Fund Information: Portfolio Management: Capabilities

World-class Investment Management

The Principal Financial Group and its member companies manages assets for individuals, institutional pension funds, and 401(k) plans. At the heart of this diversified asset management organization is Principal Global Investors, an investment manager that combines wide-ranging capabilities with a truly global reach.

Principal Global Investors has attracted a large base of institutional assets from clients in 25 countries. It has investment expertise in these areas:

• Target-risk and target-date asset allocation funds
• Large-cap, mid-cap, and small-cap growth equities
• Real estate securities
• International equities
• Taxable fixed-income securities

In addition to its U.S. locations in New York and Des Moines, Principal Global Investors has regional headquarters in Australia, Europe, and Singapore.

Principal Global Investors expands its capabilities through a network of affiliated investment advisors. These boutique firms have expertise in both core styles and niche offerings.

• Edge Asset Management, Inc. has been a pioneer in the field of actively managed asset allocation funds and is a leading manager of value equities and taxable fixed-income securities.
• Columbus Circle Investors focuses on growth equities through an emphasis on good companies getting stronger and companies that are exceeding investor expectations.
• Spectrum Asset Management offers expertise in preferred securities - generally one of the highest yielding investment-grade securities.
• Post Advisory Group offers expertise in the management of high-yield securities. It uses a consistent, value-oriented investment philosophy.
• Principal Real Estate Investors is one of the largest institutional U.S. real estate managers, with in-depth coverage of over 60 metropolitan property markets.

We have some of the nation's most well-known asset managers as additional sub-advisors.

Since no single investment manager has all the answers for your investment needs, we also offer funds guided by other leading asset managers and investment boutiques. Access to these sub-advisors creates a broad selection of funds that can give you the flexibility to use multiple asset classes with the convenience of one fund family:

• T. Rowe Price Associates
• Goldman Sachs Asset Management
• American Century Investment Management
• AllianceBernstein Investment Research and Management
• Turner Investment Partners
• Mellon Equity Associates
• Neuberger Berman Management Inc.
• Jacobs Levy Equity Management Inc.
• Emerald Advisers Inc.
• UBS Global Asset Management Inc.
• Essex Investment Management Company

Principal Due Diligence Program^SM

The Principal Due Diligence Program provides a rigorous and disciplined framework for identifying, hiring, monitoring, and retaining premier investment talent. The program allows us to thoroughly evaluate affiliated and unaffiliated firms so that we can:

• Identify stable, well-managed investment firms with top talent.
• Continuously monitor these firms to identify any adverse changes in their organizations, investment processes, or performance results.

This proprietary process can help you feel confident that all portfolio managers of our funds are judged against high expectations.

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To obtain a prospectus, order online or call Customer Service at 1.800.222.5852

While this communication may be used to promote or market a transaction or an idea that is discussed in the publication, it is intended to provide general information about the subject matter covered and is provided with the understanding that The Principal^® is not rendering legal, accounting, or tax advice. It is not a marketed opinion and may not be used to avoid penalties under the Internal Revenue Code. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements. For more information about our funds, including their full names, please see the Principal Funds, Inc. prospectus or call Customer Service at 1.800.222.5852.

A mutual fund's share price and investment return will vary with market conditions, and the principal value of an investment when you sell your shares may be more or less than the original cost.

This Web site was created and is maintained by Principal Funds Distributor, Inc. exclusively, and not by the Directors of the funds.

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 or NCUA/NCUSIF insured - May lose value - No bank guarantee - Not a deposit - Not insured by any federal government agency