Principal Prosperity Series

1. Principal Prosperity Series consists of sub-funds (the Sub-Funds) investing in equities or debt securities located in developed markets or in emerging markets. Such investments carry market, credit, liquidity, currency, regulatory and other associated risks that can cause portfolio values to be very volatile. 

2. Generally, emerging market investments carry higher risks due to risks associated with higher volatility, inadequate liquidity and additional regulatory risks. As such, the Sub-Funds that predominantly invest into such markets may be considered speculative and they carry significant risk. 

3. For Principal Sustainable Asian Allocation Fund and Principal Sustainable Asian Income Fund, the use of environmental, social and governance (“ESG”) criteria may affect the Sub-Fund’s investment performance and, as such, the Sub-Fund may perform differently compared to similar funds that do not use such criteria. For instance, ESG criteria used in the Sub-Fund’s investment policy may result in the Sub-Fund forgoing opportunities to buy certain securities when it might otherwise be advantageous to do so, and/or selling securities due to such securities no longer meeting the Sub-Fund’s ESG criteria when it might be disadvantageous to do so. As such, the application of ESG criteria may restrict the ability of the Sub-Fund to acquire or dispose of its investments at a price and time that it wishes to do so, and may therefore result in a loss to the Sub-Fund. The use of ESG criteria may also result in the Sub-Fund being concentrated in companies with a focus on ESG criteria and its value may be more volatile than that of a fund having a more diverse portfolio of investments. The selection of securities may involve the subjective judgement of the Fund Manager’s Sub-Delegates. There is also a lack of standardized taxonomy of ESG criteria evaluation methodology and the way in which different funds apply such ESG criteria may vary. The Fund Manager and the Fund Manager’s Sub-Delegates’ ESG assessment takes into account ESG data and research from external data providers, which may be incomplete, inaccurate or unavailable. As a result, there is a risk associated with the assessment of a security or issuer based on such information or data. 

4. For Income Class Units of the Principal Asia Pacific High Dividend Equity Fund, the Manager may at its discretion pay dividend out of gross income while paying all or part of the fees and expenses attributable to the Income Class Units out of the capital of such Units, resulting in an increase in distributable income for the payment of dividends by the Income Class Units and therefore, the Sub-Fund may effectively pay dividend paid out of capital. Payment of dividend effectively out of capital amounts to a return or withdrawal of part of the investor's original investment in the Income Class Units or from any capital gains attributable to that original investment. Any distributions involving payment of dividends effectively out of the capital of the Income Class Units may result in an immediate reduction of its net asset value per Unit. 

5. For Principal Sustainable Asian Allocation Fund and Principal Sustainable Asian Income Fund, the dividend distributed by the Sub-Fund in respect of Income Class Units may be paid effectively out of the capital of the Sub-Fund (i.e. making the distribution from gross income while charging all or part of the relevant Sub-Fund’s fees and expenses to capital), resulting in an increase in distributable income for the payment of dividend by the Sub-Fund and may result in an immediate reduction of the net asset value per unit of the relevant class. Dividend for Income Plus Class Units may be paid out capital. Such payment of dividend out of capital or effectively out of capital amounts to a return or withdrawal of part of an investor’s original investment in the Income Class Units or the Income Plus Class Units or from any capital gains attributable to that original investment. Dividend is not guaranteed.

6. In respect of RMB share classes of Principal Sustainable Asian Allocation Fund and Principal Sustainable Asian Income Fund, RMB is currently not freely convertible and is subject to exchange controls and restrictions. Non-RMB based investors are exposed to foreign exchange risk and there is no guarantee that the value of RMB against the investors’ base currencies (for example HKD) will not depreciate. Any depreciation of RMB could adversely affect the value of investor’s investment in the Sub-Fund. Although offshore RMB (CNH) and onshore RMB (CNY) are the same currency, they trade at different rates. Any divergence between CNH and CNY may adversely impact investors. Under exceptional circumstances, payment of realisation and/or distribution payment in RMB may be delayed due to the exchange controls and restrictions applicable to RMB. 

7. Some of the Sub-Funds may carry significant risks arising from credit, counterparty and liquidity issues through investment in high yielding debt securities. Investors may suffer significant loss in the value of their investment in the Sub-Funds when portfolio holdings fall below investment grade or when counterparties default on their obligations. 

8. Some of the Sub-Funds may have concentrated exposures in one or a select few markets making them riskier than diversified funds. 

9. The Sub-Funds may invest in financial futures, options or structured investments which may involve additional risks including market, counterparty or default risks, exposing the Sub-Funds to losses. 

10. The investment decision is yours but you should not invest unless the intermediary who sells it to you has advised you that it is suitable for you and explained why, including how, buying it would be consistent with your investment objectives.

Important Notes:

Principal Sustainable Asian Income Fund and Principal Sustainable Asian Allocation Fund

•   The use of ESG criteria may affect the Sub-Fund’s investment performance and, as such, the Sub-Fund may perform differently compared to similar funds that do not use such criteria. For instance, ESG criteria used in the Sub-Fund’s investment policy may result in the Sub-Fund forgoing opportunities to buy certain securities when it might otherwise be advantageous to do so, and/or selling securities due to such securities no longer meeting the Sub-Fund’s ESG criteria when it might be disadvantageous to do so. As such, the application of ESG criteria may restrict the ability of the Sub-Fund to acquire or dispose of its investments at a price and time that it wishes to do so, and may therefore result in a loss to the Sub-Fund.

•  The use of ESG criteria may also result in the Sub-Fund being concentrated in companies with a focus on ESG criteria and its value may be more volatile than that of a fund having a more diverse portfolio of investments. The selection of securities may involve the subjective judgement of the Fund Manager’s Sub-Delegates. There is also a lack of standardized taxonomy of ESG criteria evaluation methodology and the way in which different funds apply such ESG criteria may vary. The Fund Manager and the Fund Manager’s Sub-Delegates’ ESG assessment takes into account ESG data and research from external data providers, which may be incomplete, inaccurate or unavailable. As a result, there is a risk associated with the assessment of a security or issuer based on such information or data.

•  The Sub-Fund may also invest up to 10% of its net asset value in debt instruments with loss absorption features, which may include instruments classified as Additional Tier 1/Tier 2 capital instruments, contingent convertible bonds (“CoCos”), non-preferred senior bonds which may also be known as Tier 3 bonds and other instruments eligible to count as loss-absorbing capacity under the resolution regime for financial institution, in compliance with its investment policy and limits. These instruments may be subject to contingent write-down or contingent conversion to equity on the occurrence of trigger event(s).

•  The Sub-Fund’s net derivative exposure may be up to 50% of the Sub-Fund’s net asset value.

• Investment involves risk. There is no assurance on investment returns and you may not get back the amount originally invested.

• The investment decision is yours but you should not invest in this Fund unless the intermediary who sells it to you has advised you that it is suitable for you and explained how it is consistent with your investment objectives.

•  You should not rely solely on this marketing material when making your investment decision. You should read the Explanatory Memorandum and Product Key Facts of Principal Prosperity Series for further details (including investment policy, risk factors, fees and charges, and fund information).

•   The dividend distributed by the Sub-Fund in respect of Income Class Units may be paid effectively out of the capital of the Sub-Fund (i.e. making the distribution from gross income while charging all or part of the relevant Sub-Fund’s fees and expenses to capital), resulting in an increase in distributable income for the payment of dividend by the Sub-Fund and may result in an immediate reduction of the net asset value per unit of the relevant class. Dividend for Income Plus Class Units may be paid out capital. Such payment of dividend out of capital or effectively out of capital amounts to a return or withdrawal of part of an investor’s original investment in the Income Class Units or the Income Plus Class Units or from any capital gains attributable to that original investment. Dividend is not guaranteed.

Principal Sustainable Asian Income Fund

•  The Sub-Fund will primarily (i.e. at least 70% of the Sub-Fund’s Net Asset Value) invest in a diversified portfolio of fixed income securities and fixed income-related securities of companies and issuers in Asia which are considered to be outperforming their peers with respect to sustainability performance based on environmental, social and governance (“ESG”) factors (“ESG leaders”) as well as ESG-focused exchange traded funds (“ETF”) and other collective investment schemes (“CIS”) which primarily invest in debt securities and companies or issuers that maintain better ESG profiles than their corresponding traditional counterparts (collectively “ESG-focused ETF/CIS”), and provide a return consisting of income and capital growth over medium to long term.

•   The Sub-Fund will primarily invest in a portfolio of fixed income and fixed income-related securities of companies domiciled in, traded in and/or with substantial business interests in Asia and/or governments and government-related issuers located in Asia, including but not limited to sovereign, quasi-sovereign, agency, such investments may include corporate bonds/debentures, floating rate notes, bills, commercial papers, certificates of deposit, and debt instruments with loss-absorption features, which may be denominated in USD or other currencies. The Sub-Fund may invest 30% or more of its net asset value in fixed income and fixed income-related securities relating to emerging markets.

•   The Sub-Fund may invest up to 40% of its Net Asset Value in debt securities rated below investment grade (i.e. rated BB+ or below by Standard & Poor’s or comparable ratings by Moody’s Investors Services or Fitch Ratings) or in the case the credit rating is designated/assigned by a PRC (means the People’s Republic of China excluding Hong Kong, Macau and Taiwan for purpose of this material) credit rating agency, A+ and below, or unrated. For the purpose of the Sub-Fund, “unrated debt securities” is defined as debt securities which neither the debt securities nor their issuers have a credit rating. While these credit ratings provided by the relevant rating agencies serve as a point of reference, the Sub-Delegate of the Manager will conduct its own assessment on the credit quality based on various factors, such as leverage level, operating margin, return on capital, interest coverage, operating cash flows, industry outlook, competitive position in the market and corporate governance. The Sub-Fund may from time to time invest less than 30% of its Net Asset Value in RMB-denominated debt securities issued in the PRC, including through the Qualified Foreign Investor (“QFI”) regime, the China interbank bond market direct access program and/ or China Hong Kong Bond Connect, as well as urban investment bonds which are debt instruments issued by local government financing vehicles (“LGFVs”). These LGFVs are separate legal entities established by local governments and/or their affiliates to raise financing for public welfare investment or infrastructure projects.

Principal Sustainable Asian Allocation Fund

•   The Sub-Fund will primarily (i.e. at least 70% of the Sub-Fund’s Net Asset Value) invest in a diversified range of assets and securities (including equities, equity related securities and debt securities) of companies and issuers in Asia Pacific (ex-Japan) which are considered to be outperforming their peers with respect to sustainability performance based on environmental, social and governance (“ESG”) factors (“ESG leaders”) as well as exchange traded funds (“ETF”) and collective investment schemes (“CIS”), which primarily invest in equity or debt securities and companies or issuers that maintain better ESG profiles than their corresponding traditional counterparts (collectively “ESG-focused ETF/CIS”), and provide capital growth and income over medium to long term.

•   These investments may be denominated in various currencies. The Sub-Fund will not aim to focus its investments on any single country or market capitalisation. However, investments in any country, the Asia Pacific region or market capitalisation may be concentrated, depending on the Fund Manager’s Sub-Delegate’s assessment of the market conditions at different times.

•   The Sub-Fund may invest up to 40% of its Net Asset Value in debt securities rated below investment grade (i.e. rated BB+ or below by Standard & Poor’s or comparable ratings by Moody’s Investors Services or Fitch Ratings) or in the case the credit rating is designated/assigned by a PRC (means the People’s Republic of China excluding Hong Kong, Macau and Taiwan for purpose of this material) credit rating agency, A+ and below, or unrated. For the purpose of the Sub-Fund, “unrated debt securities” is defined as debt securities which neither the debt securities nor their issuers have a credit rating. While these credit ratings provided by the relevant rating agencies serve as a point of reference, the Sub-Delegate of the Manager will conduct its own assessment on the credit quality based on various factors, such as leverage level, operating margin, return on capital, interest coverage, operating cash flows, industry outlook, competitive position in the market and corporate governance. The Sub-Fund may from time to time invest less than 30% of its Net Asset Value in RMB-denominated debt securities and equity securities issued in the PRC, including China A-shares via the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect or indirectly through all eligible instruments, the Qualified Foreign Investor (“QFI”) regime, the China interbank bond market direct access program and/or China Hong Kong Bond Connect, as well as urban investment bonds which are debt instruments issued by local government financing vehicles (“LGFVs”). These LGFVs are separate legal entities established by local governments and/or their affiliates to raise financing for public welfare investment or infrastructure projects.

•   Various countries in Asia Pacific in which the Sub-Fund may invest, including but not limited to the following countries: China, Indonesia, Malaysia, Philippines and Thailand, are considered as emerging markets. As emerging markets tend to be more volatile than developed markets, any holdings in emerging markets are exposed to higher levels of market risk. Holdings in emerging markets are also exposed to special considerations not typically associated with investment in more developed markets, such as liquidity risks, currency risks/control, political and economic uncertainties, legal and taxation risks, settlement risks, custody risk and the likelihood of a high degree of volatility. The securities markets of some of the emerging countries in which the Sub-Fund’s assets may be invested are not yet fully developed which may, in some circumstances, lead to a potential lack of liquidity. Accounting, auditing and financial reporting standards in some of the emerging markets in which the Sub-Fund’s assets may be invested may be less vigorous than international standards. As a result, certain material disclosures may not be made by some companies. As a result, the Sub-Fund/investors may be adversely impacted.