Monthly Report Quarterly Report

Principal FreedomSM Variable Annuity 2
Performance Update

Variable annuities are long term investments and thus are not suitable for everyone; earnings grow tax-deferred; and withdrawals prior to age 59 ½ may result in a 10% penalty tax.

The initial offering of the Principal FreedomSM Variable Annuity 2 was October 30, 2006. The separate account that funds the contract was established on January 12, 1970.

The investment results shown represent historical returns based upon the assumption that the Principal FreedomSM Variable Annuity 2 was available for the period shown. Past performance is no guarantee of future results. Current performance may be lower or higher than the performance data shown. For more performance information, including most recent month-end performance, visit our website at www.principal.com and click on "Rates & Values."

The return and principal value of an investment in any of the divisions will fluctuate so that the value, when redeemed, may be worth more or less than its original cost.

Except where noted, investment results include all charges and expenses (no contingent deferred surrender charge applies).

An investment in the Fidelity VIP Government Money Market Subaccount is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. Although the underlying mutual fund invested in by the subaccount seeks to preserve the value of your investment at $1 per share, the subaccount itself does not seek to maintain a stable net asset value. It is possible to lose money investing in this subaccount.

Before investing in a variable annuity, investors should carefully consider the investment objectives, risks, charges and expenses of the contract and its underlying investment options. This and other information is contained in the free prospectus and, if available, the summary prospectus which can be obtained online or call customer service at 1.800.852.4450. Please read the prospectus and, if available, the summary prospectus carefully before investing.

Equity investment options involve greater risk, including heightened volatility, than fixed-income investment options. Fixed-income investment options are subject to interest rate risk, and their value will decline as interest rates rise. Fixed-income investment options that invest in mortgage securities are subject to increased risk due to real estate exposure.

Principal FreedomSM Variable Annuity 2
Quarterly Performance Update
as of 06/30/2016
Average Annual Total Returns
Division Portfolio
Inception
Date
Total
Expenses
Unit Value
(UV)
as of
08/29/2016
Daily
Change
in UV
YTD 1 Year 3 Year 5 Year 10 Year Since
Portfolio
Inception *
Since
Division
Inception *
SHORT-TERM FIXED INCOME
FIDELITY GOV MONEY MARKET 04/01/1982 0.25% 9.957243 - 0.000598 -0.39 -0.85 -0.91 -0.88 0.24 3.42 -0.31
SHORT-TERM INCOME 01/12/1994 0.49% 12.032534 - 0.000940 1.49 0.94 0.76 1.13 2.23 2.86 2.86
FIXED INCOME
CORE PLUS BOND 12/18/1987 0.46% 13.976973 0.047744 5.11 3.92 2.88 3.00 3.43 5.32 5.32
GOVT & HIGH QUALITY BOND 05/06/1993 0.51% 12.663223 - 0.000989 2.96 2.79 2.27 2.19 3.58 3.77 3.77
BALANCED/ASSET ALLOCATION
LIFETIME STRAT INCOME 08/30/2004 0.6% 13.139449 0.044644 3.37 0.84 3.04 3.29 2.58 3.31 3.31
LIFETIME 2010 08/30/2004 0.64% 13.913803 0.043338 2.71 -0.56 3.89 4.11 3.15 4.00 4.00
LIFETIME 2020 08/30/2004 0.67% 14.867448 0.057520 2.20 -1.23 4.95 5.08 3.74 4.80 4.80
LIFETIME 2030 08/30/2004 0.71% 14.917015 0.064156 1.53 -2.24 5.40 5.41 3.78 4.79 4.79
LIFETIME 2040 08/30/2004 0.73% 15.169688 0.066548 0.48 -3.44 5.75 5.85 3.94 5.06 5.06
LIFETIME 2050 08/30/2004 0.76% 15.190664 0.069152 0.14 -3.88 5.91 5.91 3.94 5.09 5.09
SAM BALANCED PORTFOLIO 06/03/1997 0.93% 14.954193 0.061151 2.51 -0.50 5.49 5.87 5.02 6.01 6.01
SAM CONSERVATIVE BALANCED 04/23/1998 0.88% 14.789783 0.050251 3.07 0.34 4.52 4.84 4.76 4.30 4.30
SAM CONSERVATIVE GROWTH 06/03/1997 0.99% 14.584112 0.075542 1.78 -1.78 6.22 6.59 4.88 6.18 6.18
SAM FLEXIBLE INCOME 09/09/1997 0.78% 14.925407 0.046680 4.39 1.61 4.00 4.41 4.69 4.99 4.99
SAM STRATEGIC GROWTH 06/03/1997 0.98% 14.446764 0.076975 1.02 -3.13 6.87 7.16 4.83 6.60 6.60
LARGE US EQUITY
AMCENT VP INCOME & GROWTH 10/31/1997 0.7% 17.097220 0.091700 4.49 0.01 8.05 9.80 5.03 5.05 3.31
CAPITAL APPRECIATION 04/28/1998 0.64% 17.695535 0.096858 2.11 1.03 10.14 10.08 6.62 8.24 8.24
LARGECAP GROWTH I 06/01/1994 0.76% 19.118157 0.044880 -3.57 -1.65 10.26 9.99 7.60 8.21 8.21
LARGECAP S&P 500 INDEX 05/03/1999 0.25% 18.609765 0.098146 3.19 2.74 10.26 10.69 6.10 3.21 3.21
LARGECAP VALUE 05/13/1970 0.61% 15.779072 0.114404 0.62 -0.93 7.75 9.04 4.42 9.43 9.43
SMALL/MID US EQUITY
FIDELITY VIP MID CAP 12/28/1998 0.73% 11.102873 0.053937 0.64 -6.20 7.70 6.86 5.94 11.24 2.18
MIDCAP 12/18/1987 0.53% 26.362386 0.159859 3.78 -0.07 10.86 11.97 9.65 11.69 11.69
REAL ESTATE SECURITIES 05/01/1998 0.89% 20.812912 0.211731 10.83 21.58 13.70 11.90 7.02 10.61 10.61
SMALLCAP 05/01/1998 0.88% 17.622817 0.086752 1.07 -7.39 9.32 9.52 5.38 4.35 4.35
INTERNATIONAL EQUITY
DIVERSIFIED INTERNATIONAL 05/02/1994 0.88% 12.523412 0.062603 -2.87 -9.10 2.06 1.43 1.17 4.71 4.71
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