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Investment Type: pifretail

Preferred Securities Fund (A) (PPSAX)

Quick Facts Ticker: PPSAX Inception Date: 06/28/2005 Extended Performance Inception Date: 05/01/2002 Morningstar Category: Intermediate-Term Bond Total Net Assets (mil): $2,761.92	Investment Strategy    What's this? The investment seeks to provide current income. The fund invests primarily in preferred securities of U.S. companies rated BBB or higher by Standard & Poor's Rating Service ("S&P") or Moody's Investor Service, Inc. ("Moody's") or, if unrated, of comparable quality in the opinion of the Sub-Advisor, Spectrum. It normally invests at least 80% of net assets (plus any borrowings for investment purposes) in preferred securities. The fund focuses primarily on the financial services, Real Estate Investment Trust and utility industries. It is nondiversified.
Morningstar Style Box™   as of 07/31/2010 What's this?	Overall Morningstar Star Rating™   as of 08/31/2010 What's this? Out of 989 Intermediate-Term Bond Funds Morningstar's Star Ratings reflect risk adjusted performance and are derived from a weighted average of the performance figures associated with its three, five, and ten-year (if applicable) time periods.

Total Returns

Investment results shown represent historical performance and do not guarantee future results. Investment returns and principal values fluctuate with changes in interest rates and other market conditions so the value, when redeemed, may be worth more or less than original costs. Current performance may be lower or higher than the performance data shown. Where gross and net expense ratios differ, Principal Management Corporation has contractually agreed to limit the investment option's expenses. Differences also may be due to Principal Management Corporation's decision to pay (through the same dates) certain expenses that would normally be payable by the fund. Returns displayed are based on net total investment expense.

Month-End | Quarter-End

Average Annual Total Returns as of 08/31/2010

1 Month 3 Month YTD 1 Year 3 Year 5 Year 10 Year Since      Inception* Excluding Sales Charge % 2.82 9.44 12.49 24.74 6.36 4.41 --- 5.03 Including Sales Charge % -1.08 5.29 8.23 20.05 5.00 3.61 --- 4.55 Preferreds Blended Index % --- --- --- --- --- --- --- --- Intermediate-Term Bond Category % 1.35 4.22 8.11 11.35 6.65 5.09 5.85 --- Morningstar Percentile Ranking** --- --- --- 1 66 74 --- --- # of Funds in Category 1216 1197 1167 1135 989 861 531 ---

* Inception Date: 06/28/2005 ; Extended Performance Inception Date: 05/01/2002

**Morningstar percentile rankings are based on total returns.

Expenses

  as of 08/31/2010

Total Investment Expense - Gross:	1.13%
Total Investment Expense - Net:	1.13%
Maximum Up-front Sales Charge:	3.75%
12b-1 Fee:	0.25%

Growth of $10,000

   What's this?

Represents performance for Class A shares adjusted for the maximum sales charge and assumes the reinvestment of distributions. Performance assumes reinvestment of all dividends and capital gains. Extended performance is calculated based on the historical performance of the investment option's oldest share class, adjusted for the fees and expenses of the share class shown. Periods of less than one year are not annualized.

Investment Subadvisors

   What's this?

Spectrum

Portfolio Managers

   What's this?

L. Phillip Jacoby IV Since 05/01/2002 B.S. , Boston University

Mark A. Lieb Since 07/01/2009 M.B.A. , University of Hartford

© 2010 Morningstar, Inc. All Rights Reserved. Part of the mutual fund data contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. The full name of this investment option is Principal Preferred Securities Fund (A). Before investing in mutual funds, investors should carefully consider the investment objectives, risks, charges and expenses of the funds. This and other information is contained in the free prospectus, which can be downloaded from our site, or by contacting us at 1.800.222.5852. Please read the prospectus carefully before investing. Principal Funds, Inc. is distributed by Principal Funds Distributor, Inc., member of the Principal Financial Group®. Principal Funds Distributor, Principal Shareholder Services, Principal Management Corporation and its affiliates, and Principal Funds, Inc. are collectively referred to as Principal Funds. Not FDIC Insured May Lose Value - Not a Deposit - No Bank Guarantee Not Insured by any Federal Government Agency

Preferreds Blended Index is composed of 65% BofA Merrill Lynch Fixed Rate Preferecurities Index and 35% Barclays Capital U.S. Tier I Capital Securities Index. These calculated returns reflect the historical performance of the oldest share class of the fund, adjusted to reflect a portion of the fees and expenses of this share class. Please see the fund's prospectus for more information on specific expenses, and the fund's most recent shareholder report for actual date of first sale. Expenses are deducted from income earned by the fund. As a result, dividends and investment results will differ for each share class. Fixed-income investment options are subject to interest rate risk, and their value will decline as interest rates rise. Neither the principal of bond investment options nor their yields are guaranteed by the U.S. government. Fixed-income and asset allocation investment options that invest in mortgage securities are subject to increased risk due to real estate exposure.