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Investment Type: pifretail

Short-Term Income Fund (A) (SRHQX)

Quick Facts Ticker: SRHQX Inception Date: 11/01/1993 Morningstar Category: Short Term Bond Total Net Assets (mil): $913.32	Investment Strategy    What's this? The investment seeks to provide as high a level of current income as is consistent with prudent investment management and stability of principal. The fund invests in high quality short-term bonds and other fixed-income securities that are rated in one of the top four rating categories by one or more nationally recognized statistical rating organizations (''NRSRO'') or, in the opinion of management, are of comparable quality (''investment-grade''). It normally maintains an effective maturity of five years or less and a dollar-weighted average duration of three years or less.
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 378 Short 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 % 0.53 1.83 4.10 6.11 5.02 4.40 4.69 4.62 Including Sales Charge % -1.75 -0.50 1.77 3.73 4.22 3.96 4.47 4.48 Citigroup Broad Investment Grade Credit 1-3 Years % 0.39 1.74 3.45 5.23 5.66 5.10 5.38 --- Short Term Bond Category % 0.46 1.72 3.75 5.80 3.93 3.73 4.13 --- Morningstar Percentile Ranking** --- --- --- 40 30 33 28 --- # of Funds in Category 455 443 437 429 378 326 182 ---

* Inception Date: 11/01/1993

**Morningstar percentile rankings are based on total returns.

Expenses

  as of 08/31/2010

Total Investment Expense - Gross:	0.83%
Total Investment Expense - Net:	0.83%
Waiver Date:	02/28/2011
Contractual Cap Date:	02/28/2011
Maximum Up-front Sales Charge:	2.25%
12b-1 Fee:	0.15%

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?

Edge Asset Management, Inc.

Portfolio Managers

   What's this?

Scott J. Peterson , CFA Since 01/01/2010 M.B.A. , New York University

John R. Friedl , CFA Since 05/19/2010 M.S. , Seattle University

Brian L. Placzek , CFA Since 05/19/2010 B.A. , Seattle University

Ryan P. McCann , CFA Since 05/19/2010 B.A. , Washington State University

© 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 Short-Term Income 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

Citigroup Broad Investment Grade Credit 1-3 Years Index is an unmanaged index of bonds designed to track the performance of bonds issued in the US investment-grade bond market which have maturities 1-3 years. 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.