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CODE OF ETHICS FOR PRINCIPAL MANAGEMENT CORPORATION
I. Statement of Purpose and General Principles
The purpose of this Code of Ethics ("Code") is to prevent conflicts of
interest which may exist, or appear to exist, when persons associated
with Principal Management Corporation ("Principal Management") own or
engage in transactions involving securities that are owned or are being
purchased or sold or are being considered for purchase or sale by the
Funds. Central to this Code are the following fiduciary principles:
A. The duty at all times to place the interests of customers first.
B. The requirement that all personal securities transactions be
conducted consistent with this Code, and in such a manner as to
avoid any actual or potential conflict of interest or abuse of
an individual's position of trust and responsibility.
C. The fundamental standard that persons associated with Principal
Management should not take inappropriate advantage of their
positions.
II. Definitions:
A. SECURITY: Shall have the meaning set forth in Section 2(a)(36)
of the Investment Company Act, except it shall not include
securities issued by the Government of the United States,
bankers' acceptances, certificates of deposit, commercial paper,
and shares of open-end management investment companies (i.e.
mutual funds).
B. ACCESS PERSON: "Access person" means any (1) director or officer
of Principal Management or (2) employee of Principal Management
who in the regular course of his or her duties makes,
participates in or obtains information regarding the purchase or
sale of securities by the Funds or whose functions relate to the
making of any recommendations with respect to such purchases and
sales.
Access Persons consist of these sub-categories: (1) Portfolio
Managers (individuals entrusted with the direct responsibility
and authority to make investment decisions affecting The Funds),
(2) Investment Personnel (which include Portfolio Managers as
well as portfolio strategists, analysts and traders), and (3)
Other Access Persons (all persons who are not included in the
sub-categories 1 or 2).
C. PURCHASE OR SALE: A security is being considered for purchase or
sale when a Portfolio Manager views the purchase or sale of the
security for a Fund as probable. The phrase "purchase or sale of
a security" includes the writing of an option to purchase or
sell a security or the purchase of an option to purchase or sell
a security.
D. BENEFICIAL OWNERSHIP: "Beneficial ownership" shall be interpreted
in the same manner as in determining whether a person is subject
to the provisions of Section 16 of the Securities Exchange Act of
1934 and the rules and regulations thereunder, except that the
determination of direct and indirect beneficial ownership shall
apply to all securities which a person owns. For example, the
term "Beneficial Ownership" encompasses (i) in addition to
securities in a person's own account(s), securities owned by
members of the person's immediate family sharing the same
household, and (ii) securities a person might acquire or dispose
of through the exercise or conversion of any derivative security,
whether presently exercisable or not.
E. RESTRICTED LISTS: Two records known as the "Restricted Debt
Securities List" and the "Restricted Equity Securities List"
shall be maintained by the securities trading area. The Lists
shall include the names of all securities the Funds (1) are
currently buying or which the Funds expect to buy, and (2)
currently hold; provided however that any security an Index Fund
is currently buying or which such Fund currently holds shall not
be included on the Restricted Equity Securities List.
The reference date for determining when a Fund "expects to buy"
is the date on which a Portfolio Manager views the purchase of
the security for a Fund as probable. Names of securities shall
be removed from the Restricted List 15 days after a Fund has (1)
ceased considering the security for purchase or (2) entirely
liquidated its position in such security.
F. THE FUNDS: The mutual funds for which Principal Management
serves as investment advisor. In the case of a series Fund,
"Fund" shall mean a series of The Fund.
III. Exempted Transactions. This Code shall not apply to:
A. Sales made pursuant to a general public tender offer.
B. The acceptance of stock dividends of securities already owned;
the reinvestment of cash dividends of securities already owned
under a dividend reinvestment program or the participation in a
monthly investment plan for the purchase of a security already
owned (Note: The initial purchase or establishment of a dividend
reinvestment program or automatic investment plan must be
precleared).
C. Purchases effected upon the exercise of rights issued by an
issuer pro rata to all holders of a class of securities, to the
extent such rights are acquired directly from the issuers
thereof, and sales of such rights.
D. Exercising or selling options or rights to exchange or convert
securities but only when those instruments have been acquired or
disposed of in accordance with the Code.
E. Purchases or sales effected in any account over which the Access
Person has no direct or indirect influence or control.
F. Purchases or sales which are non-volitional on the part of
either the Access Person or one of the Funds.
IV. Restricted and Prohibited Transactions
A. No Investment Personnel may acquire, directly or indirectly,
beneficial ownership in any security that is part of an initial
public offering.
B. No Investment Personnel may acquire, directly or indirectly,
beneficial ownership in any security in a private placement
transaction without prior approval.
Investment Personnel who have acquired securities in a private
placement transaction must disclose that investment when they
play a part in any consideration by one of The Funds of an
investment in the issuer of the privately placed security. In
such circumstances a decision to purchase securities on behalf
of one of The Funds must be subject to an independent review by
Investment Personnel with no personal interest in the issuer.
C. No Access Person may purchase or sell a security in which he or
she has, or by reason of such transaction acquires, any direct
or indirect beneficial ownership while that security is listed
on a Restricted List, except as provided elsewhere in this Code.
See V. Preclearance.
No Portfolio Manager may purchase or sell a security in which he
or she has, or by reason of such transaction acquires, any
direct or indirect beneficial interest within 7 days before and
after a Fund that he or she manages trades in that security.
D. Investment Personnel may not profit directly or indirectly from
the acquisition and disposition (or disposition and acquisition)
of beneficial ownership of the same (or equivalent) securities
within 60 calendar days. Any profits realized on such short-term
trades must be disgorged to a charitable organization determined
by Principal Management.
Investment Personnel may request exceptions to this prohibition
prior to realizing the profit. Such exceptions will be
considered on a case-by-case basis, taking into consideration
the facts and circumstances of each situation.
V. Preclearance
A. Portfolio Managers (Refer also to Section IV. C.)
Portfolio Managers may request permission to trade any security
on the Restricted Debt Securities List. Portfolio Managers may
also request permission to trade securities on the Restricted
Equity Securities List in an amount each calendar quarter that
is the greater of 500 shares or 1% of the daily average trading
volume during the 90 days prior to the date the Portfolio
Manager makes the request; provided however Portfolio Managers
may not purchase or sell any security within seven (7) days
before or after a Fund the Portfolio Manager manages purchased
or sold the security.
Requests for approval may be made by contacting the person
responsible for maintaining the Restricted Debt Securities List
or the Restricted Equity Securities List.
Approvals to trade are valid for 24 hours after given. Portfolio
Managers who desire an approval that is valid for a longer
period may make such a request when seeking approval to trade.
B. Access Persons Other Than Portfolio Managers
Access Persons other than Portfolio Managers may request
permission to trade any security on the Restricted Debt
Securities List. Access Persons may also request permission to
trade securities on the Restricted Equity Securities List in an
amount each calendar quarter that is the greater of 500 shares
or 1% of the daily average trading volume during the 90 days
prior to the date the Access Person makes the request.
Requests for approval may be made by contacting the person
responsible for maintaining the Restricted Debt Securities List
or the Restricted Equity Securities List.
Approvals to trade are valid for 24 hours after given. Access
Persons who desire an approval that is valid for a longer period
may make such a request when seeking approval to trade.
VI. Disclosure of Securities Ownership and Securities Transactions
A. When recommending the purchase or sale of securities for one of
the Funds in accordance with portfolio management procedures,
Investment Personnel must disclose any direct or indirect
beneficial ownership in any security of the issuer whose
securities are under consideration.
B. All Access Persons shall file a report with Principal Management
listing all their personal securities transactions during the
previous calendar quarter in any security (as defined in Section
II, A.) in which such person has acquired or sold any direct or
indirect beneficial ownership including transactions exempt from
this Code under Section III. The report shall be made on a form
provided by Principal Management within 10 days following the
end of such calendar quarter. The report shall contain the
following information:
(1) The date of the transaction, the name and the number of
shares or the principal amount of each security involved;
(2) The nature of the transactions (e.g., purchase or sale);
(3) The price at which the transaction was effected;
(4) The name of the broker, dealer or bank with or through which
the transaction was effected; and
(5) If a sale transaction, the date on which the security was
acquired and the cost basis of the security.
C. Access Persons must direct brokerage and other firms with which
they have securities accounts to furnish Principal Management on
a timely basis duplicate copies of confirmations of all personal
securities transactions.
D. Access Persons must direct brokerage and other firms with which
they have securities accounts to furnish Principal Management on
a timely basis a duplicate copy of the Access Person's December
31 account statement.
E. Access Persons who are Portfolio Managers must furnish Principal
Management a listing of all securities in which they have a
direct or indirect beneficial ownership at the time of their
appointment as a Portfolio Manager, and thereafter on an annual
basis as of December 31 of each year.
VII. Certification of Compliance
All Access Persons will be required to certify annually that they have
read and understand the Code and its applicability to them, and that
they have complied with the requirements of the Code and that they have
disclosed or reported all personal securities transactions as required
by the Code.
VIII. Gifts
Investment Personnel are prohibited from receiving any gift or other
thing having a value of more than $100 in the aggregate in any calendar
year from any person or entity that does business with or on behalf of
the Funds. Gifts do not include occasional dinners, sporting events or
other entertainment that Investment Personnel attend with their host.
IX. Service as a Corporate Director
Investment Personnel are prohibited from serving on the board of
directors of a publicly traded company, absent prior authorization
based on a determination that board service would be consistent with
the interests of the Funds and their shareholders.
X. Administration and Sanctions
A. Responsibility for this Code is vested in the Chairman of the
Boards of Directors of Principal Management. (Administrative
responsibility has been delegated to A. S. Filean and E. H.
Gillum. Requests for interpretation of this Code or for
preclearance of purchase or sales that are not clearly addressed
by this Code should be directed (in the order to be contacted)
to: J. B. Schustek, E. H. Gillum, A. S. Filean, M. D. Roughton,
R.C. Eucher).
B. Upon discovering a violation of this Code, the Chairman of
Principal Management may impose such sanctions as the Chairman
deems appropriate.
C. Annually, those individuals charged with the responsibility for
carrying out this Code shall prepare a report to the Boards of
Directors of Principal Management and of the Funds that, as a
minimum, will include:
(1) A summary of existing procedures concerning personal
investing and any procedural changes made during the
past year;
(2) Identification of violations requiring significant
remedial action during the past year; and
(3) Recommendations, if any, as to changes in existing
restrictions or procedures based on experience with this
Code, evolving industry practices or developments in
applicable laws or regulations.
