Principal Funds Hires Jeff Tyler as Principal LifeTime Funds Portfolio Manager

Principal Funds has hired Jeff Tyler as portfolio manager for Principal LifeTime Funds, effective March 1, 2011. Tyler will have primary responsibility for the target-date fund series.

"We’re pleased to add Jeff to our team of asset-allocation professionals,” said Nora Everett, president and CEO of Principal Funds. "We believe his skill and experience in managing target-date investment options is a great addition to Principal LifeTime portfolios, one of our flagship offerings.”

With assets totaling $17.6 billion¹, Principal LifeTime Funds are the fourth largest target-date fund offering in the industry. The funds have one of the longest track records among target-date investment options, in existence since 2001.

Tyler has 30 years of experience in the financial services industry, 21 years of which he spent at American Century Investments. He was instrumental in the creation of American Century’s target-date funds in 2004 and served as lead portfolio manager and head of the firm’s asset allocation team until his departure in 2009.

Also effective March 1, 2011, Michael Finnegan will depart the Principal LifeTime portfolio management team to broaden his focus on designing and launching investment products and solutions for retail and retirement clients of the Principal Financial Group^®. Finnegan will continue in his role as chief investment officer of Principal Funds, overseeing both retail and retirement investment platforms. He will also continue to serve as portfolio advisor to the Principal Global Diversified Income Fund (PGBAX) and Principal Diversified Real Asset Fund (PRDAX).

Tim Dunbar, who was promoted to senior vice president of Strategy and Finance at The Principal^®, will also depart the portfolio management team effective March 1.

A tenured team consisting of David Blake, James Fennessey, Dirk Laschanzky and Randy Welch remain on the Principal LifeTime portfolios as managers.

In Barron’s latest annual ranking of top mutual fund families, Principal Funds earned No. 3 based on one-year performance and No. 7 based on 10-year performance. Principal Funds ranked third in the mixed equity (asset allocation) category, also based on one-year performance.

Past performance is no guarantee of future results. Of all fund families that met the criteria, Principal Management Corporation, investment advisor to the Principal Funds, was ranked No. 3 out of 57 fund families for one year (overall and mixed-equity categories), No. 33 out of 53 for five years and No. 7 out of 46 fund families for 10 years, all periods ended 12/31/2010. Performance data used for the rankings does not account for any up-front sales charges, contingent deferred sales charges or 12b-1 fees.

To qualify for the rankings, a fund family must have at least three funds in Lipper's general U.S. stock category, one in world equity (combining global and international funds), one mixed-equity fund (stocks and bonds), at least two taxable bond funds and one tax-exempt offering. Each fund's return is measured against those of all funds in its Lipper category and assigned a percentile ranking, with 100 as the highest and 1 the lowest, which is then weighted by asset size, relative to the fund family’s other assets in its general classification. The score is multiplied by the weighting of its general classification, as determined by the entire Lipper universe of funds. The category weightings for the one-year results: general equity, 40.52%; world equity, 14.32%; mixed equity, 16.46%; taxable bond, 24.52%; tax-exempt bond, 4.18%. The same process is repeated for the five- and 10-year rankings.

About Principal LifeTime Funds
Principal LifeTime Funds invest in underlying Principal Funds and each is managed toward a particular target (retirement) date, or the approximate date the participant or investor starts withdrawing money. Investors choose the portfolio most closely matching their approximate retirement date. As each Principal LifeTime portfolio approaches its target date, the investment mix becomes more conservative by increasing exposure to generally more conservative investment options and reducing exposure to typically more aggressive investment options. The portfolio continues to be managed for approximately 15 years beyond the original target date. It is expected that within 10 to 15 years after its target year, the allocation will match that of the Principal LifeTime Strategic Income Fund. Principal LifeTime portfolios assume the value of the investor’s account will be withdrawn gradually during retirement. Neither the principal nor the underlying assets of the Principal LifeTime investment options are guaranteed at any time, including the target date. Investment risk remains at all times.

About Principal Funds
Principal Funds is a leading provider of mutual funds, with $66.2 billion in assets under management.² Principal Funds brings expertise in global investment management, asset allocation and retirement leadership to financial professionals and investors. Including its target-risk and target-date offerings, Principal Funds is the fifth largest manager of lifecycle funds in the industry.³ The companies that make up Principal Funds are members of the Principal Financial Group^®. For more information, visit www.principalfunds.com.

About the Principal Financial Group
The Principal Financial Group^® (The Principal^®)⁴ is a leader in offering businesses, individuals and institutional clients a wide range of financial products and services, including retirement and investment services, life and health insurance, and banking through its diverse family of financial services companies. A member of the Fortune 500, the Principal Financial Group has $318.8 billion in assets under management⁵ and serves some 19.1 million customers worldwide from offices in Asia, Australia, Europe, Latin America and the United States. Principal Financial Group, Inc. is traded on the New York Stock Exchange under the ticker symbol PFG. For more information, visit www.principal.com.

Investors should carefully consider a fund’s investment objectives, risks, charges, and expenses prior to investing. A prospectus containing this and other information can be obtained by contacting a financial professional, visiting principalfunds.com, or by calling 800-222-5852. Read the prospectus carefully before investing.

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.

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.

t11020903s9

¹ As of Dec. 31, 2010.
² As of Dec. 31, 2010. Includes all share classes of the Principal Funds, Inc. and Principal Variable Contracts Funds, Inc.
³ FRC Mutual Fund Lifecycle Report 3Q10.
⁴ "The Principal Financial Group” and "The Principal” are registered service marks of Principal Financial Services, Inc., a member of the Principal Financial Group.
⁵ As of Dec. 31, 2010.