
464
TC
Energy
Corp
19,654
765
Williams
Cos
Inc/The
6,565
196
$
2,697
Private
Equity
-
0.10%
Capitaland
Investment
Ltd/Singapore
59,700
166
Real
Estate
-
0.62%
Castellum
AB
4,690
55
Mitsubishi
Estate
Co
Ltd
6,100
73
Mitsui
Fudosan
Co
Ltd
13,300
250
New
World
Development
Co
Ltd
21,750
58
Qualitas
Ltd
84,176
134
Sun
Hung
Kai
Properties
Ltd
20,000
280
Vonovia
SE
4,329
81
Wihlborgs
Fastigheter
AB
8,604
66
$
997
REITs
-
8.61%
Activia
Properties
Inc
31
88
AIMS
APAC
REIT
48,200
48
Alexandria
Real
Estate
Equities
Inc
2,388
300
American
Homes
4
Rent
7,789
245
American
Tower
Corp
3,625
741
Arena
REIT
18,497
45
AvalonBay
Communities
Inc
690
116
Big
Yellow
Group
PLC
17,793
257
Broadstone
Net
Lease
Inc
4,833
82
CapitaLand
Integrated
Commercial
Trust
79,033
118
Centuria
Industrial
REIT
41,395
84
Centuria
Office
REIT
24,576
24
CRE
Logistics
REIT
Inc
85
108
Crown
Castle
Inc
5,475
732
CubeSmart
11,250
520
Daiwa
House
REIT
Investment
Corp
92
189
Daiwa
Office
Investment
Corp
15
69
Digital
Realty
Trust
Inc
4,030
396
Dream
Industrial
Real
Estate
Investment
Trust
27,000
294
Equinix
Inc
528
381
Equity
LifeStyle
Properties
Inc
2,358
158
ESR
Kendall
Square
REIT
Co
Ltd
18,759
56
ESR-LOGOS
REIT
251,188
61
Essex
Property
Trust
Inc
510
107
First
Industrial
Realty
Trust
Inc
3,200
170
Gaming
and
Leisure
Properties
Inc
10,570
550
Gecina
SA
1,007
105
Goodman
Group
6,745
86
Healthcare
Realty
Trust
Inc
7,188
139
HealthCo
REIT
11,326
10
Independence
Realty
Trust
Inc
14,131
227
Industrial
&
Infrastructure
Fund
Investment
Corp
62
67
Ingenia
Communities
Group
19,978
51
Schedule
of
Investments
Principal
Diversified
Select
Real
Asset
Fund
March
31,
2023
See
accompanying
notes.
19
COMMON
STOCKS
(continued)
Shares
Held
Value
(000’s)
REITs
(continued)
Invincible
Investment
Corp
174
$
73
Invitation
Homes
Inc
12,952
404
Japan
Hotel
REIT
Investment
Corp
144
82
Japan
Metropolitan
Fund
Invest
146
107
Klepierre
SA
6,461
146
Lendlease
Global
Commercial
REIT
107,361
55
Link
REIT
78,240
503
Medical
Properties
Trust
Inc
11,085
91
Merlin
Properties
Socimi
SA
14,744
129
Mitsubishi
Estate
Logistics
REIT
Investment
Corp
30
88
National
Health
Investors
Inc
2,154
111
National
Storage
Affiliates
Trust
4,400
184
Nexus
Industrial
REIT
43,100
311
NSI
NV
5,836
147
Plymouth
Industrial
REIT
Inc
6,414
135
Prologis
Inc
4,929
615
Rexford
Industrial
Realty
Inc
5,875
350
Sabra
Health
Care
REIT
Inc
21,936
252
Safestore
Holdings
PLC
6,815
80
Saul
Centers
Inc
2,626
102
Scentre
Group
73,624
136
Segro
PLC
21,163
202
Sekisui
House
Reit
Inc
351
190
SF
Real
Estate
Investment
Trust
95,000
36
Spirit
Realty
Capital
Inc
2,936
117
Stockland
51,901
139
Sun
Communities
Inc
3,346
471
Sunstone
Hotel
Investors
Inc
7,680
76
UNITE
Group
PLC/The
6,901
82
Ventas
Inc
12,553
544
VICI
Properties
Inc
18,783
613
Welltower
Inc
7,820
561
$
13,756
Transportation
-
0.61%
Union
Pacific
Corp
1,450
292
West
Japan
Railway
Co
16,358
674
$
966
Water
-
0.63%
Pennon
Group
PLC
41,401
447
United
Utilities
Group
PLC
42,403
555
$
1,002
TOTAL
COMMON
STOCKS
$
32,058
CONVERTIBLE
PREFERRED
STOCKS
-
0.05%
Shares
Held
Value
(000's)
REITs
-
0.05%
RPT
Realty
7.25%
(d)
1,650
$
79
TOTAL
CONVERTIBLE
PREFERRED
STOCKS
$
79
PREFERRED
STOCKS
-
0.17%
Shares
Held
Value
(000's)
Electric
-
0.17%
Centrais
Eletricas
Brasileiras
SA
1.61%
37,235
$
266
TOTAL
PREFERRED
STOCKS
$
266
BONDS
-
3.24%
Principal
Amount
(000's)
Value
(000's)
Commercial
Mortgage
Backed
Securities
-
3.24%
BANK
2020-BNK25
3.35%,
01/15/2063
(e)
$
447
$
340
BBCMS
Mortgage
Trust
2022-C17
4.89%,
09/15/2055
(e)
250
221
Benchmark
2019-B11
Mortgage
Trust
3.00%,
05/15/2052
(f)
310
196
3.78%,
05/15/2052
500
440
Benchmark
2019-B13
Mortgage
Trust
1.00%,
08/15/2057
(e),(f),(g)
1,750
85
Benchmark
2020-B20
Mortgage
Trust
1.55%,
10/15/2053
(e),(f),(g)
3,250
284
Benchmark
2021-B23
Mortgage
Trust
1.27%,
02/15/2054
(e),(g)
2,481
168
BONDS
(continued)
Principal
Amount
(000’s)
Value
(000’s)
Commercial
Mortgage
Backed
Securities
(continued)
Benchmark
2021-B28
Mortgage
Trust
1.38%,
08/15/2054
(e),(f),(g)
$
4,000
$
351
Benchmark
2021-B29
Mortgage
Trust
2.00%,
09/15/2054
(f)
1,000
501
Freddie
Mac
Multifamily
Structured
Pass
Through
Certificates
2.45%,
03/25/2049
(e),(g)
6,890
642
GS
Mortgage
Securities
Trust
2013-GCJ14
4.67%,
08/10/2046
(e),(f)
539
428
Morgan
Stanley
Bank
of
America
Merrill
Lynch
Trust
2015-C25
4.52%,
10/15/2048
(e),(f)
1,000
718
Morgan
Stanley
Capital
I
Trust
2019-H7
1.30%,
07/15/2052
(e),(g)
5,024
293
Morgan
Stanley
Capital
I
Trust
2020-HR8
2.70%,
07/15/2053
189
143
Wells
Fargo
Commercial
Mortgage
Trust
2020-C56
1.40%,
06/15/2053
(e),(g)
5,542
356
$
5,166
TOTAL
BONDS
$
5,166
Total
Investments
$
159,478
Other
Assets
and
Liabilities
- 0.15%
252
TOTAL
NET
ASSETS
-
100.00%
$
159,730
(a)
Current
yield
shown
is
as
of
period
end.
(b)
Private
Investment
Funds
have
quarterly
or
annual
redemption
frequencies
and
are
considered
restricted
securities.
Please
see
Private
Investment
Funds
sub-schedule
for
additional
information.
(c)
Non-income
producing
security
(d)
Perpetual
security.
Perpetual
securities
pay
an
indefinite
stream
of
interest,
but
they
may
be
called
by
the
issuer
at
an
earlier
date.
Date
shown,
if
any,
reflects
the
next
call
date
or
final
legal
maturity
date.
Rate
shown
is
as
of
period
end.
(e)
Certain
variable
rate
securities
are
not
based
on
a
published
reference
rate
and
spread
but
are
determined
by
the
issuer
or
agent
and
are
based
on
current
market
conditions. These
securities
do
not
indicate
a
reference
rate
and
spread
in
their
description.
Rate
shown
is
the
rate
in
effect
as
of
period
end.
(f)
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
$2,563
or
1.60%
of
net
assets.
(g)
Security
is
an
Interest
Only
Strip.
Portfolio
Summary
Sector
Percent
Financial
36.16%
Consumer,
Non-cyclical
19.55%
Energy
12.41%
Investment
Companies
8.46%
Materials
7.49%
Utilities
7.29%
Money
Market
Funds
4.36%
Mortgage
Securities
3.24%
Industrial
0.89%
Basic
Materials
0.00%
Other
Assets
and
Liabilities
0.15%
TOTAL
NET
ASSETS
100.00%
Schedule
of
Investments
Principal
Diversified
Select
Real
Asset
Fund
March
31,
2023
See
accompanying
notes.
20
Private
Investment
Funds
Security
Name
Acquisition
Date
Cost
Value
Redemption
Notice
(days)
Percent
of
Net
Assets
ACIP
Parallel
Fund
A,
LP
(a)
11/15/2021
-
03/23/2023
$
3,099
$
3,369
N/A
2.11%
Brookfield
Senior
Mezzanine
Real
Estate
Finance
Fund,
LP
(b)
03/31/2022
5,000
4,400
90
2.75%
Brookfield
Super-Core
Infrastructure
Partners
Fund,
LP
(c)
07/01/2021
-
06/27/2022
7,996
8,261
N/A
5.17%
BTG
Pactual
Open
Ended
Core
US
Timberland
Fund,
LP
(d)
07/01/2019
-
12/30/2021
10,269
11,968
90
7.49%
CBRE
Caledon
Global
Infrastructure
Fund
(International),
LP
(e)
07/16/2021
-
01/13/2023
5,277
5,148
N/A
3.23%
Ceres
Farmland
Holdings,
LP
(f)
11/06/2019,
02/05/2021
7,000
10,068
N/A
6.30%
FDR
PELF
SCA,
SICAV-RAIF
(g)
12/01/2022
6,610
5,955
90
3.73%
GDIF
US
Hedged
Feeder
Fund,
LP
(h)
04/23/2021
-
08/17/2022
8,513
8,853
N/A
5.54%
Hancock
Timberland
and
Farmland
Fund,
LP
(i)
08/12/2020
-
12/17/2021
12,002
12,249
N/A
7.67%
HarbourVest
Infrastructure
Income
Delaware
Parallel
Partnership,
LP
(j)
06/27/2022
8,000
9,676
90
6.06%
PGIM
Real
Estate
US
Debt
Fund,
LP
(k)
04/30/2021,
06/30/2021
5,315
5,289
N/A
3.31%
UBS
AgriVest
Farmland
Fund
(l)
07/01/2020
-
01/03/2023
6,908
7,637
60
4.78%
UBS
Trumbull
Property
Growth
&
Income
Fund
(m)
07/01/2020
-
12/30/2021
7,744
8,558
60
5.36%
Total
$
101,431
63.50%
The
private
investment
funds
listed
in
the
table
do
not
include
any
unfunded
commitments. Please
see
Note
3
for
details
of
any
unfunded
commitments.
Amounts
in
thousands.
(a)
This
closed-end
fund
focuses
on
the
Climate
Infrastructure
sector
which
includes
value-add
renewable
energy,
resource
and
energy
efficiency,
transmission
and
smart
grids,
vehicle
electrification,
and
energy
storage
and
microgrids.
The
fund
has
a
life
term
of
10
years
during
which,
redemptions
are
not
permitted.
(b)
The
fund
was
established
as
an
open-end
senior
real
estate
debt
fund
focused
on
providing
primarily
floating
rate
financing
secured
by
commercial
property
primarily
located
in
the
U.S.
Redemptions
are
subject
to
a
two-year
holding
period
from
the
acquisition
date.
(c)
This
open-end
fund
will
invest
in
high-quality,
core
infrastructure
assets
principally
throughout
North
America,
Europe
and
Australia
with
a
focus
on
current
yield,
diversification
and
inflation
protection.
Specifically,
the
fund
will
focus
on
regulated
or
contracted
assets
in
the
utilities,
energy,
power
and
transportation
sector
where
Brookfield
has
established
operating
expertise.
Of
those
sectors,
utilities
will
be
a
significant
focus
and
transportation
would
be
a
much
smaller
allocation
in
the
portfolio
given
its
more
cyclical
nature.
Redemptions
are
subject
to
a
three-year
holding
period
from
the
acquisition
date.
(d)
The
fund
was
established
to
invest
and
reinvest
assets
of
the
investors
through
the
REIT,
primarily
in
interests
(including
ownership
or
leasehold
interests)
in
real
property,
which
is
to
be
planted
with
trees,
or
real
property
on
which
trees
are
growing
(timberland),
trees
growing
on
timberland,
or
trees
which
have
been
cut
but
not
removed
from
the
timberland
(timber);
contracts
or
agreements
for
the
cutting
and/or
use
of
timber
on
timberland.
Timber
investments
are
not
intended
to
produce
immediate
revenues.
Redemptions
are
subject
to
a
two-year
holding
period
from
the
acquisition
date.
(e)
The
fund
will
seek
to
invest
in
a
global,
diversified
portfolio
of
high-quality
core
and
core-plus
mid-market
infrastructure
investments
with
stable
returns,
inflation
protection,
low
volatility,
predictable
yield
and
a
low
correlation
with
other
asset
classes
through
an
open-end
structure.
Redemptions
are
subject
to
a
three-year
holding
period
from
the
acquisition
date.
(f)
The
fund
is
an
open-ended
investment
fund
whose
objective
is
to
generate
an
attractive
total
return
through
the
acquisition
and
management
of
farmland
in
the
Midwestern
United
States.
Redemptions
are
subject
to
a
one-year
holding
period
from
the
acquisition
date.
After
the
holding
period
has
expired,
redemptions
are
permitted
with
written
redemption
notice
five
months
prior
to
the
annual
redemption
date,
which
is
the
last
day
of
February.
(g)
This
feeder
fund
represents
an
indirect
ownership
of
the
Prologis
European
Logistics
Fund
which
has
an
investment
objective
of
combining
attractive
current
income
with
long-term
capital
growth
by
investing
in
European
logistics
real
estate
assets.
Redemption
requests
accommodated
quarterly
to
the
extent
of
sufficient
liquid
assets,
with
at
least
90
days
notice.
(h)
This
feeder
fund
offers
hedging
to
protect
against
currency
movements
in
the
Global
Diversified
Infrastructure
Fund
which
invests
in
diversified
infrastructure
investments.
Redemptions
are
subject
to
a
three-year
holding
period
from
the
acquisition
date.
(i)
This
open-end
fund
blends
the
two
asset
classes
of
timberland
and
farmland.
The
geographic
focus
will
be
in
the
U.S.,
Canada,
Australia,
New
Zealand,
Chile,
Brazil,
Uruguay,
and
Western
Europe.
Agriculture
investments
will
be
diversified
among
row
crops
(corn,
soy,
wheat,
etc.),
permanent
crops
(vines/trees),
and
commodity
crops
(cotton,
lettuce,
strawberries,
etc.).
Redemptions
are
subject
to
a
three-year
holding
period
from
the
acquisition
date.
After
the
holding
period
has
expired,
redemptions
are
permitted
with
written
redemption
notice
given
by
April
30th
of
that
year.
(j)
The
fund
will
primarily
invest,
directly
or
indirectly,
in
core
and
core
plus
infrastructure
assets
and
infrastructure
investments
focused
on
the
infrastructure
and
power
sectors.
Redemptions
are
subject
to
a
three-year
holding
period
from
the
acquisition
date.
(k)
This
fund
is
comprised
of
loans
with
strong
fundamentals
and
focused
on
income
return.
Redemptions
are
available
if
inflows
of
capital
offset
the
requested
redemption
amount
and
if
liquidity
is
sufficient.
(l)
This
open-end
fund
invests
primarily
in
U.S.
farmland.
It
is
a
well-diversified
portfolio
across
many
regions
of
the
country
and
diversified
across
row
crops,
vegetable
crops,
and
permanent
crops.
Redemptions
are
permitted
with
written
redemption
notice
60
days
prior
to
the
end
of
the
quarter.
(m)
This
open-end,
commingled
private
real
estate
portfolio
combines
value-add
properties
with
capital
appreciation
potential
and
more
stable
income-generating
properties.
Properties
in
the
portfolio
typically
start
as
development,
renovation,
repositioning,
or
lease-up
stage
investments,
and
transition
toward
stabilized
assets.
Redemptions
are
permitted
with
written
redemption
notice
60
days
prior
to
the
end
of
the
quarter.
Glossary
to
the
Schedule
of
Investments
March
31,
2023
See
accompanying
notes.
21
Currency
Abbreviations
USD/$
United
States
Dollar
See
accompanying
notes.
22
Financial
Highlights
Net
Asset
Value,
Beginning
of
Period
Net
Investment
Income
(Loss)
(a)
Net
Realized
and
Unrealized
Gain
(Loss)
on
Investments
Total
From
Investment
Operations
Dividends
from
Net
Investment
Income
Distributions
from
Realized
Gains
Tax
Return
of
Capital
Distribution
Total
Dividends
and
Distributions
Net
Asset
Value,
End
of
Period
PRINCIPAL
DIVERSIFIED
SELECT
REAL
ASSET
FUND
Class
A
shares
March
31,
2023
$
28.09
$
0.63
(
$
1.54)
(
$
0.91)
(
$
0.41)
(
$
1.37)
$
–
(
$
1.78)
$
25.40
March
31,
2022
26.27
0.33
3.34
3.67
(
0.37)
(
1.48)
–
(
1.85)
28.09
March
31,
2021
19.35
0.49
7.18
7.67
(
0.52)
(
0.23)
–
(
0.75)
26.27
March
31,
2020(h)
25.00
0.36
(
5.61)
(
5.25)
(
0.35)
–
(
0.05)
(
0.40)
19.35
Class
Y
shares
March
31,
2023
28.31
0.76
(
1.54)
(
0.78)
(
0.48)
(
1.37)
–
(
1.85)
25.68
March
31,
2022
26.42
0.47
3.36
3.83
(
0.42)
(
1.52)
–
(
1.94)
28.31
March
31,
2021
19.39
0.62
7.20
7.82
(
0.55)
(
0.24)
–
(
0.79)
26.42
March
31,
2020(h)
25.00
0.47
(
5.64)
(
5.17)
(
0.39)
–
(
0.05)
(
0.44)
19.39
Institutional
shares
March
31,
2023
28.15
0.64
(
1.46)
(
0.82)
(
0.48)
(
1.37)
–
(
1.85)
25.48
March
31,
2022
26.33
0.42
3.33
3.75
(
0.41)
(
1.52)
–
(
1.93)
28.15
March
31,
2021
19.36
0.56
7.20
7.76
(
0.55)
(
0.24)
–
(
0.79)
26.33
March
31,
2020(h)
25.00
0.41
(
5.61)
(
5.20)
(
0.39)
–
(
0.05)
(
0.44)
19.36
See
accompanying
notes.
23
Financial
Highlights
(Continued)
Total
Return
Net
Assets,
End
of
Period
(in
thousands)
Ratio
of
Expenses
to
Average
Net
Assets
Ratio
of
Expenses
to
Average
Net
Assets
(Excluding
Interest
Expense
and
Fees)(b)
Ratio
of
Net
Investment
Income
to
Average
Net
Assets
Portfolio
Turnover
Rate
(2.13)
%
(c),(d),(e)
$
754
1.70
%
(f)
1.66
%
(f)
2.41
%
39.8
%
12.58
(c),(d),(g)
372
1.91
(f)
1.88
(f)
1.19
45.4
39.63
(c),(d)
276
1.67
(f)
N/A
2.11
56.0
(21.27)
(d),(
i
)
197
1.94
(f),(j)
N/A
1.87
(j)
56.8
(j)
(1.62)
(c),(e)
148,223
1.24
(f)
1.20
(f)
2.84
39.8
13.13
(c),(g)
187,063
1.41
(f)
1.38
(f)
1.69
45.4
40.36
(c)
162,855
1.17
(f)
N/A
2.61
56.0
(20.98)
(
i
)
98,501
1.43
(f),(j)
N/A
2.47
(j)
56.8
(j)
(1.82)
(c),(e)
10,753
1.30
(f)
1.26
(f)
2.48
39.8
12.93
(c),(g)
627
1.63
(f)
1.60
(f)
1.54
45.4
40.06
(c)
277
1.37
(f)
N/A
2.41
56.0
(21.10)
(
i
)
197
1.64
(f),(j)
N/A
2.17
(j)
56.8
(j)
(a)
Calculated
based
on
average
shares
outstanding
during
the
period.
(b)
Excludes
interest
expense
and
commitment
fees
charged
on
borrowings.
See
"Operating
Policies"
in
notes
to
financial
statements.
(c)
Total
return
is
calculated
using
the
traded
net
asset
value
which
may
differ
from
the
reported
net
asset
value.
The
traded
net
asset
value
is
the
net
asset
value
which
a
shareholder
would
have
paid
or
received
from
a
subscription
or
redemption.
(d)
Total
return
is
calculated
without
the
front-end
sales
charge
or
contingent
deferred
sales
charge.
(e)
Total
returns
calculated
using
the
reported
net
asset
values
as
of
March
31,
2023
are
(3.11)%,
(2.64)%
and
(2.80)%
for
Class
A,
Class
Y
and
Institutional,
respectively.
(f)
Reflects
Manager's
contractual
expense
limit.
(g)
Total
returns
calculated
using
the
reported
net
asset
values
as
of
March
31,
2022
are 14.32%,
14.86%,
and
14.62%
for
Class
A,
Class
Y,
and
Institutional,
respectively.
(h)
Period
from
June
25,
2019,
date
operations
commenced,
through
March
31,
2020.
(
i
)
Total
return
amounts
have
not
been
annualized.
(j)
Computed
on
an
annualized
basis.
Report
of
Independent
Registered
Public
Accounting
Firm
24
To
the
Shareholders
and
the
Board
of
Trustees
of
Principal
Diversified
Select
Real
Asset
Fund
Opinion
on
the
Financial
Statements
We
have
audited
the
accompanying
statement
of
assets
and
liabilities
of
Principal
Diversified
Select
Real
Asset
Fund
(the
“Fund”),
including
the
schedule
of
investments,
as
of
March
31,
2023,
and
the
related
statements
of
operations
and
cash
flows
for
the
year
then
ended,
the
statements
of
changes
in
net
assets
for
each
of
the
two
years
in
the
period
then
ended,
the
financial
highlights
for
each
of
the
three
years
in
the
period
then
ended
and
the
period
from
June
25,
2019,
date
operations
commenced,
through
March
31,
2020,
and
the
related
notes
(collectively
referred
to
as
the
“financial
statements”).
In
our
opinion,
the
financial
statements
present
fairly,
in
all
material
respects,
the
financial
position
of
the
Fund
at
March
31,
2023,
the
results
of
its
operations
and
its
cash
flows
for
the
year
then
ended,
the
changes
in
its
net
assets
for
each
of
the
two
years
in
the
period
then
ended
and
its
financial
highlights
for
each
of
the
three
years
in
the
period
then
ended
and
the
period
from
June
25,
2019,
date
operations
commenced,
through
March
31,
2020,
in
conformity
with
U.S.
generally
accepted
accounting
principles.
Basis
for
Opinion
These
financial
statements
are
the
responsibility
of
the
Fund’s
management.
Our
responsibility
is
to
express
an
opinion
on
the
Fund’s
financial
statements
based
on
our
audits.
We
are
a
public
accounting
firm
registered
with
the
Public
Company
Accounting
Oversight
Board
(United
States)
(“PCAOB”)
and
are
required
to
be
independent
with
respect
to
the
Fund
in
accordance
with
the
U.S.
federal
securities
laws
and
the
applicable
rules
and
regulations
of
the
Securities
and
Exchange
Commission
and
the
PCAOB.
We
conducted
our
audits
in
accordance
with
the
standards
of
the
PCAOB.
Those
standards
require
that
we
plan
and
perform
the
audit
to
obtain
reasonable
assurance
about
whether
the
financial
statements
are
free
of
material
misstatement,
whether
due
to
error
or
fraud.
The
Fund
is
not
required
to
have,
nor
were
we
engaged
to
perform,
an
audit
of
the
Fund’s
internal
control
over
financial
reporting.
As
part
of
our
audits,
we
are
required
to
obtain
an
understanding
of
internal
control
over
financial
reporting
but
not
for
the
purpose
of
expressing
an
opinion
on
the
effectiveness
of
the
Fund’s
internal
control
over
financial
reporting.
Accordingly,
we
express
no
such
opinion.
Our
audits
included
performing
procedures
to
assess
the
risks
of
material
misstatement
of
the
financial
statements,
whether
due
to
error
or
fraud,
and
performing
procedures
that
respond
to
those
risks.
Such
procedures
included
examining,
on
a
test
basis,
evidence
regarding
the
amounts
and
disclosures
in
the
financial
statements.
Our
procedures
included
confirmation
of
securities
owned
as
of
March
31,
2023,
by
correspondence
with
the
custodian,
transfer
agent,
investment
manager
of
the
private
investment
funds
and
brokers;
when
replies
were
not
received
by
brokers
or
investment
manager
of
the
private
investment
funds,
we
performed
other
auditing
procedures.
Our
audits
also
included
evaluating
the
accounting
principles
used
and
significant
estimates
made
by
management,
as
well
as
evaluating
the
overall
presentation
of
the
financial
statements.
We
believe
that
our
audits
provide
a
reasonable
basis
for
our
opinion.
We
have
served
as
the
auditor
of
one
or
more
Principal
investment
companies
since
1969.
Minneapolis,
Minnesota
May
25,
2023
Shareholder
Expense
Example
Principal
Diversified
Select
Real
Asset
Fund
March
31,
2023
(unaudited)
25
As
a
shareholder
of
Principal
Diversified
Select
Real
Asset
Fund,
you
incur
two
types
of
costs:
(1)
transaction
costs,
including
sales
charges
on
purchase
payments
and
contingent
deferred
sales
charges;
and
(2)
ongoing
costs,
including
management
fees;
distribution
fees;
and
other
fund
expenses.
In
addition
to
the
expenses
the
Fund
bears
directly,
the
Fund
may
indirectly
bear
its
pro
rata
share
of
the
expenses
incurred
by
the
investment
companies
in
which
the
Fund
invests.
This
Example
is
intended
to
help
you
understand
your
ongoing
costs
(in
dollars)
of
investing
in
Principal
Diversified
Select
Real
Asset
Fund
and
to
compare
these
costs
with
the
ongoing
costs
of
investing
in
other
funds.
The
Example
is
based
on
an
investment
of
$1,000
invested
at
the
beginning
of
the
period
and
held
for
the
entire
period
October
1,
2022
to
March
31,
2023
,
unless
otherwise
noted.
Actual
Expenses
The
first
section
of
the
table
below
provides
information
about
actual
account
values
and
actual
expenses.
You
may
use
the
information
in
this
section,
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
section
under
the
heading
entitled
“Expenses
Paid
During
Period”
to
estimate
the
expenses
you
paid
on
your
account
during
this
period.
Additional
account
fees
may
apply
to
certain
types
of
investment
products
which
are
not
included
in
the
table
below.
If
they
were,
the
estimate
of
expenses
you
paid
during
the
period
would
be
higher,
and
your
ending
account
value
lower,
by
this
amount.
Hypothetical
Example
for
Comparison
Purposes
The
second
section
of
the
table
below
provides
information
about
hypothetical
account
values
and
hypothetical
expenses
based
on
the
Fund’s
actual
expense
ratio
and
an
assumed
rate
of
return
of
5%
per
year
before
expenses,
which
is
not
the
Fund’s
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
Fund
and
other
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
sales
charges
on
purchase
payments,
contingent
deferred
sales
charges,
redemption
fees
or
exchange
fees.
Therefore,
the
second
section
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.
Actual
Hypothetical
Beginning
Account
Value
October
1,
2022
Ending
Account
Value
March
31,
2023
Expenses
Paid
During Period
October
1,
2022 to
March
31,
2023
(a)
Beginning
Account
Value
October
1,
2022
Ending
Account
Value
March
31,
2023
Expenses
Paid
During Period
October
1,
2022 to
March
31,
2023
(a)
Annualized
Expense
Ratio
Principal
Diversified
Select
Real
Asset
Fund
Class
A
$
1,000.00
$
1,038.73
$
8.03
$
1,000.00
$
1,017.05
$
7.95
1.58
%
Class
Y
1,000.00
1,041.58
5.50
1,000.00
1,019.55
5.44
1.08
Institutional
1,000.00
1,040.66
6.51
1,000.00
1,018.55
6.44
1.28
Principal
Diversified
Select
Real
Asset
Fund
(Excluding
Interest
Expense
and
Fees
)
Class
A
1,000.00
1,038.73
7.83
1,000.00
1,017.25
7.75
1.54
Class
Y
1,000.00
1,041.58
5.29
1,000.00
1,019.75
5.24
1.04
Institutional
1,000.00
1,040.66
6.31
1,000.00
1,018.75
6.24
1.24
(a)
Expenses
are
equal
to
a
fund's
annualized
expense
ratio
multiplied
by
the
average
account
value
over
the
period,
multiplied
by
182/365
(to
reflect
the
one-half
year
period).
26
FUND
BOARD
OF
TRUSTEES
AND
OFFICERS
The
Board
of
Trustees
(the
“Board”)
has
overall
responsibility
for
overseeing
the
Fund’s
operations
in
accordance
with
the
Investment
Act
of
1940,
as
amended
(the
“1940
Act”),
other
applicable
laws,
and
the
Fund’s
charter.
Each
member
of
the
Board
(“Board
Member”)
serves
on
the
Boards
of
the
following
investment
companies:
Principal
Funds,
Inc.,
Principal
Variable
Contracts
Funds,
Inc.,
Principal
Exchange-Traded
Funds,
and
Principal
Diversified
Select
Real
Asset
Fund
which
are
collectively
referred
to
as
the
“Fund
Complex”.
Board
Members
that
are
affiliated
persons
of
any
investment
advisor,
the
principal
distributor,
or
the
principal
underwriter
of
the
Fund
Complex
are
considered
“interested
persons”
of
the
Fund
(as
defined
in
the
1940
Act)
and
are
referred
to
as
“Interested
Board
Members”.
Board
Members
who
are
not
Interested
Board
Members
are
referred
to
as
“Independent
Board
Members”.
Each
Board
Member
generally
serves
until
the
next
annual
meeting
of
shareholders
or
until
such
Board
Member’s
earlier
death,
resignation,
or
removal.
Independent
Board
Members
have
a
72-year
age
limit
and,
for
Independent
Board
Members
elected
on
or
after
September
14,
2021,
a
72-year
age
limit
or
a
15-year
term
limit,
whichever
occurs
first.
The
Board
may
waive
the
age
or
term
limits
in
the
Board’s
discretion.
The
Board
elects
officers
to
supervise
the
day-to-day
operations
of
the
Fund
Complex.
Officers
serve
at
the
pleasure
of
the
Board,
and
each
officer
has
the
same
position
with
each
investment
company
in
the
Fund
Complex.
INDEPENDENT
BOARD
MEMBERS
Name,
Position
Held
with
the
Fund
Complex,
Year
of
Birth
Principal
Occupation(s)
During
past
5
years
Number
of
Portfolios
in
Fund
Complex
Overseen
by
Board
Member
Other
Directorships
Held
by
Board
Member
During
Past
5
Years
Leroy
T.
Barnes,
Jr.
Board
Member
since
2012
Member,
Audit
Committee
1951
Retired
130
McClatchy
Newspapers,
Inc.
(2000-
2020);
Frontier
Communications,
Inc.
(2005-2019)
Craig
Damos
Lead
Independent
Board
Member
since
2020
Board
Member
since
2008
Member,
Nominating
and
Governance
Committee
Member,
Operations
Committee
Member,
Executive
Committee
1954
President,
C.P.
Damos
Consulting
LLC
(consulting
services)
130
None
Katharin
S.
Dyer
Board
Member
since
2023
Member,
Operations
Committee
1957
Founder
and
Chief
Executive
Officer,
PivotWise
(consulting
services)
Global
Partner,
IBM
(technology
company)
from
2016-2018
130
Liquidity
Services,
Inc.
(2020-present)
Frances
P.
Grieb
Board
Member
since
2023
Member,
Audit
Committee
1960
Retired
130
First
Interstate
BancSystems,
Inc.
(2022-present);
Great
Western
Bancorp,
Inc.
and
Great
Western
Bank
(2014-2022)
Fritz
S.
Hirsch
Board
Member
since
2005
Member,
Nominating
and
Governance
Committee
Member,
15(c)
Committee
1951
Interim
CEO,
MAM
USA
(manufacturer
of
infant
and
juvenile
products)
from
February
2020
to
October
2020
130
MAM
USA
(2011-present)
Victor
Hymes
Board
Member
since
2020
Chair,
Audit
Committee
Member,
Nominating
and
Governance
Committee
1957
Founder,
CEO,
CIO,
Legato
Capital
Management,
LLC
(investment
management
company)
130
None
Padelford
L.
Lattimer
Board
Member
since
2020
Chair,
Operations
Committee
Member,
15(c)
Committee
1961
Managing
Partner,
TBA
Management
Consulting
LLC
(management
consulting
and
staffing
company)
130
None
Karen
McMillan
Board
Member
since
2014
Member,
Operations
Committee
Chair,
15(c)
Committee
1961
Founder/Owner,
Tyche
Consulting
LLC
(consulting
services)
Managing
Director,
Patomak
Global
Partners,
LLC
(financial
services
consulting)
from
2014-2021
130
None
27
INTERESTED
BOARD
MEMBERS
Name,
Position
Held
with
the
Fund
Complex,
Year
of
Birth
Principal
Occupation(s)
During
past
5
years
Number
of
Portfolios
in
Fund
Complex
Overseen
by
Board
Member
Other
Directorships
Held
by
Board
Member
During
Past
5
Years
Elizabeth
A.
Nickels
Board
Member
since
2015
Member,
Audit
Committee
Chair,
Nominating
and
Governance
Committee
1962
Retired
130
SpartanNash
(2000-2022)
Mary
M.
VanDeWeghe
Board
Member
since
2018
Member,
Audit
Committee
Member,
15(c)
Committee
1959
CEO
and
President,
Forte
Consulting,
Inc.
(financial
and
management
consulting)
130
Helmerich
&
Payne
(2019-present);
Denbury
Resources
Inc.
(2019-2020)
Name,
Position
Held
with
the
Fund
Complex,
Year
of
Birth
Principal
Occupation(s)
During
past
5
years
Number
of
Portfolios
in
Fund
Complex
Overseen
by
Board
Member
Other
Directorships
Held
by
Board
Member
During
Past
5
Years
Kamal
Bhatia
Principal
Global
Investors,
LLC
(“PGI”)
130
None
Chair
and
Board
Member
since
2023
Chief
Executive
Officer
and
President
since
2019
Chair,
Executive
Committee
1972
Director
since
2019
President-Principal
Funds
since
2019
Principal
Funds
Distributor,
Inc.
(“PFD”)
Director
since
2019
Principal
Financial
Group,
Inc.
(“PFGI”),
Principal
Financial
Services,
Inc.
(“PFSI”),
and
Principal
Life
Insurance
Company
(“PLIC”)
Senior
Executive
Managing
Director
–
Global
Head
of
Investments
–
Principal
Asset
Management
(“PAM”)
since
2023
Senior
Executive
Director
and
Chief
Operating
Officer
-
PAM
since
2023
Senior
Executive
Director
and
Chief
Operating
Officer
-
PGI
(2020-2022)
President-Principal
Funds
(2019-2020)
Post
Advisory
Group,
LLC
(“Post”)
Director
since
2020
Principal
Real
Estate
Investors,
LLC
(“PREI”)
Senior
Executive
Director
and
Chief
Operating
Officer
-
PGI
since
2022
Director
since
2020
Principal
Shareholder
Services,
Inc.
(“PSS”)
Executive
Vice
President
since
2019
Director
and
Chair
(2019-2022)
Spectrum
Asset
Management
(“Spectrum”)
Director
since
2021
Origin
Asset
Management
(“Origin”)
Additional
Director
since
2022
OppenheimerFunds
Senior
Vice
President
(2011-2019)
28
Correspondence
intended
for
each
Board
Member
who
is
other
than
an
Interested
Board
Member
may
be
sent
to
655
9th
Street,
Des
Moines,
IA
50392.
Position
Held
with
the
Fund
Complex,
Year
of
Birth
Principal
Occupation(s)
During
past
5
years
Number
of
Portfolios
in
Fund
Complex
Overseen
by
Board
Member
Other
Directorships
Held
by
Board
Member
During
Past
5
Years
Patrick
G.
Halter
PGI
130
None
Board
Member
since
2017
Member,
Executive
Committee
1959
Chair
since
2018
Chief
Executive
Officer
and
President
since
2018
Director
since
2003
PFGI,
PFSI,
and
PLIC
President
and
Chief
Executive
Officer
–
PAM)
since
2022
President
–
Principal
Global
Asset
Management
(“PGAM”)
(2020-2022)
Post
Director
since
2017
Chair
(2017-2020)
PREI
President
-
PGAM
since
2022
Director
and
Chair
since
2004
Chief
Executive
Officer
and
President
(2018-2021)
Origin
Director
(2018-2019)
Kenneth
A.
McCullum
PGI
130
Board
Member
since
2023
1964
Director
since
2020
PFGI,
PFSI,
and
PLIC
Executive
Vice
President
and
Chief
Risk
Officer
since
2023
Senior
Vice
President
and
Chief
Risk
Officer
(2020-
2023)
Vice
President
and
Chief
Actuary
(2015-2020)
Principal
Securities,
Inc.
(“PSI”)
Director
since
2020
PSS
Director
since
2020
29
FUND
COMPLEX
OFFICERS
Name,
Position
Held
with
the
Fund
Complex,
Address,
and
Year
of
Birth
Principal
Occupation(s)
During
past
5
years
Randy
D.
Bolin
Assistant
Tax
Counsel
Des
Moines,
IA
50392
1961
Vice
President/Associate
General
Counsel,
PGI
since
2016
Vice
President/Associate
General
Counsel,
PFSI
since
2013
Vice
President/Associate
General
Counsel,
PLIC
since
2013
Beth
Graff
Vice
President
and
Assistant
Controller
Des
Moines,
IA
50392
1968
Director
–
Fund
Accounting,
PLIC
since
2016
Gina
L.
Graham
Treasurer
Des
Moines,
IA
50392
1965
Vice
President
and
Treasurer,
PGI
since
2016
Vice
President
and
Treasurer,
PFD
since
2016
Vice
President
and
Treasurer,
PFSI
since
2016
Vice
President
and
Treasurer,
PLIC
since
2016
Vice
President
and
Treasurer,
PREI
since
2017
Vice
President
and
Treasurer,
PSI
since
2016
Vice
President
and
Treasurer,
PSS
since
2016
Vice
President
and
Treasurer,
RobustWealth,
Inc.
since
2018
Megan
Hoffmann
Vice
President
and
Controller
Des
Moines,
IA
50392
1979
Director
–
Accounting,
PLIC
since
2020
Assistant
Director
–
Accounting,
PLIC
(2017-2020)
Laura
B.
Latham
Assistant
Counsel
and
Assistant
Secretary
Des
Moines,
IA
50392
1986
Counsel,
PGI
since
2018
Counsel,
PLIC
since
2018
Diane
K.
Nelson
AML
Officer
Des
Moines,
IA
50392
1965
Chief
Compliance
Officer/AML
Officer,
PSS
since
2015
Tara
Parks
Vice
President
and
Assistant
Controller
Des
Moines,
IA
50392
1983
Director
–
Accounting,
PLIC
since
2019
Tax
Manager
–
ALPS
Fund
Services
(2011-2019)
Deanna
Y.
Pellack
Assistant
Counsel
and
Assistant
Secretary
Des
Moines,
IA
50392
1987
Counsel,
PLIC
since
2022
Vice
President,
The
Northern
Trust
Company
(2019-
2022)
Second
Vice
President,
The
Northern
Trust
Company
(2014-2019)
Secretary,
Advisers
Investment
Trust
(2021-2022)
Assistant
Secretary,
Advisers
Investment
Trust
(2018-2021)
Sara
L.
Reece
Vice
President
and
Chief
Operating
Officer
Des
Moines,
IA
50392
1975
Managing
Director
–
Global
Funds
Ops,
PLIC
since
2021
Managing
Director
–
Financial
Analysis/
Planning,
PLIC
(2021)
Director
-
Accounting,
PLIC
(2015-2021)
Teri
R.
Root
Chief
Compliance
Officer
Des
Moines,
IA
50392
1979
Interim
Chief
Compliance
Officer
-
Funds
(2018)
Vice
President,
PSS
since
2015
Michael
Scholten
Chief
Financial
Officer
Des
Moines,
IA
50392
1979
Chief
Operations
Officer,
PFD
since
2022
Chief
Financial
Officer
–
PFD
(2016-2022)
Assistant
Vice
President
and
Actuary,
PLIC
since
2021
Chief
Financial
Officer
–
Funds/Platforms,
PLIC
since
2015
Chief
Financial
Officer,
PSS
since
2015
30
Name,
Position
Held
with
the
Fund
Complex,
Address,
and
Year
of
Birth
Principal
Occupation(s)
During
past
5
years
Adam
U.
Shaikh
Assistant
Counsel
and
Assistant
Secretary
Des
Moines,
IA
50392
1972
Assistant
General
Counsel,
PGI
since
2018
Counsel,
PLIC
since
2006
John
L.
Sullivan
Assistant
Counsel
and
Assistant
Secretary
Des
Moines,
IA
50392
1970
Counsel,
PGI
since
2020
Counsel,
PLIC
since
2019
Prior
thereto,
Attorney
in
Private
Practice
Dan
L.
Westholm
Assistant
Treasurer
Des
Moines,
IA
50392
1966
Assistant
Vice
President-Treasury,
PGI
since
2013
Assistant
Vice
President-Treasury,
PFD
since
2013
Assistant
Vice
President-Treasury,
PLIC
since
2014
Assistant
Vice
President-Treasury,
PSI
since
2013
Assistant
Vice
President-Treasury,
PSS
since
2013
Beth
C.
Wilson
Vice
President
and
Secretary
Des
Moines,
IA
50392
1956
Director
and
Secretary
–
Funds,
PLIC
since
2007
Clint
L.
Woods
PGI
Counsel,
Vice
President,
and
Assistant
Secretary
Des
Moines,
IA
50392
1961
Vice
President,
Associate
General
Counsel,
and
Assistant
Secretary
since
2021
Vice
President,
Associate
General
Counsel,
and
Secretary
(2020-2021)
Vice
President,
Associate
General
Counsel,
Governance
Officer,
and
Assistant
Corporate
Secretary
(2018-2020)
PFD
Vice
President,
Associate
General
Counsel,
and
Secretary
since
2022
Vice
President,
Associate
General
Counsel,
and
Assistant
Corporate
Secretary
(2019-2022)
PFSI
Vice
President,
Associate
Counsel,
Governance
Officer,
and
Assistant
Corporate
Secretary
since
2015
PLIC
Vice
President,
Associate
General
Counsel,
Governance
Officer,
and
Assistant
Corporate
Secretary
since
2015
Post
Assistant
Secretary
since
2021
Secretary
(2020-2021)
PREI
Vice
President,
Associate
General
Counsel,
Governance
Officer,
and
Secretary
since
2020
Vice
President,
Associate
Counsel,
Governance
Officer,
and
Assistant
Corporate
Secretary
(2020)
PSI
Vice
President,
Associate
General
Counsel,
and
Secretary
(2021-2022)
Vice
President,
Associate
General
Counsel,
and
Assistant
Corporate
Secretary
(2019-2021)
PSS
Vice
President,
Associate
General
Counsel,
and
Secretary
since
2021
Vice
President,
Associate
General
Counsel,
and
Assistant
Corporate
Secretary
(2019-2021)
31
The
15(c)
Committee’s
primary
purpose
is
to
assist
the
Board
in
performing
the
annual
review
of
the
Fund’s
advisory
and
sub-advisory
agreements
pursuant
to
Section
15(c)
of
the
1940
Act.
The
Committee
is
responsible
for
requesting
and
reviewing
related
materials.
The
Audit
Committee’s
primary
purpose
is
to
assist
the
Board
by
serving
as
an
independent
and
objective
party
to
monitor
the
Fund
Complex’s
accounting
policies,
financial
reporting
and
internal
control
system,
as
well
as
the
work
of
the
independent
registered
public
accountants.
The
Audit
Committee
assists
Board
oversight
of
1)
the
integrity
of
the
Fund
Complex’s
financial
statements;
2)
the
Fund
Complex’s
compliance
with
certain
legal
and
regulatory
requirements;
3)
the
independent
registered
public
accountants’
qualifications
and
independence;
and
4)
the
performance
of
the
Fund
Complex’s
independent
registered
public
accountants.
The
Audit
Committee
also
provides
an
open
avenue
of
communication
among
the
independent
registered
public
accountants,
the
Manager’s
internal
auditors,
Fund
Complex
management,
and
the
Board.
The
Executive
Committee’s
primary
purpose
is
to
exercise
certain
powers
of
the
Board
when
the
Board
is
not
in
session.
When
the
Board
is
not
in
session,
the
Committee
may
exercise
all
powers
of
the
Board
in
the
management
of
the
Fund
Complex's
business
except
the
power
to
1)
issue
stock,
except
as
permitted
by
law;
2)
recommend
to
the
shareholders
any
action
that
requires
shareholder
approval;
3)
amend
the
bylaws;
or
4)
approve
any
merger
or
share
exchange
that
does
not
require
shareholder
approval.
The
Nominating
and
Governance
Committee’s
primary
purpose
is
to
oversee
the
structure
and
efficiency
of
the
Board
and
the
committees.
The
Committee
is
responsible
for
evaluating
Board
membership
and
functions,
committee
membership
and
functions,
insurance
coverage,
and
legal
matters.
The
Committee's
nominating
functions
include
selecting
and
nominating
Independent
Board
Member
candidates
for
election
to
the
Board.
Generally,
the
Committee
requests
nominee
suggestions
from
Board
Members
and
management.
In
addition,
the
Committee
considers
candidates
recommended
by
shareholders
of
the
Fund
Complex.
Recommendations
should
be
submitted
in
writing
to
the
Principal
Funds
Complex
Secretary,
in
care
of
the
Principal
Funds
Complex,
711
High
Street,
Des
Moines,
IA
50392.
Such
recommendations
must
include
all
information
specified
in
the
Committee’s
charter
and
must
conform
with
the
procedures
set
forth
in
Appendix
A
thereto,
which
can
be
found
at
https://secure02.principal.com/publicvsupply/GetFile?fm=MM13013&ty=VOP&EXT=.VOP.
Examples
of
such
information
include
the
nominee’s
biographical
information;
relevant
educational
and
professional
background
of
the
nominee;
the
number
of
shares
of
each
Fund
owned
of
record
and
beneficially
by
the
nominee
and
by
the
recommending
shareholder;
any
other
information
regarding
the
nominee
that
would
be
required
to
be
disclosed
in
a
proxy
statement
or
other
filing
required
to
be
made
in
connection
with
the
solicitation
of
proxies
for
the
election
of
board
members;
whether
the
nominee
is
an
“interested
person”
of
the
Fund
as
defined
in
the
1940
Act;
and
the
written
consent
of
the
nominee
to
be
named
as
a
nominee
and
serve
as
a
board
member
if
elected.
When
evaluating
a
potential
nominee
for
Independent
Board
Member,
the
Committee
may
consider,
among
other
factors:
educational
background;
relevant
business
and
industry
experience;
whether
the
person
is
an
"interested
person"
of
the
Fund
as
defined
in
the
1940
Act;
and
whether
the
person
is
willing
to
serve,
and
willing
and
able
to
commit
the
time
necessary
to
attend
meetings
and
perform
the
duties
of
an
Independent
Board
Member. In
addition,
the
Committee
may
consider
whether
a
candidate’s
background,
experience,
skills
and
views
would
complement
the
background,
experience,
skills
and
views
of
other
Board
Members
and
would
contribute
to
the
diversity
of
the
Board. The
final
decision
is
based
on
a
combination
of
factors,
including
the
strengths
and
the
experience
an
individual
may
bring
to
the
Board.
The
Board
does
not
regularly
use
the
services
of
professional
search
firms
to
identify
or
evaluate
potential
candidates
or
nominees.
The
Operations
Committee’s
primary
purpose
is
to
review
and
oversee
the
provision
of
administrative
and
distribution
services
to
the
Fund
Complex,
communications
with
the
Fund
Complex’s
shareholders,
and
the
Fund
Complex’s
operations.
Additional
information
about
the
Fund
is
available
in
the
Prospectus
and
the
Statement
of
Additional
Information
dated
August
1,
2022
and
as
supplemented.
These
documents
may
be
obtained
free
of
charge
by
writing
Principal
Diversified
Select
Real
Asset
Fund,
P.O.
Box
219971,
Kansas
City,
MO
64121-9971
or
telephoning
1-800-222-5852.
The
prospectus
may
be
viewed
at
www.PrincipalAM.com/plp#tab=interval.
Name,
Position
Held
with
the
Fund
Complex,
Address,
and
Year
of
Birth
Principal
Occupation(s)
During
past
5
years
Clint
L.
Woods
(continued)
RobustWealth,
Inc.
Vice
President,
Associate
General
Counsel,
and
Assistant
Corporate
Secretary
since
2019
Spectrum
Assistant
Secretary
since
2021
Secretary
(2020-2021)
Jared
A.
Yepsen
Assistant
Tax
Counsel
Des
Moines,
IA
50392
1981
Counsel,
PGI
(2017-2019)
Counsel,
PLIC
since
2015
32
PROXY
VOTING
POLICIES
A
description
of
the
policies
and
procedures
the
Fund
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
1-800-222-5852,
or
on
the
SEC
website
at
www.sec.gov.
SCHEDULES
OF
INVESTMENTS
The
Fund
files
complete
schedules
of
investments
with
the
Securities
and
Exchange
Commission
for
the
first
and
third
quarters
of
each
fiscal
year
as
an
exhibit
to
its
reports
on
Form
N-PORT.
The
Fund’s
Form
N-PORT
reports
are
available
on
the
Commission’s
website
at
www.
sec.gov.
Federal
Income
Tax
Information
Principal
Diversified
Select
Real
Asset
Fund
March
31,
2023
(unaudited)
33
Long-Term
Capital
Gain
Dividends.
The
Fund
distributed
long-term
capital
gain
dividends
during
the
fiscal
year
ended
March
31,
2023
.
Details
of
designated
long-term
capital
gain
dividends
for
federal
income
tax
purposes
are
shown
in
the
Notes
to
Financial
Statements.
To
the
extent
necessary
to
distribute
such
capital
gains,
the
Fund
may
also
utilize,
and
hereby
designate,
earnings
and
profits
distributed
to
shareholders
on
redemptions
of
shares
as
part
of
the
Dividends
Paid
Deduction.
Dividends
Received
Deduction
(“DRD”).
For
corporate
shareholders,
the
Fund
designates
the
following
as
a
percentage
of
taxable
ordinary
income
distributions
(dividend
income
and
short-term
gains,
if
any),
or
up
to
the
maximum
amount
allowable,
as
DRD
eligible
for
the
calendar
year
ended
December
31,
2022:
Qualified
Dividend
Income
(“QDI”).
Certain
dividends
paid
by
the
Fund
may
be
subject
to
a
maximum
tax
rate
of
20%.
The
Fund
designates
the
following
as
a
percentage
of
taxable
ordinary
income
distributions
(dividend
income
and
short-term
gains,
if
any),
or
up
to
the
maximum
amount
allowable,
as
QDI
eligible
for
the
calendar
year
ended
December
31,
2022:
Section
163(j)
Interest
Dividends.
The
Fund
intends
to
pass
through
Section
163(j)
Interest
Dividends
as
defined
in
Proposed
Treasury
Regulation
§1.163(j)-1(b).
The
Fund
designates
the
following
as
a
percentage
of
taxable
ordinary
income
distributions
(dividend
income
and
short-term
gains,
if
any),
or
up
to
the
maximum
amount
allowable,
as
QDI
eligible
for
the
calendar
year
ended
December
31,
2022:
In
early
2023,
if
applicable,
shareholders
of
record
received
the
above
information
on
QDI,
Foreign
Tax
Credit,
and
Section
199A
for
the
distribution
paid
to
them
by
the
Fund
during
the
calendar
year
2022
via
Form
1099.
This
information
is
given
to
meet
certain
requirements
of
the
Internal
Revenue
Code
and
should
not
be
used
by
shareholders
for
preparing
their
income
tax
returns.
For
tax
return
preparation
purposes,
please
refer
to
the
information
supplied
with
the
Form
1099-DIV
you
will
receive
from
the
Fund's
transfer
agent.
The
Fund
will
notify
shareholders
in
early
2024
of
amounts
paid
to
them
by
the
funds,
if
any,
during
the
calendar
year
2023.
The
latest
tax
reporting
supplement
is
available
on
Principal's
Tax
Center
website.
Website:
https://www.principal.com/tax-center
Please
consult
your
tax
advisor
if
you
have
any
questions.
DRD
Principal
Diversified
Select
Real
Asset
Fund
100.00%
QDI
Principal
Diversified
Select
Real
Asset
Fund
100.00%
163(j)
Interest
Dividends
Principal
Diversified
Select
Real
Asset
Fund
3.31
%
Principal
Funds
Distributor,
Inc.
711
High
Street
Des
Moines,
IA
50392-6370
Do
not
use
this
address
for
business
correspondence
PrincipalAM.com
Investing
involves
risk,
including
possible
loss
of
principal.
This
shareholder
report
is
published
as
general
information
for
the
shareholders
of
Principal
Diversified
Select
Real
Asset
Fund.
This
material
is
not
authorized
for
distribution
unless
preceded
or
accompanied
by
a
current
prospectus
or
a
summary
prospectus
that
includes
more
information
regarding
the
risk
factors,
expenses,
policies,
and
objectives
of
the
funds.
Investors
should
read
the
prospectus
or
summary
prospectus
carefully
before
investing.
To
obtain
a
prospectus
or
summary
prospectus,
please
contact
your
financial
professional
or
call
800-222-5852.
Principal
Funds
are
distributed
by
Principal
Funds
Distributor,
Inc.
Principal
®
,
Principal
Financial
Group
®
,
and
Principal
and
the
logomark
design
are
registered
trademarks
of
Principal
Financial
Services,
Inc.,
a
Principal
Financial
Group
company,
in
the
United
States
and
are
trademarks
and
services
marks
of
Principal
Financial
Services,
Inc.,
in
various
countries
around
the
world.
©
2023
Principal
Financial
Services,
Inc.
|
INF100AR-03
|
05/2023
|
2784330
ITEM 2 – CODE OF ETHICS
(a) The Registrant has adopted a code of ethics (the "Code of Ethics") that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.
(b) Not applicable.
(c) The Registrant has not amended, as described in Item 2(c) of Form N-CSR, its Code of Ethics during the period covered by the shareholder report presented in Item 1 hereto.
(d) The Registrant has not granted a waiver or an implicit waiver from a provision of its Code of Ethics during the period covered by the shareholder report presented in Item 1 hereto.
(e) Not applicable.
(f) The Registrant's Code of Ethics is attached as an Exhibit hereto in response to Item 13(a)(1).
ITEM 3 – AUDIT COMMITTEE FINANCIAL EXPERT
The Registrant's Board has determined that Elizabeth Nickels, a member of the Registrant's Audit Committee, is an "audit committee financial expert" and "independent," as such terms are defined in this Item.
ITEM 4 – PRINCIPAL ACCOUNTANT FEES AND SERVICES
(a) Audit Fees.
Ernst & Young is the principal accountant for the registrant. As such, Ernst & Young has audited the financial statements of the registrant and reviewed regulatory filings that include those financial statements. During the last two fiscal years, Ernst & Young has billed the following amounts for their professional services.
March 31, 2023 - $105,000
March 31, 2022 - $100,000
(b) Audit-Related Fees.
Ernst & Young provided audit-related services to the registrant that are not included in response to item 4(a). Those services related to the review of Form N-2. During the last two fiscal years, Ernst & Young has billed the following amounts for those services.
March 31, 2023 - $0
March 31, 2022 - $0
Ernst & Young billed no fees that registrant’s audit committee was required to pre-approve pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X.
(c) Tax Fees.
Ernst & Young prepares and reviews the federal income tax returns and federal excise tax returns of the registrant. In connection with this service, Ernst & Young prepares and reviews the calculation of the registrant’s dividend distributions that are included as deductions on the tax returns. Ernst & Young also provides services to identify passive foreign investment companies. Ernst & Young also provides services to understand and comply with tax laws in certain foreign countries and services to determine the taxability of corporate actions. During the last two fiscal years, Ernst & Young has billed the following amounts for their professional tax services.
March 31, 2023 - $11,539
March 31, 2022 - $11,699
Ernst & Young billed no fees that registrant’s audit committee was required to pre-approve pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X.
(d) All Other Fees.
Ernst & Young has not billed the registrant for other products or services during the last two fiscal years.
Ernst & Young billed no fees that registrant’s audit committee was required to pre-approve pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X.
(e) (1) Audit Committee Pre-Approval Policy.
The audit committee of the registrant has adopted the following pre-approval policy:
The Principal Funds
Policy on Auditor Independence
The purpose of this policy is to ensure the independence of the Principal Funds' primary independent auditor. This policy is established by the Audit Committee (the "Committee") of the Boards of Directors of Principal Funds, Inc. and Principal Variable Contracts Funds, Inc. and the Boards of Trustees of Principal Exchange-Traded Funds and any registered closed‑end management investment company that is operated as an interval fund and managed by Principal Global Investors, LLC (the “Funds”) (the “Boards of the Funds”) effective for all engagements of the primary independent auditor.
[1]
1. The primary independent auditor, its subsidiaries and affiliates shall not provide Prohibited Services to the Funds. For the purposes of this policy, Prohibited Services are:
·
Services that are subject to audit procedure during a financial statement audit;
·
Services where the auditor would act on behalf of management;
·
Services where the auditor is an advocate to the client's position in an adversarial proceeding;
·
Bookkeeping or other services related to the accounting records or financial statements of the Funds, its subsidiaries and affiliates;
·
Financial information systems design and implementation;
·
Appraisal or valuation services, fairness opinions, or contribution-in-kind reports;
·
Actuarial services;
·
Internal audit functions or human resources;
·
Broker or dealer, investment advisor, or investment banking services;
·
Legal services and expert services unrelated to the audit;
·
Tax planning services related to listed, confidential and aggressive transactions;
·
Personal tax planning services to individuals in a financial reporting oversight role with regard to the Funds (other than members of the Boards of the Funds who are not also officers of the Funds), including the immediate family members of such individuals;
·
Any other service that the Public Company Accounting Oversight Board (PCAOB) determines, by regulation, is impermissible.
2. (A) All services the primary independent auditor, its subsidiaries and affiliates provide to the Funds, and (B) Audit services, including audits of annual financial statements, audits of acquired or divested businesses or review of regulatory filings, any independent auditor provides, shall be approved by the Committee in advance in accordance with the following procedure:
Each quarter, Management will present to the Committee for pre-approval, a detailed description of each particular service, excluding tax services, for which pre-approval is sought and a range of fees for such service. The Committee may delegate pre-approval authority to one or more of its members provided such delegated member(s) shall present a report of any services approved to the full Committee at its next regularly scheduled meeting. The Committee Chairperson shall have pre-approval authority for changes to any range of fees applicable to services the Committee previously approved and for new services and the range of fees for such services that arise between regularly scheduled Committee meetings.
Similarly, the primary independent auditor will present to the Committee for pre-approval a written description of the nature and scope of all tax services not expressly prohibited, including the fee arrangements for such services, and the potential effects of such services on the audit firm’s independence.
In considering whether to pre-approve the primary independent auditor’s provision of non-audit services, the Committee will consider whether the services are compatible with the maintenance of such auditor's independence. The Committee will also consider whether the primary independent auditor is best positioned to provide the most effective and efficient service, for reasons such as its familiarity with the Funds' business, people, culture, accounting systems, risk profile and other factors, and whether the service might enhance the Funds' ability to manage or control risk or improve audit quality.
3. The provisions of this policy shall apply to all audit and non-audit services provided directly to the Funds. Additionally, the provisions of this policy shall apply to non-audit services provided to Principal Global Investors, LLC (“PGI”) or an affiliate of PGI that provides ongoing services to the Funds if the engagement relates directly to the operations and financial reporting of the Funds.
4. Not less than annually, the primary independent auditor shall report to the Committee in writing all relationships that may reasonably be thought to bear on independence between the auditor and the Funds or persons in financial reporting oversight roles with respect to any services provided by the auditor, its subsidiaries or affiliates as of the date of the communication, pursuant to Rule 3526 of the PCAOB. The primary independent auditor shall discuss with the Committee the potential effects of such relationships on the independence of the auditor. In addition, the primary independent auditor shall affirm, in writing, that, as of the date of the communication, it is independent within the meaning of the federal securities laws and Rule 3520 of the PCAOB.
5. The Committee shall ensure that the lead (or coordinating) audit partners, as well as the reviewing audit partner, of the Funds' primary independent auditor are rotated at least every five years and subject upon rotation to a five year "time out" period. All other audit partners of the primary independent auditor, excluding partners who simply consult with others on the audit engagement regarding technical issues, shall rotate after seven years and be subject upon rotation to a two year "time out" period.
6.
Neither the Funds nor PGI may hire or promote any former partner, principal, shareholder or professional employee (Former Employee) of the primary independent auditor into a financial reporting oversight role unless the Former Employee (1) has severed his/her economic interest in the independent audit firm, and (2) was not a member of the audit engagement team for the Funds during the one year period preceding the date that the audit procedures began for the fiscal period in which the Funds or PGI proposes to hire or promote the Former Employee. Neither the Funds nor PGI shall, without prior written consent of the primary independent auditor, hire or promote any Former Employee into a role not prohibited above if the Former Employee had provided any services to the Funds or PGI during the 12 months preceding the date of filing of the Funds' most recent annual report with the SEC. Upon termination of the primary independent auditor, the Funds or PGI shall not, without prior written consent of the former primary independent auditor, hire or promote any Former Employee for a period of up to 12 months from termination.
7.
For persons recently promoted or hired into a financial reporting oversight role (other than members of the Boards of the Funds who are not also officers of the Funds), any personal tax planning services pursuant to an engagement that was in progress before the hiring or promotion and provided by the primary independent auditor must be completed on or before 180 days after the hiring or promotion.
8.
The phrase "financial reporting oversight role" means a role in which a person is in a position to exercise influence over the contents of the financial statements or anyone who prepares them, such as a member of the board of directors or similar management or governing body, chief executive officer, president, chief operating officer, chief financial officer, counsel, controller, chief internal auditor, or any equivalent positions.
(Adopted by the Audit Committee of the Boards of the Funds on March 10, 2020).
(End of policy)
(e) (2) Pre-Approval Waivers.
There were no services, or 0%, provided to the registrant by Ernst & Young that were approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f)
Substantially all work in connection with the audit of the registrant’s financial statements was performed by full-time employees of Ernst & Young.
(g)
The aggregate non-audit fees Ernst & Young billed to the registrant, the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by or under common control with the adviser that provides ongoing services to the registrant for each of registrant's last two fiscal years were as follows.
March 31, 2023 - $175,770
March 31, 2022 - $106,900
(h)
The registrant’s audit committee of the board has considered whether the provision of non-audit services that were rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.
ITEM 5 – AUDIT COMMITTEE OF LISTED REGISTRANTS
(a) Not applicable.
(b) 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
Below are copies of the Registrant’s proxy voting policies and procedures, which consist of the proxy voting policies and procedures of the Registrant’s adviser, Principal Global Investors, LLC (“PGI”), and its sub-advisers.
Proxy Voting Policies and Procedures For
Principal Funds, Inc.
Principal Variable Contracts Funds, Inc.
Principal Exchange-Traded Funds
Principal Diversified Select Real Asset Fund (and other Principal interval funds)
(each a “Fund” and together “the Funds”)
(March 9, 2015)
Revised June 11, 2019
It is each Fund's policy to delegate authority to its advisor or sub-advisor, as appropriate, to vote proxy ballots relating to the Fund's portfolio securities in accordance with the adviser's or sub-adviser's voting policies and procedures.
The adviser or sub-adviser must provide, on a quarterly basis:
I.
Written affirmation that all proxies voted during the preceding calendar quarter, other than those specifically identified by the adviser or sub-adviser, were voted in a manner consistent with the adviser's or sub-adviser's voting policies and procedures. In order to monitor the potential effect of conflicts of interest of an adviser or sub-adviser, the adviser or sub-adviser will identify any proxies the adviser or sub-adviser voted in a manner inconsistent with its policies and procedures. The adviser or sub-adviser shall list each vote, explain why the adviser or sub-adviser voted in a manner contrary to its policies and procedures, state whether the adviser or sub-adviser’s vote was consistent with the recommendation to the adviser or sub-adviser of a third-party and, if so, identify the third-party; and
II.
Written notification of any material changes to the adviser's or sub-adviser's proxy voting policies and procedures made during the preceding calendar quarter.
The adviser or sub-adviser must provide, no later than July 31 of each year, the following information regarding each proxy vote cast during the 12-month period ended June 30 for each Fund portfolio or portion of Fund portfolio for which it serves as investment adviser, in a format acceptable to Fund management:
III.
Identification of the issuer of the security;
IV.
Exchange ticker symbol of the security;
A.
CUSIP number of the security;
B.
The date of the shareholder meeting;
C.
A brief description of the subject of the vote;
V.
Whether the proposal was put forward by the issuer or a shareholder;
A.
Whether and how the vote was cast; and
B.
Whether the vote was cast for or against management of the issuer.
PROXY VOTING POLICIES AND PROCEDURES
Introduction
Principal Global Investors
[2]
(“PGI”) is an investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”) pursuant to the Investment Advisers Act of 1940 (the “Advisers Act”). As a registered investment adviser, PGI has a fiduciary duty to act in the best interests of its clients. PGI recognizes that this duty requires it to vote client securities, for which it has voting power on the applicable record date, in a timely manner and make voting decisions that are in the best interests of its clients. This document, Principal Global Investors’ Proxy Voting Policies and Procedures (the “Policy”) is intended to comply with the requirements of the Investment Advisers Act of 1940, the Investment Company Act of 1940 and the Employee Retirement Income Security Act of 1974 applicable to the voting of the proxies of both US and non-US issuers on behalf of PGI’s clients who have delegated such authority and discretion.
Effective January 1, 2021 Finisterre investment teams adopted the policies and procedures in the Adviser’s compliance manual except for the following proxy policies and procedures. Finisterre investment teams will continue to follow previously adopted proxy policies and procedures until amended. Please see attached Appendix to this manual for Finisterre specific proxy policies and procedures.
Relationship between Investment Strategy, ESG and Proxy Voting
PGI has a fiduciary duty to make investment decisions that are in its clients’ best interests by maximizing the value of their shares. Proxy voting is an important part of this process through which PGI can support strong corporate governance structures, shareholder rights and transparency. PGI also believes a company’s positive environmental, social and governance (“ESG”) practices may influence the value of the company, leading to long-term shareholder value. PGI may take these factors into considerations when voting proxies in its effort to seek the best outcome for its clients. PGI believes that the integration of consideration of ESG practices in PGI’s investment process helps identify sources of risk that could erode the long-term investment results it seeks on behalf of its clients. From time to time, PGI may work with various ESG-related organizations to engage issuers or advocate for greater levels of disclosure.
Roles and Responsibilities
Role of the Proxy Voting Committee
PGI’s Proxy Voting Committee (the “Proxy Voting Committee”) shall (i) oversee the voting of proxies and the Proxy Advisory Firm, (ii) where necessary, make determinations as to how to instruct the vote on certain specific proxies, (iii) verify ongoing compliance with the Policy, (iv) review the business practices of the Proxy Advisory Firm and (v) evaluate, maintain, and review the Policy on an annual basis. The Proxy Voting Committee is comprised of representatives of each investment team and a representative from PGI Risk, Legal, Operations, and Compliance will be available to advise the Proxy Voting Committee but are non-voting members. The Proxy Voting Committee may designate one or more of its members to oversee specific, ongoing compliance with respect to the Policy and may designate personnel to instruct the vote on proxies on behalf the PGI’s clients (collectively, “Authorized Persons”).
The Proxy Voting Committee shall meet at least four times per year, and as necessary to address special situations.
Role of Portfolio Management
While the Proxy Voting Committee establishes the Guidelines and Procedures, the Proxy Voting Committee does not direct votes for any client except in certain cases where a conflict of interest exists. Each investment team is responsible for determining how to vote proxies for those securities held in the portfolios their team manages. While investment teams generally vote consistently with the Guidelines, there may be instances where their vote deviates from the Guidelines. In those circumstances, the investment team will work within the Exception Process. In some instances, the same security may be held by more than one investment team. In these cases, PGI may vote differently on the same matter for different accounts as determined by each investment team.
Proxy Voting Guidelines
The Proxy Voting Committee, on an annual basis, or more frequently as needed, will direct each investment team to review draft proxy voting guidelines recommended by the Proxy Advisory Firm (“Draft Guidelines”). The Proxy Voting Committee will collect the reviews of the Draft Guidelines to determine whether any investment teams have positions on issues that deviate from the Draft Guidelines. Based on this review, PGI will adopt proxy voting guidelines. Where an investment team has a position which deviates from the Draft Guidelines, an alternative set of guidelines for that investment team may be created. Collectively, these guidelines will constitute PGI’s current Proxy Voting Guidelines and may change from time to time (the “Guidelines”). The Proxy Voting Committee has the obligation to determine that, in general, voting proxies pursuant to the Guidelines is in the best interests of clients. Exhibit A to the Policy sets forth the current Guidelines.
There may be instances where proxy votes will not be in accordance with the Guidelines. Clients may instruct PGI to utilize a different set of guidelines, request specific deviations, or directly assume responsibility for the voting of proxies. In addition, PGI may deviate from the Guidelines on an exception basis if the investment team or PGI has determined that it is the best interest of clients in a particular strategy to do so, or where the Guidelines do not direct a particular response and instead list relevant factors. Any such a deviation will comply with the Exception Process which shall include a written record setting out the rationale for the deviation.
The subject of the proxy vote may not be covered in the Guidelines. In situations where the Guidelines do not provide a position, PGI will consider the relevant facts and circumstances of a particular vote and then vote in a manner PGI believes to be in the clients’ bests interests. In such circumstance, the analysis will be documented in writing and periodically presented to the Proxy Voting Committee. To the extent that the Guidelines do not cover potential voting issues, PGI may consider the spirit of the Guidelines and instruct the vote on such issues in a manner that PGI believes would be in the best interests of the client.
Use of Proxy Advisory Firms
PGI has retained one or more third-party proxy service provider(s) (the “Proxy Advisory Firm”) to provide recommendations for proxy voting guidelines, information on shareholder meeting dates and proxy materials, translate proxy materials printed in a foreign language, provide research on proxy proposals, operationally process votes in accordance with the Guidelines on behalf of the clients for whom PGI has proxy voting responsibility, and provide reports concerning the proxies voted (“Proxy Voting Services”). Although PGI has retained the Proxy Advisory Firm for Proxy Voting Services, PGI remains responsible for proxy voting decisions. PGI has designed the Policy to oversee and evaluate the Proxy Advisory Firm, including with respect to the matters described below, to support the PGI’s voting in accordance with this Policy.
Oversight of Proxy Advisory Firms
Prior to the selection of any new Proxy Advisory Firm and annually thereafter or more frequently if deemed necessary by PGI, the Proxy Voting Committee will consider whether the Proxy Advisory Firm: (a) has the capacity and competency to adequately analyze proxy issues and provide the Proxy Voting Services the Proxy Advisory Firm has been engaged to provide and (b) can make its recommendations in an impartial manner, in consideration of the best interests of PGI’s clients, and consistent with the PGI’s voting policies. Such considerations may include, depending on the Proxy Voting Services provided, the following: (i) periodic sampling of votes pre-populated by the Proxy Advisory Firm’s systems as well as votes cast by the Proxy Advisory Firm to review that the Guidelines adopted by PGI are being followed; (ii) onsite visits to the Proxy Advisory Firm office and/or discussions with the Proxy Advisory Firm to determine whether the Proxy Advisory Firm continues to have the capacity and competency to carry out its proxy obligations to PGI; (iii) a review of those aspects of the Proxy Advisory Firm’s policies, procedures, and methodologies for formulating voting recommendations that PGI consider material to Proxy Voting Services provided to PGI, including factors considered, with a particular focus on those relating to identifying, addressing and disclosing potential conflicts of interest (including potential conflicts related to the provision of Proxy Voting Services, activities other than Proxy Voting Services, and those presented by affiliation such as a controlling shareholder of the Proxy Advisory Firm) and monitoring that materially current, accurate, and complete information is used in creating recommendations and research; (iv) requiring the Proxy Advisory Firm to notify PGI if there is a substantive change in the Proxy Advisory Firm’s policies and procedures or otherwise to business practices, including with respect to conflicts, information gathering and creating voting recommendations and research, and reviewing any such change(s); (v) a review of how and when the Proxy Advisory Firm engages with, and receives and incorporates input from, issuers, the Proxy Advisory Firm’s clients and other third-party information sources; (vi) assessing how the Proxy Advisory Firm considers factors unique to a specific issuer or proposal when evaluating a matter subject to a shareholder vote; (vii) in case of an error made by the Proxy Advisory Firm, discussing the error with the Proxy Advisory Firm and determining whether appropriate corrective and preventive action is being taken; and (viii) assessing whether the Proxy Advisory Firm appropriately updates its methodologies, guidelines, and voting recommendations on an ongoing basis and incorporates input from issuers and Proxy Advisory Firm clients in the update process. In evaluating the Proxy Advisory Firm, PGI may also consider the adequacy and quality of the Proxy Advisory Firm’s staffing, personnel, and/or technology.
Procedures for Voting Proxies
To increase the efficiency of the voting process, PGI utilizes the Proxy Advisory Firm to act as its voting agent for its clients’ holdings. Issuers initially send proxy information to the clients’ custodians. PGI instructs these custodians to direct proxy related materials to the Proxy Advisory Firm. The Proxy Advisory Firm provides PGI with research related to each resolution.
PGI analyzes relevant proxy materials on behalf of their clients and seek to instruct the vote (or refrain from voting) proxies in accordance with the Guidelines. A client may direct PGI to vote for such client’s account differently than what would occur in applying the Policy and the Guidelines. PGI may also agree to follow a client’s individualized proxy voting guidelines or otherwise agree with a client on particular voting considerations.
PGI seeks to vote (or refrain from voting) proxies for its clients in a manner that PGI determines is in the best interests of its clients, which may include both considering both the effect on the value of the client’s investments and ESG factors. In some cases, PGI may determine that it is in the best interests of clients to refrain from exercising the clients’ proxy voting rights. PGI may determine that voting is not in the best interests of a client and refrain from voting if the costs, including the opportunity costs, of voting would, in the view of PGI, exceed the expected benefits of voting to the client.
Procedures for Proxy Issues within the Guidelines
Where the Guidelines address the proxy matter being voted on, the Proxy Advisor Firm will generally process all proxy votes in accordance with the Guidelines. The applicable investment team may provide instructions to vote contrary to the Guidelines in their discretion and with sufficient rationale documented in writing to seek to maximize the value of the client’s investments or is otherwise in the client’s best interest. This rationale will be submitted to PGI Compliance to approve and once approved administered by PGI Operations. This process will follow the Exception Process. The Proxy Voting Committee will receive and review a quarterly report summarizing all proxy votes for securities for which PGI exercises voting authority. In certain cases, a client may have elected to have PGI administer a custom policy which is unique to the Client. If PGI is also responsible for the administration of such a policy, in general, except for the specific policy differences, the procedures documented here will also be applicable, excluding reporting and disclosure procedures.
Procedures for Proxy Issues Outside the Guidelines
To the extent that the Guidelines do not cover potential voting issues, the Proxy Advisory Firm will seek direction from PGI. PGI may consider the spirit of the Guidelines and instruct the vote on such issues in a manner that PGI believes would be in the best interests of the client. Although this not an exception to the Guidelines, this process will also follow the Exception Process. The Proxy Voting Committee will receive and review a quarterly report summarizing all proxy votes for securities for which PGI exercises voting discretion, which shall include instances where issues fall outside the Guidelines.
Securities Lending
Some clients may have entered into securities lending arrangements with agent lenders to generate additional revenue. If a client participates in such lending, the client will need to inform PGI as part of their contract with PGI if they require PGI to take actions in regard to voting securities that have been lent. If not commemorated in such agreement, PGI will not recall securities and as such, they will not have an obligation to direct the proxy voting of lent securities.
In the case of lending, PGI maintains one share for each company security out on loan by the client. PGI will vote the remaining share in these circumstances.
In cases where PGI does not receive a solicitation or enough information within a sufficient time (as reasonably determined by PGI) prior to the proxy-voting deadline, PGI or the Proxy Advisory Firm may be unable to vote.
Regional Variances in Proxy Voting
PGI utilizes the Policy and Guidelines for both US and non-US clients, and there are some significant differences between voting U.S. company proxies and voting non-U.S. company proxies. For U.S. companies, it is usually relatively easy to vote proxies, as the proxies are typically received automatically and may be voted by mail or electronically. In most cases, the officers of a U.S. company soliciting a proxy act as proxies for the company’s shareholders.
With respect to non-U.S. companies, we make reasonable efforts to vote most proxies and follow a similar process to those in the U.S. However, in some cases it may be both difficult and costly to vote proxies due to local regulations, customs or other requirements or restrictions, and such circumstances and expected costs may outweigh any anticipated economic benefit of voting. The major difficulties and costs may include: (i) appointing a proxy; (ii) obtaining reliable information about the time and location of a meeting; (iii) obtaining relevant information about voting procedures for foreign shareholders; (iv) restrictions on trading securities that are subject to proxy votes (share-blocking periods); (v) arranging for a proxy to vote locally in person; (vi) fees charged by custody banks for providing certain services with regard to voting proxies; and (vii) foregone income from securities lending programs. In certain instances, it may be determined by PGI that the anticipated economic benefit outweighs the expected cost of voting. PGI intends to make their determination on whether to vote proxies of non-U.S. companies on a case-by-case basis. In doing so, PGI shall evaluate market requirements and impediments, including the difficulties set forth above, for voting proxies of companies in each country. PGI periodically reviews voting logistics, including costs and other voting difficulties, on a client by client and country by country basis, in order to determine if there have been any material changes that would affect PGI’s determinations and procedures.
Conflicts of Interest
PGI recognizes that, from time to time, potential conflicts of interest may exist. In order to avoid any perceived or actual conflict of interest, the procedures set forth below have been established for use when PGI encounters a potential conflict to ensure that PGI’s voting decisions are based on maximizing shareholder value and are not the product of a conflict.
Addressing Conflicts of Interest – Exception Process
Prior to voting contrary to the Guidelines, the relevant investment team must complete and submit a report to PGI Compliance setting out the name of the security, the issue up for vote, a summary of the Guidelines’ recommendation, the vote changes requested and the rational for voting against the Guidelines’ recommendation. The member of the investment team requesting the exception must attest to compliance with Principal’s Code of Conduct and the has an affirmative obligation to disclose any known personal or business relationship that could affect the voting of the applicable proxy. PGI Compliance will approve or deny the exception in consultation, if deemed necessary, with the Legal.
If PGI Compliance determines that there is no potential material conflict exists, the Guidelines may be overridden. If PGI Compliance determines that there exists or may exist a material conflict, it will refer the issue to the Proxy Voting Committee. The Proxy Voting Committee will consider the facts and circumstances of the pending proxy vote and the potential or actual material conflict and decide by a majority vote as to how to vote the proxy – i.e., whether to permit or deny the exception.
In considering the proxy vote and potential material conflict of interest, the Proxy Voting Committee may review the following factors:
·
The percentage of outstanding securities of the issuer held on behalf of clients by PGI;
·
The nature of the relationship of the issuer with the PGI, its affiliates or its executive officers;
·
Whether there has been any attempt to directly or indirectly influence the investment team’s decision;
·
Whether the direction of the proposed vote would appear to benefit PGI or a related party; and/or
·
Whether an objective decision to vote in a certain way will still create a strong appearance of a conflict.
In the event that the Proxy Advisor Firm itself has a conflict and thus is unable to provide a recommendation, the investment team may vote in accordance with the recommendation of another independent service provider, if available. If a recommendation from an independent service provider other than the Proxy Advisor Firm is not available, the investment team will follow the Exception Process. PGI Compliance will review the form and if it determines that there is no potential material conflict mandating a voting recommendation from the Proxy Voting Committee, the investment team may instruct the Proxy Advisory Firm to vote the proxy issue as it determines is in the best interest of clients. If PGI Compliance determines that there exists or may exist a material conflict, it will refer the issue to the Proxy Voting Committee for consideration as outlined above.
Availability of Proxy Voting Information and Recordkeeping
Disclosure
On a quarterly basis, PGI publicly discloses on our website https://www.principalglobal.com/eu/about-us/responsible-investing a voting report setting forth the manner in which votes were cast, including details related to (i) votes against management, and (ii) abstentions. Form more information, Clients may contact PGI for more information related to how PGI has voted with respect to securities held in the Client’s account.
On request, PGI will provide clients with a summary of PGI’s proxy voting guidelines, process and policies and will inform the clients how they can obtain a copy of the complete Proxy Voting Policies and Procedures upon request. PGI will also include such information described in the preceding two sentences in Part 2A of its Form ADV.
Recordkeeping
PGI will keep records of the following items: (i) the Guidelines, (ii) the Proxy Voting Policies and Procedures; (iii) proxy statements received regarding client securities (unless such statements are available on the SEC’s Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system); (iv) records of votes they cast on behalf of clients, which may be maintained by a Proxy Advisory Firm if it undertakes to provide copies of those records promptly upon request; (v) records of written client requests for proxy voting information and PGI’s responses (whether a client’s request was oral or in writing); (vi) any documents prepared by PGI that were material to making a decision how to vote, or that memorialized the basis for the decision; (vii) a record of any testing conducted on any Proxy Advisory Firm’s votes; (viii) materials collected and reviewed by PGI as part of its due diligence of the Proxy Advisory Firm; (ix) a copy of each version of the Proxy Advisory Firm’s policies and procedures provided to PGI; and (x) the minutes of the Proxy Voting Committee meetings. All of the records referenced above will be kept in an easily accessible place for at least the length of time required by local regulation and custom, and, if such local regulation requires that records are kept for less than six years from the end of the fiscal year during which the last entry was made on such record, we will follow the US rule of six years. If the local regulation requires that records are kept for more than six years, we will comply with the local regulation. We maintain the vast majority of these records electronically.
Appendix: Finisterre Proxy Voting Policy and Procedures
I.
STATEMENT OF POLICY
Proxy voting is an important right of investors and reasonable care and diligence must be undertaken to ensure that such rights are properly and timely exercised. The Firm generally retains proxy-voting authority with respect to securities purchased for its clients. Under such circumstances, the Firm votes proxies in the best interest of its clients and in accordance with these policies and procedures.
II.
USE OF THIRD-PARTY PROXY VOTING SERVICE
The Firm has entered into an agreement with Broadridge Investor Communication Solutions, Inc. (referred to as “Broadridge” and the “Proxy Voting Service”) acting with Glass Lewis & Co, to enable it to fulfill its proxy voting obligations.
Broadridge executes, monitors and records the proxies according to the instructions of the Firm. The Firm relies on the recommendations of Glass Lewis & Co, LLC to provide recommendations as to how any proxy should be voted in the best interests of the Clients. These recommendations are integrated into the voting platform set up by the Proxy Voting Service, and the Firm has instructed the Proxy Voting Service to execute all proxies in accordance with such recommendation unless instructed otherwise by the Firm.
The SEC has expressed its view that although the voting of proxies remains the duty of a registered adviser, an adviser may contract with service providers to perform certain functions with respect to proxy voting so long as the adviser is comfortable that the proxy voting service is independent from the issuer companies on which it completes its proxy research. In assessing whether a proxy voting service is independent (as defined by the SEC), the SEC counsels investment advisers that they should not follow the recommendations of an independent proxy voting service without first determining, among other things, that the proxy voting service (a) has the capacity and competence to analyze proxy issues and (b) is in fact independent and can make recommendations in an impartial manner in the best interests of the adviser's clients.
At a minimum annually, or more frequently as deemed necessary, Compliance will ensure that a review of the independence and impartiality of the Proxy Voting Service is carried out, including obtaining certification or other information from the Proxy Voting Service to enable the Firm to make such an assessment. Compliance will also monitor any new SEC interpretations regarding the voting of proxies and the uses of third-party proxy voting services and revise the Firm’s policies and procedures as necessary.
Proxies relating to securities held in client accounts will be sent directly to the Proxy Voting Service. If a proxy is received by anyone in the Firm, they must immediately inform the Compliance and work with Compliance to ensure that it is promptly forwarded to the Proxy Voting Service. In the event that the Proxy Voting Service is unable to complete/provide its research regarding a security on a timely basis or the Firm has made a determination that it is in the best interests of the Firm’s clients for the Firm to vote the proxy, the Firm’s general proxy-voting procedures are required to be followed, as follows.
Compliance will require that:
1.
the recipient of the proxy will forward a copy to Compliance, who will keep a copy of each proxy received;
2.
if the recipient is not the Portfolio Manager responsible for voting the proxy on behalf of the Firm, s/he will forward a copy to such Portfolio manager;
3.
the Portfolio Manager will determine how to vote the proxy promptly in order to allow enough time for the completed proxy to be returned to the issuer prior to the vote taking place; and provide evidence of such to Compliance;
4.
Absent material conflicts (see Section V), the Portfolio Manager will determine whether the Firm will follow the Proxy Voting Service’s recommendation or vote the proxy directly. The Portfolio Manager will send his/her decision on how the Firm should vote a proxy to the Proxy Voting Service, in a timely and appropriate manner. It is desirable to have the Proxy Voting Service complete the actual voting so there exists one central source for the documentation of the Firm’s proxy voting records.
III.
VOTING GUIDELINES
To the extent that the Firm is voting a proxy itself and not utilizing the Proxy Voting Service, the Firm will consider the proxy on a case by case basis and require that the relevant investment professional vote the proxy in a manner consistent with the Firm’s duty. Investment professionals of the Firm each have the duty to vote proxies in a way that, in their best judgment, is in the best interest of the Firm’s clients.
IV.
DISCLOSURE
A.
The Firm will disclose in its Form ADV Part 2 that clients may contact the Chief Compliance Officer via e-mail or telephone in order to obtain information on how the Firm voted such client’s proxies, and to request a copy of these policies and procedures. If a client requests this information, the Chief Compliance Officer will prepare a written response to the client that lists, with respect to each voted proxy that the client has inquired about, (1) the name of the issuer; (2) the proposal voted upon and (3) how the Firm voted the client’s proxy.
B.
A concise summary of these Proxy Voting Policies and Procedures will be included in the Firm’s Form ADV Part 2 and will be updated whenever these policies and procedures are updated. Compliance will arrange for a copy of this summary to be sent to all existing clients.
V.
POTENTIAL CONFLICTS OF INTEREST
A. In the event that the Firm is directly voting a proxy, Compliance will examine conflicts that exist between the interests of the Firm and its clients. This examination will include a review of the relationship of the Firm, its personnel and its affiliates with the issuer of each security and any of the issuer’s affiliates to determine if the issuer is a client of the Firm or an affiliate of the Firm or has some other relationship with the Firm, its personnel or a client of the Firm.
B. | If, as a result of Compliance’s examination, a determination is made that a material conflict of interest exists, the Firm will determine whether voting in accordance with the voting guidelines and factors described above is in the best interests of the client. If the proxy involves a matter covered by the voting guidelines and factors described above, the Firm will generally vote the proxy as specified above. Alternatively, the Firm may vote the proxy in accordance with the recommendation of the Proxy Voting Service. | |
The Firm may disclose the conflict to the affected clients and, except in the case of clients that are subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), give the clients the opportunity to vote their proxies themselves In the case of ERISA clients, if the Investment Management Agreement reserves to the ERISA client the authority to vote proxies when the Firm determines it has a material conflict that affects its best judgment as an ERISA fiduciary, the Firm will give the ERISA client the opportunity to vote the proxies themselves. | ||
Absent the client reserving voting rights, the Firm will either vote the proxies in accordance with the policies outlined in Section III “Voting Guidelines” above or vote the proxies in accordance with the recommendation of the Proxy Voting Service. | ||
VI. | PROXY RECORDKEEPING | |
Compliance will maintain files relating to the Firm’s proxy voting procedures in an easily accessible place. (Under the services contract between the Firm and its Proxy Voting Service, the Proxy Voting Service will maintain the Firm’s proxy-voting records). Records will be maintained and preserved for five years from the end of the fiscal year during which the last entry was made on a record, with records for the most recent two years kept in the offices of the Firm. Records of the following will be included in the files: | ||
1. | Copies of these proxy voting policies and procedures, and any amendments thereto; | |
2. | A copy of each proxy statement that the Firm receives regarding client securities (the Firm may rely on third parties or EDGAR); | |
3. | A record of each vote that the Firm casts; | |
4. | A copy of any document the Firm created that was material to making a decision how to vote proxies, or that memorializes that decision. (For votes that are inconsistent with the Firm’s general proxy voting polices, the reason/rationale for such an inconsistent vote is required to be briefly documented and maintained); and | |
5. | A copy of each written client request for information on how the Firm voted such client’s proxies, and a copy of any written response to any (written or oral) client request for information on how the Firm voted its proxies. |
ClearBridge | ||
Investments |
ProxyVoting
Policy
December
2022
ClearBridgeInvestmentsLimited
(CIL)
ClearBridgeRAREInfrastructureInternationalPtyLimited(CBIRIIPL) ClearBridge Investments (North America) Pty Limited (CINA)
(theaboveentitiesarereferredtoas“ClearBridge”forthepurposesofthispolicy. ClearBridge and ClearBridge Investments, LLC. are collectively referred to as “ClearBridge Investments”.)
DocumentOwner:HeadofLegal,Risk&
Compliance
This document is confidential and is only intended for the purposes of the above entities. This document may only be provided to third parties with the expresspriorwrittenapprovaloftheHeadofLegal,Risk&Compliance.Norecipientisauthorisedtopassthisdocumentoritscontentsontoanyotherperson
whatsoever
orreproduceitbyanymeans.Allintellectualpropertycontainedinthisdocumentremainsthepropertyoftheaboveentitiesandanyrightsinrelationtothis
1
intellectualpropertyarenotintendedtobedilutedbythedistributionofthis
document.
CLEARBRIDGE
INVESTMENTS
PROXY
VOTING
POLICIES
AND
PROCEDURES
I.
TypesofAccountsforWhichClearBridgeVotes
Proxies
II.
General
Guidelines
III.
HowClearBridge
Votes
IV.
Conflictsof
Interest
A.
ProceduresforIdentifyingConflictsof
Interest
B.
ProceduresforAssessingMaterialityofConflictsofInterestandforAddressingMaterialConflictsof
Interest
C.
ThirdPartyProxyVotingFirm-Conflictsof
Interest
V.
Voting
Policy
A.
Election
of
Directors
B.
Proxy
Contests
C.
Auditors
D.
Proxy
Contest
Defenses
E.
Tender
Offer
Defenses
F.
Miscellaneous
Governance
Provisions
G.
Capital
Structure
H.
Executive
and
Director
Compensation
I.
State/Country
of
Incorporation
J.
Mergers
and
Corporate
Restructuring
K.
Social
and
Environmental
Issues
L.
Miscellaneous
VI.
Other
Considerations
A.
Share
Blocking
B.
Securitieson
Loan
VII.
DisclosureofProxy
Voting
VIII.
Recordkeepingand
Oversight
ProxyVotingPoliciesand
Procedures
I. TYPESOFACCOUNTSFORWHICHCLEARBRIDGEVOTESPROXIES
ClearBridge votes proxies for each client for which it has investment discretion unless the investment management agreement provides that the client or other authorized party (e.g., a trustee or named fiduciary of a plan) is responsible for voting proxies.
II. GENERALGUIDELINES
In voting proxies, we are guided by general fiduciary principles.Our goal is to act prudently, solely in the best interest of the beneficial owners of the accounts we manage.We attempt to provide for the consideration of all factors that could affect the value oftheinvestmentandwillvoteproxiesin themannerthatwebelievewillbeconsistentwitheffortstomaximizeshareholdervalues.
III. HOW CLEARBRIDGEVOTES
Section V of these policies and procedures sets forth certain stated positions.In the case of a proxy issue for which there is a stated position, we generally vote in accordance with the stated position.In the case of a proxy issue for which there is a list of factors set forth in Section V that we consider in voting on such issue, we consider those factorsand vote on acase-by-case basis in accordance with thegeneral principles set forth above.In the case of a proxy issue for which there is no stated position or list of factors thatwe consider in voting on such issue, we vote on a case-by-case basis in accordance with the general principles set forth above.Wemay utilizeanexternalserviceprovidertoprovideuswithinformationand/orarecommendationwithregardtoproxyvotesbutwearenot requiredtofollowanysuchrecommendations.Theuseofanexternalserviceproviderdoesnotrelieveusofourresponsibilityforthe proxyvote.
Forroutinematters, weusually voteaccording to ourpolicy ortheexternalserviceprovider’srecommendation, although weare not obligated to do so and each individual portfolio management team may vote contrary to our policy or the recommendation of the externalserviceprovider.Ifamatterisnon-routine,e.g.,management’srecommendationisdifferentthanthatoftheexternalservice provider and ClearBridge is a significant holder or it is a significant holding for ClearBridge, the issues will be highlighted to the appropriateInvestmentteams.DifferentInvestmentteamsmayvotedifferentlyonthesameissue,dependingupontheirassessment of clients’ best interests.
ClearBridge’s
policies
are
reviewed
annually,
and
its
proxy
voting
process
is
overseen
and
coordinated
by
its
Proxy
Committee.
IV. CONFLICTS OFINTEREST
In furtherance of ClearBridge’s goal to vote proxies in the best interests of clients, ClearBridge follows procedures designed to identify and address material conflicts that may arise between ClearBridge’s interests and those of its clients before voting proxieson behalf of such clients.
A. ProceduresforIdentifyingConflictsofInterest
ClearBridgereliesonthefollowingtoseektoidentifyconflictsofinterestwithrespecttoproxy
voting:
1.
ClearBridge’s employees are periodically reminded of their obligation (i) to be aware of the potential for conflicts of interest on the part of ClearBridge with respect to voting proxies on behalf of client accounts both as a result of their personal relationships or personal or business relationships relating to anotherFranklin Resources, Inc. (Franklin) business unit, and (ii) to bring conflicts of interest of which they become aware to the attention of ClearBridge’sGeneral Counsel/Chief Compliance Officer.
2.
ClearBridge’s finance area maintains and provides to ClearBridge Compliance and proxy voting personnel an up- to- datelistofallclientrelationshipsthathavehistoricallyaccountedfororareprojectedtoaccountforgreaterthan1%of ClearBridge’s net revenues.
3.
As a general matter, ClearBridge takes the position that relationships between a non-ClearBridge Franklin unit and an issuer (e.g., investment management relationship between an issuer and a non-ClearBridge Franklin affiliate) do not present a conflict of interest for ClearBridge in voting proxies with respect to such issuer because ClearBridge operates asanindependentbusinessunitfromotherFranklinbusinessunitsandbecauseoftheexistenceofinformational
barriers between ClearBridge and certain otherFranklinbusiness units.As noted above, ClearBridge employees are under an obligation to bring such conflicts of interest, including conflicts of interest which may arise because of an attempt by another Franklin business unit or non-ClearBridge Franklin officer or employee to influence proxy voting by ClearBridge to the attention of ClearBridge Compliance.
4.
A listofissuers withrespectto whichClearBridgehasapotentialconflictof interestinvotingproxiesonbehalfofclient accounts will be maintained by ClearBridge proxy voting personnel.ClearBridge will not vote proxies relating to such issuers until it has been determined that the conflict of interest is not material or a method for resolving the conflict of interest has been agreed upon and implemented, as described in Section IV below.
B. ProceduresforAssessingMaterialityofConflictsofInterestandforAddressingMaterialConflictsofInterest
1.
ClearBridge maintains a Proxy Committee which, among other things, reviews and addresses conflicts of interest broughttoitsattention.TheProxyCommitteeiscomprisedofsuchClearBridgepersonnel(andothers, atClearBridge’s request), as are designated from time to time.The current members of the Proxy Committee are setforth in the Proxy Committee’s Terms of Reference.
2.
Allconflictsofinterestidentifiedpursuanttotheprocedures outlinedinSectionIV.A.mustbebroughttotheattention of the Proxy Committee for resolution.A proxy issue that will be voted in accordance with a stated ClearBridgeposition on such issue or in accordance with the recommendation of an independent third party generally is not brought to the attention of the Proxy Committee for a conflict of interest review because ClearBridge’s position is that any conflict of interest issues are resolved by voting in accordance with a pre-determined policy or in accordance with the recommendation of an independent third party.
3.
The Proxy Committee will determine whether a conflict of interest is material.A conflict of interest will be considered material to the extent that it is determined that such conflict is likely to influence, or appear to influence, ClearBridge’s decision-making in voting the proxy.All materiality determinations will be based on an assessment of the particular facts and circumstances.A written record of all materiality determinations made by the Proxy Committee will be
maintained.
4.
If it is determined by the Proxy Committee that a conflict of interest is not material, ClearBridge may vote proxies notwithstanding the existence of the conflict.
5.
IfitisdeterminedbytheProxyCommitteethataconflictofinterestismaterial,theProxyCommitteewilldeterminean appropriate method to resolve such conflict of interest before the proxy affected by the conflict of interest is voted. Such determination shall be based on the particular facts and circumstances, including the importance of the proxy issue, the nature of the conflict of interest, etc. Such methods may include:
·
disclosingtheconflicttoclientsandobtainingtheirconsentbefore
voting;
·
suggestingtoclientsthattheyengageanotherpartytovotetheproxyontheir
behalf;
·
in the case of a conflict of interest resulting from a particular employee’s personal relationships, removing suchemployee from the decision-making process with respect to such proxy vote; or
·
suchothermethodasisdeemedappropriategiventheparticularfactsandcircumstances,includingthe importance of the proxy issue, the nature of the conflict of interest, etc.
*
A
written
record
of
the
method
used
to
resolve
a
material
conflict
of
interest
shall
be
maintained.
C. ThirdPartyProxyVotingFirm-ConflictsofInterest
With respect to a third-party proxy voting firm described herein, the Proxy Committee will periodically review and assess such firm’spolicies,proceduresandpracticeswithrespecttothedisclosureandhandlingofconflictsofinterest.
*
Especially in the case of anapparent, as opposed to actual, conflict of interest, the Proxy Committee may resolve suchconflict of interest by satisfying itself thatClearBridge’s proposed vote on a proxy issue is in the best interest of client accounts and is not being influenced by the conflict of interest.
V. VOTINGPOLICY
Thesearepolicyguidelinesthatcanalwaysbesuperseded,subjecttothedutytoactsolelyinthebestinterestofthebeneficialowners ofaccounts,bytheinvestmentmanagementprofessionalsresponsiblefortheaccountholdingthesharesbeingvoted.Theremaybe occasions when different Investment teams vote differently on the same issue.In addition, in the case of Taft-Hartley clients, ClearBridge will comply with a client direction to vote proxies in accordance with Institutional Shareholder Services’ (ISS) PVS Proxy VotingGuidelines,whichISSrepresentstobefullyconsistentwithAFL-CIOguidelines.
A. ElectionofDirectors
1.
Voting
on
Director
Nominees
in
Uncontested
Elections
a.
We
withhold
our
vote
from
a
director
nominee
who:
·
attendedlessthan75percentofthecompany’sboardandcommitteemeetingswithoutavalidexcuse(illness, service to the nation/local government, work on behalf of the company)
·
received more than 50 percent withheld votes of the shares cast at the previous board election, and the company has failed to address the issue as to why
·
is a member of the company’s audit committee, when excessive non-audit fees were paid to the auditor, or there are chronic control issues and an absence of established effective control mechanisms
·
isamemberofthecompany’scompensationcommitteeifthecompensationcommitteeignoreasayonpay proposal that a majority of shareholders opposed
·
isamemberofthecompany’snominatingcommitteeandthereisnogenderdiversityontheboard(orthose currently proposed for election to the board do not meet that criterion).
·
is a member of the company’s nominating committee andthere is no racial/ethnic diversity on theboard (or those currently proposed for election to the board do not meet that criterion).
1
b.
We
vote
for
all
other
director
nominees.
2.
Chairman
and
CEO
is
the
Same
Person
Wevoteonacase-by-casebasisonshareholderproposalsthatwouldrequirethepositionsoftheChairmanandCEOto be held by different persons.We would generally vote FOR such a proposal unless there are compelling reasons tovote against the proposal, including:
·
designationofalead
director
·
majorityofindependentdirectors
(supermajority)
·
allindependentkey
committees
·
sizeofthecompany(basedonmarket
capitalization)
·
establishedgovernance
guidelines
·
company
performance
3.
MajorityofIndependent
Directors
a.
Wevoteforshareholderproposalsthatrequestthattheboardbecomprisedofamajorityofindependentdirectors. Generally that would require that the director have no connection to the company other than the board seat.In determining whether an independent director is truly independent (e.g. when voting on a slate of director candidates),weconsidercertainfactorsincluding,butnotnecessarilylimitedto,thefollowing:whetherthedirector orhis/hercompanyprovidedprofessionalservicestothecompanyoritsaffiliateseithercurrentlyorinthepastyear; whether the director has any transactional relationship with the company; whether the director is a significant customerorsupplierofthecompany;whetherthedirectorisemployed byafoundationoruniversity thatreceived
significant
grants
or endowments
from
the
company or
its
affiliates;
and
whether
there
are interlocking directorships.
b.
Wevoteforshareholderproposalsthatrequestthattheboardaudit,compensationand/ornominatingcommittees include independent directors exclusively.
1
ThispositiononlyappliestoAnglomarketswhichisdefinedasUS,Canada,UK,Ireland,AustraliaandNew
Zealand.
4.
StockOwnership
Requirements
We vote against shareholder proposals requiring directors to own a minimum amount of company stock in order to qualify as a director, or to remain on the board.
5.
Termof
Office
We
vote
against
shareholder
proposals
to
limit
the
tenure
of
independent
directors.
6.
DirectorandOfficerIndemnificationandLiability
Protection
a.
Subject to subparagraphs 2, 3, and 4 below, we vote for proposals concerning director and officer indemnification and liability protection.
b.
We vote for proposals to limit and against proposalsto eliminate entirely director and officer liability for monetary damages for violating the duty of care.
c.
We vote against indemnification proposalsthat would expand coverage beyond just legal expensesto acts, such as negligence,thataremoreseriousviolationsoffiduciaryobligationsthanmerecarelessness.
d.
Wevoteforonlythoseproposalsthatprovidesuchexpandedcoveragenotedinsubparagraph3aboveincaseswhen adirector'sorofficer'slegaldefensewasunsuccessfulif:(1)thedirectorwasfoundtohaveactedingoodfaithandin a manner that he reasonably believed was in the best interests of the company, and (2) if only the director's legal expenses would be covered.
7.
Director
Qualifications
a.
We vote case-by-case on proposals that establish or amend director qualifications.Considerations include how reasonable the criteria are and to what degree they may preclude dissident nominees from joining the board.
b.
Wevoteagainstshareholderproposalsrequiringtwocandidatesperboard
seat.
B. ProxyContests
1.
Voting
for
Director
Nominees
in
Contested
Elections
Wevoteonacase-by-casebasisincontestedelectionsofdirectors.Considerationsinclude:chronologyofeventsleading up to the proxy contest; qualifications of director nominees (incumbents and dissidents); for incumbents, whether the board is comprised of a majority of outside directors; whether key committees (i.e.: nominating, audit, compensation) comprisesolelyofindependentoutsiders;discussionwiththerespectivePortfolioManager(s).
2.
Reimburse
Proxy
Solicitation
Expenses
We vote on a case-by-case basis on proposals to provide full reimbursement for dissidents waging a proxy contest. Considerationsinclude:identityofpersonswhowillpaysolicitationexpenses;costofsolicitation;percentagethatwillbe paid to proxy solicitation firms.
C. Auditors
1.
Ratifying
Auditors
Wevoteforproposalstoratifyauditors,unlessanauditorhasafinancialinterestinorassociationwiththecompany,and isthereforenotindependent;orthereisreasontobelievethattheindependentauditorhasrenderedanopinionthatis neitheraccuratenorindicativeofthecompany'sfinancialpositionorthereisreasontobelievetheindependentauditor has not followed the highest level of ethical conduct.Specifically, we will vote to ratify auditors if the auditors only provide the company audit services and such other audit-related and non-audit services the provision of which will not causesuchauditorstolosetheirindependenceunderapplicablelaws,rulesandregulations.
2.
Financial
Statements
and
Director
and
Auditor
Reports
We generally vote for management proposals seeking approval of financial accounts and reports and the discharge of managementandsupervisoryboardmembers,unlessthereisconcernaboutthepastactionsofthecompany’sauditors ordirectors.
3.
Remuneration
of
Auditors
We vote for proposals to authorize the board or an audit committee of the board to determine the remuneration of auditors, unless there is evidence of excessive compensation relative to the size and nature of the company.
4.
Indemnification
of
Auditors
Wevoteagainstproposalstoindemnify
auditors.
D. ProxyContestDefenses
1.
Board
Structure:
Staggered
vs.
Annual
Elections
a.
We
vote
against
proposals
to
classify
the
board.
b.
We
vote
for
proposals
to
repeal
classified
boards
and
to
elect
all
directors
annually.
2.
Shareholder
Ability
to
Remove
Directors
a.
We
vote
against
proposals
that
provide
that
directors
may
be
removed
only
for
cause.
b.
We
vote
for
proposals
to
restore
shareholder
ability
to
remove
directors
with
or
without
cause.
c.
We
vote
against
proposals
that
provide
that
only
continuing
directors
may
elect
replacements
to
fill
board
vacancies.
d.
We
vote
for
proposals
that
permit
shareholders
to
elect
directors
to
fill
board
vacancies.
3.
Cumulative
Voting
a.
Ifpluralityvotingisinplaceforuncontesteddirectorelections,wevoteforproposalstopermitorrestorecumulative
voting.
b.
If
majority
voting
is
in
place
for
uncontested
director
elections,
we
vote
against
cumulative
voting.
c.
If plurality voting is in place for uncontested director elections, and proposals to adopt both cumulative voting and majorityvotingareonthesameslate,wevoteformajorityvotingandagainstcumulativevoting.
4.
Majority
Voting
We vote for non-binding and/or binding resolutions requesting that the board amend a company’s by-laws to stipulate thatdirectorsneedtobeelectedwithanaffirmativemajorityofthevotescast,providedthatitdoesnotconflictwiththe state law where the company is incorporated.In addition, all resolutions need to provide for a carve-out for a plurality votestandardwhentherearemorenomineesthanboardseats(i.e.contestedelection).Inaddition,ClearBridgestrongly encouragescompaniestoadoptapost-electiondirectorresignationpolicysettingguidelinesforthecompanytofollowto promptly address situations involving holdover directors.
5.
Shareholder
Ability
to
Call
Special
Meetings
a.
We
vote
against
proposals
to
restrict
or
prohibit
shareholder
ability
to
call
special
meetings.
b.
We vote for proposals that provide shareholders with the ability to call special meetings, taking into account a minimumownershipthresholdof10percent(andinvestorownershipstructure,dependingonbylaws).
6.
Shareholder
Ability
to
Act
by
Written
Consent
a.
We
vote
against
proposals
to
restrict
or
prohibit
shareholder
ability
to
take
action
by
written
consent.
b.
We
vote
for
proposals
to
allow
or
make
easier
shareholder
action
by
written
consent.
7.
Shareholder
Ability
to
Alter
the
Size
of
the
Board
a.
We
vote
for
proposals
that
seek
to
fix
the
size
of
the
board.
b.
We vote against proposals that give management the ability to alter the size of the board without shareholder
approval.
8.
Advance
Notice
Proposals
Wevoteonadvancenoticeproposalsonacase-by-casebasis,givingsupporttothoseproposalswhichallowshareholders tosubmitproposalsasclosetothemeetingdateasreasonablypossibleandwithinthebroadestwindowpossible.
9.
Amendment
of
By-
Laws
a.
We
vote
against
proposals
giving
the
board
exclusive
authority
to
amend
the
by-laws.
b.
We
vote
for
proposals
giving
the
board
the
ability
to
amend
the
by-laws
in
addition
to
shareholders.
10.
Article Amendments (not otherwise covered by ClearBridge Proxy Voting Policies and Procedures) We
review
on
a
case-by-case
basis
all
proposals
seeking
amendments
to
the
articles
of
association.
We vote for article amendments if:
·
shareholderrightsare
protected;
·
thereisnegligibleorpositiveimpactonshareholder
value;
·
managementprovidesadequatereasonsfortheamendments;
and
·
thecompanyisrequiredtodosoby law(if
applicable).
E. TenderOfferDefenses
1.
Poison
Pills
a.
We
vote
for
shareholder
proposals
that
ask
a
company
to
submit
its
poison
pill
for
shareholder
ratification.
b.
We vote on a case-by-case basis on shareholder proposals to redeem a company's poison pill.Considerations include:whentheplanwasoriginallyadopted;financialconditionofthecompany;termsofthepoisonpill.
c.
We vote on a case-by-case basis on management proposals to ratify a poison pill.Considerations include: sunset provision - poison pill is submitted to shareholders for ratification or rejection every 2 to 3 years; shareholder redemptionfeature-10%ofthesharesmaycallaspecialmeetingorseekawrittenconsenttovoteonrescindingthe rightsplan.
2.
Fair
Price
Provisions
a.
Wevoteforfairpriceproposals,aslongastheshareholdervoterequirementembeddedintheprovisionisnomore than a majority of disinterested shares.
b.
We
vote
for
shareholder
proposals
to
lower
the
shareholder
vote
requirement
in
existing
fair
price
provisions.
3.
Greenmail
a.
We
vote
for
proposals
to
adopt
anti-greenmail
charter
or
bylaw
amendments
or
otherwise
restrict
a
company's
ability
to make greenmail payments.
b.
We vote on a case-by-case basis on anti-greenmail proposals when they are bundled with other charter or bylaw
amendments.
4.
Unequal
Voting
Rights
a.
We
vote
against
dual
class
exchange
offers.
b.
We
vote
against
dual
class
re-capitalization.
5.
Supermajority
Shareholder
Vote
Requirement
to
Amend
the
Charter
or
Bylaws
a.
Wevoteagainstmanagementproposalstorequireasupermajorityshareholdervotetoapprovecharterandbylaw
amendments.
b.
We vote for shareholder proposals to lower supermajority shareholder vote requirements for charter and bylaw
amendments.
6.
Supermajority
Shareholder
Vote
Requirement
to
Approve
Mergers
a.
Wevoteagainstmanagementproposalstorequireasupermajorityshareholdervotetoapprovemergersandother significant business combinations.
b.
We vote for shareholder proposals to lower supermajority shareholder vote requirements for mergers and other significant business combinations.
7.
White
Knight/Squire
Placements
We
vote
for
shareholder
proposals
to
require
approval
of
blank
check
preferred
stock
issues.
F. MiscellaneousGovernanceProvisions
1.
Confidential
Voting
a.
We vote for shareholder proposals that request corporations to adopt confidential voting, use independent tabulatorsanduseindependentinspectorsofelectionaslongastheproposalsincludeclausesforproxycontestsas follows:inthecaseofacontestedelection,managementispermittedtorequestthatthedissidentgrouphonorits confidential voting policy.If the dissidents agree, the policy remains in place.If the dissidents do not agree, the confidential voting policy is waived.
b.
We vote for management proposals to adopt confidential voting subject to the proviso for contested elections set forth in sub-paragraph A.1. above.
2.
Equal
Access
We vote for shareholder proposals that would allow significant company shareholders equal access to management's proxymaterialinordertoevaluateandproposevotingrecommendationsonproxyproposalsanddirectornominees,and in order to nominate their own candidates to the board.
3.
Bundled
Proposals
Wevoteonacase-by-casebasisonbundledor"conditioned"proxyproposals.Inthecaseofitemsthatareconditioned upon each other, we examine the benefits and costs of the packaged items.In instances when the joint effect of the conditioneditemsisnotinshareholders'bestinterestsandthereforenotinthebestinterestsofthebeneficialownersof accounts,wevoteagainsttheproposals.Ifthecombinedeffectispositive,wesupportsuchproposals.
4.
Shareholder
Advisory
Committees
We vote on a case-by-case basis on proposals to establish a shareholder advisory committee. Considerations include: rationaleandcosttothefirmtoformsuchacommittee.Wegenerallyvoteagainstsuchproposalsiftheboardandkey nominatingcommitteesarecomprisedsolelyofindependent/outsidedirectors.
5.
Other
Business
Wevoteforproposalsthatseektobringforthotherbusiness
matters.
6.
Adjourn
Meeting
We vote on a case-by-case basis on proposals that seek to adjourn a shareholder meeting in order to solicit additional
votes.
7.
Lackof
Information
We vote against proposals if a company fails to provide shareholders with adequate information upon which to base their voting decision.
G. CapitalStructure
1.
Common
Stock
Authorization
a.
We
vote
on
a
case-by-case
basis
on
proposals
to
increase
the
number
of
shares
of
common
stock
authorized
for
issue,
except as described in paragraph 2 below.
b.
Subject to paragraph 3, below we vote for the approval requesting increases in authorized shares if the company meets certain criteria:
·
companyhasalreadyissuedacertainpercentage(i.e.,greaterthan50%)ofthecompany's
allotment
·
theproposedincreaseisreasonable(i.e.,lessthan150%ofcurrentinventory)basedonananalysisofthe company's historical stock management or future growth outlook of the company.
c.
Wevoteonacase-by-casebasis,basedontheinputofaffectedPortfolioManagers,ifholdingisgreaterthan1%of anaccount.
2.
Stock
Distributions:
Splits
and
Dividends
We vote on a case-by-case basis on management proposals to increase common share authorization for a stock split, provided that the split does not result in an increase of authorized but unissued shares of more than 100% after giving effect to the shares needed for the split.
3.
Reverse
Stock
Splits
Wevoteformanagementproposalstoimplementareversestocksplit,providedthatthereversesplitdoesnotresultin anincreaseofauthorizedbutunissuedsharesofmorethan100%aftergivingeffecttothesharesneededforthereverse
split.
4.
Blank
Check
Preferred
Stock
a.
Wevoteagainstproposalstocreate,authorizeorincreasethenumberofshareswithregardtoblankcheckpreferred stockwithunspecifiedvoting,conversion,dividenddistributionandotherrights.
b.
We vote for proposals to create “declawed” blank check preferred stock (stock that cannot be used as a takeover
defense).
c.
Wevoteforproposalstoauthorizepreferredstockincaseswherethecompanyspecifiesthevoting,dividend, conversion,andotherrightsofsuchstockandthetermsofthepreferredstockappearreasonable.
d.
We
vote
for
proposals
requiring
a
shareholder
vote
for
blank
check
preferred
stock
issues.
5.
Adjust
Par
Value
of
Common
Stock
We
vote
for
management
proposals
to
reduce
the
par
value
of
common
stock.
6.
Preemptive
Rights
a.
Wevoteonacase-by-casebasisforshareholderproposalsseekingtoestablishthemandconsiderthefollowing
factors:
·
sizeofthe
Company
·
characteristicsofthesizeoftheholding(holderowningmorethan1%oftheoutstanding
shares)
·
percentageoftherightsoffering(ruleofthumblessthan
5%).
b.
We
vote
on
a
case-by-case
basis
for
shareholder
proposals
seeking
the
elimination
of
pre-emptive
rights.
7.
Debt
Restructuring
Wevoteonacase-by-casebasisforproposalstoincreasecommonand/orpreferredsharesandtoissuesharesaspartof adebt-restructuringplan.Generally,weapproveproposalsthatfacilitatedebtrestructuring.
8.
Share
Repurchase
Programs
We vote for management proposals to institute open-market share repurchase plans in which all shareholders may participate on equal terms.
9.
Dual-Class
Stock
Wevoteforproposalstocreateanewclassofnonvotingorsubvotingcommonstock
if:
·
itisintendedforfinancingpurposeswithminimalornodilutiontocurrent
shareholders
·
itisnotdesignedtopreservethevotingpowerofaninsiderorsignificant
shareholder.
10.
Issue
Stock
for
Use
with
Rights
Plan
We vote against proposals that increase authorized common stock for the explicit purpose of implementing a shareholder rights plan (poison pill).
11.
Debt
Issuance
Requests
Whenevaluatingadebtissuancerequest,theissuingcompany’spresentfinancialsituationisexamined.Themainfactor foranalysisisthecompany’scurrentdebt-to-equityratio,orgearinglevel.Ahighgearinglevelmayinclinemarketsand financialanalyststodowngradethecompany’sbondrating,increasingitsinvestmentriskfactorintheprocess.Agearing level up to 100 percent is considered acceptable.
We
vote
for
debt
issuances
for
companies
when
the
gearing
level
is
between
zero
and
100
percent.
Weviewonacase-by-casebasisproposals wheretheissuanceofdebtwillresultinthe gearing levelbeinggreaterthan 100percent.Anyproposeddebtissuanceiscomparedtoindustryandmarketstandards.
12.
Financing
Plans
Wegenerallyvotefortheadoptingoffinancingplansifwebelievetheyareinthebesteconomicinterestsof
shareholders.
H. ExecutiveandDirectorCompensation
Ingeneral,wevoteforexecutiveanddirectorcompensationplans,withtheviewthatviablecompensationprogramsreward the creation of stockholder wealth by having high payout sensitivity to increases in shareholder value.Certain factors, however, such as repricing underwater stock options without shareholder approval, would cause us to vote against a plan. Additionally,insomecaseswewouldvoteagainstaplandeemedunnecessary.
1.
OBRA-Related
Compensation
Proposals
a.
Amendments
that
Place
a
Cap
on
Annual
Grant
or
Amend
Administrative
Features
We
vote
for
plans
that
simply amend shareholder-approved plans
to include
administrative
features
or place
a
cap on
the annual grants any one participant may receive to comply with the provisions of Section 162(m) of the Internal RevenueCode.b.
Amendments
to
Added
Performance-Based
Goals
Wevoteforamendmentstoaddperformancegoalstoexistingcompensationplanstocomplywiththeprovisionsof Section 162(m) of the Internal Revenue Code.
c.
Amendments
to
Increase
Shares
and
Retain
Tax
Deductions
Under
OBRA
We vote for amendments to existing plans to increase shares reserved and to qualify the plan for favorable tax treatmentundertheprovisionsofSection162(m)theInternalRevenueCode.
d.
Approval
of
Cash
or
Cash-and-Stock
Bonus
Plans
We vote for cash or cash-and-stock bonus plans to exempt the compensation from taxes under the provisions of Section 162(m) of the Internal Revenue Code.
2.
Expensing
of
Options
We
vote
for
proposals
to
expense
stock
options
on
financial
statements.
3.
Shareholder
Proposals
to
Limit
Executive
and
Director
Pay
a.
We
vote on a
case-by-case
basis
on all shareholder
proposals
that seek additional
disclosure
of
executive
and director
pay information. Considerations include: cost and form of disclosure.We vote for such proposals if additional disclosureisrelevanttoshareholder’sneedsandwouldnotputthecompanyatacompetitivedisadvantagerelative to its industry.
b.
We
vote
on
a
case-by-case
basis
on
all
other
shareholder
proposals
that
seek
to
limit
executive
and
director
pay.
4.
Reports
to
Assess
the
Feasibility
of
Including
Sustainability
as
a
Performance
Metric
Wevoteinfavorofnon-bindingproposalsforreportsonthefeasibilityofincludingsustainabilityasaperformancemetric for senior executive compensation.
We have a policy of voting to reasonably limit the levelof options and other equity-based compensation arrangements available to management to reasonably limit shareholder dilution and management compensation.For options and equity-based compensation arrangements, we vote FOR proposals or amendments that would result in the available awards being less than 10% of fully diluted outstanding shares (i.e. if the combined total of shares, common share equivalents and options available to be awarded under all current and proposed compensation plans is less than 10%of fully diluted shares).In the event the available awards exceed the 10% threshold, we would also consider the % relative to the common practice of its specific industry (e.g. technology firms).Other considerations would include, without limitation, the following:
·
compensationcommitteecomprisedofindependentoutside
directors
·
maximumaward
limits
·
repricingwithoutshareholderapproval
prohibited
·
3-yearaverageburnratefor
company
·
planadministratorhasauthoritytoacceleratethevestingof
awards
·
sharesundertheplansubjecttoperformance
criteria.
5.
Golden
Parachutes
a.
We
vote
for
shareholder
proposals
to
have
golden
parachutes
submitted
for
shareholder
ratification.
b.
We voteon a case-by-casebasison allproposalsto ratify orcancelgolden parachutes.Considerationsinclude: the amount should not exceed 3 times average base salary plus guaranteed benefits; golden parachute should be less attractive than anongoing employmentopportunity withthefirm.
6.
Golden
Coffins
a.
We vote for shareholder proposals that request a company not to make any death benefit payments to senior executives’ estates or beneficiaries or pay premiums in respect to any life insurance policy covering a senior executive’slife(“goldencoffin”).Wecarveoutbenefitsprovidedunderaplan,policyorarrangementapplicabletoa broadergroupofemployees,suchasofferinggroupuniversallifeinsurance.
b.
We
vote for shareholder
proposals that request shareholder
approval
of survivor
benefits
for
future
agreements
that,
followingthedeathofaseniorexecutive,wouldobligatethecompanytomakepaymentsorawardsnotearned.
7.
Anti-Tax
Gross-up
Policy
a.
We vote for proposals that ask a company to adopt a policy whereby it will not make, or promise to make, any tax gross-up payment to its senior executives, except for tax gross-ups provided pursuant to a plan, policy, or arrangement applicable to management employees of the company generally, such as relocation or expatriate tax equalization policy; we also vote for proposals that ask management to put gross-up payments to a shareholder
vote.
b.
Wevoteagainstproposalswhereacompany willmake,orpromisetomake,anytaxgross-uppaymenttoitssenior executives without a shareholder vote, except for tax gross-ups provided pursuant to a plan, policy, orarrangement applicable to management employees of the company generally, such as relocation or expatriate tax equalization policy.
8.
EmployeeStockOwnershipPlans
(ESOPs)
WevoteforproposalsthatrequestshareholderapprovalinordertoimplementanESOPortoincreaseauthorizedshares forexistingESOPs,exceptincaseswhenthenumberofsharesallocatedtotheESOPis"excessive"(i.e.,generallygreater than five percent of outstanding shares).
9.
Employee
Stock
Purchase
Plans
a.
We
vote
for
qualified
plans
where
all
of
the
following
apply:
·
thepurchasepriceisatleast85percentoffairmarket
value
·
theofferingperiodis27monthsor
less
·
thenumberofsharesallocatedtotheplanisfivepercentorlessofoutstanding
shares.
If
the
above
do
not
apply,
we
vote
on
a
case-by-case
basis.
b.
We
vote
for
non-qualified
plans
where
all
of
the
following
apply:
·
allemployeesofthecompanyareeligibletoparticipate(excluding5percentormorebeneficial
owners)
·
therearelimitsonemployeecontribution(ex:fixeddollar
amount).
·
thereisacompanymatchingcontributionwithamaximumof25percentofanemployee’s
contribution
·
thereisnodiscountonthestockpriceonpurchasedate(sincethereisacompany
match).
If
the
above
do
not
apply,
we
vote
against
the
non-qualified
employee
stock
purchase
plan.
10.
401(k)
Employee
Benefit
Plans
We
vote
for
proposals
to
implement
a
401(k)
savings
plan
for
employees.
11.
Stock
Compensation
Plans
a.
We
vote
for
stock
compensation
plans
which
provide
a
dollar-for-dollar
cash
for
stock
exchange.
b.
Wevoteonacase-by-casebasisforstockcompensationplanswhichdonotprovideadollar-for-dollarcashforstock exchange using a quantitative model.
12.
Directors
Retirement
Plans
a.
Wevoteagainstretirementplansfornon-employee
directors.
b.
Wevoteforshareholderproposalstoeliminateretirementplansfornon-employee
directors.
13.
Management
Proposals
to
Reprice
Options
Wevoteagainstmanagementproposalsseekingapprovaltoreprice
options.
14.
Shareholder
Proposals
Regarding
Executive
and
Director
Pay
a.
We vote against shareholder proposals seeking to set absolute levels on compensation or otherwise dictate the amount or form of compensation.
b.
We
vote
against
shareholder
proposals
requiring
director
fees
be
paid
in
stock
only.
c.
We
vote
against
shareholder
proposals
to
eliminate
vesting
of
options
and
restricted
stock
on
change
of
control.
d.
We
vote
for
shareholder
proposals
to
put
option
repricing
to
a
shareholder
vote.
e.
We vote for shareholder proposals that call for a non-binding advisory vote on executive pay (“say-on-pay”). Company boards would adopt a policy giving shareholders the opportunity at each annual meeting to vote on an advisory resolution to ratify the compensation of the named executive officers set forth in the proxy statement’s summary compensation table.
f.
We
vote
“annual”
for
the
frequency
of
say-on-pay
proposals
rather
than
once
every
two
or
three
years.
g.
Wevoteonacase-by-casebasisforallothershareholderproposalsregardingexecutiveanddirectorpay,takinginto accountcompanyperformance,paylevelversuspeers,paylevelversusindustry,andlongtermcorporateoutlook.
15.
Management
Proposals
on
Executive
Compensation
Fornon-bindingadvisoryvotesonexecutiveofficercompensation,whenmanagementandtheexternalserviceprovider agree,wevotefortheproposal.Whenmanagementandtheexternalserviceproviderdisagree,theproposalbecomesa referitem.InthecaseofaReferitem,thefactorsunderconsiderationwillincludethefollowing:
·
companyperformanceoverthelast1,3,and5-yearperiodsonatotalshareholderreturn
basis
·
performancemetricsforshort-andlong-termincentive
programs
·
CEOpayrelativetocompanyperformance(istherea
misalignment)
·
taxgross-upstosenior
executives
·
change-in-control
arrangements
·
presenceofaclawbackprovision,ownershipguidelines,orstockholdingrequirementsforsenior
executives
16.
Stock
Retention
/
Holding
Period
of
Equity
Awards
Wevoteonacase-by-casebasisonshareholderproposalsaskingcompaniestoadoptpoliciesrequiringseniorexecutives toretainallorasignificant(>50percent)portionoftheirsharesacquiredthroughequitycompensationplans,either:
·
whileemployedand/orforonetotwoyearsfollowingtheterminationoftheiremployment;
or
·
for a substantial period following the lapse of all other vesting requirements for the award, with ratable release ofa portion of the shares annually during the lock-up period
The
following
factors
will
be
taken
into
consideration:
·
Whetherthecompany hasanyholdingperiod,retentionratio,ornamedexecutiveofficerownershiprequirements currently in place
·
Actualstockownershipofthecompany’snamedexecutive
officers
·
Policiesaimedatmitigatingrisktakingbysenior
executives
·
Paypracticesatthecompanythatwedeem
problematic
I. State/CountryofIncorporation
1.
Voting
on
State
Takeover
Statutes
a.
We
vote
for
proposals
to
opt
out
of
state
freeze-out
provisions.
b.
We
vote
for
proposals
to
opt
out
of
state
disgorgement
provisions.
2.
Voting
on
Re-incorporation
Proposals
We vote on a case-by-casebasison proposals to changea company's stateor country of incorporation.Considerations include:reasonsforre-incorporation(i.e.financial,restructuring,etc);advantages/benefitsforchange(i.e.lowertaxes); comparethedifferencesinstate/countrylawsgoverningthecorporation.
3.
Control
Share
Acquisition
Provisions
a.
Wevoteagainstproposalstoamendthechartertoincludecontrolshareacquisition
provisions.
b.
Wevoteforproposalstooptoutofcontrolshareacquisition statutesunlessdoingsowouldenablethecompletion of a takeover that would be detrimental to shareholders.
c.
Wevoteforproposalstorestorevotingrightstothecontrol
shares.
d.
Wevoteforproposalstooptoutofcontrolsharecashout
statutes.
J. MergersandCorporateRestructuring
1.
Mergers
and
Acquisitions
a.We vote on a case-by-case basis on mergers and acquisitions. Considerations include: benefits/advantages of the combinedcompanies(i.e.economiesofscale,operatingsynergies,increaseinmarketpower/share,etc.);offerprice (premiumordiscount);changeinthecapitalstructure;impactonshareholderrights.
2.
Corporate
Restructuring
a.Wevoteonacase-by-casebasisoncorporaterestructuringproposalsinvolvingminoritysqueezeoutsandleveraged buyouts.Considerationsinclude:offerprice,otheralternatives/offersconsideredandreviewoffairnessopinions.
3.
Spin-
offs
a.Wevoteonacase-by-casebasisonspin-offs.Considerationsincludethetaxandregulatoryadvantages,planneduse of sale proceeds, market focus, and managerial incentives.
4.
Asset
Sales
a.We vote on a case-by-case basis on asset sales.Considerations include the impact on the balance sheet/working capital,valuereceivedfortheasset,andpotentialeliminationofdiseconomies.
5.
Liquidations
a.We vote on a case-by-case basison liquidations after reviewing management's efforts to pursue otheralternatives, appraisalvalueofassets,andthecompensationplanforexecutivesmanagingtheliquidation.
6.
Appraisal
Rights
a.
We
vote
for
proposals
to
restore,
or
provide
shareholders
with,
rights
of
appraisal.
7.
Changing
Corporate
Name
a.We vote for proposals to change the “corporate name”, unless the proposed name change bears a negative
connotation.
8.
Conversion
of
Securities
a.Wevoteonacase-by-casebasisonproposalsregardingconversionofsecurities.Considerationsincludethedilution to existing shareholders, the conversion price relative to market value, financial issues, control issues, termination penalties, and conflicts of interest.
9.
Stakeholder
Provisions
a.We vote against proposals that ask the board to consider non-shareholder constituencies or other non-financial effects when evaluating a merger or business combination.
K. SocialandEnvironmentalIssues
When considering environmental and social (E&S) proposals, we have an obligation to vote proxies in the best interest of our clients, considering both shareholder value as well as societal impact.
1.
Sustainability
Reporting
a.
We vote for proposals seeking greater disclosure on the company’s environmental, social & governance policies and practices;
b.
We vote for proposals that would require companies whose annual revenues are at least $5 billion to prepare asustainability report.All others will be decided on a case-by-case basis.
2.
Diversity&
Equality
a.
We vote for proposals supporting nomination of most qualified candidates, inclusive of a diverse pool of women and people of color, to the Board of Directors and senior management levels;
b.
Wevoteforproposalsrequestingcomprehensivedisclosureonboard
diversity;
c.
Wevoteforproposalsrequestingcomprehensivedisclosureonemployee
diversity;
d.
Wevoteforproposalsrequestingcomprehensivereportsongenderandracialpay
disparity;
e.
Wevoteforproposalsseeking toamendacompany’sEEOstatementordiversity policiestoprohibitdiscrimination based on sexual orientation and/or gender identity.
3.
ClimateRisk
Disclosure
a.
We vote for climate proposals seeking more disclosure on financial, physical or regulatory risks related to climate change and/or how the company measures and manages such risks;
b.
We vote for climate proposals requesting a report/disclosure of goals on GHG emissions reduction targets fromcompany operations and/or products;
4.
Case-by-caseE&Sproposals
(examples)
a.
Animalwelfare
policies
b.
Humanrightsandcompany
policies
c.
Operationsinhigh-riskorsensitive
areas
d.
Productintegrityand
marketing.
L. Miscellaneous
1.
Charitable
Contributions
We
vote
against
proposals
to
eliminate,
direct
or
otherwise
restrict
charitable
contributions.
2.
Political
Contributions
We
will
vote
in
favor
of
non-binding
proposals
for
reports
on
corporate
lobbying
and
political
contributions.
Ingeneral,wevoteonacase-by-casebasisonothershareholderproposalspertainingtopoliticalcontributions.In determiningourvoteonpoliticalcontributionproposalsweconsider,amongotherthings,thefollowing:
·
doesthecompanyhaveapoliticalcontributionspolicypublicly
available
·
howextensiveisthedisclosureonthese
documents
·
whatoversightmechanismsthecompanyhasinplaceforapproving/reviewingpoliticalcontributionsand
expenditures
·
doesthecompanyprovideinformationonitstradeassociation
expenditures
·
totalamountofpoliticalexpenditurebythecompanyinrecent
history.
3.
Operational
Items
a.
Wevoteagainstproposalstoprovidemanagementwiththeauthoritytoadjournanannualorspecialmeeting absent compelling reasons to support the proposal.
b.
Wevoteagainstproposalstoreducequorumrequirementsforshareholdermeetingsbelowamajorityofthe shares outstanding unless there are compelling reasons to support the proposal.
c.
Wevoteforby-laworcharterchangesthatareofahousekeepingnature(updatesor
corrections).
d.
We vote for management proposals to change the date/time/location of the annual meeting unless the proposed change is unreasonable.
e.
We vote against shareholder proposals to change the date/time/location of the annual meeting unless the current scheduling or location is unreasonable.
f.
Wevoteagainstproposalstoapproveotherbusinesswhenitappearsasvoting
item.
4.
RoutineAgenda
Items
Insomemarkets,shareholdersareroutinelyaskedto
approve:
·
theopeningoftheshareholder
meeting
·
thatthemeetinghasbeenconvenedunderlocalregulatory
requirements
·
thepresenceofa
quorum
·
theagendafortheshareholder
meeting
·
theelectionofthechairofthe
meeting
·
regulatory
filings
·
theallowanceof
questions
·
thepublicationof
minutes
·
theclosingoftheshareholder
meeting.
Wegenerallyvotefortheseandsimilarroutinemanagement
proposals.
5.
AllocationofIncomeand
Dividends
We generally vote for management proposals concerning allocation of income and the distribution of dividends, unless the amount of the distribution is consistently and unusually small or large.
6.
Stock(Scrip)Dividend
Alternatives
a.
Wevoteformoststock(scrip)dividend
proposals.
b.
Wevoteagainstproposalsthatdonotallowforacashoptionunlessmanagementdemonstratesthatthecash option is harmful to shareholder value.
ClearBridgehasdeterminedthatregisteredinvestmentcompanies,particularlyclosedendinvestmentcompanies,raise special policy issues making specific voting guidelines frequently inapplicable.To the extent that ClearBridge has proxy votingauthoritywithrespecttosharesofregisteredinvestmentcompanies,ClearBridgeshallvotesuchsharesinthebest interest of client accounts and subject to the general fiduciary principles set forth herein without regard to the specific voting guidelines set forth in Section V. A. through L.
The voting policy guidelines set forth herein will be reviewed annually and may be changed by ClearBridge in its sole
discretion.
VI. OTHERCONSIDERATIONS
In certain situations, ClearBridge may determine not to vote proxies on behalf of a client because ClearBridge believes that the expected benefit to the client of voting shares is outweighed by countervailing considerations. Examples of situations in which ClearBridge may determine not to vote proxies on behalf of a client include:
A. ShareBlocking
Proxy voting in certain countries requires “share blocking.”This means that shareholders wishing to vote their proxies must deposit their shares shortly before the date of the meeting (e.g., one week) with a designated depositary.During the blocking period, shares that will be voted at the meeting cannot be sold until the meeting has taken place and the shares have been returned to client accounts by the designated depositary.In deciding whether to vote shares subject to share blocking, ClearBridge will considerandweigh,basedon theparticular factsandcircumstances, the expectedbenefit toclientsof votingin relation to the detriment to clients of not being able to sell such shares during the applicable period.
B. SecuritiesonLoan
Certain clients of ClearBridge, such as an institutional client or a mutual fund for which ClearBridge acts as a sub-adviser, may engage in securities lending with respect to the securities in their accounts.ClearBridge typically does not direct or overseesuch securities lending activities.To the extent feasible and practical under the circumstances, ClearBridge will request that the client recall shares that are on loan so that such shares can be voted if ClearBridge believes that the expected benefit to the client of voting such shares outweighs the detriment to the client of recalling such shares (e.g., foregone income).The ability to timely recall shares for proxy voting purposes typically is not entirely within the control of ClearBridge and requires the cooperation of the client and its other service providers.Under certain circumstances, the recall of shares in time for such shares to be voted may not be possible due to applicable proxy voting record dates and administrative considerations.
VII. DISCLOSUREOFPROXYVOTING
ClearBridgeemployeesmaynotdisclosetoothersoutsideofClearBridge(including employeesofotherFranklin businessunits) how ClearBridge intends to vote a proxy absent prior approval from ClearBridge’s General Counsel/Chief Compliance Officer, except thata ClearBridgeinvestmentprofessional maydisclose toa third party (other thananemployeeofanotherFranklinbusiness unit)how s/he intends to vote without obtaining prior approval fromClearBridge’s General Counsel/Chief Compliance Officer if (1) the disclosure is intended to facilitate a discussion of publicly available information by ClearBridge personnel with a representative of a company whose securities are the subject of the proxy, (2) the company’s market capitalization exceeds $1 billion and (3)ClearBridge has voting power with respect to less than 5% of the outstanding common stock of the company.
If a ClearBridge employee receives a request to disclose ClearBridge’s proxy voting intentions to, or is otherwise contacted by, another person outside of ClearBridge (including an employee of another Franklin business unit) in connection with an upcoming proxy voting matter, he/she should immediately notify ClearBridge’s General Counsel/Chief Compliance Officer.
If a Portfolio Manager wants to take a public stance with regards to a proxy, s/he must consult with ClearBridge’s General Counsel/Chief Compliance Officer before making or issuing a public statement.
VIII. RECORDKEEPINGANDOVERSIGHT
ClearBridgeshallmaintainthefollowingrecordsrelatingtoproxy
voting:
·
acopyofthesepoliciesand
procedures;
·
acopyofeachproxyform(as
voted);
·
acopyofeachproxysolicitation(includingproxystatements)andrelatedmaterialswithregardtoeach
vote;
·
documentationrelatingtotheidentificationandresolutionofconflictsof
interest;
·
any documents created by ClearBridge that were material to a proxy voting decision or that memorialized the basis for that decision; and
·
acopyofeachwrittenclientrequestforinformationonhowClearBridgevotedproxiesonbehalfoftheclient,andacopyof any written response by ClearBridge to any (written or oral) client request for information on how ClearBridge votedproxies on behalf of the requesting client.
Such records shall be maintained and preserved in an easily accessible place for a period of not less than six years from the end of the fiscal year during which the last entry was made on such record, the first two years in an appropriate office of the ClearBridge
adviser.
To the extent that ClearBridge is authorized to vote proxies for a United States Registered Investment Company, ClearBridge shall maintain such records as are necessary to allow such fund to comply with its recordkeeping, reporting and disclosure obligations under applicable laws, rules and regulations.
In lieu of keeping copies of proxy statements, ClearBridge may rely on proxy statements filed on the EDGAR system as well as on thirdpartyrecords ofproxystatementsandvotes cast if the thirdparty provides an undertaking toprovide thedocuments promptly upon request.
ITEM 8 – PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
This section contains information about the Registrant’s portfolio managers and the other accounts they manage, their compensation, and their ownership of securities of the Registrant. "Ownership of Securities" information reflects a portfolio manager’s beneficial ownership, which means a direct or indirect pecuniary interest.
Information in this section is as of March 31, 2023, unless otherwise noted.
(a)(1)
Jessica S. Bush has been with Principal® since 2006. Ms. Bush earned a bachelor’s degree in Business Administration from the University of Michigan. She has earned the right to use the Chartered Financial Analyst designation.
Benjamin E. Rotenberg has been with Principal® since 2014. Mr. Rotenberg earned a bachelor’s degree in International Relations and Russian from Pomona College. He has earned the right to use the Chartered Financial Analyst and the Chartered Alternative Investment Analyst designations.
May Tong has been with Principal® since 2021. Prior to that, Ms. Tong was a Senior Vice President, Portfolio Manager for Franklin Templeton Multi-Asset Solutions since 2018. Prior to that, Ms. Tong was a Portfolio Manager and Head of Portfolio Implementation and Management for Voya Investment Management’s Multi-Asset Strategies and Solutions Team since 2011. She earned a bachelor’s degree in Accounting and Finance from Boston College and an M.B.A. from Columbia University. She has earned the right to use the Chartered Financial Analyst designation.
(a)(2)
The following table provides information relating to other accounts managed by the Registrant’s portfolio managers disclosed in (a)(1) above.
Other Accounts Managed | ||||
Number of | Total Assets of the | |||
Principal Diversified Select Real Asset Fund | Total Number | Total Assets in the | Accounts that Base the Advisory Fee on | Accounts that Base the Advisory Fee on |
of Accounts | Accounts | Performance | Performance | |
Jessica S. Bush | ||||
Registered investment companies | 3 | $7.2 billion | 0 | $0 |
Other pooled investment vehicles | 1 | $1.6 billion | 0 | $0 |
Other accounts | 3 | $10.7 million | 0 | $0 |
Benjamin E. Rotenberg | ||||
Registered investment companies | 3 | $7.2 billion | 0 | $0 |
Other pooled investment vehicles | 1 | $1.6 billion | 0 | $0 |
Other accounts | 3 | $10.7 million | 0 | $0 |
May Tong | ||||
Registered investment companies | 3 | $7.2 billion | 0 | $0 |
Other pooled investment vehicles | 1 | $1.6 billion | 0 | $0 |
Other accounts | 0 | $0 | 0 | $0 |
Portfolio managers at PGI and the sub‑advisers typically manage multiple accounts. These accounts may include, among others, mutual funds, proprietary accounts, and separate accounts (assets managed on behalf of pension funds, foundations, and other investment accounts). The management of multiple funds and accounts may give rise to potential conflicts of interest if the funds and accounts have different objectives, benchmarks, time horizons, and fees. In addition, the side-by-side management of these funds and accounts may raise potential conflicts of interest relating to cross trading, the allocation of investment opportunities, and the aggregation and allocation of trades. PGI seeks to provide best execution of all securities transactions and aggregate and then allocate securities to client accounts in a fair and timely manner. To this end, PGI has developed policies and procedures designed to mitigate and manage the potential conflicts of interest that may arise from side-by-side management.
(a)(3)
PGI offers investment professionals a competitive compensation structure that is evaluated annually relative to other global asset management firms to ensure its continued competitiveness and alignment with industry best practices. The objective of the structure is to offer market competitive compensation that aligns individual and team contributions with firm and client performance objectives in a manner that is consistent with industry standards and business results.
Compensation for investment professionals at all levels is comprised of base salary and variable incentive components. As team members advance in their careers, the variable component increases in its proportion commensurate with responsibility levels. The variable component is designed to reinforce delivery of investment performance, firm performance, team collaboration, regulatory compliance, operational excellence, client retention and client satisfaction. Investment performance is measured on a pretax basis against relative client benchmarks and peer groups over one year, three-year and five-year periods, calculated quarterly, reinforcing a longer‑term orientation.
Payments under the variable incentive plan are delivered in the form of cash or a combination of cash and deferred compensation. The amount of incentive delivered in the form of deferred compensation depends on the size of an individual’s incentive award as it relates to a tiered deferral scale. Deferred compensation is required to be invested into Principal Financial Group (“PFG”) restricted stock units and funds managed by the team, via a co-investment program. Both payment vehicles are subject to a three‑year vesting schedule. The overall measurement framework and the deferred component are well aligned with our desired focus on clients’ objectives (e.g., co-investment), alignment with Principal stakeholders, and talent retention.
In addition to deferred compensation obtained through their compensation programming, team members have investments acquired through their participation in PFG’s employee stock purchase plan, retirement plans offered by the Principal (e.g., 401(k) plan), and direct personal investments. It should be noted that the Company’s retirement and deferred compensation plans generally utilize its non‑registered group separate accounts or commingled vehicles rather than the traditional mutual funds. In each instance, however, these vehicles are managed in lockstep alignment with the mutual funds.
(a)(4) The portfolio managers disclosed in (a)(1) above own shares of the Registrant as follows:
Portfolio Manager | Dollar Range of Securities Owned by the Portfolio Manager |
Jessica S. Bush | $50,001 - $100,000 |
Benjamin E. Rotenberg | None |
May Tong | None |
(b) 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 period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
ITEM 12 – DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not applicable.
ITEM 13 – EXHIBITS
(a)(1) Code of Ethics required to be disclosed under Item 2 of Form N-CSR attached hereto as
Exhibit 99.CODE ETH
.
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940 are attached hereto as
Exhibit 99.CERT
.
(b) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(b) under the Investment Company Act of 1940 is attached hereto as
Exhibit 99.906CERT
.
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 Diversified Select Real Asset Fund |
By | /s/ Kamal Bhatia |
Kamal Bhatia, President and CEO
Date | 05/09/2023 |
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/ Kamal Bhatia |
Kamal Bhatia, President and CEO
Date | 05/09/2023 |
By | /s/ Michael Scholten |
Michael Scholten, Chief Financial Officer
Date | 05/09/2023 |