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, 2026 -
$133,288
March 31, 2025 - $165,639
(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:
The Principal Funds
Policy
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. For all non-audit
services, including tax services, the primary independent auditor will perform
assessment of the potential effects of such services on the audit firm’s
independence and provide the Committee in writing, its conclusion that the
threat created by the level of non-audit services is deemed to be at an
acceptable level.
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 June 17, 2025).
(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, 2026 -
$246,551
March 31, 2025 - $225,575
(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
Principal
Private Credit Fund
Principal
Real Asset Fund
(Closed-End
Interval Funds)
It is the
Interval Funds’ policy to delegate authority to its adviser or sub-adviser, as
appropriate, to vote proxy ballots relating to the Funds’ 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:
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.
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:
1.
Identification of the issuer of the security;
2.
Exchange ticker symbol of the security;
3.
CUSIP number of the security;
4.
The date of the shareholder meeting;
5.
A brief description of the subject of the vote;
6.
Whether the proposal was put forward by the issuer or a shareholder;
7.
Whether and how the vote was cast; and
8.
Whether the vote was cast for or against management of the issuer.
Principal Global
Investors, LLC
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.
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 reduce risk and, in turn, influence the value of a company.
Principal Asset Management may take these factors into consideration, alongside
other non-sustainability factors, when voting proxies in its effort to seek the
best economic outcome for its clients. Shareholder proposals often address
matters that are in direct conflict with the opinions of company management. As
a result, we believe additional scrutiny is required and, therefore, all
shareholder proposals are escalated to the investment teams for a final voting
decision.
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.
The Proxy Voting Committee and Chief Investment
Officer, on an annual basis, or more frequently as needed, will establish a
working group to review draft proxy voting guidelines recommended to the Committee
(“Draft Guidelines”). The Guidelines Working Group will collect feedback and
propose Draft Guidelines for adoption by the Committee. Each investment team
maintains autonomy to select the most correlated Guidelines for their
strategies. 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 (Proxy Voting Philosophy Summary) provides
an overview of our current philosophy underlying our three core Guidelines;
Base, Sustainable and Board Aligned. Full overviews of each of these custom
Guidelines are maintained and available.
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.
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.
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
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.
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.
Principal Asset Management’s Proxy Voting
Philosophy is built on an unwavering commitment of creating long-term value for
our shareholders and investing in businesses sharing this commitment. While we
think setting and executing corporate policies should generally rest with a
company’s board of directors and executive management, we also think
shareholders play a critical role in holding these parties accountable. We take
this responsibility seriously. Our policy is implemented globally, taking into
consideration the relevant legal and regulatory requirements in each region.
Our philosophy is structured around four key
themes:
Board
Structure and Composition
Board
Oversight of Risk and Strategy
Board
Oversight of Executive Selection and Compensation
Shareholder
Rights and Protections
The positions described below should be
understood as principles underlying our general philosophy and not as strict
requirements to be followed with respect to each and every proxy vote.
Board Structure, Composition, and
Accountability
The philosophy of our active investment teams:
Our clients, as shareholders, own the corporation. Boards of directors are
accountable to them. Corporate management, in turn, is accountable to its
board. As investors, we need to be comfortable delegating trust and responsibility
to these parties – and these parties should have the appropriate discretion to
manage a company’s affairs with an awareness of the company’s particular
circumstances. We guide our proxy voting in this area to help ensure our
clients are invested in companies with trustworthy and effective boards.
Examples of relevant principals underlying this philosophy include but are not
limited to:
Independence
– A majority of board members are expected to be substantially independent from
the company – not company executives, not key customers or suppliers, and not
executives who sit on one another’s boards. Non-independent board members
should be prohibited from serving on key board committees such as audit,
compensation, nominating and governance. In addition, board leadership should
be independent of company management either through an independent chair or
lead independent director with sufficient authority.
Board
composition and selection – A board must possess the fully array of skills and
experience necessary to oversee and guide the company it serves. We expect
boards to curate an inventory of necessary skills and experiences and ensure
full representation across the board. For new board members, boards should
recruit unbiased slates of candidates who reflect the skills needed by the
board.
Board
size – A board should bring a wide range of relevant perspectives, incorporate
skills aligning with business needs, and include enough members to ensure
sufficient levels of independence for key committees.
Capacity
and commitments of board members – Board members should demonstrate a capacity
to fulfill their roles and a commitment to the responsible discharge of their
duties. This includes attendance of at least 75% of board meetings and
participation in no more than four other public company boards.
Accountability
– As shareholder representatives, board members should be held to a high
standard with their performance assessed on a regular basis. As such,
shareholders should have the right to vote on the entire slate of directors on
an annual basis.
Board Oversight of Risk and Strategy
The philosophy of our active investment teams:
The oversight, guidance, and support a board of directors provides to a
management team is critical to the execution of its long-term corporate
strategy and ultimately, the creation of shareholder value. We expect boards to
assist in identifying material risks to the company’s strategy, disclosure
practices, and execution and to provide risk mitigation insight and monitoring.
Examples of relevant principles underlying this philosophy include but are not
limited to:
Capital
Structure – Increases in authorized shares outstanding are generally accepted
if the proposed authorization results in an increase in shares authorized of
10% or less over a 2-year period. Proposals to create, modify, or issue common
and preferred stock are generally accepted if the rights of the issuance are
not superior to the rights of the current shareholders, subject to the
principal that the authorization increase is limited to 10% of less over a
2-year period.
Mergers
and Acquisitions – We expect boards to actively review potential targets and
offers, assessing all such activities with shareholder value creation as the
primary consideration. As investors, we recognize all merger and acquisition
proposals are unique and should be assessed on their individual merit,
including the deal premium, strategic rationale and possibility of competing
offers.
Auditors
– A board of directors should oversee the company’s third-party auditor to
ensure an independent and accurate assessment of the company’s financial
position is being portrayed. This should include a regular review of auditor
qualifications, independence and competency.
Climate
Reporting – We expect boards and managements to assess financially material
climate risks to the business and, when relevant, provide the disclosure
necessary for a reasonable investor to make informed decisions regarding
potential impacts upon shareholder value.
Board Oversight of Executive Selection and
Compensation
The philosophy of our active investment teams:
A key aspect of a board of directors’ governance responsibility is the support,
selection and assessment of the management team. Boards should hold executives
to clear value creation and be willing to make changes to management when
shareholder value creation falls short of reasonable potential. Boards should
also create and maintain formal succession plans to ensure continuity and
minimize key person risk. Examples of relevant principles underlying this
philosophy include but are not limited to:
Executive
Pay – A board should have a clear philosophy on executive pay and maintain an
independent compensation committee focused on attracting and retaining
executives who will drive shareholder value over time. Executives’ pay and
long-term performance should align executives with shareholders through
measures of financial performance relative to financial targets aligned with
value generation, and the performance of relevant peers. Likewise, we expect
the board of directors to be aligned with shareholders through financial
incentives and share ownership.
Stock
Based Compensation – We support the use of share-based incentive plans intended
to increase the share ownership by management and align shareholder interests
with management. Such plans should take into consideration the dollar cost of
the plans to shareholders and the appropriateness of financial targets included
in the plans. However, we believe that retroactive re-pricing of underwater
options is indicative of poor corporate governance and will generally vote in
opposition to a repricing scheme.
Say
on Pay Frequency – In order to ensure alignment between pay and performance, we
support annual advisory votes to approve executive compensation.
Executive
Selection and Succession – We expect a board of directors to carry out a
thorough executive selection process considering a range of qualified
candidates with a variety of skills and backgrounds. It is ultimately the
responsibility of a board to select the candidate they think will best generate
long-term value for shareholders.
Shareholder Rights and Protections
The philosophy of our active investment teams:
As investors, we view the protection of shareholder rights as integral to
proper corporate governance and think major corporate changes require prior
shareholder approval. We also recognize there are costs associated with
shareholder proposals and think ownership thresholds are appropriate in many
circumstances. We oppose all structural impediments to increasing shareholder
value. Examples of relevant principles underlying this philosophy include but
are not limited to:
Shareholder
Rights Plans “Poison Pills” – We generally oppose the use of poison pills
unless a “pill” is approved by shareholders and does not hamper value creation.
Supermajority
Voting – A majority vote of shareholders should be sufficient to approve items
such as bylaws and acquisitions. Supermajority requirements have the potential
to erode the rights of minority shareholders and are viewed negatively.
Unequal
Voting Rights – We support equal voting rights and think voting power should be
allocated in direct proportion to the shareholders’ equity ownership.
Accordingly, we believe that dual share classes generally present more
disadvantages than advantages to long-term investors and will generally vote
against proposals to create or continue such structures. Notable exceptions
include Real Estate Investment Trusts.
Shareholder
Rights – We think shareholders generally have the right to nominate directors,
call special meetings and act without holding a meeting in certain
circumstances. However, we also recognize there is potential for abuse and
therefore support reasonable ownership thresholds.
Capital
Structure – The decision to issue or repurchase stock, issue debt or split
shares is made by a board presumably with the intent of improving the overall
capital structure, investing in growth, reaching a broader investment audience,
enhancing shareholder value, and/or managing challenging liquidity/leverage
circumstances. As such, we review these decisions on a case-by-case basis
taking into consideration the degree of dilution and impact on liquidity.
Proposals to create, modify or issue common and preferred stock are generally
accepted if the rights of the issuance are not superior to the rights of
current shareholders subject to the principal that an authorization increase is
limited to 10% or less over a 2-year period.
A Note on Shareholder Proposals
Shareholder Proposals are often company
specific making a one-size fits all approach to voting suboptimal. For that
reason, shareholder proposals are escalated to the active investment teams for
case-by-case analysis and decision making. Voting decisions are made by
weighing the financial materiality of the proposal against any opposing
rationale from company management, with the ultimate determination driven by
the economic best interest of shareholders. While votes are generally cast
consistently across the investment teams, there may be situations where
portfolio managers holding the same security disagree on what is in the best
interests of their shareholders.
Our passively managed strategies follow the
same voting philosophy as our actively managed strategies. In the absence of a
determination by our active investment teams, our passive strategies will
typically vote in alignment with management. We think managements and boards of
directors should have comprehensive insights into the company's long-term
strategy and operations. This insight puts them in a sound position to
determine the financial materiality of proposals and their alignment with the
economic interest of shareholders in the absence of an evaluation by our active
teams.
We execute this philosophy through our Proxy
Voting Guidelines as overseen by our Proxy Voting committee. Strategies are
aligned to one of our custom Guidelines - Base, Sustainable and Board Aligned.
We provide clients with transparency into our voting history and rationale via
our interactive website. In most strategies, clients may also choose to vote
their own shares or request a custom set of vote guidelines aligning with their
own specific requirements.
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, 2026, unless otherwise
noted.
Matt
Darrah has served as portfolio manager for the Fund since its
launch in 2024. He leads the Underwriting Team for Principal’s Direct Lending
strategy with responsibility for the team’s underwriting philosophy and
processes, as well as overseeing the underwriting of new direct loan
investment opportunities. Mr. Darrah is a member of the Direct Lending
Investment Committee and has been with PGI since 2020. He has 15 years of
experience in direct lending, having previously started the strategy for
Capital Southwest, a publicly traded, lower middle market business
development company, and also as Portfolio Manager of the leveraged loan
strategy for Petrus Asset Management, the primary investment vehicle for Ross
Perot and his family. Mr. Darrah received a bachelor’s degree in Finance
from Southern Methodist University. Tim
Warrick has served as portfolio manager for the Fund since its
launch in 2024. He has been with Principal for over 30 years and leads its
Direct Lending business and is the Portfolio Manager for the strategy. Mr.
Warrick is a member of the Direct Lending Investment Committee. He has spent
much of his career managing corporate and U.S. core plus portfolios and
continues to manage select portfolios in these strategies. Mr. Warrick
previously served as Portfolio Management Team Leader with responsibility for
overseeing portfolio management functions for all total return fixed income
products. He also oversaw the corporate trading desk, was one of the first
Portfolio Managers for Principal’s general account and began his career at
Principal as a fixed income credit analyst focused on both private and public
credit. In addition to his responsibilities with the firm, Mr. Warrick also
spent two years with ReliaStar Investment Research, Inc., where he was an Analyst
for multiple sectors, including mezzanine debt, leveraged bank loans,
corporate bonds and asset-backed securities. Mr. Warrick received an MBA from
Drake University and a bachelor’s degree in Accounting and Economics from
Simpson College. He holds the Chartered Financial Analyst designation and is
a member of the CFA Institute. |
The
following table provides information relating to other accounts managed by the
Registrant’s portfolio managers disclosed in (a)(1).
|
|
|
|
|
|
Total Assets
in the Accounts |
Number of Accounts that
Base the Advisory Fee on Performance |
Total Assets of the
Accounts that Base the Advisory Fee on Performance |
Matt Darrah: Principal Private Credit
Fund |
Registered investment companies |
|
|
|
|
Other pooled investment vehicles |
|
|
|
|
|
|
|
|
|
|
Tim Warrick: Principal Private Credit
Fund |
Registered investment companies |
|
|
|
|
Other pooled investment vehicles |
|
|
|
|
|
|
|
|
|
|
Portfolio managers at
PGI 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.
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
for purposes of the variable component is measured on a pre-tax 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 cash or as 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 will be deferred
into one or any combination of the following vehicles: cash, Principal
Financial Group (“PFG”) restricted stock units, and/or deferred cash. All
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, 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”).
Finally, PGI may offer
certain investment professionals the opportunity to participate in a carried
interest program based on their expected contributions to the success of the
strategy. Payments under the carried interest program are expected to be paid in
the form of cash.
The
portfolio managers disclosed in (a)(1) above own shares of the Registrant as
follows:
|
|
Dollar Range of Securities
Owned by the Portfolio Manager |
|
|
|
|
|
|
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.
|
|
Principal
Private Credit 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)