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.
(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.
(f) The Registrant's Code of Ethics is attached
as an Exhibit hereto in response to Item 19(a)(1).
ITEM 3 – AUDIT COMMITTEE FINANCIAL EXPERT
The Registrant's Board has determined that Shane
Goodwin, 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, 2024 -
$110,406
March 31, 2025 - $112,454
(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.
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.
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:
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 Board of
Trustees of the Principal Private Credit
Fund I, Principal Real Asset Fund, and any other registered closed‑end
investment companies that the Board of Trustees oversees (the “Funds”).
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;
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
Board
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; and
Any other service that the International Ethics Standards Board
for Accountants (IESBA) determines, by regulation, is impermissible.
(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 and pre-concurrence,
a detailed description of each particular service, excluding tax services, for
which pre-approval and pre-concurrence
is
sought,
and
the corresponding
range
of
fees
for
such
service.
The
Committee
may delegate pre-approval and
pre-concurrence authority to one or more of its members provided such delegated
member(s) shall present a report of any services so pre-approved and
pre-concurred to the full Committee at its next regularly scheduled meeting.
The Committee Chairperson shall have
pre-approval and pre-concurrence 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
and pre-concurrence 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
grant
pre-approval and pre-concurrence
with respect to
the
primary
independent
auditor’s
provision of non-audit services, the
Committee (or the delegated members(s), as applicable) will consider whether
the services are compatible
with
the
maintenance
of
such
auditor's
independence.
The
Committee (or the delegated members(s),
as applicable) 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.
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 as well as any controlled subsidiary.
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.
The Committee shall monitor 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.
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.
For
persons
recently
promoted
or
hired
into
a
financial
reporting
oversight
role
(other
than members
of
the
Board
of
the
Funds
who
are
not
also
officers
or otherwise “interested persons” (as defined by
the Investment Company Act of 1940)
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.
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
Board
of
the
Funds
on
March 22
,
2024).
(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, 2024 -
$244,814
March 31, 2025 - $232,309
(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 and notes there were no fees requiring such
consideration.
(i) The registrant has not been identified by
the Securities and Exchange Commission as having filed an annual report issued
by a registered public accounting firm branch or office that is located in a
foreign jurisdiction where the Public Company Accounting Oversight Board is
unable to inspect or completely investigate because of a position of authority
in that jurisdiction.
(j) the registrant is not a foreign issuer.
ITEM 5 – AUDIT COMMITTEE OF LISTED REGISTRANTS
ITEM 6 – INVESTMENTS
Schedule of Investments is included as part of
the Report to Stockholders filed under Item 1 of this form.
ITEM 7 – FINANCIAL STATEMENTS AND FINANCIAL
HIGHLIGHTS FOR OPEN-END MANAGEMENT INVESTMENT COMPANIES
ITEM 8 – CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
FOR OPEN-END MANAGEMENT INVESTMENT COMPANIES
ITEM 9 –
PROXY DISCLOSURES FOR OPEN-END MANAGEMENT COMPANIES
ITEM 10 –
REMUNERATION PAID TO DIRECTORS, OFFICERS, AND OTHERS OF OPEN-END MANAGEMENT
INVESTMENT COMPANIES
ITEM 11 –
STATEMENT REGARDING BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACT
Statement
Regarding Basis for Approval of Investment Advisory Contracts is included as
part of the Report to Stockholders filed under Item 1 of this form.
ITEM 12 – 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 Real
Asset Fund
Principal Private
Credit Fund I
(each a “Fund” and
together the “Interval Funds”)
The Board has delegated
responsibility for decisions regarding proxy voting for securities held by each
Fund to Principal Global Investors (“PGI”) or to the Fund’s sub-advisor, as
appropriate. PGI and each sub-advisor will vote such proxies in accordance with
its proxy policies and procedures, which have been reviewed by the Fund’s
Board. Any material changes to the proxy policies and procedures will be
submitted to the Board for approval.
For Funds that participate in a
securities lending program, the voting rights for securities that are loaned
are transferred to the borrower. Therefore, the lender (i.e., a Fund) is not
entitled to vote the loaned securities, unless it recalls those securities.
Those managing the Fund’s investments may recall securities for voting purposes
when they reasonably believe the ability to vote such securities outweighs the
additional revenue received if such securities were not recalled.
The Funds have a policy
prohibiting investment in securities of Principal Financial Group, Inc., except
for those Funds that track an index and are permitted to do so under SEC
no-action relief. If any such securities are owned in any of the Funds’
portfolios, the Investment Adviser will vote according to third-party
guidelines. PGI has a policy to not buy securities of affiliated entities in
the portfolios they manage.
Each quarter, the adviser or
sub-adviser must provide to the Interval Funds:
1.
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
2.
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.
Annually, the adviser or
sub-adviser must provide to the Interval Funds, no later than July 31, their
proxy voting data for each 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.
Principal Global
Investors, LLC
Proxy Voting
Policy
Introduction
Principal Global Investors, LLC
(doing
business as Principal Asset Management) 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, Principal Asset Management has a fiduciary duty
to act in the best interests of its clients. Principal Asset Management
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,
the Principal Asset Management 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 clients of Principal Asset
Management 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 the previously
adopted proxy policies and procedures until amended. Please see the Appendix to
the compliance manual for Finisterre specific proxy policies and procedures.
Relationship between
Investment Strategy, Sustainable Investing, and Proxy Voting
Principal Asset Management 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 Principal Asset Management can support
strong corporate governance structures, shareholder rights, and transparency.
Principal Asset Management also
believes a company's positive environmental and social practices may influence
the value of the company, with a goal of leading to long-term shareholder
value.
Principal Asset Management may
take these factors into consideration, alongside other non sustainability
factors, when voting proxies in its effort to seek the best outcome for its
clients. We consider disclosure a useful resource in determining risks and seek
to balance these disclosures with the practice and views of management.
Principal Asset Management believes that the integrated consideration of
sustainable investment practices may help identify sources of risk that could
erode the long-term investment results it seeks on behalf of its clients. From
time to time, Principal Asset Management may work with various sustainability-related
organizations to engage issuers or advocate for greater levels of disclosure.
ROLES AND
RESPONSIBILITIES
Role of the Proxy Voting
Committee
Principal Asset Management'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
Principal Asset Management 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 Principal Asset Management 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, Principal Asset Management 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 Committee ("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, Principal
Asset Management 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 the current Proxy Voting Guidelines of
Principal Asset Management 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 (Base) and Exhibit B (Sustainable) 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
Principal Asset Management to utilize a different set of guidelines, request specific
deviations, or directly assume responsibility for the voting of proxies. In
addition, Principal Asset Management may deviate from the Guidelines on an
exception basis if the investment team or Principal Asset Management 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, Principal Asset Management will consider the relevant facts
and circumstances of a particular vote and then vote in a manner Principal
Asset Management 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, Principal Asset Management may consider the
spirit of the Guidelines and instruct the vote on such issues believed to be in
the best interests of the client.
Use of Proxy Advisory Firms
Principal Asset Management 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 Principal Asset Management has proxy voting responsibility,
and provide reports concerning the proxies voted ("Proxy Voting
Services"). Although Principal Asset Management has retained the Proxy
Advisory Firm for Proxy Voting Services, the entity remains responsible for
proxy voting decisions. Principal Asset Management has designed the Policy to
oversee and evaluate the Proxy Advisory Firm, including with respect to the
matters described below, to support its 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 Principal Asset Management, 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 Principal Asset Management's clients, and consistent with its 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 Principal Asset
Management 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 Principal Asset Management; (iii) a review of those
aspects of the Proxy Advisory Firm's policies, procedures, and methodologies
for formulating voting recommendations that Principal Asset Management
considers material to Proxy Voting Services, 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 Principal Asset Management 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, Principal Asset Management 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, Principal Asset Management utilizes the Proxy Advisory Firm to
act as its voting agent for its clients' holdings. Issuers initially send proxy
information to the clients' custodians.
Principal Asset Management
instructs these custodians to direct proxy related materials to the Proxy
Advisory Firm. The Proxy Advisory Firm provides Principal Asset Management with
research related to each resolution. Principal Asset Management analyzes
relevant proxy materials on behalf of their clients and seeks to instruct the
vote (or refrain from voting) in accordance with the Guidelines. A client may
direct Principal Asset Management to vote for such client's account differently
than what would occur in applying the Policy and the Guidelines. Principal
Asset Management may also agree to follow a client's individualized proxy
voting guidelines or otherwise agree with a client on particular voting
considerations. Principal Asset Management seeks to vote (or refrain from
voting) proxies for its clients in a manner determined to be in their best
interests, which may include both considering both the effect on the value of
the client's investments and ESG factors. In some cases, Principal Asset
Management may determine that it is in the best interests of clients to refrain
from exercising the clients' proxy voting rights. Principal Asset Management
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 Principal Asset Management, 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 Principal Asset Management
Compliance to approve and once approved, is administered by Principal Asset
Management 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 Principal Asset Management exercises
voting authority. In certain cases, a client may have elected to have Principal
Asset Management administer a custom policy which is unique to the Client. If
Principal Asset Management 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 Principal Asset Management. Principal Asset Management may
consider the spirit of the Guidelines and instruct the vote on such issues in a
manner believed to 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 Principal Asset Management
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 Principal Asset Management as part of their contract with Principal
Asset Management if they require Principal Asset Management to take actions in
regard to voting securities that have been lent. If not commemorated in such
agreement nor dictated by regulatory requirements, Principal Asset Management
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, Principal
Asset Management maintains one share for each company security out on loan by
the client. Principal Asset Management will vote the remaining share in these
circumstances.
In cases where Principal Asset
Management does not receive a solicitation or enough information within a
sufficient time (as reasonably determined by Principal Asset Management) prior
to the proxy voting deadline, Principal Asset Management or the Proxy Advisory
Firm may be unable to vote.
Regional Variances in Proxy
Voting
Principal Asset Management
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 Principal Asset Management that the anticipated economic
benefit outweighs the expected cost of voting. Principal Asset Management
intends to make their determination on whether to vote proxies of non-U.S.
companies on a case-by case basis. In doing so, Principal Asset Management
shall evaluate market requirements and impediments, including the difficulties
set forth above, for voting proxies of companies in each country. Principal
Asset Management 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
Principal Asset Management's determinations and procedures.
Conflicts of Interest
Principal Asset Management 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 Principal Asset Management encounters
a potential conflict to ensure that its 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
Principal Asset Management 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 has an affirmative obligation
to disclose any known personal or business relationship that could affect the
voting of the applicable proxy. Principal Asset Management Compliance will
approve or deny the exception in consultation, if deemed necessary, with the
Legal.
If Principal Asset Management
Compliance determines that no potential material conflict exists, the Guidelines
may be overridden. If Principal Asset Management 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
Principal Asset Management;
The
nature of the relationship of the issuer with Principal Asset Management, 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 Principal Asset
Management 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.
To further address potential
conflicts of interest for any proxy votes specific to Principal Financial Group
common stock, the exception process is not applicable. In the case of any
proprietary electronically traded funds ("ETF"s), mutual funds or
other comingled proprietary vehicles, PGI will vote in the same proportion as
all other voting shareholders of the underlying fund/vehicle, which is referred
to as echo voting, and the exception process is not applicable If echo voting
is not available or operationally feasible, PGI may abstain from voting.
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. Principal
Asset Management 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 Principal Asset Management 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
Principal Asset Management
publicly discloses on our website Principal Asset Management Vote
Disclosure. The interactive voting dashboard, allows for dynamic disclosure
of the manner in which votes were cast, including details related to (i) votes
against management, (ii) abstentions, (iii) vote rationale, and (iii) voting
metrics. For more information, Clients may contact Principal Asset Management
for details related to how Principal Asset Management has voted with respect to
securities held in the Client's account. On request, Principal Asset Management
will provide clients with a summary of Principal Asset Management'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. Principal Asset Management will also include such information
described in the preceding two sentences in Part 2A of its Form ADV.
Recordkeeping
Principal Asset Management 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 responses
from Principal Asset Management (whether a client's request was oral or in
writing); (vi) any documents prepared by Principal Asset Management 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 Principal Asset
Management 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 Principal Asset Management; 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.
ITEM 13 – PORTFOLIO MANAGERS OF CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
This section contains information about
portfolio managers and the other accounts they manage, their compensation, and
their ownership of securities. The “Ownership of Securities” tables reflect the
portfolio managers’ beneficial ownership, which means a direct or indirect
pecuniary interest.
Information in this section is as of March 31,
2025, unless otherwise noted.
Jessica S. Bush has been with Principal®
since 2006. She earned a bachelor’s degree in Business Administration from the
University of Michigan. Ms. Bush has earned the right to use the Chartered
Financial Analyst designation.
Benjamin E. Rotenberg has been with
Principal® since 2014. He earned a bachelor’s degree in International Relations
and Russian from Pomona College. Mr. Rotenberg 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. She earned a
bachelor’s degree in Accounting and Finance from Boston College and an M.B.A.
from Columbia University. Ms. Tong has earned the right to use the Chartered
Financial Analyst designation.
The following table provides information
relating to other accounts managed by the Registrant’s portfolio managers
disclosed in (a)(1) above.
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Principal
Real Asset Fund |
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Accounts that Base the
Advisory Fee on |
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Registered
investment companies |
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Other
pooled investment vehicles |
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Registered
investment companies |
|
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Other
pooled investment vehicles |
|
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Registered
investment companies |
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Other
pooled investment vehicles |
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|
Portfolio managers at PGI and the Sub-Advisors
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.
Sub-Advisor and Underlying Fund Manager
Conflicts
Conflicts of interest may arise from the fact
that the sub-advisors, managers of underlying funds, and their affiliates
generally will be carrying on substantial investment activities for other
accounts, in which the Fund will have no interest. Such advisors may have
financial incentives to favor certain of such accounts over the Fund. Any of these
accounts may compete with the Fund for specific trades or may hold positions
opposite to positions maintained on behalf of the Fund. Such advisors, either
acting as a sub-advisor or on behalf of an underlying fund, may give advice and
recommend securities to, or buy or sell securities for, the Fund, which advice
or securities may differ from advice given to, or securities recommended or
bought or sold for, such advisor's accounts even though their investment
objectives may be the same as, or similar to, those of the Fund.
Each such advisor will evaluate a variety of
factors that may be relevant in determining whether a particular investment
opportunity or strategy is appropriate and feasible for the Fund and/or other
accounts under management at a particular time. Because these considerations
may differ, the investment activities of the Fund, on the one hand, and other
managed accounts, on the other hand, may differ considerably from time to time.
In addition, the fees and expenses of the Fund may differ from those of the
other managed accounts. Accordingly, prospective investors in the Fund should
note that the future performance of the Fund and its advisors’ other accounts
will vary.
Additionally, such advisors may have an
incentive to favor certain of their accounts over the Fund as they may have
proprietary investments in those accounts or receive greater compensation for
managing them than they do for managing the Fund’s trading.
PGI offers the Fund's 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 the Fund's investment team 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 the PFG’s employee stock purchase plan,
retirement plans, and direct personal investments. It should be noted that the
Company’s retirement plans and deferred compensation plans generally utilize
its non-registered group separate accounts or commingled vehicles rather than
the traditional mutual funds. However, in each instance these vehicles are
managed in lockstep alignment with the mutual funds (i.e. “clones”).
(a)(4) The portfolio managers disclosed in
(a)(1) above own shares of the Registrant as follows:
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Dollar Range of
Securities Owned by the Portfolio
Manager |
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ITEM 14 – PURCHASES OF EQUITY
SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED
PURCHASERS
ITEM 15 – SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS
None.
ITEM 16 – 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 17 – DISCLOSURE OF SECURITIES LENDING
ACTIVITIES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES
ITEM 18 – RECOVERY OF ERRONEOUSLY AWARDED COMPENSATION
(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
.
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.
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Principal
Real Asset Fund |
Barbara Wenig, President and Chief Executive Officer (Principal Executive
Officer)
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.
Barbara Wenig, President and Chief Executive Officer (Principal Executive
Officer)
Michael Scholten, Chief Financial Officer (Principal Financial Officer)