Company: PGZ
Filing Date: 2025-01-03
Form Type: N-CSR
Source: 0001398344-25-000145
Chunk: 49

Company: Principal Real Estate Income Fund
Filing Date: 2025-01-03
Form: N-CSR
Chunk 49
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 a particular hedging transaction not been utilized, in which case the Fund’s performance would have been better had the Fund not engaged in the hedging transaction; (ii) the risk of imperfect correlation between the risk sought to be hedged and the hedging instrument used; (iii) potential illiquidity for the hedging instrument used, which may make it difficult or costly for the Fund to close-out or unwind a hedging transaction; and (iv) market conditions.

Over-the-counter derivatives transactions are also subject to counterparty risk.Counterparty risk is the risk that the party on the opposite side of a contract will be unable or unwilling to fulfill the terms of the contract when called upon, creating exposure equal to the replacement cost or loss of market value of the contract. This risk is heightened in market environments where interest rates are changing, notably when rates are rising or when refinancing obligations become more challenging. To minimize counterparty risk, the Fund may diversify its counterparty exposure and may create exposure limits.

The Fund’s use of derivatives or other hedging transactions may be limited by legal and regulatory requirements applicable to the Fund or PrinREI.

Tax Risk Relating to Investments in Certain REMICs .The Fund may acquire residual interests in REMICs. The Fund may be taxable at the highest corporate income tax rate on a portion of the income arising from a residual interest in a REMIC that is allocable to the percentage of the Fund’s Common Shares held by “disqualified organizations,” which are generally certain cooperatives, governmental entities and tax-exempt organizations that are exempt from unrelated business taxable income. Because this tax would be imposed on the Fund, all of the Fund’s investors, including investors that are not disqualified organizations, would bear a portion of the tax cost associated with the Fund’s investment in a residual interest in a REMIC.

In addition, if the Fund realizes excess inclusion income and allocates it to Common Shareholders, this income cannot be offset by net operating losses of the Common Shareholders. If the Common Shareholder is a tax-exempt entity and not a disqualified organization, then this income would be fully taxable as unrelated business taxable income under Section 512 of the Code. If the Common Shareholder is a foreign person, it would be subject to U.S. federal income tax withholding on this income without reduction or exemption pursuant to any otherwise applicable income tax treaty.

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| Principal               
 Real Estate Income Fund | Summary                
 of Updated Information 
 Regarding              
 the Fund               |