PRINCIPAL CAPITAL INCOME INVESTORS, LLC CODE OF ETHICS
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 Capital Income Investors own or engage in transactions
involving Securities (as defined below) that are owned or are being
purchased or sold or are being considered for purchase or sale for the
accounts of clients of Principal Capital Income Investors. Central to
this Code is the principle that employees of Principal Capital Income
Investors will adhere to the highest ethical standards and will act in
accordance with the following fiduciary principles:
o The duty at all times to place the interests of clients first.
o The requirement to conduct all personal Securities transactions
in a manner consistent with this Code so as to avoid any actual
or potential conflicts of interest or abuse of an individual's
position of trust and responsibility.
o Persons associated with Principal Capital Income Investors shall
not take inappropriate advantage of their positions.
II. Definitions:
A. Security: Shall have the meaning set forth in Section 202(a)(18)
of the Investment Advisers Act, except it shall not include
direct obligations of the Government of the United States,
bankers' acceptances, bank certificates of deposit, commercial
paper, high quality short-term debt instruments including
repurchase agreements, and shares of open-end management
investment companies (i.e., mutual funds).
B. Access Person: Means any (1) director or officer of Principal
Capital Income Investors or (2) employee of Principal Capital
Income Investors who in the regular course of his or her duties
makes, participates in or obtains information regarding the
purchase or sale of Securities for the accounts of Principal
Capital Income Investors clients or whose functions relate to the
making of any recommendations with respect to such purchases and
sales.
Access Persons consist of the following sub-categories:
(i) Portfolio Managers - individuals entrusted with the direct
responsibility and authority to make investment decisions
affecting the accounts of Principal Capital Income Investors
clients,
(ii) Investment Personnel - which include Portfolio Managers as
well as portfolio strategists, fixed income securities
analysts and traders, and
(iii)Other Access Persons - all persons who are not included in
subcategories i or ii.
C. Being Considered for Purchase or Sale: A Security is being
considered for purchase or sale when a Portfolio Manager views
the purchase or sale of a Security for a client account 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 the
beneficial owner of a Security for purposes of Section 16 of the
Securities Exchange Act of 1934, and the rules and regulations
thereunder.
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;
(ii) a partner's proportionate interest in the portfolio of
Securities held by a partnership (e.g., an investment club);
and
(iii)Securities a person might acquire or dispose of through the
exercise or conversion of any derivative security (e.g., an
option, whether presently exercisable or not).
E. Restricted Lists: Records known as the "Restricted Debt
Securities List" and the "Restricted Equity Securities List" are
maintained within the Principal Financial Group. These Restricted
Lists include the names of all Securities that Principal Capital
Income Investors (1) is currently buying or which Principal
Capital Income Investors expects to buy for client accounts, and
(2) currently holds in client accounts; however any security an
index account is currently buying or which such account currently
holds shall not be included on the Restricted Equity Securities
List, unless some other client account is currently buying or
currently holds such security.
The reference date for determining when Principal Capital Income
Investors "expects to buy" is the date on which a Portfolio
Manager views the purchase of the Security as probable. Names of
Securities shall be removed from the Restricted Lists 15 days
after Principal Capital Income Investors has (1) ceased
considering the Security for purchase, or (2) entirely liquidated
its position in such Security.
III. Exempted Transactions. This Code shall not apply to:
A. Sales made pursuant to general public tender offers.
B. The acceptance of stock dividends resulting from Securities
already owned; the reinvestment of cash dividends resulting from
Securities already owned under a dividend reinvestment program or
the participation in an automatic investment plan for the
purchase of Securities already owned. (Note: The initial purchase
or establishment of an automatic investment plan must be
precleared.)
C. Purchases effected upon the exercise of rights issued by a
Security's 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. Purchases or sales of Securities in response to the exercise of
an option written by the Access Person.
E. Exercising rights to exchange or convert securities, but only
when those rights have been acquired in accordance with the Code.
F. Purchases or sales effected in any account over which the Access
Person has no direct or indirect influence or control.
G. Purchases or sales which are non-volitional on the part of either
the Access Person or a Principal Capital Income Investors client
account.
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 ("IPO"). Investment Personnel may, however, in
special circumstances, seek permission to purchase Securities in
an IPO by submitting to one of the persons listed in Section X, A
"Administration and Sanctions" a written request for approval of
the purchase that includes a description of the special
circumstances.
B. No Investment Personnel may acquire, directly or indirectly,
Beneficial Ownership in any Security in a private placement
transaction without prior approval of the Compliance Officer.
Investment Personnel who have acquired Securities in a private
placement transaction must disclose that investment when they
play a part in any consideration of an investment in the issuer
of the privately placed Security for a client account. In such
circumstances, a decision to purchase such Securities for a
client account 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 listed on a
Restricted List, except as provided elsewhere in this Code. [See
Section V, "Preclearance".]
No Portfolio Manager may purchase or sell a Security within 7
days before and after a client account 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 designated
by management of Principal Capital Income Investors.
Investment Personnel may request exceptions to this prohibition
by submitting a written request to the Compliance Officer 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 (see also, 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. The maximum amount of shares that may be
traded each calendar quarter 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. However,
Portfolio Managers may not trade any security within seven (7)
days before or after a client account the Portfolio Manager
manages trades the security.
Requests for approval may be made by contacting the person
responsible for maintaining the Restricted Debt Securities List
and the Restricted Equity Securities List.
Personal security transaction approvals 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.
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. The
maximum amount of shares that may be traded each calendar quarter
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
and the Restricted Equity Securities List.
Personal Security transaction approvals 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.
VI. Disclosure of Securities Ownership and Securities Transactions
A. When recommending the purchase or sale of Securities for a client
account in accordance with portfolio management procedures,
Investment Personnel must disclose
(i) any direct or indirect Beneficial Ownership in any Security
of the issuer whose Securities are under consideration,
(ii) any position with such issuer or its affiliates, and
(iii)any present or proposed business relationship between such
issuer or its affiliates.
B. All Access Persons shall file a report with the Principal Capital
Income Investors Compliance Officer listing all their personal
Securities transactions during the previous calendar quarter in
any Security in which such person has acquired 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 Capital Income Investors within 10 days
following the end of such calendar quarter. The report shall
contain the following information:
(i) the date of the transaction(s), the title, the interest rate
and maturity date (if applicable), the number of shares, and
the principal amount of each Security involved;
(ii) the nature of the transaction (e.g., purchase or sale);
(iii) the price at which the transaction was effected;
(iv) the name of the broker, dealer, or bank with or through
which the transaction was effected;
(v) the date the report is submitted by the Access Person;
(vi) the name and address of any broker, dealer, or bank at which
the Access Person established any account during the quarter
in which securities (including direct obligations of the
United States, bankers acceptances, bank certificates of
deposit, commercial paper, short term debt instruments, and
mutual fund shares) were held for the direct or indirect
benefit of the Access Person;
(vii)the account number of any account described in (vi), above;
and
(viii) the date the Access Person established the account.
C. Access Persons must direct brokerage and other firms with which
they have Securities accounts to furnish the Compliance Officer
on a timely basis duplicate copies of confirmations of all
personal Securities transactions.
D. Access Persons must within 10 days of their appointment as an
Access Person and thereafter on an annual basis as of December 31
of each year, furnish Principal Capital Income Investors a report
containing the following information:
(i) the name, number of shares, and principal amount of each
Security in which the Access Person had any direct or
indirect beneficial ownership at the time the Access Person
submitted the report;
(ii) the name and address of any broker, dealer, or bank at which
the Access Person established any account during the quarter
in which securities (including direct obligations of the
United States, bankers acceptances, bank certificates of
deposit, commercial paper, short term debt instruments, and
mutual fund shares) were held for the direct or indirect
benefit of the Access Person;
(iii) the account number of any account described in (ii), above;
(iv) the date the Access Person submitted the report.
VII. Certification of Compliance
All Access Persons will be required to certify annually that they have
read and understood 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
Access Persons 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
Principal Capital Income Investors. Gifts do not include occasional
dinners, sporting event tickets, or other entertainment that Access
Persons 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. However, prior authorization to
serve may be obtained. Authorization is based on a determination that
board service would be consistent with the interests of Principal
Capital Income Investors and its clients.
X. Administration and Sanctions
A. Responsibility for this Code is vested in the Chairman of the
Board of Directors of Principal Capital Income Investors.
Administrative responsibility, including the responsibility to
review Access Persons' initial and annual holdings reports and
quarterly transaction reports, belongs to the Compliance Officer,
Tim Howald and/or alternate compliance staff as designated by
him. Requests for interpretation of this Code or preclearance of
purchase or sales that are not clearly addressed by this Code
should be directed, in the following order, to Clint May, Tim
Howald, Dennis Cameron.
B. Upon discovering a violation of this Code, the Chairman of
Principal Capital Income Investors shall impose such sanctions as
the Chairman deems appropriate, upon recommendation of the
Compliance Officer. Sanctions may include a letter of censure,
suspension of personal Securities transactions, and suspension or
termination of the employment of the violator.
C. Annually, those individuals charged with the responsibility for
carrying out this Code shall prepare a written report to the
Board of Directors of Principal Capital Income Investors that, at
a minimum, will include:
(i) a certification that Principal Capital Income Investors has
adopted procedures reasonably necessary to prevent Access
Persons from violating the Code;
(ii) identification of material violations and sanctions imposed
in response to those violations during the past year;
(iii)a description of issues that arose during the previous year
under the Code; and
(iv) 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.
