From the Chairman and the CEO To our shareholders:

What’s next for our strategy?

At its core, our strategy remains the same. We know where we’re going to compete in:

• Asset management globally
• Retirement and long-term savings in the U.S., Latin America and Asia
• Insurance in the U.S.

Opportunities in our chosen markets remain compelling. The global asset management industry—which includes retail, retirement and institutional investing—is projected to grow at a compounded annual rate of 6 percent, surpassing $100 trillion of AUM in 2020, on its way to $400 trillion in 2050.¹

And we know how we’ll continue to win:

• Through consistently strong investment performance
• By solving problems and meeting the needs of individuals, small to medium-sized businesses and institutions
• Through strong execution of our growth strategy

In 2015, we did just that, as evidenced by superior investment performance, strong customer retention, notable recognition and essential actions to drive long-term success.

Superior investment performance—44 funds, or 76 percent of our Morningstar-rated retail mutual funds, had a four- or five-star rating at year-end; and 93 percent of these funds were above median for the five-year period.

Strong customer retention—We delivered $23 billion in positive net customer cash flows, while many of our peers were experiencing outflows. Principal International, our retirement and long-term savings business in Latin America and Asia, delivered its 29th consecutive quarter of positive flows.

Notable third party recognition—In 2015, Principal was named by Ethisphere magazine as one of the world’s most ethical companies. As recognized in the 2015 Recognition highlights, we were also recognized for top-tier investment performance, as a best place to work and as a leading business technology innovator.

Essential actions—We also positioned the company for future success by: expanding our portfolio of income solutions; using technology to improve the customer experience; enhancing our distribution network; and expanding our presence in Asia through the acquisition of AXA’s pension business in Hong Kong, where we are now the fifth largest provider.

What’s next for growth = what’s next for customers

To answer “What’s next for growth?” we must answer “What’s next for customers?” Because customer needs and preferences are continuously changing, this is the hard part. But this is also the part that makes our work rewarding.

Getting people on the path to financial security

• PlanWorks: Our best practice plan design continues to build momentum in helping more people save for retirement. In 2015, the increase in the number of people saving for their retirement grew at a rate more than five times greater for our PlanWorks customers than for our total block of 401(k) business.
• Easy Elect: Piloted in seven markets in 2015, this patent-pending technology makes it easier for people to understand options, make decisions and enroll in employer-sponsored benefits, such as life insurance and income protection, which are critical aspects of broader financial security. Early results show participation levels that are 6 to 10 percent higher than traditional enrollment methods.

Building resilient investment portfolios

Principal continues to help retirees diversify and balance four key investment objectives given longer life expectancies: protecting purchasing power; preserving capital in volatile markets; life-time income; and capital appreciation. In 2015, with these goals in mind, we continued to expand our solution set, including:

• Principal Pension Builder, which gives retirement plan participants a way to diversify savings into guaranteed income within the retirement plan
• Multiple income-oriented funds, such as The Principal EDGE Active Income ETF, which invests across a diversified range of income-generating asset classes
• Enhancing our deferred income annuity, making it available as a qualified longevity annuity contract, helping ensure individuals have income for later in retirement

Influencing the development of retirement systems that work

Globally, populations are aging and fertility rates are declining. The result: fewer workers to support a larger number of retirees who are living longer. In 2015, we sponsored a comprehensive study on emerging market retirement systems, markets such as Brazil, China and Mexico, where the number of elderly per 100 working-age adults is projected to at least triple between 2010 and 2050. Global Aging and Retirement Security in Emerging Markets is just one example of the work we’re involved in. Our focus: understanding how various retirement systems are structured and financed; then advocating ways to help more people maintain their lifestyle during retirement, without putting undue burden on future workers or employers, or on governments already struggling with debt. You can read more about the report in the global aging report section.

What’s next: making our customers more successful

When customers succeed, we succeed, and when we succeed, shareholders succeed. In the pages that follow, we explain what’s next by connecting our strategy more directly to the end customer, whether that customer is an institutional investor, a business owner or an individual.

We’re also introducing our new face to the world—one we believe truly represents the way we help people achieve financial progress, wherever they are in their journey. Our new global brand reveals who we’ve always been with renewed pride. And it captures our ongoing commitment to simplifying the complex for people.

On behalf of Principal, our sincere thanks for your continued support. We encourage you to cast your vote in time for the Annual Meeting of Shareholders, which is on May 17, 2016. We remain, as always, firmly focused on delivering on our promises to you, and to each of our stakeholders.

1 Asset Management 2020: A Brave New World, PwC, 2014; The age of asset management? Speech by Andrew G Haldane, Executive Director, Financial Stability, Bank of England, April 4, 2014.