Monthly Credit Update

• Rates: Access to best

of lnternal/External & Proprietary

• Credit: Exhaustive top

down process

combined with

"bottom up" issuer

selection

Research

• Monthly Asset

Allocation Matrix

• Benchmark & PeerGroup Analysis

• Daily Performance

Attribution

• Portfolio Laddering

Highlights of the Credit Research Process

Board approved Internal Credit Risk Assessment Policy

• Limit monitoring/

compliance

• Monthly Review of Risk

Areas

• Global Supervision of

Risk Processes

Risk

Management

"Credit Tracker" list of approved Credits: LT & ST: Bottom Up Approach

Inclusion and sustainability of a credit in the record/list is determined by the established credit

process, which includes two broad areas :

• Approval for new credits (through credit note)

• Review and monitoring of existing credits

"Early in- Early Exit" Identify new promising credits early on, take shorter exposures

Access to in house Equity Team expertise on sector/stock coverage where we take exposure

IIFL Home Finance Limited (‘IIFHL’)

Coastal Gujrat Power Ltd (‘CGPL’)

Ess Kay Fincorp

Suryoday Small Finance Bank

Dewan Housing Finance Corp Ltd (‘DHFL’).

Hindalco Industries Ltd

Steel Authority Of India (‘sail’)

Godrej Industries Ltd (‘GIL’)

Indiabulls Housing Finance Ltd (‘IBHFL’)

Jamnagar Utilities And Power Pvt Ltd (JUPPL)

IIFL HOME FINANCE LIMITED (‘IIFHL’)

Rating: Crisil AA (stable) and ICRA AA (stable) and CARE AA( stable)Rating change in last month: No changeSector: Financial ServicesAbout: IIHFL, a subsidiary of India Infoline Finance Ltd. (IIFL), is National Housing Bank (NHB) registered Housing

Finance Company (HFC). IIFL has a diversified loan book and offers products like home loans, gold loans, commercial vehicle loans, MFI loans, MSME loans, LAP and construction finance. IIHFL caters to a vast segment of retail and corporate customers through its loan offering - this includes home loans, construction finance and loans against property, with the key focus area being housing loans to individuals against the security of residential collaterals. The company has built its portfolio only in the past few years and asset under management (AUM) of the company stood at app. 10kcr as on March 31, 2018. As of June 30, 2019, the company had an AUM of Rs 18,988 crore (Rs 18,158 crore as on March 31, 2019). The company had a networth of Rs 1,665 crore as on June 30, 2019 (Rs 1,597 crore as of March 31, 2019). It reported a profit after tax (PAT) of Rs 70 crore on a total income (net of interest expense) of Rs 178 crore for the quarter ended June 30, 2019 (Rs 296 crore and Rs 743 crore, respectively, in fiscal 2019.

COASTAL GUJARAT POWER LTD (‘CGPL’)

Rating: AA (SO )by India Ratings and CARERating change in last month: No changeSector: PowerAbout: CGPL had implemented a 4,150-MW Ultra Mega Power Project (UMPP) in Mundra in Gujarat. The

operations started in 2013. • CGPL has entered into Power Purchase Agreement (PPA) with DISCOMs in Maharashtra (760 MW), Gujarat (1805 MW), Rajasthan (380 MW), Punjab (475 MW) and Haryana (380 MW) for 3,800 MW power supply. CGPL is a wholly owned subsidiary of Tata Power, which has a strong market position as integrated power player. Tata Power is rated AA- by CRISIL. Exposure on CGPL is guaranteed by unconditional and irrevocable guarantee of Tata Power.

ESS KAY FINCORP

Rating: India Ratings A+(SO) (Stable)Rating change in last month: No changeSector: Financial ServicesAbout: EssKay Fincorp (EKFL) is an asset financing non-deposit-taking non-banking finance company registered

with the Reserve Bank of India. The company was incorporated in 1994 and is engaged in the financing of both new and used vehicles and refinancing of pre-owned vehicles. It also provides loans to SMEs. Portfolio comprised commercial vehicle (54%), tractor (18%), Car (14%), MSME (10%) and two-wheeler (3%) as on March 31, 2019. Mr. Rajendra K Setia is the founder and managing director of the company. Profit after tax (PAT) was Rs 52.2 crore on total income of Rs 365 crore in fiscal 2019 against a PAT of Rs 22 crore on total income of Rs 227.3 crore in the previous fiscal. Profitability improved in fiscal 2019 owing to improvement in net interest income and reduction in operating expenses.The exposure has an unconditional, irrevocable partial credit enhancement by Northern Arc Capital ltd.(rated A+ by ICRA).

SURYODAY SMALL FINANCE BANK

Rating: ICRA A (stable) Rating change in last month: No changeSector: Financial ServicesAbout: Suryoday Small Finance Bank (SSFB), which started as Suryoday Micro Finance Limited, was set up in

October 2008 as a non-banking finance company (NBFC) for providing loans to women in urban and semi-urban areas under the Grameen Bank Joint Lending Model. SSFB received a licence from the Reserve Bank of India in FY2016 to commence operations as a small finance bank. Subsequently, it commenced operations as a small finance bank on January 23, 2017. The residual maturity of the NCD is now only two months. The bank has earned profit of Rs. 45.2 crore in the quarter ended Jun 2020 compared to Rs. 17.1Cr for the quarter ended Jun 2019.

DEWAN HOUSING FINANCE CORP LTD (‘DHFL’).

Rating: CARE D Rating change in last month: No changeSector: About:

Financial ServicesDHFL is a large housing finance company with a track record of more than 30 years. The NCDs were rated AAA by CARE at the time of our investment. The NCD’s held are secured, with security in the form of first ranking pari-passu charge on present and future receivables of the Company. The Company delayed some payment in June 2019 which resulted in external rating downgrade to D. Due to this, independent scrip level valuation agencies marked down the secured exposures of DHFL by 75%. Currently the company has stopped paying any dues as they are in a ‘standstill mode’ awaiting signing of Inter Creditor Agreement (ICA) with the lenders. Further, the Debenture Trustee, Catalyst Trusteeship Limited, had sent a written communication asking for consent of NCD holders for acceding to the Inter Creditor Agreement (ICA) in terms of Reserve Bank of India (Prudential Framework for Resolution of Stressed Assets) Directions, 2019. The deadline for the same was 4th Sept 2019. Pursuant to the framework for resolution of stressed assets as provided by SEBI for Inter Creditor Agreements (ICA), consent to the Debenture Trustee for the ICA was not provided. The Debenture Trustee is currently awaiting report from the Scrutinizer appointed for the same and would be communicating soon the further line of action. We have initiated legal proceedings to recover the monies due to Principal Mutual Fund. Legal notices have been served on DHFL as part of the process. Please also refer the link on our website for updates on DHFL.

HINDALCO INDUSTRIES LTD

Rating: CRISIL AA (POSITIVE), CARE AA+ StableRating change in last month: No changeSector: MetalsAbout: Hindalco, the flagship company of the Aditya Birla group, commenced operations in 1962 with an

aluminium unit at Renukoot, Uttar Pradesh. It has become the largest integrated aluminium manufacturer in India, with capacity to produce 1,300 kilo tonne per annum (ktpa) of aluminium and 2,900 ktpa of alumina. The company also has a custom smelter in the copper business. The company made a consolidated PAT at Rs. 5495cr for FY19 compared to Rs. 4518cr in FY18 and the consolidated Net Debt to EBITDA was at 2.48 times as at 31st Mar 2019 compared to 2.82 times as on 31st Mar 2018.

STEEL AUTHORITY OF INDIA (‘SAIL’)

Rating: CARE AA- (STABLE), India Ratings AA- (Stable)Rating change in last month: No changeSector: MetalsAbout: SAIL is a PSU with GOI stake of 75%. SAIL is an integrated iron and steelmaker with five integrated steel

plants: Bhilai Steel Plant, Durgapur Steel Plant, Rourkela Steel Plant, Bokaro Steel Plant and IISCO Steel Plant. In addition, it has three special steel plants: Alloy Steel Plant, Salem Steel Plant and Visvesvaraya Iron & Steel Plant.SAIL is one of the largest steelmakers in India, with a total crude steel and saleable steel capacity of 19.1 million tonnes per annum and 17.9 million tonnes per annum as on 30 June 2018, respectively. The company made profit of Rs. 2178cr for the year ended March 2019.Net debt to EBITDA at FY19 end was at 4.6x and management targets to achieve 2.5x. Our exposure is short term with residual maturity of less than three months.

GODREJ INDUSTRIES LTD (‘GIL’)

Rating: CRISIL A1+, ICRA A1+ and AA (Stable)Rating change in last month: No changeSector: About:

Consumer GoodsGIL is a part of the ~$4 billion Godrej Group. The Godrej Group held a 74.74% equity in the company as on September 30, 2018. GIL is one of the Group's holding companies which is involved in the chemical business on a standalone basis and has significant interests in real estate, agriculture, consumer goods and gourmet retail (through its subsidiaries, associate companies and JV companies).As on September 11, 2019, GIL's investment portfolio derived strength from its shareholding in key investments in Godrej Consumer Products Limited (a 23.75% stake, Market Value 14,710cr ), GAVL (a 58.0% stake, Market value 5,156cr), Godrej Properties Limited (a 48.8% stake, Market value 11083cr). The company's manufacturing facilities are at Ambernath (Thane), Dombivali (Thane), Wadala (Mumbai) and Valia (Gujarat). GIL also generates income from its premises in Vikhroli, Mumbai, which are given out to various corporates on a leave and license basis.

INDIABULLS HOUSING FINANCE LTD (‘IBHFL’).

Rating: CRISIL AA+ (Watch with developing implications), ICRA AA+ (Watch with developing implications), CARE AAA (Watch developing)

Rating Change in last month: Downgraded from AAA by one notch Sector: Financial ServicesAbout: IBHFL continues to operate as a housing finance company registered with the National Housing Bank.

The company will continue to focus on asset classes such as mortgages and commercial credit. As on March 31, 2019, the promoter group held 21.5% stake in the company.

For fiscal 2019, IBHFL had a profit after tax (PAT) of Rs 4,091 crore on a total income of Rs 17,027 crore, compared with a PAT of Rs 3,895 crore and total income of Rs 14,959 crore in the previous fiscal. IBHFL is awaiting regulatory approvals for their application for merging with a bank (Lakshmi Vilas bank) which is a key monitorable going forward. We have exposure to secured bonds maturing in March 2020.

JAMNAGAR UTILITIES AND POWER PVT Ltd (JUPPL)

Rating: CRISIL AAA (stable) , CARE AAA (stable)Rating Change in last month: No changeSector: EnergyAbout: JUPPL operates coal- and gas-based power plants at Jamnagar (both in the domestic tariff area and SEZ),

Hazira, and Dahej, having combined capacity of about 2,300 MW of power and 10,000 tph of steam for catering to RIL's manufacturing facilities. In fiscal 2019, JUPPL had a net profit of Rs 133 crore on revenue of Rs 4,564 crore. JUPPL is a subsidiary of RIHPL which is a holding company owned by the promoters of RIL. Its 100% economic ownership (including direct and indirect) of JUPPL is in addition to the economic interest it holds in RIL's shares, either directly or indirectly (75.4 crore shares of RIL (worth about Rs 97,000 crore as on June 26, 2019).

Axis Bank Ltd

Bank Of Baroda

Berger Paints India Limited

Bharat Petroleum

Corporation LtdCoastal Gujarata Power Ltd

Dewan Housing Finance Corp Ltd.

Ess Kay Fincorp Ltd.

Export Import Bank Of India Ltd

Godrej Industries Ltd

Hdfc Bank Ltd

Hindalco Industries Ltd.

Housing Development Finance Corp.

Icici Bank Ltd

India Infoline Housing Finance LimitedIndiabulls Housing Finance Ltd.Indian Railway Finance CorporationJamnagar Utilities And Power Pvt LimitedKotak Mahindra Bank.

Nabard

National Housing Bank

National Thermal Power Corporation

Power Finance Corporation Ltd

Power Grid Corporation Of India Ltd

Punjab National Bank

Reliance Industries Ltd

Rural Electrification Cor Ltd

Sidbi

Steel Authority Of India

Suryoday Small Finance Bank Limited

Ultratech Cement Ltd

Principal Credit Risk

Fund

Principal Dynamic

Bond Fund

Principal Low Duration

Fund

Principal Short Term Debt Fund

Principal Ultra

Short Term Fund

Principal Cash

Management Fund

Issuer

Issuer wise Holding as on August 31, 2019

DISCLAIMER

Disclaimer:

The details given above are the statistical summary of the companies obtained from their website/ from the companies directly/ other research reports. The disclosure on credit quality of debt instruments/ issuers is based on the information provided by rating agencies/respective companies. Some of the schemes of the Principal Mutual Fund has exposure to securities issued by these companies. However, the Fund Manager at their discretion may or may not invest in the Debt instruments issued by above companies.The information contained in this document is for general purposes only. The document is given in summary form and does not purport to be complete. The document does not have regard to specific investment objectives, financial situation and the particular needs of any specific person who may receive this document. The information/ data herein alone are not sufficient and should not be used for the development or implementation of an investment strategy. The statements contained herein are based on our current views and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. The investment strategy stated above may change from time to time without any notice and shall be in accordance with the strategy as mentioned in the Scheme Information Document of the scheme. Investors are advised to consult their Investment advisors for determining their risk appetite and Tax Advisor before taking any investment decision.Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

Principal Credit Risk Fund (An open ended debt scheme predominately investing in AA and below rated corporate bonds (excluding AA+ rated corporate bonds))This Product Is Suitable For Investors Who Are

~Seeking -• Income over a Medium to long term investment

horizon. • Investment in AA and below Rated Corporate Debt

& other Debt and Money Market Instruments.

Riskometer

Investors understand that their principal will be at moderate risk

LOW HIGH

Moderate ModeratelyHighModerately

Low

HighLo

w

~ Investors should consult their financial advisors if in doubt about whether the product is suitable for them.

Principal Ultra Short Term Fund (An open ended ultra-short term debt scheme investing in instruments such that the Macaulay duration of the portfolio is between 3 months and 6 months)This Product Is Suitable For Investors Who Are

~Seeking -• Income over a short term investment horizon. • Investment in Debt & Money Market instruments.

Riskometer

Investors understand that their principal will be at moderately low risk

LOW HIGH

Moderate ModeratelyHighModerately

Low

HighLo

w

~ Investors should consult their financial advisors if in doubt about whether the product is suitable for them.

Principal Cash Management Fund (An Open-ended Liquid Scheme)

This Product Is Suitable For Investors Who Are ~Seeking -

• Income over a short term investment horizon.• Investment in debt & Money Market Instruments,

with maturity not exceeding 91 days.

Riskometer

Investors understand that their principal will be at low risk

LOW HIGH

Moderate ModeratelyHighModerately

Low

HighLo

w

~ Investors should consult their financial advisors if in doubt about whether the product is suitable for them.

Principal Low Duration Fund (An open ended low duration debt scheme investing in instruments such that the Macaulay duration of the portfolio is between 6 months and 12 months)This Product Is Suitable For Investors Who Are

~Seeking -• Income over a short term investment horizon.• Investment in Debt & Money Market Instruments.

Riskometer

Investors understand that their principal will be at moderately low risk

LOW HIGH

Moderate ModeratelyHighModerately

Low

HighLo

w

~ Investors should consult their financial advisors if in doubt about whether the product is suitable for them.

Principal Short Term Debt Fund (An open ended short term debt scheme investing in instruments such that the Macaulay duration of the portfolio is between 1 year and 3 years)

This Product Is Suitable For Investors Who Are ~Seeking -

• Income over a medium term investment horizon.• Investment in Debt & Money Market Instruments.

~ Investors should consult their financial advisors if in doubt about whether the product is suitable for them.

Principal Dynamic Bond Fund (An open ended dynamic debt scheme investing across duration)

This Product Is Suitable For Investors Who Are ~Seeking -

• Income over a long term investment horizon.

• Investment in Debt & Money Market Instruments.

~ Investors should consult their financial advisors if in doubt about whether the product is suitable for them.

Riskometer

Investors understand that their principal will be at moderate risk

LOW HIGH

Moderate ModeratelyHighModerately

Low

HighLo

w

Riskometer

Investors understand that their principal will be at moderate risk

LOW HIGH

Moderate ModeratelyHighModerately

Low

HighLo

w