PFI 1031 Annual Update 030123

PRINCIPAL FUNDS, INC.

(“PFI” or the “Registrant”)

Class A Shares
Class C Shares
Class J Shares
Institutional Class Shares
Class R-1 Shares
Class R-3 Shares
Class R-4 Shares
Class R-5 Shares
Class R-6 Shares

The date of this Prospectus is March 1, 2023.

The ticker symbols for series and share classes begin on the next page.

The Securities and Exchange Commission and the Commodity Futures Trading Commission have not approved or disapproved these securities or passed upon the adequacy of this Prospectus. Any representation to the contrary is a criminal offense.

FUNDS OF THE REGISTRANT

(each, a “Fund” and, together, the “Funds”)

	Ticker Symbols by Share Class
Fund/Portfolio	A	C	J	Inst.	R-1	R-3	R-4	R-5	R-6
California Municipal	SRCMX	SRCCX		PCMFX
Core Fixed Income	CMPIX	CNMCX	PIOJX	PIOIX	PIOMX	PIOOX	PIOPX	PIOQX	PICNX
Core Plus Bond	PRBDX		PBMJX	PMSIX	PBOMX	PBMMX	PBMSX	PBMPX
Diversified Income	PGBAX	PGDCX		PGDIX					PGBLX
Diversified International	PRWLX		PIIJX	PIIIX	PDVIX	PINRX	PINLX	PINPX	PDIFX
Equity Income	PQIAX	PEUCX	PEIJX	PEIIX	PIEMX	PEIOX	PEIPX	PEIQX
Finisterre Emerging Markets Total Return Bond				PFUMX
Global Emerging Markets	PRIAX		PIEJX	PIEIX	PIXEX	PEAPX	PESSX	PEPSX	PIIMX
Global Real Estate Securities	POSAX			POSIX		PGRKX	PGRVX	PGRUX	PGRSX
Government & High Quality Bond	CMPGX		PMRJX	PMRIX	PMGRX	PRCMX	PMRDX	PMREX
Government Money Market				PGVXX					PGWXX
High Income				PYHIX
High Yield	CPHYX	CCHIX		PHYTX					PHYFX
Inflation Protection			PIPJX	PIPIX	PISPX	PIFPX	PIFSX	PBPPX
International I				PINIX	PPISX	PRPPX	PUPPX	PTPPX	PIIDX
LargeCap Growth I	PLGAX		PLGJX	PLGIX	PCRSX	PPUMX	PPUSX	PPUPX	PLCGX
LargeCap S&P 500 Index	PLSAX	PLICX	PSPJX	PLFIX	PLPIX	PLFMX	PLFSX	PLFPX
LargeCap Value III			PLVJX	PLVIX	PESAX	PPSFX	PPSSX	PPSRX
MidCap	PEMGX	PMBCX	PMBJX	PCBIX	PMSBX	PMBMX	PMBSX	PMBPX	PMAQX
MidCap Growth			PMGJX	PGWIX	PMSGX	PFPPX	PIPPX	PHPPX
MidCap Growth III			PPQJX	PPIMX	PHASX	PPQMX	PPQSX	PPQPX
MidCap S&P 400 Index			PMFJX	MPSIX	PMSSX	PMFMX	PMFSX	PMFPX	PMAPX
MidCap Value I	PCMVX		PVEJX	PVMIX	PLASX	PMPRX	PABWX	PABVX	PCMSX
Money Market	PCSXX		PMJXX
Overseas				PINZX		PINTX	PINUX
Principal Capital Appreciation	CMNWX	CMNCX		PWCIX	PCAMX	PCAOX	PCAPX	PCAQX
Principal LifeTime Strategic Income	PALTX		PLSJX	PLSIX	PLAIX	PLSMX	PLSSX	PLSPX
Principal LifeTime 2010	PENAX		PTAJX	PTTIX	PVASX	PTAMX	PTASX	PTAPX
Principal LifeTime 2015				LTINX	LTSGX	LTAPX	LTSLX	LTPFX
Principal LifeTime 2020	PTBAX		PLFJX	PLWIX	PWASX	PTBMX	PTBSX	PTBPX
Principal LifeTime 2025				LTSTX	LTSNX	LTVPX	LTEEX	LTPDX
Principal LifeTime 2030	PTCAX		PLTJX	PMTIX	PXASX	PTCMX	PTCSX	PTCPX
Principal LifeTime 2035				LTIUX	LTANX	LTAOX	LTSEX	LTPEX
Principal LifeTime 2040	PTDAX		PTDJX	PTDIX	PYASX	PTDMX	PTDSX	PTDPX
Principal LifeTime 2045				LTRIX	LTRGX	LTRVX	LTRLX	LTRDX
Principal LifeTime 2050	PPEAX		PFLJX	PPLIX	PZASX	PTERX	PTESX	PTEFX
Principal LifeTime 2055				LTFIX	LTFGX	LTFDX	LTFLX	LTFPX
Principal LifeTime 2060			PLTAX	PLTZX	PLTRX	PLTCX	PLTMX	PLTOX
Principal LifeTime 2065				PLJIX	PLJAX	PLJCX	PLJDX	PLJEX
Principal LifeTime 2070			PLTLX	PLTGX	PLTSX	PLTDX	PLTBX	PLTFX
Principal LifeTime Hybrid Income			PHJFX	PHTFX					PLTYX
Principal LifeTime Hybrid 2015			PHJMX	PHTMX					PLRRX
Principal LifeTime Hybrid 2020			PHJTX	PHTTX					PLTTX
Principal LifeTime Hybrid 2025			PHJQX	PHTQX					PLFTX
Principal LifeTime Hybrid 2030			PHJNX	PHTNX					PLZTX
Principal LifeTime Hybrid 2035			PHJJX	PHTJX					PLRTX
Principal LifeTime Hybrid 2040			PHJEX	PLTQX					PLMTX
Principal LifeTime Hybrid 2045			PHJYX	PHTYX					PLNTX
Principal LifeTime Hybrid 2050			PHJUX	PHTUX					PLJTX
Principal LifeTime Hybrid 2055			PHJBX	PLTNX					PLHTX

	Ticker Symbols by Share Class
Fund/Portfolio	A	C	J	Inst.	R-1	R-3	R-4	R-5	R-6
Principal LifeTime Hybrid 2060			PHJGX	PLTHX					PLKTX
Principal LifeTime Hybrid 2065			PHJDX	PLHHX					PLHRX
Principal LifeTime Hybrid 2070			PLKJX	PLKSX					PLKRX
Real Estate Securities	PRRAX	PRCEX	PREJX	PIREX	PRAEX	PRERX	PRETX	PREPX	PFRSX
SAM Balanced	SABPX	SCBPX	PSAJX	PSBIX	PSBGX	PBAPX	PSBLX	PSBFX
SAM Conservative Balanced	SAIPX	SCIPX	PCBJX	PCCIX	PCSSX	PCBPX	PCBLX	PCBFX
SAM Conservative Growth	SAGPX	SCGPX	PCGJX	PCWIX	PCGGX	PCGPX	PCWSX	PCWPX
SAM Flexible Income	SAUPX	SCUPX	PFIJX	PIFIX	PFIGX	PFIPX	PFILX	PFIFX
SAM Strategic Growth	SACAX	SWHCX	PSWJX	PSWIX	PSGGX	PSGPX	PSGLX	PSGFX
Short-Term Income	SRHQX	STCCX	PSJIX	PSHIX	PSIMX	PSIOX	PSIPX	PSIQX
SmallCap	PLLAX	PSMCX	PSBJX	PSLIX	PSABX	PSBMX	PSBSX	PSBPX	PSMLX
SmallCap Growth I			PSIJX	PGRTX	PNASX	PPNMX	PPNSX	PPNPX	PCSMX
SmallCap S&P 600 Index			PSSJX	PSSIX	PSAPX	PSSMX	PSSSX	PSSPX	PSPIX
SmallCap Value II			PSMJX	PPVIX	PCPTX	PJARX	PSTWX	PLARX	PSMVX
Tax-Exempt Bond	PTEAX	PTBCX		PITEX

Table of Contents

Fund Summaries
California Municipal Fund	4
Core Fixed Income Fund	9
Core Plus Bond Fund	14
Diversified Income Fund	20
Diversified International Fund	26
Equity Income Fund	31
Finisterre Emerging Markets Total Return Bond Fund	35
Global Emerging Markets Fund	41
Global Real Estate Securities Fund	46
Government & High Quality Bond Fund	51
Government Money Market Fund	56
High Income Fund	60
High Yield Fund	65
Inflation Protection Fund	69
International Fund I	74
LargeCap Growth Fund I	79
LargeCap S&P 500 Index Fund	84
LargeCap Value Fund III	89
MidCap Fund	93
MidCap Growth Fund	98
MidCap Growth Fund III	102
MidCap S&P 400 Index Fund	106
MidCap Value Fund I	111
Money Market Fund	116
Overseas Fund	120
Principal Capital Appreciation Fund	125
Principal LifeTime Strategic Income Fund	129
Principal LifeTime 2010 Fund	135
Principal LifeTime 2015 Fund	141
Principal LifeTime 2020 Fund	147
Principal LifeTime 2025 Fund	153
Principal LifeTime 2030 Fund	159
Principal LifeTime 2035 Fund	165
Principal LifeTime 2040 Fund	171
Principal LifeTime 2045 Fund	177
Principal LifeTime 2050 Fund	182
Principal LifeTime 2055 Fund	188
Principal LifeTime 2060 Fund	193
Principal LifeTime 2065 Fund	199
Principal LifeTime 2070 Fund	204
Principal LifeTime Hybrid Income Fund	209
Principal LifeTime Hybrid 2015 Fund	215
Principal LifeTime Hybrid 2020 Fund	221
Principal LifeTime Hybrid 2025 Fund	227
Principal LifeTime Hybrid 2030 Fund	233
Principal LifeTime Hybrid 2035 Fund	239
Principal LifeTime Hybrid 2040 Fund	245

Principal LifeTime Hybrid 2045 Fund	251
Principal LifeTime Hybrid 2050 Fund	257
Principal LifeTime Hybrid 2055 Fund	263
Principal LifeTime Hybrid 2060 Fund	269
Principal LifeTime Hybrid 2065 Fund	275
Principal LifeTime Hybrid 2070 Fund	281
Real Estate Securities Fund	286
SAM (Strategic Asset Management) Balanced Portfolio	292
SAM (Strategic Asset Management) Conservative Balanced Portfolio	298
SAM (Strategic Asset Management) Conservative Growth Portfolio	304
SAM (Strategic Asset Management) Flexible Income Portfolio	310
SAM (Strategic Asset Management) Strategic Growth Portfolio	316
Short-Term Income Fund	321
SmallCap Fund	326
SmallCap Growth Fund I	330
SmallCap S&P 600 Index Fund	334
SmallCap Value Fund II	339
Tax-Exempt Bond Fund	344
ADDITIONAL INFORMATION ABOUT INVESTMENT STRATEGIES AND RISKS	349
PORTFOLIO HOLDINGS INFORMATION	380
MANAGEMENT OF THE FUNDS	380
PRICING OF FUND SHARES	389
CONTACT PRINCIPAL FUNDS, INC.	390
PURCHASE OF FUND SHARES	390
Redemption of Fund Shares	395
EXCHANGE OF FUND SHARES	399
DIVIDENDS AND DISTRIBUTIONS	401
FREQUENT PURCHASES AND REDEMPTIONS	402
TAX CONSIDERATIONS	403
Choosing a Share Class and the Costs of Investing	404
DISTRIBUTION PLANS AND INTERMEDIARY COMPENSATION	411
FUND ACCOUNT INFORMATION	413
APPENDIX A—DESCRIPTION OF BOND RATINGS	A-1
APPENDIX B—INTERMEDIARY-SPECIFIC SALES CHARGE WAIVERS AND REDUCTIONS	B-1
APPENDIX C — FINANCIAL HIGHLIGHTS	C-1
ADDITIONAL INFORMATION	D

California Municipal Fund

Objective

The Fund seeks to provide as high a level of current income that is exempt from federal and state personal income tax as is consistent with prudent investment management and preservation of capital.

Fees and Expenses of the Fund

This table describes the fees and expenses that you may pay if you buy, hold, and sell shares of the Fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the tables and examples below. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $100,000 in Class A Shares of Principal Funds, Inc. More information about these and other discounts is available from your financial intermediary and in “Choosing a Share Class and The Costs of Investing” beginning on page 404 of the Fund’s Prospectus, Appendix B to the Prospectus titled “Intermediary-Specific Sales Charge Waivers and Reductions,” and “Multiple Class Structure” beginning on page 4 of the Fund’s Statement of Additional Information.

If you purchase Institutional Class shares through certain programs offered by certain financial intermediaries, you may be required to pay a commission and/or other forms of compensation to the broker, or to your Financial Professional or other financial intermediary.

Shareholder Fees (fees paid directly from your investment)

	Share Class
	A	C	Inst.
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	3.75%	None	None
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	1.00%	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	A	C	Inst.
Management Fees(1)	0.40%	0.40%	0.40%
Distribution and/or Service (12b-1) Fees	0.25%	1.00%	N/A
Other Expenses:
Interest Expense	0.06%	0.06%	0.06%
Remainder of Other Expenses	0.06%	0.13%	0.08%
Total Other Expenses	0.12%	0.19%	0.14%
Total Annual Fund Operating Expenses	0.77%	1.59%	0.54%
Expense Reimbursement(2)	N/A	N/A	(0.02)%
Total Annual Fund Operating Expenses after Expense Reimbursement	0.77%	1.59%	0.52%

(1)

Fees have been restated to reflect current fees.

(2)

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example assumes conversion of the Class C shares to Class A shares after the eighth year. The Example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same. The calculation of costs takes into account any applicable contractual fee waivers and/or expense reimbursements for the period noted in the table above. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

	1 year	3 years	5 years	10 years
Class A	$451	$612	$787	$1,293
Class C	262	502	866	1,669
Institutional Class	53	171	300	675

With respect to Class C shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class C	$162	$502	$866	$1,669

Portfolio Turnover

The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in Annual Fund Operating Expenses or in the Example, affect the Fund’s performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 38.90% of the average value of its portfolio.

Principal Investment Strategies

Under normal circumstances, the Fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in California municipal obligations (securities issued by or on behalf of state or local governments and other public authorities) at the time of purchase. Generally, these municipal obligations pay interest that is exempt from state personal income tax and federal income tax. These obligations may include bonds that generate interest payments that are subject to the federal individual alternative minimum tax. The Fund’s investment in municipal obligations include industrial revenue bonds. The Fund invests up to 20% of its assets in below investment grade bonds (sometimes called “high yield bonds” or “junk bonds”), which are rated at the time of purchase Ba1 or lower by Moody’s Investors Service, Inc. (“Moody’s”) and BB+ or lower by S&P Global Ratings (“S&P Global”) (if the bond has been rated by only one of those agencies, that rating will determine whether the bond is below investment grade; if the bond has not been rated by either of those agencies, those selecting such investments will determine whether the bond is of a quality comparable to those rated below investment grade). The Fund also invests in inverse floating rate obligations (variable rate debt instruments that pay interest at rates that move in the opposite direction of prevailing interest rates), which are generally more volatile than other types of municipal obligations and may involve leverage.

Under normal circumstances, the Fund maintains an average portfolio duration that is within ±50% of the duration of the Bloomberg California Municipal Bond Index, which as of January 31, 2023 was 5.24 years. The Fund is not managed to a particular maturity.

Principal Risks

The value of your investment in the Fund changes with the value of the Fund’s investments. Many factors affect that value, and it is possible to lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The principal risks of investing in the Fund are listed below in alphabetical order and not in order of significance.

Counterparty Risk. Counterparty risk is the risk that the counterparty to a contract or other obligation will be unable or unwilling to honor its obligations.

Fixed-Income Securities Risk. Fixed-income securities are subject to interest rate, credit quality, and liquidity risks. The market value of fixed-income securities generally declines when interest rates rise, and increased interest rates may adversely affect the liquidity of certain fixed-income securities. Moreover, an issuer of fixed-income securities could default on its payment obligations due to increased interest rates or for other reasons.

Geographic Concentration Risk. A fund that invests significant portions of its assets in municipal obligations and bonds in particular geographic areas (a particular state, such as California, or a particular country or region) has greater exposure than other funds to economic conditions and developments in those areas.

High Yield Securities Risk. High yield fixed-income securities (commonly referred to as “junk bonds”) are subject to greater credit quality risk than higher rated fixed-income securities and should be considered speculative.

Industrial Revenue Bond Risk. The Fund will be sensitive to, and its performance will depend to a greater extent on, the overall condition and performance of industrial revenue bonds. These revenue bonds are issued by or on behalf of public authorities to obtain funds to finance various public and/or privately operated facilities, including those for business and manufacturing, housing, sports, pollution control, airport, mass transit, port, and parking facilities. These bonds are normally secured only by the revenues from the project and not by state or local government tax payments. Consequently, the credit quality of these bonds is dependent upon the ability of the user of the facilities financed by the bonds and any guarantor to meet its financial obligations.

Inverse Floating Rate Investments Risk. Inverse floating rate investments are extremely sensitive to changes in interest rates and, in some cases, their market value may be extremely volatile.

Leverage Risk. Leverage created by borrowing or certain types of transactions or investments may impair the fund’s liquidity, cause it to liquidate positions at an unfavorable time, increase volatility of the fund’s net asset value, or diminish the fund’s performance.

Municipal Obligations Risk. Principal and interest payments on municipal securities may not be guaranteed by the issuing body and may be payable only from a particular source. That source may not perform as expected, and payment obligations may not be made or made on time.

Portfolio Duration Risk. Portfolio duration is a measure of the expected life of a fixed-income security and its sensitivity to changes in interest rates. The longer a fund’s average portfolio duration, the more sensitive the fund will be to changes in interest rates, which means funds with longer average portfolio durations may be more volatile than those with shorter durations.

Redemption and Large Transaction Risk. Ownership of the Fund’s shares may be concentrated in one or a few large investors (such as funds of funds, institutional investors, and asset allocation programs) that may redeem or purchase shares in large quantities. These transactions may cause the Fund to sell securities to meet redemptions or to invest additional cash at times it would not otherwise do so, which may result in increased transaction costs, increased expenses, changes to expense ratios, and adverse effects to Fund performance. Such transactions may also accelerate the realization of taxable income if sales of portfolio securities result in gains. Moreover, reallocations by large shareholders among share classes of a fund may result in changes to the expense ratios of affected classes, which may increase the expenses paid by shareholders of the class that experienced the redemption.

Performance

The following information provides some indication of the risks of investing in the Fund. Past performance (before and after taxes) is not necessarily an indication of how the Fund will perform in the future. You may get updated performance information at www.PrincipalAM.com.

The bar chart shows the investment returns of the Fund’s Class A shares for each full calendar year of operations for 10 years (or, if shorter, the life of the Fund). These annual returns do not reflect sales charges on Class A shares; if they did, results would be lower. The table shows for the last one, five, and ten calendar year periods (or, if shorter, the life of the Fund), how the Fund’s average annual total returns compare with those of one or more broad measures of market performance.

For periods prior to the inception date of Institutional Class shares (March 1, 2015), the performance shown in the table for Institutional Class shares is that of the Fund’s Class A shares, adjusted to reflect the fees and expenses of Institutional Class shares. However, where the adjustment for fees and expenses results in performance for Institutional Class shares that is higher than the historical performance of the Class A shares, the historical performance of Class A shares is used (without respect to sales charges, which are not applicable to Institutional Class shares). These adjustments result in performance for such periods that is no higher than the historical performance of the Class A shares.

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q1 2014	5.67%
Lowest return for a quarter during the period of the bar chart above:	Q1 2022	(7.07)%

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Class A Return Before Taxes	(14.04)%	(0.13)%	1.96%
Class A Return After Taxes on Distributions	(14.04)%	(0.13)%	1.96%
Class A Return After Taxes on Distributions and Sale of Fund Shares	(7.39)%	0.50%	2.23%
Class C Return Before Taxes	(12.29)%	(0.19)%	1.63%
Institutional Class Return Before Taxes	(10.39)%	0.91%	2.55%
Bloomberg California Municipal Bond Index (reflects no deduction for fees, expenses, or taxes)	(8.17)%	1.25%	2.30%

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Class A shares only and would be different for the other share classes.

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

James Noble (since 2013), Portfolio Manager

•

James Welch (since 2014), Portfolio Manager

Purchase and Sale of Fund Shares

For Classes A and C shares, the required minimum initial investment per Fund is generally $1,000, and the minimum initial investment per Fund for accounts with an Automatic Investment Plan (“AIP”) is $100. The required minimum subsequent investment per Fund is generally $100; however, for accounts with an AIP, subsequent automatic investments must total $1,200 annually if the initial $1,000 has not been met. Some exceptions apply; see “Purchase of Fund Shares – Minimum Investments” for more information.

For Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

You may purchase or redeem shares on any business day (normally any day when the New York Stock Exchange is open for regular trading) through your plan, intermediary, or Financial Professional by sending a written request to Principal Funds at P.O. Box 219971, Kansas City, MO 64121-9971 (regular mail) or 430 W. 7th Street, Ste. 219971, Kansas City, MO 64105-1407 (overnight mail); calling us at 1-800-222-5852; or accessing our website (www.principal.com).

Class C shares are subject to an 8-year automatic conversion plan whereby Class C shares held for eight years after purchase will automatically convert to Class A shares of the same Fund.

See Purchase of Fund Shares for more information.

Tax Information

While the Fund intends to distribute income that is exempt from regular federal and California income taxes, a portion of the Fund’s distributions may be subject to California or federal income taxes or to the federal individual alternative minimum tax.

Payments to Broker-Dealers and Other Financial Intermediaries

If you purchase the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment, or to recommend one share class of the Fund over another share class. Ask your salesperson or visit your financial intermediary’s website for more information.

Core Fixed Income Fund

SHARE CLASS CONVERSION NOTICE: On December 13, 2022, the Fund’s Board of Directors approved the conversion of the Fund’s Class C shares into Class A shares. Following the close of business on May 19, 2023, Class C shares of the Fund will automatically convert into Class A shares of the Fund on the basis of the share classes’ relative net asset values on such date. The conversion will not result in the imposition of a sales charge or any other charge. As a result of the conversion, the affected shareholders will be in a better position with respect to expenses, as expenses are lower for Class A shares than for the current Class C shares. The Fund expects these share class conversions will not constitute taxable sales or exchanges to shareholders. Effective as of the close of the New York Stock Exchange on March 24, 2023, Class C shares will no longer be available for purchase except in limited circumstances.

On or about May 19, 2023, delete references to Class C shares of this Fund, including information regarding the conversion plan, from the Prospectus.

Objective

The Fund seeks to provide a high level of current income consistent with preservation of capital.

Fees and Expenses of the Fund

If you purchase Institutional Class or Class R-6 shares through certain programs offered by certain financial intermediaries, you may be required to pay a commission and/or other forms of compensation to the broker, or to your Financial Professional or other financial intermediary.

Shareholder Fees (fees paid directly from your investment)

	Share Class
	A	C	J	Inst.	R-1	R-3	R-4	R-5	R-6
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	2.25%	None	None	None	None	None	None	None	None
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	1.00%	1.00%	None	None	None	None	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	A	C	J	Inst.	R-1	R-3	R-4	R-5	R-6
Management Fees(1)	0.37%	0.37%	0.37%	0.37%	0.37%	0.37%	0.37%	0.37%	0.37%
Distribution and/or Service (12b-1) Fees	0.25%	1.00%	0.15%	N/A	0.35%	0.25%	0.10%	N/A	N/A
Other Expenses	0.13%	0.24%	0.11%	0.13%	0.53%	0.32%	0.28%	0.26%	0.00%
Acquired Fund Fees and Expenses	0.01%	0.01%	0.01%	0.01%	0.01%	0.01%	0.01%	0.01%	0.01%
Total Annual Fund Operating Expenses	0.76%	1.62%	0.64%	0.51%	1.26%	0.95%	0.76%	0.64%	0.38%
Expense Reimbursement(2)	N/A	N/A	N/A	(0.04)%	N/A	N/A	N/A	N/A	N/A
Total Annual Fund Operating Expenses after Expense Reimbursement	0.76%	1.62%	0.64%	0.47%	1.26%	0.95%	0.76%	0.64%	0.38%

(1)

Fees have been restated to reflect current fees.

(2)

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Class A	$301	$462	$638	$1,146
Class C	265	511	881	1,692
Class J	165	205	357	798
Institutional Class	48	160	281	637
Class R-1	128	400	692	1,523
Class R-3	97	303	525	1,166
Class R-4	78	243	422	942
Class R-5	65	205	357	798
Class R-6	39	122	213	480

With respect to Classes C and J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class C	$165	$511	$881	$1,692
Class J	65	205	357	798

Portfolio Turnover

Principal Investment Strategies

Under normal circumstances, the Fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in fixed-income securities. The Fund invests primarily in a diversified pool of investment-grade fixed-income securities, including corporate securities, U.S. government securities, asset-backed securities and mortgage-backed securities (securitized products) (including collateralized mortgage obligations), and foreign securities. “Investment grade” securities are rated BBB- or higher by S&P Global Ratings (“S&P Global”) or Baa3 or higher by Moody’s Investors Service, Inc. (“Moody’s”) or, if unrated, of comparable quality in the opinion of those selecting such investments. If the security has been rated by only one of those agencies, that rating will determine whether the security is investment grade. If securities are rated differently by the rating agencies, the highest rating is used. The Fund is not managed to a particular maturity. Under normal circumstances, the Fund maintains an average portfolio duration that is within ±25% of the duration of the Bloomberg U.S. Aggregate Bond Index, which as of January 31, 2023 was 6.43 years.

Principal Risks

Foreign Securities Risk. The risks of foreign securities include loss of value as a result of: political or economic instability; nationalization, expropriation, or confiscatory taxation; settlement delays; and limited government regulation (including less stringent reporting, accounting, and disclosure standards than are required of U.S. companies).

Real Estate Securities Risk. Investing in real estate securities subjects the fund to the risks associated with the real estate market (which are similar to the risks associated with direct ownership in real estate), including declines in real estate values, loss due to casualty or condemnation, property taxes, interest rate changes, increased expenses, cash flow of underlying real estate assets, regulatory changes (including zoning, land use, and rents), and environmental problems, as well as to the risks related to the management skill and creditworthiness of the issuer.

Securitized Products Risk. Investments in securitized products are subject to risks similar to traditional fixed-income securities, such as credit, interest rate, liquidity, prepayment, extension, and default risk, as well as additional risks associated with the nature of the assets and the servicing of those assets. Unscheduled prepayments on securitized products may have to be reinvested at lower rates. A reduction in prepayments may increase the effective maturities of these securities, exposing them to the risk of decline in market value over time (extension risk).

U.S. Government Securities Risk. Yields available from U.S. government securities are generally lower than yields from many other fixed-income securities.

U.S. Government-Sponsored Securities Risk. Securities issued by U.S. government-sponsored enterprises such as the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, and the Federal Home Loan Banks are not issued or guaranteed by the U.S. government.

Performance

For periods prior to the inception date of Class R-6 shares (November 25, 2014), the performance shown in the table for Class R-6 shares is that of the Fund’s Class A shares, adjusted to reflect the fees and expenses of Class R-6 shares. However, where the adjustment for fees and expenses results in performance for Class R-6 shares that is higher than the historical performance of the Class A shares, the historical performance of the Class A shares is used (without respect to sales charges, which are not applicable to Class R-6 shares). These adjustments result in performance for such periods that is no higher than the historical performance of the Class A shares.

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	5.87%
Lowest return for a quarter during the period of the bar chart above:	Q1 2022	(5.80)%

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Class A Return Before Taxes	(14.99)%	(0.54)%	0.96%
Class A Return After Taxes on Distributions	(15.81)%	(1.53)%	(0.24)%
Class A Return After Taxes on Distributions and Sale of Fund Shares	(8.85)%	(0.78)%	0.22%
Class C Return Before Taxes	(14.66)%	(0.93)%	0.55%
Class J Return Before Taxes	(13.72)%	0.05%	1.28%
Institutional Class Return Before Taxes	(12.82)%	0.17%	1.51%
Class R-1 Return Before Taxes	(13.41)%	(0.58)%	0.69%
Class R-3 Return Before Taxes	(13.22)%	(0.29)%	1.00%
Class R-4 Return Before Taxes	(12.96)%	(0.08)%	1.20%
Class R-5 Return Before Taxes	(12.88)%	0.04%	1.32%
Class R-6 Return Before Taxes	(12.66)%	0.30%	1.50%
Bloomberg U.S. Aggregate Bond Index (reflects no deduction for fees, expenses, or taxes)	(13.02)%	0.02%	1.06%

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

John R. Friedl (since 2005), Portfolio Manager

•

Scott J. Peterson (since 2010), Portfolio Manager

Purchase and Sale of Fund Shares

For Classes A, C, and J shares, the required minimum initial investment per Fund is generally $1,000, and the minimum initial investment per Fund for accounts with an Automatic Investment Plan (“AIP”) is $100. The required minimum subsequent investment per Fund is generally $100; however, for accounts with an AIP, subsequent automatic investments must total $1,200 annually if the initial $1,000 has not been met. Some exceptions apply; see “Purchase of Fund Shares – Minimum Investments” for more information.

For Classes R-1, R-3, R-4, R-5, R-6, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances.

Class C shares are subject to an 8-year automatic conversion plan whereby Class C shares held for eight years after purchase will automatically convert to Class A shares of the same Fund.

Effective as of the close of the New York Stock Exchange on March 24, 2023, Class C shares will no longer be available for purchase except in limited circumstances.

See Purchase of Fund Shares for more information.

Tax Information

The Fund’s distributions you receive are generally subject to federal income tax as ordinary income or capital gain and may also be subject to state and local taxes, unless you are tax-exempt or your account is tax-deferred in which case your distributions would be taxed when withdrawn from the tax-deferred account.

Payments to Broker-Dealers and Other Financial Intermediaries

Core Plus Bond Fund

Objective

The Fund seeks to provide current income and, as a secondary objective, capital appreciation.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment)

	Share Class
	A	J	Inst.	R-1	R-3	R-4	R-5
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	3.75%	None	None	None	None	None	None
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	1.00%	None	None	None	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	A	J	Inst.	R-1	R-3	R-4	R-5
Management Fees(1)	0.49%	0.49%	0.49%	0.49%	0.49%	0.49%	0.49%
Distribution and/or Service (12b-1) Fees	0.25%	0.15%	N/A	0.35%	0.25%	0.10%	N/A
Other Expenses	0.23%	0.23%	0.15%	0.54%	0.33%	0.29%	0.27%
Acquired Fund Fees and Expenses	0.01%	0.01%	0.01%	0.01%	0.01%	0.01%	0.01%
Total Annual Fund Operating Expenses	0.98%	0.88%	0.65%	1.39%	1.08%	0.89%	0.77%
Expense Reimbursement(2)	(0.13)%	N/A	(0.08)%	N/A	N/A	N/A	N/A
Total Annual Fund Operating Expenses after Expense Reimbursement	0.85%	0.88%	0.57%	1.39%	1.08%	0.89%	0.77%

(1)

Fees have been restated to reflect current fees.

(2)

Principal Global Investors, LLC (“PGI”), the investment advisor, has contractually agreed to limit the Fund’s expenses by paying, if necessary, expenses normally payable by the Fund (excluding interest expense, expenses related to fund investments, acquired fund fees and expenses, and tax reclaim recovery expenses and other extraordinary expenses) to maintain a total level of operating expenses (expressed as a percent of average net assets on an annualized basis) not to exceed 0.84% for Class A and 0.56% for Institutional Class shares. It is expected that the expense limits will continue through the period ending February 29, 2024; however, Principal Funds, Inc. and PGI, the parties to the agreement, may mutually agree to terminate the expense limits prior to the end of the period. Subject to applicable expense limits, the Fund may reimburse PGI for expenses incurred during the current fiscal year.

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same. The calculation of costs takes into account any applicable contractual fee waivers and/or expense reimbursements for the period noted in the table above. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

	1 year	3 years	5 years	10 years
Class A	$459	$663	$884	$1,520
Class J	190	281	488	1,084
Institutional Class	58	200	354	803
Class R-1	142	440	761	1,669
Class R-3	110	343	595	1,317
Class R-4	91	284	493	1,096
Class R-5	79	246	428	954

With respect to Class J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class J	$90	$281	$488	$1,084

Portfolio Turnover

Principal Investment Strategies

Under normal circumstances, the Fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in bonds or other debt securities at the time of purchase. Such investments include securities issued or guaranteed by the U.S. government or its agencies or instrumentalities (including collateralized mortgage obligations); asset-backed securities and mortgage-backed securities (securitized products); corporate bonds; and foreign securities, including emerging market securities. The Fund invests in investment-grade securities and, with respect to up to 25% of its assets, in below investment grade securities (sometimes called “high yield” or “junk”), which are rated at the time of purchase Ba1 or lower by Moody’s Investors Service, Inc. (“Moody’s”) and BB+ or lower by S&P Global Ratings (“S&P Global”) (if the security has been rated by only one of those agencies, that rating will determine whether the security is below investment grade; if the security has not been rated by either of those agencies, those selecting such investments will determine whether the security is of a quality comparable to those rated below investment grade; if securities are rated differently by the rating agencies, the highest rating is used). The Fund is not managed to a particular maturity. Under normal circumstances, the Fund maintains an average portfolio duration that is within ±25% of the duration of the Bloomberg U.S. Aggregate Bond Index, which as of January 31, 2023 was 6.43 years. The Fund’s strategies may result in the active and frequent trading of the Fund’s portfolio securities.

The Fund enters into dollar roll transactions, which may involve leverage. The Fund invests in derivatives, including Treasury futures and interest rate swaps to manage the fixed-income exposure (including for hedging purposes) and credit default swaps to increase or decrease, in an efficient manner, exposures to certain sectors or individual issuers. A derivative is a financial arrangement, the value of which is derived from, or based on, a traditional security, asset, or market index.

Principal Risks

Counterparty Risk. Counterparty risk is the risk that the counterparty to a contract or other obligation will be unable or unwilling to honor its obligations.

Derivatives Risk. Derivatives may not move in the direction anticipated by the portfolio manager. Transactions in derivatives may increase volatility, cause the liquidation of portfolio positions when not advantageous to do so, and result in disproportionate losses that may be substantially greater than a fund’s initial investment.

•

Credit Default Swaps. Credit default swaps involve special risks in addition to those associated with swaps generally because they are difficult to value, are highly susceptible to liquidity and credit risk, and generally pay a return to the party that has paid the premium only in the event of an actual default by the issuer of the underlying obligation (as opposed to a credit downgrade or other indication of financial difficulty). The protection “buyer” in a credit default contract may be obligated to pay the protection “seller” an up-front payment or a periodic stream of payments over the term of the contract, provided, generally, that no credit event on a reference obligation has occurred. If a credit event occurs, the seller generally must pay the buyer the “par value” (i.e., full notional value) of the swap in exchange for an equal face amount of deliverable obligations of the reference entity described in the swap, or the seller may be required to deliver the related net cash amount, if the swap is cash settled. The Fund may be either the buyer or seller in the transaction.

•

Currency Contracts. Derivatives related to currency contracts involve the specific risk of government action through exchange controls that would restrict the ability of the fund to deliver or receive currency.

•

Futures and Swaps. These derivative instruments involve specific risks, including: the imperfect correlation between the change in market value of the instruments held by the fund and the price of the instruments; possible lack of a liquid secondary market for an instrument and the resulting inability to close it when desired; counterparty risk; and if the fund has insufficient cash, it may have to sell securities from its portfolio to meet any applicable daily variation margin requirements.

Emerging Markets Risk. Investments in emerging markets may have more risk than those in developed markets because the emerging markets are less developed and more illiquid. Emerging markets can also be subject to increased social, economic, regulatory, and political uncertainties and can be extremely volatile. The U.S. Securities and Exchange Commission, the U.S. Department of Justice, and other U.S. authorities may be limited in their ability to pursue bad actors in emerging markets, including with respect to fraud.

Foreign Currency Risk. Risks of investing in securities denominated in, or that trade in, foreign (non-U.S.) currencies include changes in foreign exchange rates and foreign exchange restrictions.

Hedging Risk. A fund that implements a hedging strategy using derivatives and/or securities could expose the fund to the risk that can arise when a change in the value of a hedge does not match a change in the value of the asset it hedges. In other words, the change in value of the hedge could move in a direction that does not match the change in value of the underlying asset, resulting in a risk of loss to the fund.

High Portfolio Turnover Risk. High portfolio turnover (more than 100%) caused by active and frequent trading of portfolio securities may result in accelerating the realization of taxable gains and losses, lower fund performance, and increased brokerage costs.

U.S. Government Securities Risk. Yields available from U.S. government securities are generally lower than yields from many other fixed-income securities.

Performance

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	5.34%
Lowest return for a quarter during the period of the bar chart above:	Q2 2022	(6.07)%

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Class A Return Before Taxes	(17.59)%	(0.91)%	0.58%
Class A Return After Taxes on Distributions	(18.32)%	(2.33)%	(0.62)%
Class A Return After Taxes on Distributions and Sale of Fund Shares	(10.39)%	(1.18)%	(0.02)%
Class J Return Before Taxes	(15.32)%	(0.13)%	0.98%
Institutional Class Return Before Taxes	(14.25)%	0.19%	1.33%
Class R-1 Return Before Taxes	(14.86)%	(0.64)%	0.47%
Class R-3 Return Before Taxes	(14.60)%	(0.31)%	0.78%
Class R-4 Return Before Taxes	(14.48)%	(0.15)%	0.96%
Class R-5 Return Before Taxes	(14.33)%	(0.03)%	1.09%
Bloomberg U.S. Aggregate Bond Index (reflects no deduction for fees, expenses, or taxes)	(13.02)%	0.02%	1.06%

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

William C. Armstrong (since 2000), Portfolio Manager

•

Bryan C. Davis (since 2022), Portfolio Manager

Purchase and Sale of Fund Shares

For Classes A and J shares, the required minimum initial investment per Fund is generally $1,000, and the minimum initial investment per Fund for accounts with an Automatic Investment Plan (“AIP”) is $100. The required minimum subsequent investment per Fund is generally $100; however, for accounts with an AIP, subsequent automatic investments must total $1,200 annually if the initial $1,000 has not been met. Some exceptions apply; see “Purchase of Fund Shares – Minimum Investments” for more information.

For Classes R-1, R-3, R-4, R-5, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances.

See Purchase of Fund Shares for more information.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

Diversified Income Fund

Objective

The Fund seeks income.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment)

	Share Class
	A	C	Inst.	R-6
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	3.75%	None	None	None
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	1.00%	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	A	C	Inst.	R-6
Management Fees(1)	0.64%	0.64%	0.64%	0.64%
Distribution and/or Service (12b-1) Fees	0.25%	1.00%	N/A	N/A
Other Expenses	0.11%	0.12%	0.11%	0.04%
Acquired Fund Fees and Expenses	0.01%	0.01%	0.01%	0.01%
Total Annual Fund Operating Expenses	1.01%	1.77%	0.76%	0.69%
Expense Reimbursement(2)	N/A	N/A	(0.07)%	(0.02)%
Total Annual Fund Operating Expenses after Expense Reimbursement	1.01%	1.77%	0.69%	0.67%

(1)

Fees have been restated to reflect current fees.

(2)

Principal Global Investors, LLC (“PGI”), the investment advisor, has contractually agreed to limit the Fund’s expenses by paying, if necessary, expenses normally payable by the Fund (excluding interest expense, expenses related to fund investments, acquired fund fees and expenses, and tax reclaim recovery expenses and other extraordinary expenses) to maintain a total level of operating expenses (expressed as a percent of average net assets on an annualized basis) not to exceed 0.68% for Institutional Class shares. In addition, for Class R-6, the expense limit will maintain “Other Expenses” (expressed as a percent of average net assets on an annualized basis) not to exceed 0.02% (excluding interest expense, expenses related to fund investments, acquired fund fees and expenses, and tax reclaim recovery expenses and other extraordinary expenses). It is expected that the expense limits will continue through the period ending February 29, 2024; however, Principal Funds, Inc. and PGI, the parties to the agreement, may mutually agree to terminate the expense limits prior to the end of the period. Subject to applicable expense limits, the Fund may reimburse PGI for expenses incurred during the current fiscal year.

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Class A	$474	$684	$912	$1,565
Class C	280	557	959	1,883
Institutional Class	70	236	415	936
Class R-6	68	219	382	857

With respect to Class C shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class C	$180	$557	$959	$1,883

Portfolio Turnover

Principal Investment Strategies

The Fund generally invests a majority of its assets in fixed-income securities, such as investment-grade corporate bonds, high yield bonds (also known as “junk” bonds), preferred securities, commercial mortgage-backed securities, and emerging market debt securities, in an effort to provide incremental yields over a portfolio of government securities. Such securities include instruments with variable or floating interest rates. The fixed-income portion of the Fund is not managed to a particular maturity or duration. The Fund invests in foreign, including emerging market, securities. The Fund uses derivative strategies. A derivative is a financial arrangement, the value of which is derived from, or based on, a traditional security, asset, or market index.

In managing the Fund, Principal Global Investors, LLC (“PGI”), the Fund’s investment advisor, determines the Fund's strategic asset allocation among actively managed and passively managed (index) strategies that are executed by PGI and multiple sub-advisors. PGI has considerable latitude in allocating the Fund's assets among the general investment categories listed below. The Fund uses strategies and sub-advisors to varying degrees and may change allocations, add new or eliminate existing strategies and sub-advisors, and temporarily or permanently reduce allocations from time to time such that the Fund would have little or no assets allocated to a particular strategy or sub-advisor.

•

Investment-grade corporate securities, which are rated at the time of purchase Baa3 or higher by Moody’s Investors Service (“Moody’s”) or BBB- or higher by S&P Global Ratings (“S&P Global”).

•

High yield and other income-producing securities, including bank loans and corporate bonds. “High yield” securities are below investment grade securities (sometimes called “junk”), which are rated at the time of purchase Ba1 or lower by Moody's and BB+ or lower by S&P Global. These securities offer a higher yield than other, higher rated securities, but they carry a greater degree of risk and are considered speculative with respect to the issuer's ability to pay interest and to repay principal. This portion of the Fund also invests in currency forwards and currency options to hedge currency risk.

•

Preferred securities, focusing primarily on the financial services and utility industries.

•

Diversified portfolio of fixed-income securities, including those issued by governments and their agencies and corporate entities in emerging markets. This portion of the Fund also invests in interest rate swaps or Treasury futures to manage fixed-income exposure; credit default swaps to increase or decrease in an efficient manner exposures to certain sectors or individual issuers; total return swaps to increase or decrease in an efficient manner exposures to certain sectors; and currency forwards and currency options to hedge currency risk and express views on the direction of currency.

•

Securitized products such as asset-backed securities and mortgage-based securities, including commercial mortgage-backed securities, which are bonds secured by first mortgages on commercial real estate.

Principal Risks

Asset Allocation Risk. A fund’s selection and weighting of asset classes may cause it to underperform other funds with a similar investment objective.

Bank Loans Risk. Changes in economic conditions are likely to cause issuers of bank loans (also known as senior floating rate interests) to be unable to meet their obligations. In addition, the value of the collateral securing the loan (if any) may decline, causing a loan to be substantially unsecured. Underlying credit agreements governing the bank loans, reliance on market makers, priority of repayment, and overall market volatility may harm the liquidity of loans.

Counterparty Risk. Counterparty risk is the risk that the counterparty to a contract or other obligation will be unable or unwilling to honor its obligations.

•

Forward Contracts, Futures, and Swaps. Forward contracts, futures, and swaps involve specific risks, including: the imperfect correlation between the change in market value of the instruments held by the fund and the price of the forward contract, future, or swap; possible lack of a liquid secondary market for a forward contract, future, or swap and the resulting inability to close a forward contract, future, or swap when desired; counterparty risk; and if the fund has insufficient cash, it may have to sell securities from its portfolio to meet daily variation margin requirements.

•

Options. Options involve specific risks, including: imperfect correlation between the change in market value of the instruments held by the Fund and the price of the options, counterparty risk, difference in trading hours for the options markets and the markets for the underlying securities (rate movements can take place in the underlying markets that cannot be reflected in the options markets), and an insufficient liquid secondary market for particular options.

Floating and Variable Rate Securities Risk. The market prices of securities with variable and floating interest rates are generally less sensitive to interest rate changes than are the market prices of securities of fixed interest rates. Floating and variable rate securities may decline in value if market interest rates or interest rates paid by them do not move as expected. Floating and variable rate securities may be subject to greater liquidity risk than other debt securities, meaning that there may be limitations on the Fund’s ability to sell the securities at any given time.

Foreign Currency Risk. Risks of investing in securities denominated in, or that trade in, foreign (non-U.S.) currencies include changes in foreign exchange rates and foreign exchange restrictions.

Index (Passive) Strategy Risk. An index (passive) fund (or passive strategy that is part of a fund) has operating and other expenses while an index does not. As a result, over time, index funds tend to underperform the index. The correlation between an index strategy’s performance and index performance may also be affected by the type of passive investment approach used (sampling or replication), changes in securities markets, changes in the composition of the index, and the timing of purchases and sales of shares.

Preferred Securities Risk. Because preferred securities have a lower priority claim on assets or earnings than senior bonds and other debt instruments in a company’s capital structure, they are subject to greater credit and liquidation risk than more senior debt instruments. In addition, preferred securities are subject to other risks, such as limited or no voting rights, deferring or skipping distributions, interest rate risk, and redeeming the security prior to any stated maturity date.

Performance

For periods prior to the inception date of Class R-6 shares (June 12, 2017), the performance shown in the table for Class R-6 shares is that of the Fund’s Institutional Class shares, adjusted to reflect the fees and expenses of Class R-6 shares. These adjustments result in performance for such periods that is no higher than the historical performance of the Institutional Class shares.

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q4 2020	8.39%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(17.02)%

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Class A Return Before Taxes	(14.82)%	0.03%	2.79%
Class A Return After Taxes on Distributions	(16.33)%	(1.63)%	0.92%
Class A Return After Taxes on Distributions and Sale of Fund Shares	(8.65)%	(0.56)%	1.41%
Class C Return Before Taxes	(13.04)%	0.05%	2.56%
Institutional Class Return Before Taxes	(11.20)%	1.14%	3.52%
Class R-6 Return Before Taxes	(11.20)%	1.14%	3.52%
Bloomberg U.S. Aggregate Bond Index (reflects no deduction for fees, expenses, or taxes)	(13.02)%	0.02%	1.06%

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

Jessica S. Bush (since 2014), Portfolio Manager

•

Benjamin E. Rotenberg (since 2014), Portfolio Manager

•

May Tong (since 2021), Portfolio Manager

Sub-Advisors

Nuveen Asset Management LLC

PineBridge Investments LLC

Polen Capital Credit, LLC (f/k/a DDJ Capital Management, LLC)

Post Advisory Group, LLC

Principal Real Estate Investors, LLC

Spectrum Asset Management, Inc.

Purchase and Sale of Fund Shares

For Class R-6 and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Class C shares are subject to an 8-year automatic conversion plan whereby Class C shares held for eight years after purchase will automatically convert to Class A shares of the same Fund.

See Purchase of Fund Shares for more information.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

Diversified International Fund

Objective

The Fund seeks long-term growth of capital.

Fees and Expenses of the Fund

This table describes the fees and expenses that you may pay if you buy, hold, and sell shares of the Fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the tables and examples below. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in Class A Shares of Principal Funds, Inc. More information about these and other discounts is available from your financial intermediary and in “Choosing a Share Class and The Costs of Investing” beginning on page 404 of the Fund’s Prospectus, Appendix B to the Prospectus titled “Intermediary-Specific Sales Charge Waivers and Reductions,” and “Multiple Class Structure” beginning on page 4 of the Fund’s Statement of Additional Information.

Shareholder Fees (fees paid directly from your investment)

	Share Class
	A	J	Inst.	R-1	R-3	R-4	R-5	R-6
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	5.50%	None	None	None	None	None	None	None
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	1.00%	None	None	None	None	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	A	J	Inst.	R-1	R-3	R-4	R-5	R-6
Management Fees	0.74%	0.74%	0.74%	0.74%	0.74%	0.74%	0.74%	0.74%
Distribution and/or Service (12b-1) Fees	0.25%	0.15%	N/A	0.35%	0.25%	0.10%	N/A	N/A
Other Expenses	0.24%	0.25%	0.17%	0.57%	0.36%	0.32%	0.30%	0.04%
Total Annual Fund Operating Expenses	1.23%	1.14%	0.91%	1.66%	1.35%	1.16%	1.04%	0.78%
Expense Reimbursement(1)	N/A	N/A	(0.03)%	N/A	N/A	N/A	N/A	N/A
Total Annual Fund Operating Expenses after Expense Reimbursement	1.23%	1.14%	0.88%	1.66%	1.35%	1.16%	1.04%	0.78%

(1)

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Class A	$668	$919	$1,188	$1,957
Class J	216	362	628	1,386
Institutional Class	90	287	501	1,117
Class R-1	169	523	902	1,965
Class R-3	137	428	739	1,624
Class R-4	118	368	638	1,409
Class R-5	106	331	574	1,271
Class R-6	80	249	433	966

With respect to Class J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class J	$116	$362	$628	$1,386

Portfolio Turnover

Principal Investment Strategies

The Fund invests primarily in foreign equity securities. The Fund has no limitation on the percentage of assets that are invested in any one country or denominated in any one currency, but the Fund typically invests in foreign securities of at least 20 countries. Primary consideration is given to securities of issuers of developed areas (for example, Japan, Western Europe, Canada, Australia, Hong Kong, and Singapore); however, the Fund also invests in emerging market securities. The Fund invests in equity securities regardless of market capitalization size (small, medium or large) and style (growth or value).

Principal Risks

Equity Securities Risk. A variety of factors can negatively impact the value of equity securities held by a fund, including a decline in the issuer’s financial condition, unfavorable performance of the issuer’s sector or industry, or changes in response to overall market and economic conditions. A fund’s principal market segment(s) (such as market capitalization or style) may underperform other market segments or the equity markets as a whole.

•

Growth Style Risk. Growth investing entails the risk that if growth companies do not increase their earnings at a rate expected by investors, the market price of their stock may decline significantly, even if earnings show an absolute increase. Growth company stocks also typically lack the dividend yield that can lessen price declines in market downturns.

•

Smaller Companies Risk. Investments in smaller companies may involve greater risk and price volatility than investments in larger, more mature companies. Smaller companies may have limited product lines, markets, or financial resources; lack the competitive strength of larger companies; have less experienced managers; or depend on a few key employees. Their securities often are less widely held and trade less frequently and in lesser quantities, and their market prices often fluctuate more, than securities of larger companies.

•

Value Style Risk. Value investing entails the risk that value stocks may continue to be undervalued by the market for extended periods, including the entire period during which the stock is held by a fund, or the events that would cause the stock price to increase may not occur as anticipated or at all. Moreover, a stock that appears to be undervalued actually may be appropriately priced at a low level and, therefore, would not be profitable for the fund.

Foreign Currency Risk. Risks of investing in securities denominated in, or that trade in, foreign (non-U.S.) currencies include changes in foreign exchange rates and foreign exchange restrictions.

Performance

For periods prior to the inception date of Class R-6 shares (March 1, 2019), the performance shown in the table for Class R-6 shares is that of the Fund’s Class R-3 shares, adjusted to reflect the fees and expenses of Class R-6 shares. However, where the adjustment for fees and expenses results in performance for Class R-6 shares that is higher than the historical performance of the Class R-3 shares, the historical performance of the Class R-3 shares is used. These adjustments result in performance for such periods that is no higher than the historical performance of the Class R-3 shares.

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	17.41%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(22.11)%

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Class A Return Before Taxes	(24.49)%	(0.57)%	3.44%
Class A Return After Taxes on Distributions	(24.60)%	(1.52)%	2.88%
Class A Return After Taxes on Distributions and Sale of Fund Shares	(14.42)%	(0.30)%	2.84%
Class J Return Before Taxes	(20.82)%	0.67%	4.15%
Institutional Class Return Before Taxes	(19.82)%	0.94%	4.48%
Class R-1 Return Before Taxes	(20.43)%	0.12%	3.61%
Class R-3 Return Before Taxes	(20.26)%	0.43%	3.93%
Class R-4 Return Before Taxes	(20.05)%	0.63%	4.14%
Class R-5 Return Before Taxes	(19.96)%	0.76%	4.27%
Class R-6 Return Before Taxes	(19.73)%	0.89%	4.17%
MSCI ACWI Ex USA Index NTR (reflects withholding taxes on foreign dividends, but no deduction for fees, expenses, or other taxes)	(16.01)%	0.88%	3.80%

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

Paul H. Blankenhagen (since 2003), Portfolio Manager

•

Juliet Cohn (since 2004), Portfolio Manager

Purchase and Sale of Fund Shares

For Classes R-1, R-3, R-4, R-5, R-6, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances.

See Purchase of Fund Shares for more information.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

Equity Income Fund

Objective

The Fund seeks to provide current income and long-term growth of income and capital.

Fees and Expenses of the Fund

This table describes the fees and expenses that you may pay if you buy, hold, and sell shares of the Fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the tables and examples below. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in Class A Shares of Principal Funds, Inc. More information about these and other discounts is available from your financial intermediary and in “Choosing a Share Class and The Costs of Investing” beginning on page 404 of the Fund’s Prospectus, Appendix B to the Prospectus titled “Intermediary-Specific Sales Charge Waivers and Reductions,” and “Multiple Class Structure” beginning on page 4 of the Fund’s Statement of Additional Information.

Shareholder Fees (fees paid directly from your investment)

	Share Class
	A	C	J	Inst.	R-1	R-3	R-4	R-5
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	5.50%	None	None	None	None	None	None	None
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	1.00%	1.00%	None	None	None	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	A	C	J	Inst.	R-1	R-3	R-4	R-5
Management Fees(1)	0.50%	0.50%	0.50%	0.50%	0.50%	0.50%	0.50%	0.50%
Distribution and/or Service (12b-1) Fees	0.25%	1.00%	0.15%	N/A	0.35%	0.25%	0.10%	N/A
Other Expenses	0.11%	0.12%	0.14%	0.04%	0.54%	0.33%	0.29%	0.27%
Total Annual Fund Operating Expenses	0.86%	1.62%	0.79%	0.54%	1.39%	1.08%	0.89%	0.77%
Expense Reimbursement(2)	N/A	N/A	N/A	(0.02)%	N/A	N/A	N/A	N/A
Total Annual Fund Operating Expenses after Expense Reimbursement	0.86%	1.62%	0.79%	0.52%	1.39%	1.08%	0.89%	0.77%

(1)

Fees have been restated to reflect current fees.

(2)

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Class A	$633	$809	$1,001	$1,552
Class C	265	511	881	1,719
Class J	181	252	439	978
Institutional Class	53	171	300	675
Class R-1	142	440	761	1,669
Class R-3	110	343	595	1,317
Class R-4	91	284	493	1,096
Class R-5	79	246	428	954

With respect to Classes C and J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class C	$165	$511	$881	$1,719
Class J	81	252	439	978

Portfolio Turnover

Principal Investment Strategies

Under normal circumstances, the Fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in dividend-paying equity securities at the time of purchase. The Fund usually invests in equity securities of companies with large and medium market capitalizations. The Fund invests in value equity securities, an investment strategy that emphasizes buying equity securities that appear to be undervalued. The Fund also invests in securities of foreign issuers.

Principal Risks

•

Performance

For periods prior to the inception date of Class J shares (October 9, 2018), the performance shown in the table for Class J shares is that of the Fund’s Class A shares, adjusted to reflect the fees and expenses of Class J shares. However, where the adjustment for fees and expenses results in performance for Class J shares that is higher than the historical performance of the Class A shares, the historical performance of the Class A shares is used without respect to sales charges. These adjustments result in performance for such periods that is no higher than the historical performance of Class A shares.

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q4 2020	15.59%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(25.44)%

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Class A Return Before Taxes	(15.74)%	5.79%	9.61%
Class A Return After Taxes on Distributions	(16.75)%	4.58%	8.57%
Class A Return After Taxes on Distributions and Sale of Fund Shares	(8.57)%	4.36%	7.70%
Class C Return Before Taxes	(12.34)%	6.20%	9.59%
Class J Return Before Taxes	(11.59)%	7.06%	10.27%
Institutional Class Return Before Taxes	(10.51)%	7.38%	10.65%
Class R-1 Return Before Taxes	(11.30)%	6.45%	9.69%
Class R-3 Return Before Taxes	(11.02)%	6.78%	10.03%
Class R-4 Return Before Taxes	(10.85)%	6.99%	10.24%
Class R-5 Return Before Taxes	(10.73)%	7.12%	10.37%
Russell 1000 Value Index (reflects no deduction for fees, expenses, or taxes)	(7.54)%	6.67%	10.29%

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

Daniel R. Coleman (since 2010), Portfolio Manager

•

Sarah E. Radecki (since 2021), Portfolio Manager

•

Nedret Vidinli (since 2017), Associate Portfolio Manager

Purchase and Sale of Fund Shares

For Classes R-1, R-3, R-4, R-5, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances.

Class C shares are subject to an 8-year automatic conversion plan whereby Class C shares held for eight years after purchase will automatically convert to Class A shares of the same Fund.

See Purchase of Fund Shares for more information.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

Finisterre Emerging Markets Total Return Bond Fund

Objective

The Fund seeks to generate total returns from current income and capital appreciation.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment):

None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	Inst.
Management Fees	0.75%
Distribution and/or Service (12b-1) Fees	N/A
Other Expenses	0.09%
Acquired Fund Fees and Expenses	0.01%
Total Annual Fund Operating Expenses	0.85%
Expense Reimbursement(1)	0.00%
Total Annual Fund Operating Expenses after Expense Reimbursement	0.85%

(1)

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Institutional Class	$87	$271	$471	$1,049

Portfolio Turnover

Principal Investment Strategies

Under normal circumstances, the Fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in bonds and other fixed-income securities that are tied economically to an emerging market, and in derivatives on such investments. The types of fixed-income securities in which the Fund invests include convertible bonds, credit- and index-linked securities, non-registered and restricted securities (including those issued in reliance on Rule 144A and Regulation S), securities issued by distressed or bankrupt issuers, and securities issued by the U.S government or U.S. government-sponsored enterprises. The Fund’s strategies may result in the active and frequent trading of the Fund’s portfolio securities.

The Fund considers a security to be tied economically to an emerging market if the issuer or guarantor of the security has its principal place of business or principal office in an emerging market, has its principal securities trading market in an emerging market, or derives a majority of its revenue from emerging markets. Emerging markets include frontier markets.

The Fund uses derivatives to enhance return and to hedge and manage investment risks. A derivative is a financial arrangement, the value of which is derived from, or based on, a traditional security, asset, or market index. Specifically, the Fund uses forward contracts, futures, options, and swaps. The Fund invests in cash and cash equivalents to support certain of these investments, as well as for other purposes.

The Fund’s investment process focuses primarily on market level analysis of global markets and political developments and their impact on individual countries and companies in emerging markets. The Fund uses a top-down portfolio construction process, blending both fundamental and technical considerations. The investment strategy provides considerable flexibility to invest in various asset classes, capital structures, maturities, and currencies.

The Fund invests, without limitation, in high yield securities (also known as “junk”) rated at the time of purchase Ba1 or lower by Moody’s Investors Services, Inc., and BB+ or lower by S&P Global Ratings (“S&P Global”) (if the security has been rated by only one of these agencies, that rating will determine whether the security is below investment grade; if the security has not been rated by either of those agencies, those selecting such investments will determine whether the security is of a quality comparable to those rated below investment grade). The Fund’s holdings range in maturity from overnight to 30 years or more and are not subject to any minimum credit rating standard.

Principal Risks

Convertible Securities Risk. Convertible securities are securities that are convertible into common stock. Convertible securities are subject to credit and interest rate risks associated with fixed-income securities and to stock market risk associated with equity securities.

Counterparty Risk. Counterparty risk is the risk that the counterparty to a contract or other obligation will be unable or unwilling to honor its obligations.

•

Distressed Investments Risk. A fund’s investment in instruments involving loans, loan participations, bonds, notes, non-performing and sub-performing mortgage loans, many of which are not publicly traded, may involve a substantial degree of risk for the following reasons. These instruments may become illiquid and the prices of such instruments may be extremely volatile. Valuing such instruments may be difficult and a fund may lose all of its investment, or it may be required to accept cash or securities with a value less than the fund’s original investment. Issuers of distressed securities are typically in a weak financial condition and may default, in which case the fund may lose its entire investment.

•

Defensive Strategy Risk. Because emerging market debt markets are particularly susceptible to adverse market, economic, political, and other conditions, the Fund is more prone to take a defensive position and invest a significant portion of its assets in cash and cash equivalents in response to abnormal market conditions. In taking a large cash position, the Fund’s performance may be adversely affected as the Fund may not be able to benefit from an upswing in the market. Further, the Fund may be unable to pursue or achieve its investment objective when employing such a defensive strategy.

•

Frontier Markets Risk. Frontier markets are emerging markets, but generally have small economies or less mature capital markets than more developed emerging markets, and, as a result, the risks of investing in emerging markets are magnified in frontier markets. Frontier markets typically have low trading volumes and the potential for extreme price volatility and illiquidity.

Foreign Currency Risk. Risks of investing in securities denominated in, or that trade in, foreign (non-U.S.) currencies include changes in foreign exchange rates and foreign exchange restrictions.

U.S. Government Securities Risk. Yields available from U.S. government securities are generally lower than yields from many other fixed-income securities.

Volatility Mitigation Risk. Volatility mitigation strategies may increase the Fund’s transaction costs, which could increase losses or reduce gains. These strategies may not protect the Fund from market declines and may reduce the Fund’s participation in market gains.

Performance

The bar chart shows the investment returns of the Fund’s shares for each full calendar year of operations for 10 years (or, if shorter, the life of the Fund). The table shows for the last one, five, and ten calendar year periods (or, if shorter, the life of the Fund), how the Fund’s average annual total returns compare with those of one or more broad measures of market performance.

Life of Fund returns are measured from the date the Fund’s shares were first sold (July 11, 2016).

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	9.76%
Lowest return for a quarter during the period of the bar chart above:	Q2 2022	(11.00)%

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	Life of Fund
			07/11/16
Institutional Class Return Before Taxes	(9.30)%	1.39%	2.99%
Institutional Class Return After Taxes on Distributions	(12.13)%	(0.53)%	0.77%
Institutional Class Return After Taxes on Distributions and Sale of Fund Shares	(5.52)%	0.31%	1.38%
JPM CEMBI Broad Diversified Index (reflects no deduction for fees, expenses, or taxes)	(12.27)%	1.08%	2.12%
JPM EMBI Global Diversified Index (reflects no deduction for fees, expenses, or taxes)	(17.79)%	(1.31)%	0.16%
JPM GBI-EM Global Diversified Index (reflects no deduction for fees, expenses, or taxes)	(11.69)%	(2.51)%	(0.43)%
Finisterre Emerging Markets Total Return Bond Blended Index (reflects no deduction for fees, expenses, or taxes)	(13.90)%	(0.86)%	0.67%

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Institutional Class shares only and would be different for the other share classes.

Performance of the blended index shows how the Fund’s performance compares to a blend of indices with similar investment objectives. Performance of each component of the blended index is also shown. The weightings for the Finisterre Emerging Markets Total Return Bond Blended Index are: 33.33% JPM CEMBI Broad Diversified Index; 33.33% JPM EMBI Global Diversified Index; and 33.33% JPM GBI-EM Global Diversified Index.

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

Damien Buchet (since 2016), Portfolio Manager

•

Christopher Watson (since 2016), Portfolio Manager

Purchase and Sale of Fund Shares

For Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

Global Emerging Markets Fund

Objective

The Fund seeks long-term growth of capital.

Fees and Expenses of the Fund

This table describes the fees and expenses that you may pay if you buy, hold, and sell shares of the Fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the tables and examples below. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in Class A Shares of Principal Funds, Inc. More information about these and other discounts is available from your financial intermediary and in “Choosing a Share Class and The Costs of Investing” beginning on page 404 of the Fund’s Prospectus, Appendix B to the Prospectus titled “Intermediary-Specific Sales Charge Waivers and Reductions,” and “Multiple Class Structure” beginning on page 4 of the Fund’s Statement of Additional Information.

Shareholder Fees (fees paid directly from your investment)

	Share Class
	A	J	Inst.	R-1	R-3	R-4	R-5	R-6
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	5.50%	None	None	None	None	None	None	None
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	1.00%	None	None	None	None	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	A	J	Inst.	R-1	R-3	R-4	R-5	R-6
Management Fees(1)	0.99%	0.99%	0.99%	0.99%	0.99%	0.99%	0.99%	0.99%
Distribution and/or Service (12b-1) Fees	0.25%	0.15%	N/A	0.35%	0.25%	0.10%	N/A	N/A
Other Expenses	0.33%	0.32%	0.26%	0.60%	0.39%	0.35%	0.33%	0.53%
Acquired Fund Fees and Expenses	0.01%	0.01%	0.01%	0.01%	0.01%	0.01%	0.01%	0.01%
Total Annual Fund Operating Expenses	1.58%	1.47%	1.26%	1.95%	1.64%	1.45%	1.33%	1.53%
Expense Reimbursement(2)	(0.12)%	(0.16)%	(0.15)%	N/A	N/A	N/A	N/A	(0.49)%
Total Annual Fund Operating Expenses after Expense Reimbursement	1.46%	1.31%	1.11%	1.95%	1.64%	1.45%	1.33%	1.04%

(1)

Fees have been restated to reflect current fees.

(2)

Principal Global Investors, LLC (“PGI”), the investment advisor, has contractually agreed to limit the Fund’s expenses by paying, if necessary, expenses normally payable by the Fund (excluding interest expense, expenses related to fund investments, acquired fund fees and expenses, and tax reclaim recovery expenses and other extraordinary expenses) to maintain a total level of operating expenses (expressed as a percent of average net assets on an annualized basis) not to exceed 1.45% for Class A, 1.30% for Class J and 1.10% for Institutional Class shares. In addition, for Class R-6, the expense limit will maintain “Other Expenses” (expressed as a percent of average net assets on an annualized basis) not to exceed 0.04% (excluding interest expense, expenses related to fund investments, acquired fund fees and expenses, and tax reclaim recovery expenses and other extraordinary expenses). It is expected that the expense limits will continue through the period ending February 29, 2024; however, Principal Funds, Inc. and PGI, the parties to the agreement, may mutually agree to terminate the expense limits prior to the end of the period. Subject to applicable expense limits, the Fund may reimburse PGI for expenses incurred during the current fiscal year.

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Class A	$690	$1,010	$1,352	$2,315
Class J	233	449	788	1,744
Institutional Class	113	385	677	1,509
Class R-1	198	612	1,052	2,275
Class R-3	167	517	892	1,944
Class R-4	148	459	792	1,735
Class R-5	135	421	729	1,601
Class R-6	106	435	788	1,782

With respect to Class J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class J	$133	$449	$788	$1,744

Portfolio Turnover

Principal Investment Strategies

Under normal circumstances, the Fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in equity securities of emerging market companies at the time of purchase. The Fund considers a security to be tied economically to an emerging market if the issuer of the security has its principal place of business or principal office in an emerging market, has its principal securities trading market in an emerging market, or derives a majority of its revenue from emerging markets.

Here, “emerging market” means any market that is considered to be an emerging market by the international financial community (including the MSCI Emerging Markets Index or Bloomberg Emerging Markets USD Aggregate Bond Index). Emerging markets generally exclude the United States, Canada, Japan, Australia, Hong Kong, Singapore, New Zealand, and most nations located in Western Europe. The Fund invests in equity securities regardless of market capitalization (small, medium or large) and style (growth or value).

Principal Risks

•

higher dependence on exports and international trade; political and social instability; infectious disease outbreaks; regional and global conflicts; increased trade tariffs, embargoes, and other trade limitations; custody and other risks associated with programs used to access Chinese securities; and uncertainties in tax rules that could result in unexpected tax liabilities for the Fund. Significant portions of the Chinese securities markets may become rapidly illiquid, as Chinese issuers have the ability to suspend the trading of their equity securities. Moreover, actions by the U.S. government, such as delisting of certain Chinese companies from U.S. securities exchanges or otherwise restricting their operations in the U.S., may negatively impact the value of such securities held by the Fund.

•

Foreign Currency Risk. Risks of investing in securities denominated in, or that trade in, foreign (non-U.S.) currencies include changes in foreign exchange rates and foreign exchange restrictions.

Performance

For periods prior to the inception date of Class R-6 shares (November 22, 2016), the performance shown in the table for Class R-6 shares is that of the Fund’s Class R-3 shares, adjusted to reflect the fees and expenses of Class R-6 shares. However, where the adjustment for fees and expenses results in performance for Class R-6 shares that is higher than the historical performance of the Class R-3 shares, the historical performance of the Class R-3 shares is used. These adjustments result in performance for such periods that is no higher than the historical performance of the Class R-3 shares.

During 2019, the Fund experienced a significant one-time gain of approximately $0.11/share as the result of a settlement in a litigation proceeding. If such gain had not been recognized, the total return amounts expressed herein would have been lower.

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	19.56%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(24.38)%

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Class A Return Before Taxes1	(27.13)%	(4.18)%	(0.40)%
Class A Return After Taxes on Distributions1	(27.20)%	(4.63)%	(0.62)%
Class A Return After Taxes on Distributions and Sale of Fund Shares1	(15.81)%	(2.89)%	(0.09)%
Class J Return Before Taxes1	(23.55)%	(2.95)%	0.29%
Institutional Class Return Before Taxes1	(22.65)%	(2.77)%	0.57%
Class R-1 Return Before Taxes1	(23.23)%	(3.54)%	(0.26)%
Class R-3 Return Before Taxes1	(23.01)%	(3.25)%	0.05%
Class R-4 Return Before Taxes1	(22.85)%	(3.07)%	0.24%
Class R-5 Return Before Taxes1	(22.76)%	(2.95)%	0.36%
Class R-6 Return Before Taxes1	(22.57)%	(2.69)%	0.40%
MSCI Emerging Markets Index NTR (reflects withholding taxes on foreign dividends, but no deduction for fees, expenses, or other taxes)	(20.10)%	(1.40)%	1.44%

During 2019, the Fund experienced a significant one-time gain of approximately $0.11 per share as a result of a settlement in a litigation proceeding. If such gain had not been recognized, the total return amounts shown for periods that include the year ended December 31, 2019 would have been lower.

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

Jeffrey Kilkenny (since 2020), Portfolio Manager

Purchase and Sale of Fund Shares

For Classes R-1, R-3, R-4, R-5, R-6, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances.

See Purchase of Fund Shares for more information.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

Global Real Estate Securities Fund

Objective

The Fund seeks to generate a total return.

Fees and Expenses of the Fund

This table describes the fees and expenses that you may pay if you buy, hold, and sell shares of the Fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the tables and examples below. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in Class A Shares of Principal Funds, Inc. More information about these and other discounts is available from your financial intermediary and in “Choosing a Share Class and The Costs of Investing” beginning on page 404 of the Fund’s Prospectus, Appendix B to the Prospectus titled “Intermediary-Specific Sales Charge Waivers and Reductions,” and “Multiple Class Structure” beginning on page 4 of the Fund’s Statement of Additional Information.

Shareholder Fees (fees paid directly from your investment)

	Share Class
	A	Inst.	R-3	R-4	R-5	R-6
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	5.50%	None	None	None	None	None
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	None	None	None	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	A	Inst.	R-3	R-4	R-5	R-6
Management Fees	0.86%	0.86%	0.86%	0.86%	0.86%	0.86%
Distribution and/or Service (12b-1) Fees	0.25%	N/A	0.25%	0.10%	N/A	N/A
Other Expenses	0.20%	0.13%	0.34%	0.30%	0.28%	0.02%
Total Annual Fund Operating Expenses	1.31%	0.99%	1.45%	1.26%	1.14%	0.88%
Expense Reimbursement(1)	N/A	(0.05)%	N/A	N/A	N/A	N/A
Total Annual Fund Operating Expenses after Expense Reimbursement	1.31%	0.94%	1.45%	1.26%	1.14%	0.88%

(1)

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Class A	$676	$942	$1,229	$2,042
Institutional Class	96	310	542	1,208
Class R-3	148	459	792	1,735
Class R-4	128	400	692	1,523
Class R-5	116	362	628	1,386
Class R-6	90	281	488	1,084

Portfolio Turnover

Principal Investment Strategies

Under normal circumstances, the Fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in equity securities of U.S. and non-U.S. companies principally engaged in the real estate industry at the time of purchase. For the Fund’s investment policies, a real estate company has at least 50% of its assets, income, or profits derived from products or services related to the real estate industry. Real estate companies include real estate investment trusts (“REITs”) and companies with substantial real estate holdings such as paper, lumber, hotel, and entertainment companies, as well as those whose products and services relate to the real estate industry, such as building supply manufacturers, mortgage lenders, and mortgage servicing companies. The Fund invests in equity securities regardless of market capitalization (small, medium or large). The Fund invests in value equity securities and growth equity securities.

The Fund invests a significant percentage of its portfolio in REITs and foreign REIT-like entities. REITs are pooled investment vehicles that invest in income producing real estate, real estate related loans, or other types of real estate interests. REITs in the U.S. are corporations or business trusts that are permitted to eliminate corporate-level federal income taxes by meeting certain requirements of the Internal Revenue Code. Some foreign countries have adopted REIT structures that are very similar to those in the U.S. Similarities include pass-through tax treatment and portfolio diversification. Other countries have REIT structures that are significantly different than the structure in the U.S., while some countries have not adopted a REIT-like structure at all.

Under normal market conditions, the Fund holds investments tied economically to at least 3 countries and invests a percentage of its net assets in securities of foreign issuers equal to at least the lesser of 40% or the percentage foreign issuers in FTSE EPRA/NAREIT Developed Markets Index minus 10%.

The Fund concentrates its investments (invest more than 25% of its net assets) in securities in the real estate industry.

Principal Risks

•

Foreign Currency Risk. Risks of investing in securities denominated in, or that trade in, foreign (non-U.S.) currencies include changes in foreign exchange rates and foreign exchange restrictions.

Industry Concentration Risk. A fund that concentrates investments in a particular industry or group of industries has greater exposure than other funds to market, economic, and other factors affecting that industry or group of industries.

•

Real Estate. A fund concentrating in the real estate industry is subject to the risks associated with direct ownership of real estate, securities of companies in the real estate industry, and/or real estate investment trusts. These risks are explained more fully below in Real Estate Investment Trusts (REITs) Risk and Real Estate Securities Risk.

Real Estate Investment Trusts (“REITs”) Risk. In addition to risks associated with investing in real estate securities, REITs are dependent upon management skills, are not diversified, and are subject to heavy cash flow dependency, risks of default by borrowers, and self-liquidation. Investment in REITs also involves risks similar to risks of investing in small market capitalization companies, such as limited financial resources, less frequent and limited volume trading, and may be subject to more abrupt or erratic price movements than larger company securities. A REIT could fail to qualify for tax-free pass-through of income under the Internal Revenue Code. Fund shareholders will indirectly bear their proportionate share of the expenses of REITs in which the fund invests.

Performance

For periods prior to the inception date of Class R-6 shares (November 25, 2014) and Classes R-3, R-4, and R-5 shares (March 1, 2016), the performance shown in the table for these newer classes is that of the Fund’s Institutional Class shares, adjusted to reflect the respective fees and expenses of each class. These adjustments result in performance for such periods that is no higher than the historical performance of the Institutional Class shares.

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q1 2019	14.95%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(25.65)%

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Class A Return Before Taxes	(31.07)%	(0.62)%	3.18%
Class A Return After Taxes on Distributions	(31.19)%	(1.45)%	2.00%
Class A Return After Taxes on Distributions and Sale of Fund Shares	(18.30)%	(0.59)%	2.13%
Institutional Class Return Before Taxes	(26.73)%	0.91%	4.18%
Class R-3 Return Before Taxes	(27.16)%	0.38%	3.65%
Class R-4 Return Before Taxes	(26.99)%	0.60%	3.84%
Class R-5 Return Before Taxes	(26.89)%	0.71%	3.98%
Class R-6 Return Before Taxes	(26.73)%	0.97%	4.20%
FTSE EPRA/NAREIT Developed Markets Index NTR (reflects withholding taxes on foreign dividends, but no deduction for fees, expenses, or other taxes)	(25.10)%	(0.23)%	2.99%

Investment Advisor

Principal Global Investors, LLC

Sub-Advisor and Portfolio Managers

Principal Real Estate Investors, LLC

•

Simon Hedger (since 2007), Portfolio Manager

•

Anthony Kenkel (since 2010), Portfolio Manager

•

Kelly D. Rush (since 2007), Portfolio Manager

Purchase and Sale of Fund Shares

For Class A shares, the required minimum initial investment per Fund is generally $1,000, and the minimum initial investment per Fund for accounts with an Automatic Investment Plan (“AIP”) is $100. The required minimum subsequent investment per Fund is generally $100; however, for accounts with an AIP, subsequent automatic investments must total $1,200 annually if the initial $1,000 has not been met. Some exceptions apply; see “Purchase of Fund Shares – Minimum Investments” for more information.

For Classes R-3, R-4, R-5, R-6, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

See Purchase of Fund Shares for more information.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

Government & High Quality Bond Fund

Objective

The Fund seeks to provide a high level of current income consistent with safety and liquidity.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment)

	Share Class
	A	J	Inst.	R-1	R-3	R-4	R-5
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	2.25%	None	None	None	None	None	None
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	1.00%	None	None	None	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	A	J	Inst.	R-1	R-3	R-4	R-5
Management Fees	0.48%	0.48%	0.48%	0.48%	0.48%	0.48%	0.48%
Distribution and/or Service (12b-1) Fees	0.15%	0.15%	N/A	0.35%	0.25%	0.10%	N/A
Other Expenses	0.15%	0.21%	0.04%	0.53%	0.32%	0.28%	0.26%
Acquired Fund Fees and Expenses	0.01%	0.01%	0.01%	0.01%	0.01%	0.01%	0.01%
Total Annual Fund Operating Expenses	0.79%	0.85%	0.53%	1.37%	1.06%	0.87%	0.75%
Expense Reimbursement(1)	N/A	N/A	0.00%	(0.07)%	(0.07)%	(0.07)%	(0.07)%
Total Annual Fund Operating Expenses after Expense Reimbursement	0.79%	0.85%	0.53%	1.30%	0.99%	0.80%	0.68%

(1)

Principal Global Investors, LLC (“PGI”), the investment advisor, has contractually agreed to limit the Fund’s expenses by paying, if necessary, expenses normally payable by the Fund (excluding interest expense, expenses related to fund investments, acquired fund fees and expenses, and tax reclaim recovery expenses and other extraordinary expenses) to maintain a total level of operating expenses (expressed as a percent of average net assets on an annualized basis) not to exceed 0.53% for Institutional Class, 1.29% for Class R-1, 0.98% for Class R-3, 0.79% for Class R-4, and 0.67% for Class R-5 shares. It is expected that the expense limits will continue through the period ending February 29, 2024; however, Principal Funds, Inc. and PGI, the parties to the agreement, may mutually agree to terminate the expense limits prior to the end of the period. Subject to applicable expense limits, the Fund may reimburse PGI for expenses incurred during the current fiscal year.

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Class A	$304	$472	$654	$1,181
Class J	187	271	471	1,049
Institutional Class	54	170	296	665
Class R-1	132	427	743	1,640
Class R-3	101	330	578	1,288
Class R-4	82	271	475	1,066
Class R-5	69	233	410	924

With respect to Class J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class J	$87	$271	$471	$1,049

Portfolio Turnover

Principal Investment Strategies

Under normal circumstances, the Fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in debt securities issued by the U.S. government, its agencies, or instrumentalities or debt securities that are rated, at the time of purchase, AAA by S&P Global Ratings (“S&P Global”) or Aaa by Moody’s Investors Service, Inc. (“Moody’s”) (if securities are rated differently by S&P Global and Moody’s, the highest rating is used; or, if unrated, in the opinion of those selecting such investments, are of comparable quality), including, but not limited to, asset-backed securities (“ABS”), mortgage securities such as agency and non-agency collateralized mortgage obligations, and other obligations that are secured by mortgages or mortgage-backed securities (“MBS”) (also referred to as securitized products). The Fund also invests in ABS and MBS that are rated lower than AAA by S&P Global or Aaa by Moody’s (or of comparable quality), including collateralized mortgage obligations, and in other obligations that are secured by mortgages or MBS. The MBS in which the Fund invests include MBS trading in the to-be-announced (“TBA”) markets.

Under normal circumstances, the Fund maintains an average portfolio duration that is within ±50% of the duration of the Bloomberg U.S. Agency Fixed Rate MBS Index, which as of January 31, 2023 was 6.27 years. The Fund is not managed to a particular maturity. The Fund’s strategies may result in the active and frequent trading of the Fund’s portfolio securities.

The Fund invests in derivatives, including Treasury futures and securities delivered in TBA transactions, to manage the fixed-income exposure. A derivative is a financial arrangement, the value of which is derived from, or based on, a traditional security, asset, or market index.

Principal Risks

•

Futures. Futures contracts involve specific risks, including: the imperfect correlation between the change in market value of the instruments held by the fund and the price of the futures contract; possible lack of a liquid secondary market for a futures contract and the resulting inability to close a futures contract when desired; counterparty risk; and if the fund has insufficient cash, it may have to sell securities from its portfolio to meet daily variation margin requirements.

U.S. Government Securities Risk. Yields available from U.S. government securities are generally lower than yields from many other fixed-income securities.

Performance

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q1 2016	2.13%
Lowest return for a quarter during the period of the bar chart above:	Q3 2022	(5.49)%

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Class A Return Before Taxes	(14.14)%	(1.61)%	(0.17)%
Class A Return After Taxes on Distributions	(14.68)%	(2.38)%	(1.23)%
Class A Return After Taxes on Distributions and Sale of Fund Shares	(8.36)%	(1.50)%	(0.56)%
Class J Return Before Taxes	(13.02)%	(1.19)%	0.00%
Institutional Class Return Before Taxes	(11.88)%	(0.88)%	0.32%
Class R-1 Return Before Taxes	(12.55)%	(1.64)%	(0.44)%
Class R-3 Return Before Taxes	(12.27)%	(1.33)%	(0.13)%
Class R-4 Return Before Taxes	(12.11)%	(1.14)%	0.06%
Class R-5 Return Before Taxes	(11.99)%	(1.02)%	0.18%
Bloomberg U.S. Agency Fixed Rate MBS Index (reflects no deduction for fees, expenses, or taxes)	(11.82)%	(0.53)%	0.75%

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

Bryan C. Davis (since 2019), Portfolio Manager

•

Zach Gassmann (since 2019), Portfolio Manager

Purchase and Sale of Fund Shares

For Classes R-1, R-3, R-4, R-5, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances.

See Purchase of Fund Shares for more information.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

Government Money Market Fund

Objective

The Fund seeks as high a level of current income as is considered consistent with preservation of principal and maintenance of liquidity.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment):

None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	Inst.	R-6
Management Fees	0.15%	0.15%
Distribution and/or Service (12b-1) Fees	N/A	N/A
Other Expenses(1)	0.06%	0.01%
Acquired Fund Fees and Expenses	0.01%	0.01%
Total Annual Fund Operating Expenses	0.22%	0.17%
Fee Waiver and Expense Reimbursement(2),(3)	(0.02)%	(0.02)%
Total Annual Operating Expenses after Fee Waiver and Expense Reimbursement	0.20%	0.15%

(1)

Based on estimated amounts for the current fiscal year.

(2)

Principal Global Investors, LLC (“PGI”), the investment advisor, has contractually agreed to reduce the Fund's management fees through the period ending February 29, 2024. The fee waiver will reduce the Fund's management fees in an amount equal to all Acquired Fund Fees and Expenses. It is expected that the fee waiver will continue through the period disclosed; however, Principal Funds, Inc. and PGI, the parties to the agreement, may mutually agree to terminate the fee waiver prior to the end of the period.

(3)

Principal Global Investors, LLC (“PGI”), the investment advisor, has contractually agreed to limit the Fund's expenses by paying, if necessary, expenses normally payable by the Fund (excluding interest expense, expenses related to fund investments, acquired fund fees and expenses, and tax reclaim recovery expenses and other extraordinary expenses) to maintain a total level of operating expenses (expressed as a percent of average net assets on an annualized basis) not to exceed 0.20% for Institutional Class Shares. In addition, for Class R-6, the expense limit will maintain “Other Expenses” (expressed as a percent of average net assets on an annualized basis) not to exceed 0.00% (excluding interest expense, expenses related to fund investments, acquired fund fees and expenses, and tax reclaim recovery expenses and other extraordinary expenses). It is expected that the expense limits will continue through the period ending February 29, 2024; however, Principal Funds, Inc. and PGI, the parties to the agreement, may mutually agree to terminate the expense limits prior to the end of the period. Subject to applicable expense limits, the Fund may reimburse PGI for expenses incurred during the current fiscal year.

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Institutional Class	$20	$69	$122	$278
Class R-6	15	53	94	215

Principal Investment Strategies

The Fund will invest at least 99.5% of its total assets in cash, government securities, and/or repurchase agreements that are collateralized fully by cash or government securities (government securities can include shares of other government money market funds). The Fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in government securities and repurchase agreements that are collateralized by government securities. Specifically, the Fund will invest in U.S. treasury bills, bonds, and other obligations issued or guaranteed by the U.S. government or its agencies or instrumentalities (which will include instruments with variable or floating interest rates), as well as shares of other government money market funds. The Fund seeks to maintain a stable net asset value of $1.00 per share. The Fund maintains a dollar weighted average portfolio maturity of 60 days or less. As with all mutual funds, the value of the Fund’s assets may rise or fall.

Principal Risks

You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time. The principal risks of investing in the Fund are listed below in alphabetical order and not in order of significance.

Counterparty Risk. Counterparty risk is the risk that the counterparty to a contract or other obligation will be unable or unwilling to honor its obligations.

Investment Company Securities Risk. A fund that invests in another investment company (for example, another fund or an exchange-traded fund (or ETF)) is subject to the risks associated with direct ownership of the securities in which such investment company invests. Fund shareholders indirectly bear their proportionate share of the expenses of each such investment company.

Repurchase Agreement Risk. If the other party to a repurchase agreement defaults on its obligation under the agreement, the Fund may suffer delays and incur costs or lose money in exercising its rights under the agreement. If the seller fails to repurchase the security and the market value of the security declines, the Fund may lose money.

U.S. Government Securities Risk. Yields available from U.S. government securities are generally lower than yields from many other fixed-income securities.

Performance

The bar chart shows the investment returns of the Fund’s Institutional Class shares for each full calendar year of operations for 10 years (or, if shorter, the life of the Fund). The table shows for the last one, five, and ten calendar year periods (or, if shorter, the life of the Fund), how the Fund’s average annual total returns compare with those of one or more broad measures of market performance.

For periods prior to the inception date of Class R-6 shares (December 12, 2022), the performance shown in the table for Class R-6 shares is that of the Fund’s Institutional Class shares.

Life of Fund returns are measured from the date the Fund’s shares were first sold (December 20, 2017).

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q4 2022	0.86%
Lowest return for a quarter during the period of the bar chart above:	Q1 2022	0.00%

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	Life of Fund
			12/20/17
Institutional Class Return Before Taxes	1.45%	1.11%	1.11%
Class R-6 Return Before Taxes	1.46%	1.11%	1.11%
Bloomberg U.S. Treasury Bellwethers 3 Month Index (reflects no deduction for fees, expenses, or taxes)	1.51%	1.28%	1.28%

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

Erika Isley (since 2017), Portfolio Manager

•

Tracy Reeg (since 2017), Portfolio Manager

Purchase and Sale of Fund Shares

For Institutional Class and Class R-6 shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

High Income Fund

Objective

The Fund seeks high current income.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment):

None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	Inst.
Management Fees	0.61%
Distribution and/or Service (12b-1) Fees	N/A
Other Expenses	0.01%
Total Annual Fund Operating Expenses	0.62%
Fee Waiver(1)	(0.02)%
Total Annual Fund Operating Expenses after Fee Waiver	0.60%

(1)

Principal Global Investors, LLC (“PGI”), the investment advisor, has contractually agreed to waive a portion of the Fund’s management fees through the period ending February 29, 2024. The fee waiver will reduce the Fund's management fees by 0.015% (expressed as a percent of average net assets on an annualized basis). It is expected that the fee waiver will continue through the period disclosed; however, Principal Funds, Inc. and PGI, the parties to the agreement, may mutually agree to terminate the fee waiver prior to the end of the period.

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Institutional Class	$61	$197	$344	$772

Portfolio Turnover

Principal Investment Strategies

Under normal circumstances, the Fund invests primarily in below investment grade bonds and bank loans (sometimes called “high yield” or “junk”), which are rated, at the time of purchase, Ba1 or lower by Moody’s Investors Service, Inc. (“Moody’s”) and BB+ or lower by S&P Global Ratings (“S&P Global”) (if the bond or bank loan has been rated by only one of those agencies, that rating will determine whether it is below investment grade; if the bond or bank loan has not been rated by either of those agencies, those selecting such investments will determine whether it is of a quality comparable to those rated below investment grade). The Fund also invests in investment grade bank loans (also known as senior floating rate interests), securities of foreign issuers, and exchange-traded funds (“ETFs”). The Fund utilizes derivative strategies for managing fixed-income exposure. A derivative is a financial arrangement, the value of which is derived from, or based on, a traditional security, asset, or market index. Specifically, the Fund invests in credit default swaps to increase or decrease, in an efficient manner, exposures to certain sectors or individual issuers.

In managing the Fund, Principal Global Investors, LLC (“PGI”), the Fund’s investment advisor, allocates the Fund’s assets among multiple sub-advisors that use differing approaches in making their investment decisions, which include actively managed and more passive investment strategies. With respect to the passive strategy, the Fund uses a sampling methodology to purchase securities with generally the same risk and return characteristics as the Bloomberg U.S. Corporate High Yield 2% Issuer Capped Index (the “Index”) in an attempt to match or exceed the performance of the Index.

Under normal circumstances, the Fund maintains an average portfolio duration that is within ±25% of the duration of the Index, which as of January 31, 2023 was 3.97 years. The Fund is not managed to a particular maturity.

Principal Risks

Counterparty Risk. Counterparty risk is the risk that the counterparty to a contract or other obligation will be unable or unwilling to honor its obligations.

•

opposed to a credit downgrade or other indication of financial difficulty). The protection “buyer” in a credit default contract may be obligated to pay the protection “seller” an up-front payment or a periodic stream of payments over the term of the contract, provided, generally, that no credit event on a reference obligation has occurred. If a credit event occurs, the seller generally must pay the buyer the “par value” (i.e., full notional value) of the swap in exchange for an equal face amount of deliverable obligations of the reference entity described in the swap, or the seller may be required to deliver the related net cash amount, if the swap is cash settled. The Fund may be either the buyer or seller in the transaction.

•

Swaps. Swaps involve specific risks, including: the imperfect correlation between the change in market value of the instruments held by the fund and the price of the swap; possible lack of a liquid secondary market for a swap and the resulting inability to close a swap when desired; counterparty risk; and if the fund has insufficient cash, it may have to sell securities from its portfolio to meet daily variation margin requirements.

Performance

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	8.47%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(12.72)%

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Institutional Class Return Before Taxes	(10.97)%	1.39%	3.04%
Institutional Class Return After Taxes on Distributions	(13.20)%	(1.05)%	0.50%
Institutional Class Return After Taxes on Distributions and Sale of Fund Shares	(6.47)%	0.07%	1.23%
Bloomberg U.S. Corporate High Yield 2% Issuer Capped Index (reflects no deduction for fees, expenses, or taxes)	(11.19)%	2.30%	4.03%

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

James W. Fennessey (since 2007), Portfolio Manager

•

Randy L. Welch (since 2007), Portfolio Manager

Sub-Advisors

Insight North America LLC

Polen Capital Credit, LLC (f/k/a DDJ Capital Management, LLC)

Post Advisory Group, LLC

Purchase and Sale of Fund Shares

For Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

High Yield Fund

Objective

The Fund seeks to provide a high level of current income.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment)

	Share Class
	A	C	Inst.	R-6
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	3.75%	None	None	None
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	1.00%	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	A	C	Inst.	R-6
Management Fees	0.51%	0.51%	0.51%	0.51%
Distribution and/or Service (12b-1) Fees	0.25%	1.00%	N/A	N/A
Other Expenses	0.15%	0.18%	0.12%	0.01%
Total Annual Fund Operating Expenses	0.91%	1.69%	0.63%	0.52%
Expense Reimbursement(1)	N/A	N/A	(0.02)%	N/A
Total Annual Fund Operating Expenses after Expense Reimbursement	0.91%	1.69%	0.61%	0.52%

(1)

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Class A	$464	$654	$860	$1,453
Class C	272	533	918	1,791
Institutional Class	62	200	349	784
Class R-6	53	167	291	653

With respect to Class C shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class C	$172	$533	$918	$1,791

Portfolio Turnover

Principal Investment Strategies

Under normal circumstances, the Fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in below investment grade bonds and bank loans (sometimes called “high yield” or “junk”), which are rated, at the time of purchase, Ba1 or lower by Moody’s Investors Service, Inc. (“Moody’s”) and BB+ or lower by S&P Global Ratings (“S&P Global”) (if the bond or bank loan has been rated by only one of those agencies, that rating will determine whether it is below investment grade; if the bond or bank loan has not been rated by either of those agencies, those selecting such investments will determine whether it is of a quality comparable to those rated below investment grade). The Fund also invests in investment grade bank loans (also known as senior floating rate interests) and securities of foreign issuers. Under normal circumstances, the Fund maintains an average portfolio duration that is within ±20% of the duration of the Bloomberg U.S. Corporate High Yield 2% Issuer Capped Index, which as of January 31, 2023 was 3.97 years. The Fund is not managed to a particular maturity.

Principal Risks

Performance

For periods prior to the inception date of Class R-6 shares (November 22, 2016), the performance shown in the table for Class R-6 shares is that of the Fund’s Class A shares, adjusted to reflect the fees and expenses of Class R-6 shares. However, where the adjustment for fees and expenses results in performance for Class R-6 shares that is higher than the historical performance of the Class A shares, the historical performance of the Class A shares is used (without respect to sales charges, which are not applicable to Class R-6). These adjustments result in performance for such periods that is no higher than the historical performance of the Class A shares.

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	8.73%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(12.01)%

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Class A Return Before Taxes	(12.03)%	1.21%	3.35%
Class A Return After Taxes on Distributions	(13.88)%	(0.94)%	0.90%
Class A Return After Taxes on Distributions and Sale of Fund Shares	(7.10)%	0.03%	1.48%
Class C Return Before Taxes	(10.30)%	1.23%	3.14%
Institutional Class Return Before Taxes	(8.34)%	2.28%	4.05%
Class R-6 Return Before Taxes	(8.26)%	2.40%	3.99%
Bloomberg U.S. Corporate High Yield 2% Issuer Capped Index (reflects no deduction for fees, expenses, or taxes)	(11.19)%	2.30%	4.03%

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

Mark P. Denkinger (since 2009), Portfolio Manager

•

Josh Rank (since 2015), Portfolio Manager

•

Darrin E. Smith (since 2009), Portfolio Manager

Purchase and Sale of Fund Shares

For Class R-6 and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Class C shares are subject to an 8-year automatic conversion plan whereby Class C shares held for eight years after purchase will automatically convert to Class A shares of the same Fund.

See Purchase of Fund Shares for more information.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

Inflation Protection Fund

Objective

The Fund seeks to provide current income and real (after inflation) total returns.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment)

	Share Class
	J	Inst.	R-1	R-3	R-4	R-5
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	None	None	None	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	J	Inst.	R-1	R-3	R-4	R-5
Management Fees	0.38%	0.38%	0.38%	0.38%	0.38%	0.38%
Distribution and/or Service (12b-1) Fees	0.15%	N/A	0.35%	0.25%	0.10%	N/A
Other Expenses	0.22%	0.01%	0.54%	0.33%	0.29%	0.27%
Total Annual Fund Operating Expenses	0.75%	0.39%	1.27%	0.96%	0.77%	0.65%

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

	1 year	3 years	5 years	10 years
Class J	$177	$240	$417	$930
Institutional Class	40	125	219	493
Class R-1	129	403	697	1,534
Class R-3	98	306	531	1,178
Class R-4	79	246	428	954
Class R-5	66	208	362	810

With respect to Class J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class J	$77	$240	$417	$930

Portfolio Turnover

Principal Investment Strategies

The Fund invests primarily in inflation-indexed bonds of varying maturities issued by the U.S. and non-U.S. governments, their agencies, or instrumentalities, and U.S. and non-U.S. corporations. Inflation-indexed bonds are fixed-income securities that are structured to provide protection against inflation. The value of the bond’s principal or the interest income paid on the bond is adjusted to track changes in an official inflation measure. The U.S. Treasury uses the Consumer Price Index for Urban Consumers as the inflation measure. Inflation-indexed bonds issued by a foreign government are generally adjusted to reflect a comparable inflation index, calculated by that government. The Fund also invests in foreign securities, U.S. Treasuries, and agency securities. The Fund utilizes derivative strategies (specifically, futures, swaps, and options) for purposes of managing the risk profile of the Fund. A derivative is a financial arrangement, the value of which is derived from, or based on, a traditional security, asset, or market index.

Under normal circumstances, the Fund maintains an average portfolio duration that is within ±20% of the duration of the Bloomberg U.S. Treasury Inflation Protected Securities (“TIPS”) Index, which as of January 31, 2023 was 6.88 years. The Fund is not managed to a particular maturity. The Fund’s strategies may result in the active and frequent trading of the Fund’s portfolio securities.

Principal Risks

Counterparty Risk. Counterparty risk is the risk that the counterparty to a contract or other obligation will be unable or unwilling to honor its obligations.

•

Foreign Currency Risk. Risks of investing in securities denominated in, or that trade in, foreign (non-U.S.) currencies include changes in foreign exchange rates and foreign exchange restrictions.

U.S. Government Securities Risk. Yields available from U.S. government securities are generally lower than yields from many other fixed-income securities.

Performance

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	4.72%
Lowest return for a quarter during the period of the bar chart above:	Q2 2013	(6.64)%

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Institutional Class Return Before Taxes	(12.08)%	1.73%	0.76%
Institutional Class Return After Taxes on Distributions	(14.23)%	0.24%	(0.25)%
Institutional Class Return After Taxes on Distributions and Sale of Fund Shares	(7.15)%	0.78%	0.19%
Class J Return Before Taxes	(13.15)%	1.16%	0.15%
Class R-1 Return Before Taxes	(12.77)%	0.85%	(0.11)%
Class R-3 Return Before Taxes	(12.48)%	1.18%	0.20%
Class R-4 Return Before Taxes	(12.37)%	1.37%	0.39%
Class R-5 Return Before Taxes	(12.25)%	1.48%	0.49%
Bloomberg U.S. Treasury TIPS Index (reflects no deduction for fees, expenses, or taxes)	(11.85)%	2.11%	1.12%

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Institutional Class shares only and would be different for the other share classes.

Investment Advisor

Principal Global Investors, LLC

Sub-Advisor and Portfolio Manager

BlackRock Financial Management, Inc.

•

Akiva Dickstein (since 2018), Managing Director

•

David Rogal (since 2022), Managing Director

Sub-Sub-Advisor and Portfolio Manager

BlackRock International Limited

•

Chris Allen (since 2017), Managing Director

Purchase and Sale of Fund Shares

For Class J shares, the required minimum initial investment per Fund is generally $1,000, and the minimum initial investment per Fund for accounts with an Automatic Investment Plan (“AIP”) is $100. The required minimum subsequent investment per Fund is generally $100; however, for accounts with an AIP, subsequent automatic investments must total $1,200 annually if the initial $1,000 has not been met. Some exceptions apply; see “Purchase of Fund Shares – Minimum Investments” for more information.

For Classes R-1, R-3, R-4, R-5, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances.

See Purchase of Fund Shares for more information.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

International Fund I

Objective

The Fund seeks long-term growth of capital.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment):

None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	Inst.	R-1	R-3	R-4	R-5	R-6
Management Fees(1)	0.65%	0.65%	0.65%	0.65%	0.65%	0.65%
Distribution and/or Service (12b-1) Fees	N/A	0.35%	0.25%	0.10%	N/A	N/A
Other Expenses	0.17%	0.57%	0.36%	0.32%	0.30%	0.05%
Total Annual Fund Operating Expenses	0.82%	1.57%	1.26%	1.07%	0.95%	0.70%
Expense Reimbursement(2)	(0.03)%	N/A	N/A	N/A	N/A	(0.01)%
Total Annual Fund Operating Expenses after Expense Reimbursement	0.79%	1.57%	1.26%	1.07%	0.95%	0.69%

(1)

Fees have been restated to reflect current fees.

(2)

Principal Global Investors, LLC (“PGI”), the investment advisor, has contractually agreed to limit the Fund’s expenses by paying, if necessary, expenses normally payable by the Fund (excluding interest expense, expenses related to fund investments, acquired fund fees and expenses, and tax reclaim recovery expenses and other extraordinary expenses) to maintain a total level of operating expenses (expressed as a percent of average net assets on an annualized basis) not to exceed 0.79% for Institutional Class shares. In addition, for Class R-6, the expense limit will maintain “Other Expenses” (expressed as a percent of average net assets on an annualized basis) not to exceed 0.04% (excluding interest expense, expenses related to fund investments, acquired fund fees and expenses, and tax reclaim recovery expenses and other extraordinary expenses). It is expected that the expense limits will continue through the period ending February 29, 2024; however, Principal Funds, Inc. and PGI, the parties to the agreement, may mutually agree to terminate the expense limits prior to the end of the period. Subject to applicable expense limits, the Fund may reimburse PGI for expenses incurred during the current fiscal year.

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Institutional Class	$81	$259	$452	$1,011
Class R-1	160	496	855	1,867
Class R-3	128	400	692	1,523
Class R-4	109	340	590	1,306
Class R-5	97	303	525	1,166
Class R-6	70	223	389	870

Portfolio Turnover

Principal Investment Strategies

The Fund invests primarily in foreign equity securities, including emerging market securities. The Fund typically invests in foreign securities of at least ten countries. The Fund invests in equity securities of small, medium, and large market capitalization companies.

The Fund invests in value equity securities, an investment strategy that emphasizes buying equity securities that appear to be undervalued. The Fund also invests in growth equity securities, an investment strategy that emphasizes buying equity securities of companies whose potential for growth of capital and earnings is expected to be above average.

Principal Risks

•

China Investment Risk. The Fund invests a significant portion of its assets in securities of issuers located or operating in China. Investing in China involves certain heightened risks and considerations, including, among others: frequent trading suspensions and government interventions (including by nationalizing assets); currency exchange rate fluctuations or blockages; limits on using brokers and on foreign ownership; different financial reporting standards; higher dependence on exports and international trade; political and social instability; infectious disease outbreaks; regional and global conflicts; increased trade tariffs, embargoes, and other trade limitations; custody and other risks associated with programs used to access Chinese securities; and uncertainties in tax rules that could result in unexpected tax liabilities for the Fund. Significant portions of the Chinese securities markets may become rapidly illiquid, as Chinese issuers have the ability to suspend the trading of their equity securities. Moreover, actions by the U.S. government, such as delisting of certain Chinese companies from U.S. securities exchanges or otherwise restricting their operations in the U.S., may negatively impact the value of such securities held by the Fund.

•

Foreign Currency Risk. Risks of investing in securities denominated in, or that trade in, foreign (non-U.S.) currencies include changes in foreign exchange rates and foreign exchange restrictions.

Performance

For periods prior to the inception date of Class R-6 shares (November 22, 2016), the performance shown in the table for Class R-6 shares is that of the Fund’s Institutional Class shares, adjusted to reflect the fees and expenses of Class R-6 shares. These adjustments result in performance for such periods that is no higher than the historical performance of the Institutional Class shares.

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	22.05%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(22.85)%

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Institutional Class Return Before Taxes	(25.27)%	(0.65)%	4.68%
Institutional Class Return After Taxes on Distributions	(26.11)%	(2.13)%	3.74%
Institutional Class Return After Taxes on Distributions and Sale of Fund Shares	(14.91)%	(0.31)%	3.82%
Class R-1 Return Before Taxes	(25.81)%	(1.43)%	3.83%
Class R-3 Return Before Taxes	(25.65)%	(1.14)%	4.14%
Class R-4 Return Before Taxes	(25.45)%	(0.93)%	4.35%
Class R-5 Return Before Taxes	(25.36)%	(0.81)%	4.46%
Class R-6 Return Before Taxes	(25.20)%	(0.55)%	4.70%
MSCI ACWI Ex USA Index NTR (reflects withholding taxes on foreign dividends, but no deduction for fees, expenses, or other taxes)	(16.01)%	0.88%	3.80%

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Institutional Class shares only and would be different for the other share classes.

Investment Advisor

Principal Global Investors, LLC

Sub-Advisor and Portfolio Managers

Origin Asset Management LLP

•

Chris Carter (since 2014), Partner

•

Tarlock Randhawa (since 2014), Managing Partner

•

Nerys Weir (since 2021), Portfolio Manager

Purchase and Sale of Fund Shares

For Classes R-1, R-3, R-4, R-5, R-6, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances.

See Purchase of Fund Shares for more information.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

LargeCap Growth Fund I

Objective

The Fund seeks long-term growth of capital.

Fees and Expenses of the Fund

This table describes the fees and expenses that you may pay if you buy, hold, and sell shares of the Fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the tables and examples below. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in Class A Shares of Principal Funds, Inc. More information about these and other discounts is available from your financial intermediary and in “Choosing a Share Class and The Costs of Investing” beginning on page 404 of the Fund’s Prospectus, Appendix B to the Prospectus titled “Intermediary-Specific Sales Charge Waivers and Reductions,” and “Multiple Class Structure” beginning on page 4 of the Fund’s Statement of Additional Information.

Shareholder Fees (fees paid directly from your investment)

	Share Class
	A	J	Inst.	R-1	R-3	R-4	R-5	R-6
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	5.50%	None	None	None	None	None	None	None
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	1.00%	None	None	None	None	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	A	J	Inst.	R-1	R-3	R-4	R-5	R-6
Management Fees	0.60%	0.60%	0.60%	0.60%	0.60%	0.60%	0.60%	0.60%
Distribution and/or Service (12b-1) Fees	0.25%	0.15%	N/A	0.35%	0.25%	0.10%	N/A	N/A
Other Expenses	0.13%	0.08%	0.10%	0.54%	0.33%	0.29%	0.27%	0.01%
Total Annual Fund Operating Expenses	0.98%	0.83%	0.70%	1.49%	1.18%	0.99%	0.87%	0.61%
Fee Waiver(1)	(0.02)%	(0.02)%	(0.02)%	(0.02)%	(0.02)%	(0.02)%	(0.02)%	(0.02)%
Total Annual Fund Operating Expenses after Fee Waiver	0.96%	0.81%	0.68%	1.47%	1.16%	0.97%	0.85%	0.59%

(1)

Principal Global Investors, LLC (“PGI”), the investment advisor, has contractually agreed to waive a portion of the Fund's management fees through the period ending February 29, 2024. The fee waiver will reduce the Fund's management fees by 0.016% (expressed as a percent of average net assets on an annualized basis). It is expected that the fee waiver will continue through the period disclosed; however, Principal Funds, Inc. and PGI, the parties to the agreement may mutually agree to terminate the fee waiver prior to the end of the period.

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Class A	$643	$843	$1,060	$1,684
Class J	183	263	459	1,023
Institutional Class	69	222	388	869
Class R-1	150	469	811	1,778
Class R-3	118	373	647	1,430
Class R-4	99	313	545	1,211
Class R-5	87	276	480	1,071
Class R-6	60	193	338	760

With respect to Class J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class J	$83	$263	$459	$1,023

Portfolio Turnover

Principal Investment Strategies

Under normal circumstances, the Fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in equity securities of companies with large market capitalizations at the time of purchase. For this Fund, companies with large market capitalizations are those with market capitalizations within the range of companies comprising the Russell 1000® Growth Index (as of January 31, 2023, this range was between approximately $852.4 million and $2.3 trillion). The Fund invests in growth equity securities, an investment strategy that emphasizes buying equity securities of companies whose potential for growth of capital and earnings is expected to be above average. The Fund invested significantly in industries within the consumer discretionary, health care, and information technology sectors as of January 31, 2023.

The Fund is primarily actively managed by the sub-advisors. In addition, Principal Global Investors, LLC may invest up to 30% of the Fund’s assets using an index sampling strategy designed to match the performance of the Russell 1000® Growth Index.

The Fund is considered non-diversified, which means it can invest a higher percentage of assets in securities of individual issuers than a diversified fund. As a result, changes in the value of a single investment could cause greater fluctuations in the Fund’s share price than would occur in a more diversified fund.

Principal Risks

Consumer Goods and Consumer Services Sector Risk. The Fund invests in securities of companies in the consumer services and consumers goods sectors. Such companies are particularly subject to risks related to performance of the overall global economy, interest rates, competition, government regulation, and consumer confidence. Success depends

heavily on disposable income and consumer spending, and is also impacted by consumer interest and marketing campaigns. Companies in these sectors may be subject to severe competition, which may have an adverse impact on their profitability. Changes in demographics and consumer tastes can affect the demand for, and success of, consumer goods and services in the marketplace.

•

Healthcare Sector Risk. A fund that invests in securities of companies in the healthcare sector (which includes companies involved in several industries, including biotechnology research and production, drugs and pharmaceuticals and health care facilities and services) is subject to the direct risks of investing in such companies. These companies are subject to extensive competition (due to, among others, generic drug sales or the loss of patent protection), product liability litigation and increased government regulation. Research and development costs of bringing new drugs to market are substantial, and there is no guarantee that a proposed product will ever come to market. Such companies are heavily dependent on patent and intellectual property rights, the loss or impairment of which may adversely affect profitability. Healthcare facility operators may be affected by the demand for services, efforts by government or insurers to limit rates, restriction of government financial assistance and competition from other providers.

Information Technology Sector Risk. Companies in the information technology sector may face dramatic and often unpredictable changes in growth rates and are particularly vulnerable to changes in technology product cycles, product obsolescence, government regulation, and competition, both domestically and internationally. Such companies are heavily dependent on patent and intellectual property rights, the loss or impairment of which may adversely affect profitability.

Non-Diversification Risk. A non-diversified fund may invest a high percentage of its assets in the securities of a small number of issuers and is more likely than diversified funds to be significantly affected by a specific security’s poor performance.

Passive Strategy Risk. A portion of the Fund seeks to match the performance of a specified index. However, the correlation between the performance of this portion of the fund and index performance may be affected by many factors, such as fund expenses, the timing of cash flows into and out of the fund, changes in securities markets, and changes in the composition of the index.

Performance

Using the historical performance of the Fund's Institutional Class shares, adjusted as described below, the bar chart shows the investment returns of the Fund’s Class A shares for each full calendar year of operations for 10 years (or, if shorter, the life of the Fund). These annual returns do not reflect sales charges on Class A shares; if they did, results would be lower. The table shows for the last one, five, and ten calendar year periods (or, if shorter, the life of the Fund), how the Fund’s average annual total returns compare with those of one or more broad measures of market performance.

For periods prior to the inception date of Class A shares (March 1, 2013) and Class R-6 shares (November 25, 2014), the performance shown in the bar chart for Class A shares and the table for Classes A and R-6 shares is that of the Fund’s Institutional Class shares, adjusted to reflect the respective fees and expenses of each class. These adjustments result in performance for such periods that is no higher than the historical performance of the Institutional Class shares.

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	27.72%
Lowest return for a quarter during the period of the bar chart above:	Q2 2022	(21.61)%

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Class A Return Before Taxes	(37.87)%	7.24%	11.57%
Class A Return After Taxes on Distributions	(39.50)%	4.56%	9.17%
Class A Return After Taxes on Distributions and Sale of Fund Shares	(21.26)%	5.68%	9.22%
Class J Return Before Taxes	(34.71)%	8.68%	12.46%
Institutional Class Return Before Taxes	(34.05)%	8.83%	12.72%
Class R-1 Return Before Taxes	(34.61)%	7.96%	11.78%
Class R-3 Return Before Taxes	(34.35)%	8.30%	12.14%
Class R-4 Return Before Taxes	(34.25)%	8.50%	12.35%
Class R-5 Return Before Taxes	(34.17)%	8.64%	12.49%
Class R-6 Return Before Taxes	(33.99)%	8.92%	12.76%
Russell 1000 Growth Index (reflects no deduction for fees, expenses, or taxes)	(29.15)%	10.96%	14.10%

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

James W. Fennessey (since 2009), Portfolio Manager

•

Randy L. Welch (since 2009), Portfolio Manager

Sub-Advisors

Brown Advisory, LLC

T. Rowe Price Associates, Inc.

Purchase and Sale of Fund Shares

For Classes R-1, R-3, R-4, R-5, R-6, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances.

See Purchase of Fund Shares for more information.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

LargeCap S&P 500 Index Fund

On or about May 19, 2023, delete references to Class C shares of this Fund, including information regarding the conversion plan, from the Prospectus.

Objective

The Fund seeks long-term growth of capital.

Fees and Expenses of the Fund

This table describes the fees and expenses that you may pay if you buy, hold, and sell shares of the Fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the tables and examples below. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in Class A Shares of Principal Funds, Inc. More information about these and other discounts is available from your financial intermediary and in “Choosing a Share Class and The Costs of Investing” beginning on page 404 of the Fund’s Prospectus, Appendix B to the Prospectus titled “Intermediary-Specific Sales Charge Waivers and Reductions,” and “Multiple Class Structure” beginning on page 4 of the Fund’s Statement of Additional Information.

Shareholder Fees (fees paid directly from your investment)

	Share Class
	A	C	J	Inst.	R-1	R-3	R-4	R-5
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	1.50%	None	None	None	None	None	None	None
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	0.25%	1.00%	1.00%	None	None	None	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	A	C	J	Inst.	R-1	R-3	R-4	R-5
Management Fees(1)	0.14%	0.14%	0.14%	0.14%	0.14%	0.14%	0.14%	0.14%
Distribution and/or Service (12b-1) Fees	0.15%	1.00%	0.15%	N/A	0.35%	0.25%	0.10%	N/A
Other Expenses	0.10%	0.15%	0.07%	0.02%	0.53%	0.32%	0.28%	0.26%
Total Annual Fund Operating Expenses	0.39%	1.29%	0.36%	0.16%	1.02%	0.71%	0.52%	0.40%
Expense Reimbursement(2)	N/A	0.00%	N/A	N/A	N/A	N/A	N/A	N/A
Total Annual Fund Operating Expenses after Expense Reimbursement	0.39%	1.29%	0.36%	0.16%	1.02%	0.71%	0.52%	0.40%

(1)

Fees have been restated to reflect current fees.

(2)

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Class A	$189	$273	$365	$635
Class C	231	409	708	1,308
Class J	137	116	202	456
Institutional Class	16	52	90	205
Class R-1	104	325	563	1,248
Class R-3	73	227	395	883
Class R-4	53	167	291	653
Class R-5	41	128	224	505

With respect to Classes C and J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class C	$131	$409	$708	$1,308
Class J	37	116	202	456

Portfolio Turnover

Principal Investment Strategies

Under normal circumstances, the Fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in equity securities of companies that compose the Standard & Poor’s (“S&P”) 500 Index (the “Index”) at the time of purchase. The Index is designed to represent U.S. equities with risk/return characteristics of the large cap universe. As of January 31, 2023, the market capitalization range of the companies comprising the Index was between approximately $4.0 billion and $2.3 trillion. Each component stock of the Index is weighted in proportion to its total market value. The Index is balanced quarterly.

The Fund employs a passive investment approach designed to attempt to track the performance of the Index. In seeking its objective, the Fund typically employs a replication strategy, which involves investing in all the securities that make up the Index, in the same proportions as the Index.

The Fund uses derivative strategies and invests in exchange-traded funds (“ETFs”). A derivative is a financial arrangement, the value of which is derived from, or based on, a traditional security, asset, or market index. Specifically, the Fund invests in index futures and equity ETFs on a daily basis to gain exposure to the Index in an effort to minimize tracking error relative to the benchmark.

The Fund will not concentrate (i.e., invest more than 25% of its assets) its investments in a particular industry except to the extent the Index is so concentrated. As of January 31, 2023, the Index was not concentrated in any industry.

Note: “Standard & Poor’s 500” and “S&P 500” are trademarks of S&P Global and have been licensed by Principal. The Fund is not sponsored, endorsed, sold, or promoted by S&P Global, and S&P Global makes no representation regarding the advisability of investing in the Fund.

Principal Risks

•

Index Fund Risk. Index funds use a passive investment approach and generally do not attempt to manage market volatility, use defensive strategies, or reduce the effect of any long-term periods of poor investment performance. Therefore, the Fund may hold securities that present risks that an investment advisor researching individual securities might seek to avoid. An index fund has operating and other expenses while an index does not. As a result, over time, index funds tend to underperform the index. The correlation between fund performance and index performance may also be affected by the type of passive investment approach used by a fund (sampling or replication), changes in securities markets, changes in the composition of the index, and the timing of purchases and sales of fund shares. Errors or delays in compiling or rebalancing the Index may impact the performance of the Fund and increase transaction costs.

Performance

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	20.38%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(19.67)%

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Class A Return Before Taxes	(19.65)%	8.62%	11.87%
Class A Return After Taxes on Distributions	(20.16)%	6.92%	10.61%
Class A Return After Taxes on Distributions and Sale of Fund Shares	(11.27)%	6.71%	9.73%
Class C Return Before Taxes	(19.95)%	8.01%	11.30%
Class J Return Before Taxes	(19.21)%	9.02%	12.10%
Institutional Class Return Before Taxes	(18.23)%	9.23%	12.36%
Class R-1 Return Before Taxes	(18.92)%	8.30%	11.39%
Class R-3 Return Before Taxes	(18.69)%	8.64%	11.74%
Class R-4 Return Before Taxes	(18.54)%	8.84%	11.95%
Class R-5 Return Before Taxes	(18.43)%	8.97%	12.09%
S&P 500 Index (reflects no deduction for fees, expenses, or taxes)	(18.12)%	9.43%	12.56%

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

Jeffrey A. Schwarte (since 2016), Portfolio Manager

•

Aaron J. Siebel (since 2018), Portfolio Manager

Purchase and Sale of Fund Shares

For Classes R-1, R-3, R-4, R-5, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances.

Class C shares are subject to an 8-year automatic conversion plan whereby Class C shares held for eight years after purchase will automatically convert to Class A shares of the same Fund.

Effective as of the close of the New York Stock Exchange on March 24, 2023, Class C shares will no longer be available for purchase except in limited circumstances.

See Purchase of Fund Shares for more information.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

LargeCap Value Fund III

Objective

The Fund seeks long-term growth of capital.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment)

	Share Class
	J	Inst.	R-1	R-3	R-4	R-5
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	None	None	None	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	J	Inst.	R-1	R-3	R-4	R-5
Management Fees	0.75%	0.75%	0.75%	0.75%	0.75%	0.75%
Distribution and/or Service (12b-1) Fees	0.15%	N/A	0.35%	0.25%	0.10%	N/A
Other Expenses	0.16%	0.02%	0.54%	0.33%	0.29%	0.27%
Total Annual Fund Operating Expenses	1.06%	0.77%	1.64%	1.33%	1.14%	1.02%
Fee Waiver(1)	(0.07)%	(0.07)%	(0.07)%	(0.07)%	(0.07)%	(0.07)%
Total Annual Fund Operating Expenses after Fee Waiver	0.99%	0.70%	1.57%	1.26%	1.07%	0.95%

(1)

Principal Global Investors, LLC (“PGI”), the investment advisor, has contractually agreed to waive a portion of the Fund's management fees through the period ending February 29, 2024. The fee waiver will reduce the Fund's management fees by 0.065% (expressed as a percent of average net assets on an annualized basis). It is expected that the fee waiver will continue through the period disclosed; however, Principal Funds, Inc. and PGI, the parties to the agreement may mutually agree to terminate the fee waiver prior to the end of the period.

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Class J	$201	$330	$578	$1,288
Institutional Class	72	239	421	948
Class R-1	160	510	885	1,938
Class R-3	128	415	722	1,595
Class R-4	109	355	621	1,380
Class R-5	97	318	556	1,241

With respect to Class J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class J	$101	$330	$578	$1,288

Portfolio Turnover

Principal Investment Strategies

Under normal circumstances, the Fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in companies with large market capitalizations at the time of purchase. For this Fund, companies with large market capitalizations are those with market capitalizations within the range of companies comprising the Russell 1000® Value Index (as of January 31, 2023, this range was between approximately $430.1 million and $1.3 trillion). The Fund invests in value equity securities, an investment strategy that emphasizes buying equity securities that appear to be undervalued.

Principal Risks

•

Performance

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q4 2020	16.32%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(26.91)%

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Institutional Class Return Before Taxes	(5.02)%	7.72%	10.78%
Institutional Class Return After Taxes on Distributions	(7.15)%	5.81%	9.22%
Institutional Class Return After Taxes on Distributions and Sale of Fund Shares	(1.49)%	5.81%	8.60%
Class J Return Before Taxes	(6.16)%	7.39%	10.41%
Class R-1 Return Before Taxes	(5.83)%	6.79%	9.81%
Class R-3 Return Before Taxes	(5.61)%	7.10%	10.15%
Class R-4 Return Before Taxes	(5.37)%	7.31%	10.37%
Class R-5 Return Before Taxes	(5.25)%	7.44%	10.49%
Russell 1000 Value Index (reflects no deduction for fees, expenses, or taxes)	(7.54)%	6.67%	10.29%

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Institutional Class shares only and would be different for the other share classes.

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

James W. Fennessey (since 2009), Portfolio Manager

•

Randy L. Welch (since 2009), Portfolio Manager

Sub-Advisors

Barrow, Hanley, Mewhinney & Strauss, LLC
Westwood Management Corp.

Purchase and Sale of Fund Shares

For Classes R-1, R-3, R-4, R-5, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances.

See Purchase of Fund Shares for more information.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

MidCap Fund

Objective

The Fund seeks long-term growth of capital.

Fees and Expenses of the Fund

This table describes the fees and expenses that you may pay if you buy, hold, and sell shares of the Fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the tables and examples below. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in Class A Shares of Principal Funds, Inc. More information about these and other discounts is available from your financial intermediary and in “Choosing a Share Class and The Costs of Investing” beginning on page 404 of the Fund’s Prospectus, Appendix B to the Prospectus titled “Intermediary-Specific Sales Charge Waivers and Reductions,” and “Multiple Class Structure” beginning on page 4 of the Fund’s Statement of Additional Information.

Shareholder Fees (fees paid directly from your investment)

	Share Class
	A	C	J	Inst.	R-1	R-3	R-4	R-5	R-6
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	5.50%	None	None	None	None	None	None	None	None
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	1.00%	1.00%	None	None	None	None	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	A	C	J	Inst.	R-1	R-3	R-4	R-5	R-6
Management Fees(1)	0.58%	0.58%	0.58%	0.58%	0.58%	0.58%	0.58%	0.58%	0.58%
Distribution and/or Service (12b-1) Fees	0.25%	1.00%	0.15%	N/A	0.35%	0.25%	0.10%	N/A	N/A
Other Expenses	0.11%	0.14%	0.08%	0.09%	0.53%	0.32%	0.28%	0.26%	0.01%
Total Annual Fund Operating Expenses	0.94%	1.72%	0.81%	0.67%	1.46%	1.15%	0.96%	0.84%	0.59%

(1)

Fees have been restated to reflect current fees.

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example assumes conversion of the Class C shares to Class A shares after the eighth year. The Example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

	1 year	3 years	5 years	10 years
Class A	$641	$833	$1,041	$1,641
Class C	275	542	933	1,823
Class J	183	259	450	1,002
Institutional Class	68	214	373	835
Class R-1	149	462	797	1,746
Class R-3	117	365	633	1,398
Class R-4	98	306	531	1,178
Class R-5	86	268	466	1,037
Class R-6	60	189	329	738

With respect to Classes C and J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class C	$175	$542	$933	$1,823
Class J	83	259	450	1,002

Portfolio Turnover

Principal Investment Strategies

Principal Risks

•

Foreign Currency Risk. Risks of investing in securities denominated in, or that trade in, foreign (non-U.S.) currencies include changes in foreign exchange rates and foreign exchange restrictions.

Performance

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	24.72%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(23.89)%

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Class A Return Before Taxes	(27.58)%	7.19%	11.39%
Class A Return After Taxes on Distributions	(28.11)%	5.78%	10.17%
Class A Return After Taxes on Distributions and Sale of Fund Shares	(15.92)%	5.54%	9.23%
Class C Return Before Taxes	(24.73)%	7.61%	11.36%
Class J Return Before Taxes	(23.99)%	8.58%	12.18%
Institutional Class Return Before Taxes	(23.18)%	8.71%	12.35%
Class R-1 Return Before Taxes	(23.78)%	7.86%	11.47%
Class R-3 Return Before Taxes	(23.55)%	8.20%	11.82%
Class R-4 Return Before Taxes	(23.39)%	8.41%	12.02%
Class R-5 Return Before Taxes	(23.28)%	8.54%	12.16%
Class R-6 Return Before Taxes	(23.11)%	8.81%	12.20%
Russell MidCap Index (reflects no deduction for fees, expenses, or taxes)	(17.33)%	7.10%	10.96%

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

K. William Nolin (since 2000), Portfolio Manager

•

Tom Rozycki (since 2013), Portfolio Manager

Purchase and Sale of Fund Shares

For Classes R-1, R-3, R-4, R-5, R-6, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

For retail investors (i.e., non-employer sponsored retirement plan investors), effective as of the close of the New York Stock Exchange on June 14, 2013, and for employer-sponsored retirement plan investors, effective as of the close of the New York Stock Exchange on August 15, 2013, the MidCap Fund is no longer available for purchases from new investors, except in limited circumstances.

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances.

Class C shares are subject to an 8-year automatic conversion plan whereby Class C shares held for eight years after purchase will automatically convert to Class A shares of the same Fund.

See Purchase of Fund Shares for more information.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

MidCap Growth Fund

Objective

The Fund seeks long-term growth of capital.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment)

	Share Class
	J	Inst.	R-1	R-3	R-4	R-5
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	None	None	None	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	J	Inst.	R-1	R-3	R-4	R-5
Management Fees	0.65%	0.65%	0.65%	0.65%	0.65%	0.65%
Distribution and/or Service (12b-1) Fees	0.15%	N/A	0.35%	0.25%	0.10%	N/A
Other Expenses	0.12%	0.12%	0.54%	0.33%	0.29%	0.27%
Acquired Fund Fees and Expenses	0.01%	0.01%	0.01%	0.01%	0.01%	0.01%
Total Annual Fund Operating Expenses	0.93%	0.78%	1.55%	1.24%	1.05%	0.93%
Expense Reimbursement(1)	N/A	(0.02)%	N/A	N/A	N/A	N/A
Total Annual Fund Operating Expenses after Expense Reimbursement	0.93%	0.76%	1.55%	1.24%	1.05%	0.93%

(1)

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Class J	$195	$296	$515	$1,143
Institutional Class	78	247	431	964
Class R-1	158	490	845	1,845
Class R-3	126	393	681	1,500
Class R-4	107	334	579	1,283
Class R-5	95	296	515	1,143

With respect to Class J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class J	$95	$296	$515	$1,143

Portfolio Turnover

Principal Investment Strategies

Under normal circumstances, the Fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in equity securities of companies with medium market capitalizations at the time of purchase. For this Fund, companies with medium market capitalizations are those with market capitalizations within the range of companies comprising the Russell MidCap® Growth Index (as of January 31, 2023, this range was between approximately $852.4 million and $54.2 billion). The Fund invests in growth equity securities, an investment strategy that emphasizes buying equity securities of companies whose potential for growth of capital and earnings is expected to be above average. The Fund’s strategies may result in the active and frequent trading of the Fund’s portfolio securities.

Principal Risks

•

Performance

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	38.05%
Lowest return for a quarter during the period of the bar chart above:	Q4 2018	(22.62)%

100

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Institutional Class Return Before Taxes	(32.28)%	8.42%	11.93%
Institutional Class Return After Taxes on Distributions	(32.28)%	6.02%	8.76%
Institutional Class Return After Taxes on Distributions and Sale of Fund Shares	(19.11)%	6.50%	8.64%
Class J Return Before Taxes	(33.08)%	8.22%	11.64%
Class R-1 Return Before Taxes	(32.83)%	7.54%	11.04%
Class R-3 Return Before Taxes	(32.57)%	7.88%	11.38%
Class R-4 Return Before Taxes	(32.45)%	8.08%	11.60%
Class R-5 Return Before Taxes	(32.38)%	8.20%	11.74%
Russell MidCap Growth Index (reflects no deduction for fees, expenses, or taxes)	(26.74)%	7.64%	11.41%

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Institutional Class shares only and would be different for the other share classes.

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

Christopher T. Corbett (since 2017), Portfolio Manager

•

Marc R. Shapiro (since 2020), Portfolio Manager

Purchase and Sale of Fund Shares

For Classes R-1, R-3, R-4, R-5, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances.

See Purchase of Fund Shares for more information.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

101

MidCap Growth Fund III

Objective

The Fund seeks long-term growth of capital.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment)

	Share Class
	J	Inst.	R-1	R-3	R-4	R-5
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	None	None	None	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	J	Inst.	R-1	R-3	R-4	R-5
Management Fees(1)	0.81%	0.81%	0.81%	0.81%	0.81%	0.81%
Distribution and/or Service (12b-1) Fees	0.15%	N/A	0.35%	0.25%	0.10%	N/A
Other Expenses	0.17%	0.01%	0.54%	0.33%	0.29%	0.27%
Total Annual Fund Operating Expenses	1.13%	0.82%	1.70%	1.39%	1.20%	1.08%
Fee Waiver(2)	(0.02)%	(0.02)%	(0.02)%	(0.02)%	(0.02)%	(0.02)%
Total Annual Fund Operating Expenses after Fee Waiver	1.11%	0.80%	1.68%	1.37%	1.18%	1.06%

(1)

Fees have been restated to reflect current fees.

(2)

Principal Global Investors, LLC (“PGI”), the investment advisor, has contractually agreed to waive a portion of the Fund's management fees through the period ending February 29 2024. The fee waiver will reduce the Fund's management fees by 0.02% (expressed as a percent of average net assets on an annualized basis). It is expected that the fee waiver will continue through the period disclosed; however, Principal Funds, Inc. and PGI, the parties to the agreement may mutually agree to terminate the fee waiver prior to the end of the period.

102

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Class J	$213	$357	$620	$1,373
Institutional Class	82	260	453	1,012
Class R-1	171	534	921	2,007
Class R-3	139	438	759	1,667
Class R-4	120	379	658	1,453
Class R-5	108	341	594	1,315

With respect to Class J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class J	$113	$357	$620	$1,373

Portfolio Turnover

Principal Investment Strategies

Principal Risks

•

103

•

Performance

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	30.62%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(20.02)%

104

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Institutional Class Return Before Taxes	(26.73)%	8.47%	10.83%
Institutional Class Return After Taxes on Distributions	(27.05)%	5.95%	7.75%
Institutional Class Return After Taxes on Distributions and Sale of Fund Shares	(15.60)%	6.59%	8.03%
Class J Return Before Taxes	(27.63)%	8.12%	10.43%
Class R-1 Return Before Taxes	(27.43)%	7.49%	9.85%
Class R-3 Return Before Taxes	(27.17)%	7.84%	10.20%
Class R-4 Return Before Taxes	(27.02)%	8.06%	10.41%
Class R-5 Return Before Taxes	(26.93)%	8.18%	10.54%
Russell MidCap Growth Index (reflects no deduction for fees, expenses, or taxes)	(26.74)%	7.64%	11.41%

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Institutional Class shares only and would be different for the other share classes.

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

James W. Fennessey (since 2009), Portfolio Manager

•

Randy L. Welch (since 2009), Portfolio Manager

Sub-Advisors

Eagle Asset Management, Inc.
Robert W. Baird & Co. Incorporated

Purchase and Sale of Fund Shares

For Classes R-1, R-3, R-4, R-5, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances.

See Purchase of Fund Shares for more information.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

105

MidCap S&P 400 Index Fund

Objective

The Fund seeks long-term growth of capital.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment)

	Share Class
	J	Inst.	R-1	R-3	R-4	R-5	R-6
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	None	None	None	None	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	J	Inst.	R-1	R-3	R-4	R-5	R-6
Management Fees	0.15%	0.15%	0.15%	0.15%	0.15%	0.15%	0.15%
Distribution and/or Service (12b-1) Fees	0.15%	N/A	0.35%	0.25%	0.10%	N/A	N/A
Other Expenses	0.11%	0.08%	0.54%	0.33%	0.29%	0.27%	0.01%
Total Annual Fund Operating Expenses	0.41%	0.23%	1.04%	0.73%	0.54%	0.42%	0.16%

106

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

	1 year	3 years	5 years	10 years
Class J	$142	$132	$230	$518
Institutional Class	24	74	130	293
Class R-1	106	331	574	1,271
Class R-3	75	233	406	906
Class R-4	55	173	302	677
Class R-5	43	135	235	530
Class R-6	16	52	90	205

With respect to Class J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class J	$42	$132	$230	$518

Portfolio Turnover

Principal Investment Strategies

Under normal circumstances, the Fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in equity securities of companies that compose the Standard & Poor’s (“S&P”) MidCap 400 Index (the “Index”) at the time of purchase. The Index is designed to represent U.S. equities with risk/return characteristics of the mid cap universe. As of January 31, 2023, the market capitalization range of the companies comprising the Index was between approximately $1.8 billion and $16.6 billion. Each component stock of the Index is weighted in proportion to its total market value. The Index is rebalanced quarterly.

Note: “Standard & Poor’s MidCap 400” and “S&P MidCap 400” are trademarks of S&P Global and have been licensed by Principal. The Fund is not sponsored, endorsed, sold, or promoted by S&P Global, and S&P Global makes no representation regarding the advisability of investing in the Fund.

Principal Risks

107

•

Performance

108

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q4 2020	24.32%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(29.79)%

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Institutional Class Return Before Taxes	(13.22)%	6.47%	10.52%
Institutional Class Return After Taxes on Distributions	(14.68)%	4.43%	8.65%
Institutional Class Return After Taxes on Distributions and Sale of Fund Shares	(6.81)%	4.80%	8.28%
Class J Return Before Taxes	(14.19)%	6.28%	10.24%
Class R-1 Return Before Taxes	(13.93)%	5.61%	9.62%
Class R-3 Return Before Taxes	(13.64)%	5.95%	9.96%
Class R-4 Return Before Taxes	(13.53)%	6.14%	10.16%
Class R-5 Return Before Taxes	(13.41)%	6.27%	10.30%
Class R-6 Return Before Taxes	(13.21)%	6.53%	10.33%
S&P MidCap 400 Index (reflects no deduction for fees, expenses, or taxes)	(13.07)%	6.71%	10.78%

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Institutional Class shares only and would be different for the other share classes.

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

Jeffrey A. Schwarte (since 2016), Portfolio Manager

•

Aaron J. Siebel (since 2018), Portfolio Manager

Purchase and Sale of Fund Shares

For Classes R-1, R-3, R-4, R-5, R-6, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

109

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances.

See Purchase of Fund Shares for more information.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

110

MidCap Value Fund I

Objective

The Fund seeks long-term growth of capital.

Fees and Expenses of the Fund

This table describes the fees and expenses that you may pay if you buy, hold, and sell shares of the Fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the tables and examples below. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in Class A Shares of Principal Funds, Inc. More information about these and other discounts is available from your financial intermediary and in “Choosing a Share Class and The Costs of Investing” beginning on page 404 of the Fund’s Prospectus, Appendix B to the Prospectus titled “Intermediary-Specific Sales Charge Waivers and Reductions,” and “Multiple Class Structure” beginning on page 4 of the Fund’s Statement of Additional Information.

Shareholder Fees (fees paid directly from your investment)

	Share Class
	A	J	Inst.	R-1	R-3	R-4	R-5	R-6
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	5.50%	None	None	None	None	None	None	None
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	1.00%	None	None	None	None	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	A	J	Inst.	R-1	R-3	R-4	R-5	R-6
Management Fees	0.64%	0.64%	0.64%	0.64%	0.64%	0.64%	0.64%	0.64%
Distribution and/or Service (12b-1) Fees	0.25%	0.15%	N/A	0.35%	0.25%	0.10%	N/A	N/A
Other Expenses	0.22%	0.13%	0.11%	0.53%	0.32%	0.28%	0.26%	0.00%
Acquired Fund Fees and Expenses	0.01%	0.01%	0.01%	0.01%	0.01%	0.01%	0.01%	0.01%
Total Annual Fund Operating Expenses	1.12%	0.93%	0.76%	1.53%	1.22%	1.03%	0.91%	0.65%
Fee Waiver and Expense Reimbursement(1),(2)	(0.02)%	(0.02)%	(0.06)%	(0.02)%	(0.02)%	(0.02)%	(0.02)%	(0.02)%
Total Annual Fund Operating Expenses after Fee Waiver and Expense Reimbursement	1.10%	0.91%	0.70%	1.51%	1.20%	1.01%	0.89%	0.63%

(1)

Principal Global Investors, LLC (“PGI”), the investment advisor, has contractually agreed to waive a portion of the Fund's management fees through the period ending February 29, 2024. The fee waiver will reduce the Fund's management fees by 0.02% (expressed as a percent of average net assets on an annualized basis). It is expected that the fee waiver will continue through the period disclosed; however, Principal Funds, Inc. and PGI, the parties to the agreement may mutually agree to terminate the fee waiver prior to the end of the period.

(2)

Principal Global Investors, LLC (“PGI”), the investment advisor, has contractually agreed to limit the Fund's expenses by paying, if necessary, expenses normally payable by the Fund (excluding interest expense, expenses related to fund investments, acquired fund fees and expenses, and tax reclaim recovery expenses and other extraordinary expenses) to maintain a total level of operating expenses (expressed as a percent of average net assets on an annualized basis) not to exceed 0.69% for Institutional Class shares. It is expected that the expense limit will continue through the period ending February 29, 2024; however, Principal Funds, Inc. and PGI, the parties to the agreement, may mutually agree to terminate the expense limit prior to the end of the period. Subject to applicable expense limits, the Fund may reimburse PGI for expenses incurred during the current fiscal year.

111

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Class A	$656	$885	$1,131	$1,837
Class J	193	294	513	1,141
Institutional Class	72	237	416	937
Class R-1	154	481	832	1,822
Class R-3	122	385	668	1,476
Class R-4	103	326	567	1,258
Class R-5	91	288	502	1,118
Class R-6	64	206	360	809

With respect to Class J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class J	$93	$294	$513	$1,141

Portfolio Turnover

Principal Investment Strategies

Under normal circumstances, the Fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in equity securities of companies with medium market capitalizations at the time of purchase. For this Fund, companies with medium market capitalizations are those with market capitalizations within the range of companies comprising the Russell MidCap® Value Index (as of January 31, 2023, this range was between approximately $430.1 million and $49.6 billion). The Fund invests in value equity securities, an investment strategy that emphasizes buying equity securities that appear to be undervalued. The Fund also invests in real estate investment trusts.

Principal Risks

•

112

•

Performance

For periods prior to the inception date of Classes A and R-6 shares (April 2, 2019), the performance shown in the table for these newer classes is that of the Fund’s Institutional Class shares, adjusted to reflect the fees and expenses of the newer class. These adjustments result in performance for such periods that is no higher than the historical performance of the Institutional Class shares.

113

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	20.14%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(29.46)%

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Institutional Class Return Before Taxes	(6.00)%	8.19%	10.68%
Institutional Class Return After Taxes on Distributions	(7.51)%	6.18%	7.88%
Institutional Class Return After Taxes on Distributions and Sale of Fund Shares	(2.49)%	6.04%	7.72%
Class A Return Before Taxes	(11.54)%	6.55%	9.70%
Class J Return Before Taxes	(7.07)%	7.97%	10.36%
Class R-1 Return Before Taxes	(6.72)%	7.35%	9.77%
Class R-3 Return Before Taxes	(6.44)%	7.68%	10.11%
Class R-4 Return Before Taxes	(6.27)%	7.88%	10.32%
Class R-5 Return Before Taxes	(6.13)%	8.01%	10.45%
Class R-6 Return Before Taxes	(5.93)%	8.29%	10.73%
Russell MidCap Value Index (reflects no deduction for fees, expenses, or taxes)	(12.04)%	5.72%	10.11%

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Institutional Class shares only and would be different for the other share classes.

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

James W. Fennessey (since 2009), Portfolio Manager

•

Randy L. Welch (since 2009), Portfolio Manager

Sub-Advisors

Los Angeles Capital Management LLC
Victory Capital Management Inc.

Purchase and Sale of Fund Shares

114

For Classes R-1, R-3, R-4, R-5, R-6, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances.

See Purchase of Fund Shares for more information.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

115

Money Market Fund

Objective

The Fund seeks as high a level of current income as is considered consistent with preservation of principal and maintenance of liquidity.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment)

	Share Class
	A	J
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	None	None
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	1.00%

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	A	J
Management Fees	0.40%	0.40%
Distribution and/or Service (12b-1) Fees	0.00%	0.15%
Other Expenses	0.14%	0.09%
Total Annual Fund Operating Expenses	0.54%	0.64%
Fee Waiver and Expense Reimbursement(1),(2)	(0.04)%	(0.15)%
Total Annual Fund Operating Expenses after Fee Waiver and Expense Reimbursement	0.50%	0.49%

(1)

Principal Funds Distributor, Inc. (the “Distributor”) has contractually agreed to limit the distribution fees attributable to Class J. The waiver will reduce the Fund's distribution fees by 0.15%. It is expected that the fee waiver will continue through the period ending February 29, 2024; however, Principal Funds, Inc. and the Distributor, the parties to the agreement, may mutually agree to terminate the fee waiver prior to the end of the period.

(2)

116

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Class A	$151	$169	$298	$673
Class J	150	190	342	784

With respect to Classes A and J shares, you would pay the following expenses if you did not redeem your shares:

	1 year	3 years	5 years	10 years
Class A	$51	$169	$298	$673
Class J	50	190	342	784

Principal Investment Strategies

The Fund seeks to maintain a stable net asset value of $1.00 per share by investing its assets in a portfolio of high quality, short-term money market instruments such as those issued by banks, corporations (U.S. and non-U.S.), municipalities, and the U.S. government. Such instruments include certificates of deposit, banker’s acceptances, commercial paper, treasury bills, bonds, repurchase agreements, and shares of other money market funds. The Fund maintains a dollar-weighted average portfolio maturity of 60 days or less. As with all mutual funds, the value of the Fund’s assets may rise or fall.

Principal Risks

You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. The Fund may impose a fee upon sale of your shares or may temporarily suspend your ability to sell shares if the Fund’s liquidity falls below required minimums because of market conditions or other factors. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time. The principal risks of investing in the Fund are listed below in alphabetical order and not in order of significance.

Commercial Paper Risk. The value of the Fund’s investment in commercial paper, which is generally unsecured, is susceptible to changes in interest rates and the issuer’s financial condition or credit quality. Commercial paper is usually repaid at maturity by the issuer from the proceeds of the issuance of new commercial paper. As a result, investments in commercial paper are subject to the risk that the issuer cannot issue enough new commercial paper to satisfy its outstanding obligations. In addition, under certain circumstances commercial paper may become illiquid or may suffer from reduced liquidity.

117

U.S. Government Securities Risk. Yields available from U.S. government securities are generally lower than yields from many other fixed-income securities.

Performance

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q4 2022	0.83%
Lowest return for a quarter during the period of the bar chart above:	Q2 2022	0.00%

118

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Class A Return Before Taxes	1.24%	1.01%	0.57%
Class J Return Before Taxes	0.26%	0.97%	0.55%
Bloomberg U.S. Treasury Bellwethers 3 Month Index (reflects no deduction for fees, expenses, or taxes)	1.51%	1.28%	0.78%

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

Erika Isley (since 2017), Portfolio Manager

•

Tracy Reeg (since 2004), Portfolio Manager

Purchase and Sale of Fund Shares

The Money Market Fund is operated as a retail money market fund, and as such, has adopted policies and procedures reasonably designed to limit all beneficial owners to natural persons. See Purchase of Fund Shares for additional information.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

119

Overseas Fund

Objective

The Fund seeks long-term growth of capital.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment):

None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	Inst.	R-3	R-4
Management Fees(1)	0.90%	0.90%	0.90%
Distribution and/or Service (12b-1) Fees	N/A	0.25%	0.10%
Other Expenses	0.05%	0.35%	0.31%
Total Annual Fund Operating Expenses	0.95%	1.50%	1.31%
Fee Waiver(2)	(0.02)%	(0.02)%	(0.02)%
Total Annual Fund Operating Expenses after Fee Waiver	0.93%	1.48%	1.29%

(1)

Fees have been restated to reflect current fees.

(2)

Principal Global Investors, LLC (“PGI”) has contractually agreed to waive a portion of the Fund's management fees through the period ending February 29, 2024. The fee waiver will reduce the Fund's management fees by 0.02% (expressed as a percent of average net assets on an annualized basis). It is expected that the fee waiver will continue through the period disclosed; however, Principal Funds, Inc. and PGI, the parties to the agreement may mutually agree to terminate the fee waiver prior to the end of the period.

120

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Institutional Class	$95	$301	$524	$1,165
Class R-3	151	472	817	1,789
Class R-4	131	413	716	1,577

Portfolio Turnover

Principal Investment Strategies

Under normal circumstances, the Fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in equity securities that are tied economically to countries outside the U.S. at the time of purchase. The Fund considers a security to be tied economically to countries outside the U.S. (a “foreign security”) if the issuer of the security has its principal place of business or principal office outside the U.S., has its principal securities trading market outside the U.S., or derives a majority of its revenue from outside the U.S.

The Fund invests in emerging market securities. The Fund invests in value equity securities, an investment strategy that emphasizes buying equity securities that appear to be undervalued. The Fund invests in equity securities of small, medium, and large market capitalization companies.

Principal Risks

•

121

•

Foreign Currency Risk. Risks of investing in securities denominated in, or that trade in, foreign (non-U.S.) currencies include changes in foreign exchange rates and foreign exchange restrictions.

Foreign Securities Risk. The risks of foreign securities include loss of value as a result of: political or economic instability; nationalization, expropriation or confiscatory taxation; settlement delays; and limited government regulation (including less stringent reporting, accounting, and disclosure standards than are required of U.S. companies). The Schedule of Investments included in the Fund’s annual and semi-annual reports identify the countries in which the Fund had invested, as of the date of the reports; to the extent a Fund has significant investments in issuers or securities tied to a certain country or region, it will be particularly susceptible to economic, political, regulatory or other events or conditions affecting such country or region.

•

Brexit Risk. The United Kingdom’s departure from the European Union, commonly known as “Brexit,” has resulted in significant uncertainties and instability in the financial markets. Brexit may have significant political and financial consequences in the United Kingdom, as well as in European markets and the broader global economy. As a result, the fund’s performance may be more volatile than the performance of a more geographically diversified fund.

Performance

122

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q4 2020	23.03%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(31.40)%

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Institutional Class Return Before Taxes	(4.89)%	1.78%	4.33%
Institutional Class Return After Taxes on Distributions	(6.60)%	0.35%	3.10%
Institutional Class Return After Taxes on Distributions and Sale of Fund Shares	(1.62)%	1.25%	3.34%
Class R-3 Return Before Taxes	(5.44)%	1.22%	3.75%
Class R-4 Return Before Taxes	(5.21)%	1.42%	3.95%
MSCI EAFE Value Index NTR (reflects withholding taxes on foreign dividends, but no deduction for fees, expenses, or other taxes)	(5.59)%	0.17%	3.51%

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Institutional Class shares only and would be different for the other share classes.

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

James W. Fennessey (since 2009), Portfolio Manager

•

Randy L. Welch (since 2009), Portfolio Manager

Sub-Advisors

Barrow, Hanley, Mewhinney & Strauss, LLC (doing business as Barrow Hanley Global Investors)
Causeway Capital Management LLC

Purchase and Sale of Fund Shares

For Classes R-3, R-4, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

See Purchase of Fund Shares for more information.

123

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

124

Principal Capital Appreciation Fund

On or about May 19, 2023, delete references to Class C shares of this Fund, including information regarding the conversion plan, from the Prospectus.

Objective

The Fund seeks to provide long-term growth of capital.

Fees and Expenses of the Fund

This table describes the fees and expenses that you may pay if you buy, hold, and sell shares of the Fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the tables and examples below. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in Class A Shares of Principal Funds, Inc. More information about these and other discounts is available from your financial intermediary and in “Choosing a Share Class and The Costs of Investing” beginning on page 404 of the Fund’s Prospectus, Appendix B to the Prospectus titled “Intermediary-Specific Sales Charge Waivers and Reductions,” and “Multiple Class Structure” beginning on page 4 of the Fund’s Statement of Additional Information.

Shareholder Fees (fees paid directly from your investment)

	Share Class
	A	C	Inst.	R-1	R-3	R-4	R-5
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	5.50%	None	None	None	None	None	None
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	1.00%	None	None	None	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	A	C	Inst.	R-1	R-3	R-4	R-5
Management Fees	0.44%	0.44%	0.44%	0.44%	0.44%	0.44%	0.44%
Distribution and/or Service (12b-1) Fees	0.25%	1.00%	N/A	0.35%	0.25%	0.10%	N/A
Other Expenses	0.08%	0.19%	0.02%	0.53%	0.32%	0.28%	0.26%
Total Annual Fund Operating Expenses	0.77%	1.63%	0.46%	1.32%	1.01%	0.82%	0.70%

125

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example assumes conversion of the Class C shares to Class A shares after the eighth year. The Example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

	1 year	3 years	5 years	10 years
Class A	$624	$782	$954	$1,452
Class C	266	514	887	1,703
Institutional Class	47	148	258	579
Class R-1	134	418	723	1,590
Class R-3	103	322	558	1,236
Class R-4	84	262	455	1,014
Class R-5	72	224	390	871

With respect to Class C shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class C	$166	$514	$887	$1,703

Portfolio Turnover

Principal Investment Strategies

The Fund invests primarily in equity securities of companies with any market capitalization, but it has a greater exposure to large market capitalization companies than small or medium market capitalization companies. Those managing the Fund’s investments seek to invest in securities of businesses that they believe are trading at a discount to their private market value (i.e., the value of the business if it was sold), have a competitive advantage, and/or that have barriers to entry in their respective industries.

Principal Risks

•

126

taxable income if sales of portfolio securities result in gains. Moreover, reallocations by large shareholders among share classes of a fund may result in changes to the expense ratios of affected classes, which may increase the expenses paid by shareholders of the class that experienced the redemption.

Performance

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	19.69%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(19.46)%

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Class A Return Before Taxes	(20.96)%	8.77%	11.73%
Class A Return After Taxes on Distributions	(21.09)%	5.81%	9.44%
Class A Return After Taxes on Distributions and Sale of Fund Shares	(12.32)%	6.28%	9.13%
Class C Return Before Taxes	(17.91)%	9.07%	11.62%
Institutional Class Return Before Taxes	(16.12)%	10.38%	12.77%
Class R-1 Return Before Taxes	(16.82)%	9.42%	11.79%
Class R-3 Return Before Taxes	(16.57)%	9.75%	12.14%
Class R-4 Return Before Taxes	(16.41)%	9.96%	12.35%
Class R-5 Return Before Taxes	(16.31)%	10.10%	12.49%
Russell 3000 Index (reflects no deduction for fees, expenses, or taxes)	(19.22)%	8.79%	12.13%

127

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

Daniel R. Coleman (since 2010), Portfolio Manager

•

Theodore Jayne (since 2015), Portfolio Manager

Purchase and Sale of Fund Shares

For Classes R-1, R-3, R-4, R-5, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances.

Class C shares are subject to an 8-year automatic conversion plan whereby Class C shares held for eight years after purchase will automatically convert to Class A shares of the same Fund.

Effective as of the close of the New York Stock Exchange on March 24, 2023, Class C shares will no longer be available for purchase except in limited circumstances.

See Purchase of Fund Shares for more information.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

128

Principal LifeTime Strategic Income Fund

Objective

The Fund seeks current income, and as a secondary objective, capital appreciation.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment)

	Share Class
	A	J	Inst.	R-1	R-3	R-4	R-5
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	3.75%	None	None	None	None	None	None
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	1.00%	None	None	None	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	A	J	Inst.	R-1	R-3	R-4	R-5
Management Fees	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%
Distribution and/or Service (12b-1) Fees	0.25%	0.15%	N/A	0.35%	0.25%	0.10%	N/A
Other Expenses	0.23%	0.10%	0.02%	0.54%	0.33%	0.29%	0.27%
Acquired Fund Fees and Expenses	0.51%	0.51%	0.51%	0.51%	0.51%	0.51%	0.51%
Total Annual Fund Operating Expenses	0.99%	0.76%	0.53%	1.40%	1.09%	0.90%	0.78%
Expense Reimbursement(1)	(0.10)%	N/A	N/A	N/A	N/A	N/A	N/A
Total Annual Fund Operating Expenses after Expense Reimbursement	0.89%	0.76%	0.53%	1.40%	1.09%	0.90%	0.78%

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129

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Class A	$462	$669	$892	$1,534
Class J	178	243	422	942
Institutional Class	54	170	296	665
Class R-1	143	443	766	1,680
Class R-3	111	347	601	1,329
Class R-4	92	287	498	1,108
Class R-5	80	249	433	966

With respect to Class J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class J	$78	$243	$422	$942

Portfolio Turnover

The Fund and each underlying fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs. These costs, which are not reflected in Annual Fund Operating Expenses or in the Example, affect the Fund’s and the underlying funds' performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 33.60% of the average value of its portfolio.

Principal Investment Strategies

The Fund invests according to an asset allocation strategy designed for investors primarily seeking current income and secondarily capital appreciation. The Fund’s asset allocation is designed for investors who are approximately 10 years beyond the normal retirement age of 65. The Fund is a fund of funds and invests in underlying funds of Principal Funds, Inc. (“PFI”). Its underlying funds consist of domestic and foreign equity funds, fixed-income funds, real asset funds, and other funds that aim to offer diversification beyond traditional equity and fixed-income securities. The diversification of the Fund is designed to moderate overall price volatility. The Fund may add, remove, or substitute underlying funds at any time.

The Fund is managed with strategic or long-term asset class targets and target ranges. There is a rebalancing strategy that aligns with the target weights to identify asset classes that are either overweight or underweight. The Fund may shift asset class targets in response to normal evaluative processes, the shortening time horizon of the Fund, or changes in market forces or Fund circumstances.

In selecting underlying funds and target weights, the Fund considers both quantitative measures (e.g., past performance, expected levels of risk and returns, expense levels, diversification, and style consistency) and qualitative factors (e.g., organizational stability, investment experience, investment and risk management processes, and information, trading, and compliance systems). There are no minimum or maximum percentages of assets that the Fund must invest in a specific asset class or underlying fund.

The underlying funds invest in growth and value stocks of large market capitalization companies, fixed-income securities, domestic and foreign securities, securities denominated in foreign currencies, investment companies, securitized products, U.S. government and U.S. government-sponsored securities, and derivatives. A derivative is a financial arrangement, the value of which is derived from, or based on, a traditional security, asset, or market index. The underlying funds principally use futures, options, swaps (including, for example, credit default, interest rate, and currency swaps), and forwards in order to gain exposure to a variety of securities or asset classes or attempt to reduce risk.

130

Principal Risks

Principal Risks of Investing in a Fund of Funds

Fund of Funds Risk. Fund shareholders bear indirectly their proportionate share of the expenses of other investment companies (for example, other mutual funds or exchange-traded funds) in which the Fund invests (“underlying funds”). The Fund’s selection and weighting of asset classes and allocation of investments in underlying funds may cause it to underperform other funds with a similar investment objective. The Fund’s performance and risks correspond directly to the performance and risks of the underlying funds in which it invests, proportionately in accordance with the weightings of such investments, and there is no assurance that the underlying funds will achieve their investment objectives. Management of the Fund entails potential conflicts of interest: the Fund invests in affiliated underlying funds; and PGI and its affiliates may earn different fees from different underlying funds and may have an incentive to allocate more Fund assets to underlying funds from which they receive higher fees.

Target Date Fund Risk. A target date fund should not be selected based solely on age or retirement date because there is no guarantee that this Fund will provide adequate income at or through retirement.

Principal Risks due to the Fund’s Investments in Underlying Funds

Counterparty Risk. Counterparty risk is the risk that the counterparty to a contract or other obligation will be unable or unwilling to honor its obligations.

•

131

the term of the contract, provided, generally, that no credit event on a reference obligation has occurred. If a credit event occurs, the seller generally must pay the buyer the “par value” (i.e., full notional value) of the swap in exchange for an equal face amount of deliverable obligations of the reference entity described in the swap, or the seller may be required to deliver the related net cash amount, if the swap is cash settled. The Fund may be either the buyer or seller in the transaction.

•

Foreign Currency Risk. Risks of investing in securities denominated in, or that trade in, foreign (non-U.S.) currencies include changes in foreign exchange rates and foreign exchange restrictions.

132

U.S. Government Securities Risk. Yields available from U.S. government securities are generally lower than yields from many other fixed-income securities.

Performance

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	8.31%
Lowest return for a quarter during the period of the bar chart above:	Q2 2022	(8.45)%

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Class A Return Before Taxes	(16.68)%	0.64%	2.36%
Class A Return After Taxes on Distributions	(17.92)%	(0.99)%	1.10%
Class A Return After Taxes on Distributions and Sale of Fund Shares	(9.54)%	0.18%	1.50%
Class J Return Before Taxes	(14.18)%	1.56%	2.87%
Institutional Class Return Before Taxes	(13.10)%	1.78%	3.12%
Class R-1 Return Before Taxes	(13.92)%	0.88%	2.23%
Class R-3 Return Before Taxes	(13.56)%	1.22%	2.55%
Class R-4 Return Before Taxes	(13.38)%	1.41%	2.74%
Class R-5 Return Before Taxes	(13.40)%	1.51%	2.85%
S&P Target Date Retirement Income Index (reflects no deduction for fees, expenses, or taxes)	(11.18)%	2.33%	3.59%

133

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

James W. Fennessey (since 2007), Portfolio Manager

•

Scott Smith (since 2017), Portfolio Manager

•

Randy L. Welch (since 2007), Portfolio Manager

Purchase and Sale of Fund Shares

For Classes R-1, R-3, R-4, R-5, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances.

See Purchase of Fund Shares for more information.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

134

Principal LifeTime 2010 Fund

On September 13, 2022, the Board of Directors of Principal Funds, Inc. approved the acquisition of the assets of the Principal LifeTime 2010 Fund (the “Fund”) by the Principal LifeTime Strategic Income Fund (the “Proposed Merger”). Additional information about the Proposed Merger was provided in the Information Statement/Prospectus that was mailed to record date shareholders of the Fund in November 2022. The record date for the determination of shareholders entitled to receive notice of the Proposed Merger was October 5, 2022, and the Proposed Merger is expected to occur on or about May 12, 2023. The Fund’s officers, however, have the discretion to change these dates. In preparation for the Proposed Merger, the Fund may deviate from its stated investment objective and strategies.

On or about May 12, 2023, delete all references to the Principal LifeTime 2010 Fund from the Prospectus.

Objective

The Fund seeks a total return consisting of long-term growth of capital and current income.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment)

	Share Class
	A	J	Inst.	R-1	R-3	R-4	R-5
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	3.75%	None	None	None	None	None	None
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	1.00%	None	None	None	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	A	J	Inst.	R-1	R-3	R-4	R-5
Management Fees	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%
Distribution and/or Service (12b-1) Fees	0.25%	0.15%	N/A	0.35%	0.25%	0.10%	N/A
Other Expenses	0.18%	0.06%	0.01%	0.54%	0.33%	0.29%	0.27%
Acquired Fund Fees and Expenses	0.51%	0.51%	0.51%	0.51%	0.51%	0.51%	0.51%
Total Annual Fund Operating Expenses	0.94%	0.72%	0.52%	1.40%	1.09%	0.90%	0.78%
Expense Reimbursement(1)	(0.05)%	N/A	N/A	N/A	N/A	N/A	N/A
Total Annual Fund Operating Expenses after Expense Reimbursement	0.89%	0.72%	0.52%	1.40%	1.09%	0.90%	0.78%

(1)

135

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Class A	$462	$659	$871	$1,482
Class J	174	230	401	894
Institutional Class	53	167	291	653
Class R-1	143	443	766	1,680
Class R-3	111	347	601	1,329
Class R-4	92	287	498	1,108
Class R-5	80	249	433	966

With respect to Class J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class J	$74	$230	$401	$894

Portfolio Turnover

The Fund and each underlying fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs. These costs, which are not reflected in Annual Fund Operating Expenses or in the Example, affect the Fund’s and the underlying fund's performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 26.70% of the average value of its portfolio.

Principal Investment Strategies

The Fund operates as a “target date fund” that invests according to an asset allocation strategy designed for investors having a retirement investment goal close to the year in the Fund’s name. The Fund is a fund of funds and invests in underlying funds of Principal Funds, Inc. (“PFI”). Its underlying funds consist of domestic and foreign equity funds, fixed-income funds, real asset funds, and other funds that aim to offer diversification beyond traditional equity and fixed-income securities. The asset class diversification of the Fund is designed to moderate overall price volatility. The Fund may add, remove, or substitute underlying funds at any time.

136

time, the Fund may be combined with the Principal LifeTime Strategic Income Fund if the Board of Directors determines that the combination is in the best interests of Fund shareholders. It is expected that at the target date in the Fund’s name, the shareholder will begin gradually withdrawing the account’s value.

Principal Risks

Principal Risks of Investing in a Fund of Funds

Principal Risks due to the Fund’s Investments in Underlying Funds

Counterparty Risk. Counterparty risk is the risk that the counterparty to a contract or other obligation will be unable or unwilling to honor its obligations.

137

•

Foreign Currency Risk. Risks of investing in securities denominated in, or that trade in, foreign (non-U.S.) currencies include changes in foreign exchange rates and foreign exchange restrictions.

138

U.S. Government Securities Risk. Yields available from U.S. government securities are generally lower than yields from many other fixed-income securities.

Performance

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	9.50%
Lowest return for a quarter during the period of the bar chart above:	Q2 2022	(8.43)%

139

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Class A Return Before Taxes	(16.70)%	1.14%	3.44%
Class A Return After Taxes on Distributions	(18.00)%	(0.77)%	1.94%
Class A Return After Taxes on Distributions and Sale of Fund Shares	(9.43)%	0.55%	2.36%
Class J Return Before Taxes	(14.09)%	2.12%	4.00%
Institutional Class Return Before Taxes	(13.12)%	2.30%	4.22%
Class R-1 Return Before Taxes	(13.95)%	1.40%	3.31%
Class R-3 Return Before Taxes	(13.60)%	1.71%	3.64%
Class R-4 Return Before Taxes	(13.47)%	1.91%	3.83%
Class R-5 Return Before Taxes	(13.38)%	2.04%	3.95%
S&P Target Date 2010 Index (reflects no deduction for fees, expenses, or taxes)	(11.45)%	2.82%	4.37%

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

James W. Fennessey (since 2007), Portfolio Manager

•

Scott Smith (since 2017), Portfolio Manager

•

Randy L. Welch (since 2007), Portfolio Manager

Purchase and Sale of Fund Shares

For Classes R-1, R-3, R-4, R-5, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances.

See Purchase of Fund Shares for more information.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

140

Principal LifeTime 2015 Fund

Objective

The Fund seeks a total return consisting of long-term growth of capital and current income.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment):

None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	Inst.	R-1	R-3	R-4	R-5
Management Fees	0.00%	0.00%	0.00%	0.00%	0.00%
Distribution and/or Service (12b-1) Fees	N/A	0.35%	0.25%	0.10%	N/A
Other Expenses	0.02%	0.54%	0.33%	0.29%	0.27%
Acquired Fund Fees and Expenses	0.52%	0.52%	0.52%	0.52%	0.52%
Total Annual Fund Operating Expenses	0.54%	1.41%	1.10%	0.91%	0.79%

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

	1 year	3 years	5 years	10 years
Institutional Class	$55	$173	$302	$677
Class R-1	144	446	771	1,691
Class R-3	112	350	606	1,340
Class R-4	93	290	504	1,120
Class R-5	81	252	439	978

Portfolio Turnover

The Fund and each underlying fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs. These costs, which are not reflected in Annual Fund Operating Expenses or in the Example, affect the Fund’s and the underlying fund's performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 29.20% of the average value of its portfolio.

Principal Investment Strategies

141

The underlying funds invest in growth and value stocks of small, medium, and large market capitalization companies, fixed-income securities, domestic and foreign securities, securities denominated in foreign currencies, investment companies, securitized products, U.S. government and U.S. government-sponsored securities, and derivatives. A derivative is a financial arrangement, the value of which is derived from, or based on, a traditional security, asset, or market index. The underlying funds principally use futures, options, swaps (including, for example, credit default, interest rate, and currency swaps), and forwards in order to gain exposure to a variety of securities or asset classes or attempt to reduce risk.

The Fund’s asset allocation will become more conservative over time as investment goals near (for example, retirement, which is assumed to begin at age 65) and investors become more risk-averse. Approximately 10 years after its target year, the Fund’s underlying fund allocation is expected to match that of the Principal LifeTime Strategic Income Fund. At that time, the Fund may be combined with the Principal LifeTime Strategic Income Fund if the Board of Directors determines that the combination is in the best interests of Fund shareholders. It is expected that at the target date in the Fund’s name, the shareholder will begin gradually withdrawing the account’s value.

Principal Risks

Principal Risks of Investing in a Fund of Funds

142

Management of the Fund entails potential conflicts of interest: the Fund invests in affiliated underlying funds; and PGI and its affiliates may earn different fees from different underlying funds and may have an incentive to allocate more Fund assets to underlying funds from which they receive higher fees.

Principal Risks due to the Fund’s Investments in Underlying Funds

Counterparty Risk. Counterparty risk is the risk that the counterparty to a contract or other obligation will be unable or unwilling to honor its obligations.

•

143

Foreign Currency Risk. Risks of investing in securities denominated in, or that trade in, foreign (non-U.S.) currencies include changes in foreign exchange rates and foreign exchange restrictions.

U.S. Government Securities Risk. Yields available from U.S. government securities are generally lower than yields from many other fixed-income securities.

Performance

144

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	11.02%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(9.54)%

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Institutional Class Return Before Taxes	(13.60)%	2.85%	4.95%
Institutional Class Return After Taxes on Distributions	(15.46)%	0.39%	2.79%
Institutional Class Return After Taxes on Distributions and Sale of Fund Shares	(7.27)%	1.75%	3.42%
Class R-1 Return Before Taxes	(14.33)%	1.95%	4.03%
Class R-3 Return Before Taxes	(14.14)%	2.26%	4.35%
Class R-4 Return Before Taxes	(13.90)%	2.46%	4.55%
Class R-5 Return Before Taxes	(13.77)%	2.57%	4.67%
S&P Target Date 2015 Index (reflects no deduction for fees, expenses, or taxes)	(12.17)%	3.07%	5.01%

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Institutional Class shares only and would be different for the other share classes.

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

James W. Fennessey (since 2008), Portfolio Manager

•

Scott Smith (since 2017), Portfolio Manager

•

Randy L. Welch (since 2008), Portfolio Manager

Purchase and Sale of Fund Shares

For Classes R-1, R-3, R-4, R-5, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances.

See Purchase of Fund Shares for more information.

145

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

146

Principal LifeTime 2020 Fund

Objective

The Fund seeks a total return consisting of long-term growth of capital and current income.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment)

	Share Class
	A	J	Inst.	R-1	R-3	R-4	R-5
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	3.75%	None	None	None	None	None	None
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	1.00%	None	None	None	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	A	J	Inst.	R-1	R-3	R-4	R-5
Management Fees	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%
Distribution and/or Service (12b-1) Fees	0.25%	0.15%	N/A	0.35%	0.25%	0.10%	N/A
Other Expenses	0.11%	0.04%	0.01%	0.53%	0.32%	0.28%	0.26%
Acquired Fund Fees and Expenses	0.53%	0.53%	0.53%	0.53%	0.53%	0.53%	0.53%
Total Annual Fund Operating Expenses	0.89%	0.72%	0.54%	1.41%	1.10%	0.91%	0.79%

147

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

	1 year	3 years	5 years	10 years
Class A	$462	$648	$850	$1,430
Class J	174	230	401	894
Institutional Class	55	173	302	677
Class R-1	144	446	771	1,691
Class R-3	112	350	606	1,340
Class R-4	93	290	504	1,120
Class R-5	81	252	439	978

With respect to Class J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class J	$74	$230	$401	$894

Portfolio Turnover

The Fund and each underlying fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs. These costs, which are not reflected in Annual Fund Operating Expenses or in the Example, affect the Fund’s and the underlying fund's performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 25.20% of the average value of its portfolio.

Principal Investment Strategies

The underlying funds invest in growth and value stocks of small, medium, and large market capitalization companies, fixed-income securities, domestic and foreign securities, securities denominated in foreign currencies, investment companies, U.S. government and U.S. government-sponsored securities, and derivatives. A derivative is a financial arrangement, the value of which is derived from, or based on, a traditional security, asset, or market index. The underlying funds principally use futures, options, swaps (including, for example, credit default, interest rate, and currency swaps), and forwards in order to gain exposure to a variety of securities or asset classes or attempt to reduce risk.

148

Principal Risks

Principal Risks of Investing in a Fund of Funds

Principal Risks due to the Fund’s Investments in Underlying Funds

Counterparty Risk. Counterparty risk is the risk that the counterparty to a contract or other obligation will be unable or unwilling to honor its obligations.

•

149

•

Foreign Currency Risk. Risks of investing in securities denominated in, or that trade in, foreign (non-U.S.) currencies include changes in foreign exchange rates and foreign exchange restrictions.

150

U.S. Government Securities Risk. Yields available from U.S. government securities are generally lower than yields from many other fixed-income securities.

Performance

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	12.29%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(11.66)%

151

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Class A Return Before Taxes	(17.92)%	2.13%	4.86%
Class A Return After Taxes on Distributions	(19.84)%	(0.05)%	3.01%
Class A Return After Taxes on Distributions and Sale of Fund Shares	(9.64)%	1.26%	3.43%
Class J Return Before Taxes	(15.30)%	3.13%	5.43%
Institutional Class Return Before Taxes	(14.35)%	3.29%	5.63%
Class R-1 Return Before Taxes	(15.15)%	2.38%	4.72%
Class R-3 Return Before Taxes	(14.88)%	2.70%	5.04%
Class R-4 Return Before Taxes	(14.74)%	2.90%	5.24%
Class R-5 Return Before Taxes	(14.58)%	3.03%	5.36%
S&P Target Date 2020 Index (reflects no deduction for fees, expenses, or taxes)	(12.82)%	3.14%	5.51%

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

James W. Fennessey (since 2007), Portfolio Manager

•

Scott Smith (since 2017), Portfolio Manager

•

Randy L. Welch (since 2007), Portfolio Manager

Purchase and Sale of Fund Shares

For Classes R-1, R-3, R-4, R-5, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances.

See Purchase of Fund Shares for more information.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

152

Principal LifeTime 2025 Fund

Objective

The Fund seeks a total return consisting of long-term growth of capital and current income.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment):

None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	Inst.	R-1	R-3	R-4	R-5
Management Fees	0.00%	0.00%	0.00%	0.00%	0.00%
Distribution and/or Service (12b-1) Fees	N/A	0.35%	0.25%	0.10%	N/A
Other Expenses	0.01%	0.53%	0.32%	0.28%	0.26%
Acquired Fund Fees and Expenses	0.55%	0.55%	0.55%	0.55%	0.55%
Total Annual Fund Operating Expenses	0.56%	1.43%	1.12%	0.93%	0.81%

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

	1 year	3 years	5 years	10 years
Institutional Class	$57	$179	$313	$701
Class R-1	146	452	782	1,713
Class R-3	114	356	617	1,363
Class R-4	95	296	515	1,143
Class R-5	83	259	450	1,002

Portfolio Turnover

The Fund and each underlying fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs. These costs, which are not reflected in Annual Fund Operating Expenses or in the Example, affect the Fund’s and the underlying fund's performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 22.60% of the average value of its portfolio.

Principal Investment Strategies

153

The underlying funds invest in growth and value stocks of small, medium, and large market capitalization companies, fixed-income securities, domestic and foreign securities, securities denominated in foreign currencies, investment companies, U.S. government and U.S. government-sponsored securities, and derivatives. A derivative is a financial arrangement, the value of which is derived from, or based on, a traditional security, asset, or market index. The underlying funds principally use futures, options, swaps (including, for example, credit default, interest rate, and currency swaps), and forwards in order to gain exposure to a variety of securities or asset classes or attempt to reduce risk.

Principal Risks

Principal Risks of Investing in a Fund of Funds

154

Principal Risks due to the Fund’s Investments in Underlying Funds

Counterparty Risk. Counterparty risk is the risk that the counterparty to a contract or other obligation will be unable or unwilling to honor its obligations.

•

155

Foreign Currency Risk. Risks of investing in securities denominated in, or that trade in, foreign (non-U.S.) currencies include changes in foreign exchange rates and foreign exchange restrictions.

U.S. Government Securities Risk. Yields available from U.S. government securities are generally lower than yields from many other fixed-income securities.

Performance

156

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	14.07%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(13.80)%

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Institutional Class Return Before Taxes	(15.22)%	3.82%	6.26%
Institutional Class Return After Taxes on Distributions	(17.01)%	1.93%	4.45%
Institutional Class Return After Taxes on Distributions and Sale of Fund Shares	(8.20)%	2.68%	4.58%
Class R-1 Return Before Taxes	(16.04)%	2.89%	5.32%
Class R-3 Return Before Taxes	(15.78)%	3.21%	5.65%
Class R-4 Return Before Taxes	(15.64)%	3.41%	5.86%
Class R-5 Return Before Taxes	(15.56)%	3.52%	5.98%
S&P Target Date 2025 Index (reflects no deduction for fees, expenses, or taxes)	(13.14)%	3.75%	6.23%

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Institutional Class shares only and would be different for the other share classes.

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

James W. Fennessey (since 2008), Portfolio Manager

•

Scott Smith (since 2017), Portfolio Manager

•

Randy L. Welch (since 2008), Portfolio Manager

Purchase and Sale of Fund Shares

For Classes R-1, R-3, R-4, R-5, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances.

See Purchase of Fund Shares for more information.

157

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

158

Principal LifeTime 2030 Fund

Objective

The Fund seeks a total return consisting of long-term growth of capital and current income.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment)

	Share Class
	A	J	Inst.	R-1	R-3	R-4	R-5
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	3.75%	None	None	None	None	None	None
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	1.00%	None	None	None	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	A	J	Inst.	R-1	R-3	R-4	R-5
Management Fees	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%
Distribution and/or Service (12b-1) Fees	0.25%	0.15%	N/A	0.35%	0.25%	0.10%	N/A
Other Expenses	0.12%	0.05%	0.01%	0.53%	0.32%	0.28%	0.26%
Acquired Fund Fees and Expenses	0.57%	0.57%	0.57%	0.57%	0.57%	0.57%	0.57%
Total Annual Fund Operating Expenses	0.94%	0.77%	0.58%	1.45%	1.14%	0.95%	0.83%

159

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

	1 year	3 years	5 years	10 years
Class A	$467	$663	$876	$1,486
Class J	179	246	428	954
Institutional Class	59	186	324	726
Class R-1	148	459	792	1,735
Class R-3	116	362	628	1,386
Class R-4	97	303	525	1,166
Class R-5	85	265	460	1,025

With respect to Class J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class J	$79	$246	$428	$954

Portfolio Turnover

The Fund and each underlying fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs. These costs, which are not reflected in Annual Fund Operating Expenses or in the Example, affect the Fund’s and the underlying fund's performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 31.10% of the average value of its portfolio.

Principal Investment Strategies

The underlying funds invest in growth and value stocks of small, medium, and large market capitalization companies, fixed-income securities, domestic and foreign securities, securities denominated in foreign currencies, investment companies (including index funds), U.S. government and U.S. government-sponsored securities, and derivatives. A derivative is a financial arrangement, the value of which is derived from, or based on, a traditional security, asset, or market index. The underlying funds principally use futures, options, swaps (including, for example, credit default, interest rate, and currency swaps), and forwards in order to gain exposure to a variety of securities or asset classes or attempt to reduce risk.

160

Principal Risks

Principal Risks of Investing in a Fund of Funds

Principal Risks due to the Fund’s Investments in Underlying Funds

Counterparty Risk. Counterparty risk is the risk that the counterparty to a contract or other obligation will be unable or unwilling to honor its obligations.

•

161

•

Foreign Currency Risk. Risks of investing in securities denominated in, or that trade in, foreign (non-U.S.) currencies include changes in foreign exchange rates and foreign exchange restrictions.

162

U.S. Government Securities Risk. Yields available from U.S. government securities are generally lower than yields from many other fixed-income securities.

Performance

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	15.42%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(15.80)%

163

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Class A Return Before Taxes	(20.25)%	2.86%	5.90%
Class A Return After Taxes on Distributions	(22.09)%	0.92%	4.12%
Class A Return After Taxes on Distributions and Sale of Fund Shares	(10.94)%	2.03%	4.37%
Class J Return Before Taxes	(17.75)%	3.88%	6.48%
Institutional Class Return Before Taxes	(16.80)%	4.05%	6.70%
Class R-1 Return Before Taxes	(17.61)%	3.13%	5.77%
Class R-3 Return Before Taxes	(17.31)%	3.45%	6.10%
Class R-4 Return Before Taxes	(17.15)%	3.66%	6.30%
Class R-5 Return Before Taxes	(17.07)%	3.77%	6.43%
S&P Target Date 2030 Index (reflects no deduction for fees, expenses, or taxes)	(13.97)%	4.17%	6.84%

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

James W. Fennessey (since 2007), Portfolio Manager

•

Scott Smith (since 2017), Portfolio Manager

•

Randy L. Welch (since 2007), Portfolio Manager

Purchase and Sale of Fund Shares

For Classes R-1, R-3, R-4, R-5, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances.

See Purchase of Fund Shares for more information.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

164

Principal LifeTime 2035 Fund

Objective

The Fund seeks a total return consisting of long-term growth of capital and current income.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment):

None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	Inst.	R-1	R-3	R-4	R-5
Management Fees	0.00%	0.00%	0.00%	0.00%	0.00%
Distribution and/or Service (12b-1) Fees	N/A	0.35%	0.25%	0.10%	N/A
Other Expenses	0.01%	0.53%	0.32%	0.28%	0.26%
Acquired Fund Fees and Expenses	0.61%	0.61%	0.61%	0.61%	0.61%
Total Annual Fund Operating Expenses	0.62%	1.49%	1.18%	0.99%	0.87%

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

	1 year	3 years	5 years	10 years
Institutional Class	$63	$199	$346	$774
Class R-1	152	471	813	1,779
Class R-3	120	375	649	1,432
Class R-4	101	315	547	1,213
Class R-5	89	278	482	1,073

Portfolio Turnover

The Fund and each underlying fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs. These costs, which are not reflected in Annual Fund Operating Expenses or in the Example, affect the Fund’s and the underlying fund's performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 19.60% of the average value of its portfolio.

Principal Investment Strategies

165

The underlying funds invest in growth and value stocks of small, medium, and large market capitalization companies, fixed-income securities, domestic and foreign securities, securities denominated in foreign currencies, investment companies (including index funds), U.S. government and U.S. government-sponsored securities, and derivatives. A derivative is a financial arrangement, the value of which is derived from, or based on, a traditional security, asset, or market index. The underlying funds principally use futures, options, swaps (including, for example, credit default, interest rate, and currency swaps), and forwards in order to gain exposure to a variety of securities or asset classes or attempt to reduce risk.

Principal Risks

Principal Risks of Investing in a Fund of Funds

166

Principal Risks due to the Fund’s Investments in Underlying Funds

Counterparty Risk. Counterparty risk is the risk that the counterparty to a contract or other obligation will be unable or unwilling to honor its obligations.

•

167

Foreign Currency Risk. Risks of investing in securities denominated in, or that trade in, foreign (non-U.S.) currencies include changes in foreign exchange rates and foreign exchange restrictions.

U.S. Government Securities Risk. Yields available from U.S. government securities are generally lower than yields from many other fixed-income securities.

Performance

168

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	17.13%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(17.37)%

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Institutional Class Return Before Taxes	(17.47)%	4.51%	7.19%
Institutional Class Return After Taxes on Distributions	(18.98)%	2.46%	5.35%
Institutional Class Return After Taxes on Distributions and Sale of Fund Shares	(9.47)%	3.08%	5.30%
Class R-1 Return Before Taxes	(18.26)%	3.58%	6.26%
Class R-3 Return Before Taxes	(17.98)%	3.90%	6.59%
Class R-4 Return Before Taxes	(17.81)%	4.09%	6.79%
Class R-5 Return Before Taxes	(17.71)%	4.24%	6.93%
S&P Target Date 2035 Index (reflects no deduction for fees, expenses, or taxes)	(15.00)%	4.63%	7.42%

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Institutional Class shares only and would be different for the other share classes.

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

James W. Fennessey (since 2008), Portfolio Manager

•

Scott Smith (since 2017), Portfolio Manager

•

Randy L. Welch (since 2008), Portfolio Manager

Purchase and Sale of Fund Shares

For Classes R-1, R-3, R-4, R-5, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances.

See Purchase of Fund Shares for more information.

169

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

170

Principal LifeTime 2040 Fund

Objective

The Fund seeks a total return consisting of long-term growth of capital and current income.

Fees and Expenses of the Fund

This table describes the fees and expenses that you may pay if you buy, hold, and sell shares of the Fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the tables and examples below. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in Class A Shares of Principal Funds, Inc. More information about these and other discounts is available from your financial intermediary and in “Choosing a Share Class and The Costs of Investing” beginning on page 404 of the Fund’s Prospectus, Appendix B to the Prospectus titled “Intermediary-Specific Sales Charge Waivers and Reductions,” and “Multiple Class Structure” beginning on page 4 of the Fund’s Statement of Additional Information.

Shareholder Fees (fees paid directly from your investment)

	Share Class
	A	J	Inst.	R-1	R-3	R-4	R-5
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	5.50%	None	None	None	None	None	None
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	1.00%	None	None	None	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	A	J	Inst.	R-1	R-3	R-4	R-5
Management Fees	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%
Distribution and/or Service (12b-1) Fees	0.25%	0.15%	N/A	0.35%	0.25%	0.10%	N/A
Other Expenses	0.13%	0.05%	0.01%	0.53%	0.32%	0.28%	0.26%
Acquired Fund Fees and Expenses	0.63%	0.63%	0.63%	0.63%	0.63%	0.63%	0.63%
Total Annual Fund Operating Expenses	1.01%	0.83%	0.64%	1.51%	1.20%	1.01%	0.89%
Expense Reimbursement(1)	0.00%	N/A	N/A	N/A	N/A	N/A	N/A
Total Annual Fund Operating Expenses after Expense Reimbursement	1.01%	0.83%	0.64%	1.51%	1.20%	1.01%	0.89%

(1)

171

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Class A	$647	$854	$1,077	$1,718
Class J	185	265	460	1,025
Institutional Class	65	205	357	798
Class R-1	154	477	824	1,802
Class R-3	122	381	660	1,455
Class R-4	103	322	558	1,236
Class R-5	91	284	493	1,096

With respect to Class J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class J	$85	$265	$460	$1,025

Portfolio Turnover

The Fund and each underlying fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs. These costs, which are not reflected in Annual Fund Operating Expenses or in the Example, affect the Fund’s and the underlying fund's performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 23.80% of the average value of its portfolio.

Principal Investment Strategies

The underlying funds invest in growth and value stocks of small, medium, and large market capitalization companies, fixed-income securities, domestic and foreign (including those in emerging markets) securities, securities denominated in foreign currencies, investment companies (including index funds), U.S. government and U.S. government-sponsored securities, and derivatives. A derivative is a financial arrangement, the value of which is derived from, or based on, a traditional security, asset, or market index. The underlying funds principally use equity index futures and options in order to gain exposure to a variety of securities or asset classes or attempt to reduce risk.

172

Principal Risks

Principal Risks of Investing in a Fund of Funds

Principal Risks due to the Fund’s Investments in Underlying Funds

Counterparty Risk. Counterparty risk is the risk that the counterparty to a contract or other obligation will be unable or unwilling to honor its obligations.

173

•

Foreign Currency Risk. Risks of investing in securities denominated in, or that trade in, foreign (non-U.S.) currencies include changes in foreign exchange rates and foreign exchange restrictions.

174

U.S. Government Securities Risk. Yields available from U.S. government securities are generally lower than yields from many other fixed-income securities.

Performance

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	17.96%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(18.87)%

175

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Class A Return Before Taxes	(22.90)%	3.20%	6.54%
Class A Return After Taxes on Distributions	(24.38)%	1.25%	4.78%
Class A Return After Taxes on Distributions and Sale of Fund Shares	(12.57)%	2.32%	4.94%
Class J Return Before Taxes	(19.01)%	4.58%	7.28%
Institutional Class Return Before Taxes	(18.13)%	4.75%	7.54%
Class R-1 Return Before Taxes	(18.83)%	3.85%	6.59%
Class R-3 Return Before Taxes	(18.55)%	4.18%	6.93%
Class R-4 Return Before Taxes	(18.38)%	4.38%	7.13%
Class R-5 Return Before Taxes	(18.32)%	4.49%	7.26%
S&P Target Date 2040 Index (reflects no deduction for fees, expenses, or taxes)	(15.57)%	4.97%	7.84%

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

James W. Fennessey (since 2007), Portfolio Manager

•

Scott Smith (since 2017), Portfolio Manager

•

Randy L. Welch (since 2007), Portfolio Manager

Purchase and Sale of Fund Shares

For Classes R-1, R-3, R-4, R-5, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances.

See Purchase of Fund Shares for more information.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

176

Principal LifeTime 2045 Fund

Objective

The Fund seeks a total return consisting of long-term growth of capital and current income.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment):

None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	Inst.	R-1	R-3	R-4	R-5
Management Fees	0.00%	0.00%	0.00%	0.00%	0.00%
Distribution and/or Service (12b-1) Fees	N/A	0.35%	0.25%	0.10%	N/A
Other Expenses	0.01%	0.53%	0.32%	0.28%	0.26%
Acquired Fund Fees and Expenses	0.65%	0.65%	0.65%	0.65%	0.65%
Total Annual Fund Operating Expenses	0.66%	1.53%	1.22%	1.03%	0.91%

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

	1 year	3 years	5 years	10 years
Institutional Class	$67	$211	$368	$822
Class R-1	156	483	834	1,824
Class R-3	124	387	670	1,477
Class R-4	105	328	569	1,259
Class R-5	93	290	504	1,120

Portfolio Turnover

The Fund and each underlying fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs. These costs, which are not reflected in Annual Fund Operating Expenses or in the Example, affect the Fund’s and the underlying fund's performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 23.80% of the average value of its portfolio.

Principal Investment Strategies

177

The underlying funds invest in growth and value stocks of small, medium, and large market capitalization companies, fixed-income securities, domestic and foreign (including those in emerging markets) securities, securities denominated in foreign currencies, investment companies (including index funds), and derivatives. A derivative is a financial arrangement, the value of which is derived from, or based on, a traditional security, asset, or market index. The underlying funds principally use equity index futures and options in order to gain exposure to a variety of securities or asset classes or attempt to reduce risk.

Principal Risks

Principal Risks of Investing in a Fund of Funds

178

Principal Risks due to the Fund’s Investments in Underlying Funds

Counterparty Risk. Counterparty risk is the risk that the counterparty to a contract or other obligation will be unable or unwilling to honor its obligations.

•

Foreign Currency Risk. Risks of investing in securities denominated in, or that trade in, foreign (non-U.S.) currencies include changes in foreign exchange rates and foreign exchange restrictions.

179

Performance

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	18.90%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(19.94)%

180

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Institutional Class Return Before Taxes	(18.52)%	4.98%	7.81%
Institutional Class Return After Taxes on Distributions	(20.12)%	3.20%	6.04%
Institutional Class Return After Taxes on Distributions and Sale of Fund Shares	(9.88)%	3.70%	5.86%
Class R-1 Return Before Taxes	(19.27)%	4.04%	6.85%
Class R-3 Return Before Taxes	(19.02)%	4.37%	7.19%
Class R-4 Return Before Taxes	(18.86)%	4.57%	7.40%
Class R-5 Return Before Taxes	(18.78)%	4.70%	7.52%
S&P Target Date 2045 Index (reflects no deduction for fees, expenses, or taxes)	(15.85)%	5.16%	8.11%

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Institutional Class shares only and would be different for the other share classes.

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

James W. Fennessey (since 2008), Portfolio Manager

•

Scott Smith (since 2017), Portfolio Manager

•

Randy L. Welch (since 2008), Portfolio Manager

Purchase and Sale of Fund Shares

For Classes R-1, R-3, R-4, R-5, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances.

See Purchase of Fund Shares for more information.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

181

Principal LifeTime 2050 Fund

Objective

The Fund seeks a total return consisting of long-term growth of capital and current income.

Fees and Expenses of the Fund

This table describes the fees and expenses that you may pay if you buy, hold, and sell shares of the Fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the tables and examples below. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in Class A Shares of Principal Funds, Inc. More information about these and other discounts is available from your financial intermediary and in “Choosing a Share Class and The Costs of Investing” beginning on page 404 of the Fund’s Prospectus, Appendix B to the Prospectus titled “Intermediary-Specific Sales Charge Waivers and Reductions,” and “Multiple Class Structure” beginning on page 4 of the Fund’s Statement of Additional Information.

Shareholder Fees (fees paid directly from your investment)

	Share Class
	A	J	Inst.	R-1	R-3	R-4	R-5
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	5.50%	None	None	None	None	None	None
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	1.00%	None	None	None	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	A	J	Inst.	R-1	R-3	R-4	R-5
Management Fees	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%
Distribution and/or Service (12b-1) Fees	0.25%	0.15%	N/A	0.35%	0.25%	0.10%	N/A
Other Expenses	0.18%	0.09%	0.01%	0.53%	0.32%	0.28%	0.26%
Acquired Fund Fees and Expenses	0.66%	0.66%	0.66%	0.66%	0.66%	0.66%	0.66%
Total Annual Fund Operating Expenses	1.09%	0.90%	0.67%	1.54%	1.23%	1.04%	0.92%
Expense Reimbursement(1)	(0.05)%	N/A	N/A	N/A	N/A	N/A	N/A
Total Annual Fund Operating Expenses after Expense Reimbursement	1.04%	0.90%	0.67%	1.54%	1.23%	1.04%	0.92%

(1)

182

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Class A	$650	$873	$1,113	$1,801
Class J	192	287	498	1,108
Institutional Class	68	214	373	835
Class R-1	157	486	839	1,834
Class R-3	125	390	676	1,489
Class R-4	106	331	574	1,271
Class R-5	94	293	509	1,131

With respect to Class J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class J	$92	$287	$498	$1,108

Portfolio Turnover

The Fund and each underlying fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs. These costs, which are not reflected in Annual Fund Operating Expenses or in the Example, affect the Fund’s and the underlying fund's performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 26.90% of the average value of its portfolio.

Principal Investment Strategies

The underlying funds invest in growth and value stocks of small, medium, and large market capitalization companies, fixed-income securities, domestic and foreign (including those in emerging markets) securities, securities denominated in foreign currencies, investment companies (including index funds), and derivatives. A derivative is a financial arrangement, the value of which is derived from, or based on, a traditional security, asset, or market index. The underlying funds principally use equity index futures and options in order to gain exposure to a variety of securities or asset classes or attempt to reduce risk.

183

Principal Risks

Principal Risks of Investing in a Fund of Funds

Principal Risks due to the Fund’s Investments in Underlying Funds

Counterparty Risk. Counterparty risk is the risk that the counterparty to a contract or other obligation will be unable or unwilling to honor its obligations.

184

•

Foreign Currency Risk. Risks of investing in securities denominated in, or that trade in, foreign (non-U.S.) currencies include changes in foreign exchange rates and foreign exchange restrictions.

185

Performance

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	19.45%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(20.88)%

186

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Class A Return Before Taxes	(23.56)%	3.52%	6.99%
Class A Return After Taxes on Distributions	(25.07)%	1.73%	5.36%
Class A Return After Taxes on Distributions and Sale of Fund Shares	(12.88)%	2.61%	5.34%
Class J Return Before Taxes	(19.72)%	4.88%	7.69%
Institutional Class Return Before Taxes	(18.79)%	5.09%	8.00%
Class R-1 Return Before Taxes	(19.55)%	4.18%	7.06%
Class R-3 Return Before Taxes	(19.30)%	4.51%	7.39%
Class R-4 Return Before Taxes	(19.10)%	4.71%	7.60%
Class R-5 Return Before Taxes	(19.06)%	4.83%	7.72%
S&P Target Date 2050 Index (reflects no deduction for fees, expenses, or taxes)	(15.98)%	5.26%	8.33%

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

James W. Fennessey (since 2007), Portfolio Manager

•

Scott Smith (since 2017), Portfolio Manager

•

Randy L. Welch (since 2007), Portfolio Manager

Purchase and Sale of Fund Shares

For Classes R-1, R-3, R-4, R-5, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances.

See Purchase of Fund Shares for more information.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

187

Principal LifeTime 2055 Fund

Objective

The Fund seeks a total return consisting of long-term growth of capital and current income.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment):

None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	Inst.	R-1	R-3	R-4	R-5
Management Fees	0.00%	0.00%	0.00%	0.00%	0.00%
Distribution and/or Service (12b-1) Fees	N/A	0.35%	0.25%	0.10%	N/A
Other Expenses	0.01%	0.54%	0.33%	0.29%	0.27%
Acquired Fund Fees and Expenses	0.66%	0.66%	0.66%	0.66%	0.66%
Total Annual Fund Operating Expenses	0.67%	1.55%	1.24%	1.05%	0.93%

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

	1 year	3 years	5 years	10 years
Institutional Class	$68	$214	$373	$835
Class R-1	158	490	845	1,845
Class R-3	126	393	681	1,500
Class R-4	107	334	579	1,283
Class R-5	95	296	515	1,143

Portfolio Turnover

The Fund and each underlying fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs. These costs, which are not reflected in Annual Fund Operating Expenses or in the Example, affect the Fund’s and the underlying fund's performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 22.60% of the average value of its portfolio.

Principal Investment Strategies

188

The underlying funds invest in growth and value stocks of small, medium, and large market capitalization companies, fixed-income securities, domestic and foreign (including those in emerging markets) securities, securities denominated in foreign currencies, investment companies (including index funds), and derivatives. A derivative is a financial arrangement, the value of which is derived from, or based on, a traditional security, asset, or market index. The underlying funds principally use equity index futures and options in order to gain exposure to a variety of securities or asset classes or attempt to reduce risk.

Principal Risks

Principal Risks of Investing in a Fund of Funds

189

Principal Risks due to the Fund’s Investments in Underlying Funds

Counterparty Risk. Counterparty risk is the risk that the counterparty to a contract or other obligation will be unable or unwilling to honor its obligations.

•

Foreign Currency Risk. Risks of investing in securities denominated in, or that trade in, foreign (non-U.S.) currencies include changes in foreign exchange rates and foreign exchange restrictions.

190

Performance

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	19.93%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(21.46)%

191

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Institutional Class Return Before Taxes	(18.85)%	5.21%	8.11%
Institutional Class Return After Taxes on Distributions	(20.40)%	3.63%	6.59%
Institutional Class Return After Taxes on Distributions and Sale of Fund Shares	(10.07)%	3.93%	6.22%
Class R-1 Return Before Taxes	(19.51)%	4.30%	7.18%
Class R-3 Return Before Taxes	(19.24)%	4.62%	7.51%
Class R-4 Return Before Taxes	(19.15)%	4.81%	7.71%
Class R-5 Return Before Taxes	(18.99)%	4.95%	7.85%
S&P Target Date 2055 Index (reflects no deduction for fees, expenses, or taxes)	(15.98)%	5.31%	8.46%

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Institutional Class shares only and would be different for the other share classes.

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

James W. Fennessey (since 2008), Portfolio Manager

•

Scott Smith (since 2017), Portfolio Manager

•

Randy L. Welch (since 2008), Portfolio Manager

Purchase and Sale of Fund Shares

For Classes R-1, R-3, R-4, R-5, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances.

See Purchase of Fund Shares for more information.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

192

Principal LifeTime 2060 Fund

Objective

The Fund seeks a total return consisting of long-term growth of capital and current income.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment)

	Share Class
	J	Inst.	R-1	R-3	R-4	R-5
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	None	None	None	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	J	Inst.	R-1	R-3	R-4	R-5
Management Fees	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%
Distribution and/or Service (12b-1) Fees	0.15%	N/A	0.35%	0.25%	0.10%	N/A
Other Expenses	0.28%	0.01%	0.54%	0.33%	0.29%	0.27%
Acquired Fund Fees and Expenses	0.66%	0.66%	0.66%	0.66%	0.66%	0.66%
Total Annual Fund Operating Expenses	1.09%	0.67%	1.55%	1.24%	1.05%	0.93%
Expense Reimbursement(1)	(0.05)%	N/A	N/A	N/A	N/A	N/A
Total Annual Fund Operating Expenses after Expense Reimbursement	1.04%	0.67%	1.55%	1.24%	1.05%	0.93%

(1)

193

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Class J	$206	$342	$596	$1,324
Institutional Class	68	214	373	835
Class R-1	158	490	845	1,845
Class R-3	126	393	681	1,500
Class R-4	107	334	579	1,283
Class R-5	95	296	515	1,143

With respect to Class J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class J	$106	$342	$596	$1,324

Portfolio Turnover

The Fund and each underlying fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs. These costs, which are not reflected in Annual Fund Operating Expenses or in the Example, affect the Fund’s and the underlying fund's performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 21.70% of the average value of its portfolio.

Principal Investment Strategies

The underlying funds invest in growth and value stocks of small, medium, and large market capitalization companies, fixed-income securities, domestic and foreign (including those in emerging markets) securities, securities denominated in foreign currencies, investment companies (including index funds), and derivatives. A derivative is a financial arrangement, the value of which is derived from, or based on, a traditional security, asset, or market index. The underlying funds principally use equity index futures and options in order to gain exposure to a variety of securities or asset classes or attempt to reduce risk.

194

Principal Risks

Principal Risks of Investing in a Fund of Funds

Principal Risks due to the Fund’s Investments in Underlying Funds

Counterparty Risk. Counterparty risk is the risk that the counterparty to a contract or other obligation will be unable or unwilling to honor its obligations.

•

195

•

Foreign Currency Risk. Risks of investing in securities denominated in, or that trade in, foreign (non-U.S.) currencies include changes in foreign exchange rates and foreign exchange restrictions.

196

Performance

Life of Fund returns are measured from the date the Fund’s shares were first sold (March 1, 2013).

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	20.12%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(21.80)%

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	Life of Fund
			03/01/13
Institutional Class Return Before Taxes	(18.82)%	5.30%	7.90%
Institutional Class Return After Taxes on Distributions	(20.35)%	3.83%	6.70%
Institutional Class Return After Taxes on Distributions and Sale of Fund Shares	(10.07)%	4.02%	6.18%
Class J Return Before Taxes	(19.86)%	4.92%	7.53%
Class R-1 Return Before Taxes	(19.52)%	4.40%	6.98%
Class R-3 Return Before Taxes	(19.26)%	4.72%	7.33%
Class R-4 Return Before Taxes	(19.12)%	4.92%	7.52%
Class R-5 Return Before Taxes	(19.03)%	5.05%	7.64%
S&P Target Date 2060 Index (reflects no deduction for fees, expenses, or taxes)	(16.02)%	5.35%	8.13%

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Institutional Class shares only and would be different for the other share classes.

197

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

James W. Fennessey (since 2013), Portfolio Manager

•

Scott Smith (since 2017), Portfolio Manager

•

Randy L. Welch (since 2013), Portfolio Manager

Purchase and Sale of Fund Shares

For Classes R-1, R-3, R-4, R-5, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances.

See Purchase of Fund Shares for more information.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

198

Principal LifeTime 2065 Fund

Objective

The Fund seeks a total return consisting of long-term growth of capital and current income.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment):

None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	Inst.	R-1	R-3	R-4	R-5
Management Fees	0.00%	0.00%	0.00%	0.00%	0.00%
Distribution and/or Service (12b-1) Fees	N/A	0.35%	0.25%	0.10%	N/A
Other Expenses	0.05%	0.55%	0.34%	0.30%	0.28%
Acquired Fund Fees and Expenses	0.66%	0.66%	0.66%	0.66%	0.66%
Total Annual Fund Operating Expenses	0.71%	1.56%	1.25%	1.06%	0.94%

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

	1 year	3 years	5 years	10 years
Institutional Class	$73	$227	$395	$883
Class R-1	159	493	850	1,856
Class R-3	127	397	686	1,511
Class R-4	108	337	585	1,294
Class R-5	96	300	520	1,155

Portfolio Turnover

The Fund and each underlying fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs. These costs, which are not reflected in Annual Fund Operating Expenses or in the Example, affect the Fund’s and the underlying fund's performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 28.40% of the average value of its portfolio.

Principal Investment Strategies

199

The underlying funds invest in growth and value stocks of small, medium, and large market capitalization companies, fixed-income securities, domestic and foreign (including those in emerging markets) securities, securities denominated in foreign currencies, investment companies (including index funds), and derivatives. A derivative is a financial arrangement, the value of which is derived from, or based on, a traditional security, asset, or market index. The underlying funds principally use equity index futures and options in order to gain exposure to a variety of securities or asset classes or attempt to reduce risk.

Principal Risks

Principal Risks of Investing in a Fund of Funds

200

Principal Risks due to the Fund’s Investments in Underlying Funds

Counterparty Risk. Counterparty risk is the risk that the counterparty to a contract or other obligation will be unable or unwilling to honor its obligations.

•

Foreign Currency Risk. Risks of investing in securities denominated in, or that trade in, foreign (non-U.S.) currencies include changes in foreign exchange rates and foreign exchange restrictions.

201

Performance

Life of Fund returns are measured from the date the Fund’s shares were first sold (September 6, 2017).

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	20.50%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(21.97)%

202

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	Life of Fund
			09/06/17
Institutional Class Return Before Taxes	(18.83)%	5.29%	6.46%
Institutional Class Return After Taxes on Distributions	(20.03)%	4.21%	5.31%
Institutional Class Return After Taxes on Distributions and Sale of Fund Shares	(10.30)%	3.99%	4.89%
Class R-1 Return Before Taxes	(19.48)%	4.45%	5.60%
Class R-3 Return Before Taxes	(19.30)%	4.75%	5.90%
Class R-4 Return Before Taxes	(19.11)%	4.95%	6.11%
Class R-5 Return Before Taxes	(19.01)%	5.09%	6.25%
S&P Target Date 2065+ Index (reflects no deduction for fees, expenses, or taxes)	(15.96)%	5.38%	6.59%

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Institutional Class shares only and would be different for the other share classes.

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

James W. Fennessey (since 2017), Portfolio Manager

•

Scott Smith (since 2017), Portfolio Manager

•

Randy L. Welch (since 2017), Portfolio Manager

Purchase and Sale of Fund Shares

For Classes R-1, R-3, R-4, R-5, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances.

See Purchase of Fund Shares for more information.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

203

Principal LifeTime 2070 Fund

Objective

The Fund seeks a total return consisting of long-term growth of capital and current income.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment)

	Share Class
	J	Inst.	R-1	R-3	R-4	R-5
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	None	None	None	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	J	Inst.	R-1	R-3	R-4	R-5
Management Fees	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%
Distribution and/or Service (12b-1) Fees	0.15%	N/A	0.35%	0.25%	0.10%	N/A
Other Expenses(1)	2.42%	0.80%	0.86%	0.65%	0.61%	0.59%
Acquired Fund Fees and Expenses(1)	0.67%	0.67%	0.67%	0.67%	0.67%	0.67%
Total Annual Fund Operating Expenses	3.24%	1.47%	1.88%	1.57%	1.38%	1.26%
Expense Reimbursement(2)	(2.27)%	(0.75)%	(0.28)%	(0.28)%	(0.28)%	(0.28)%
Total Annual Fund Operating Expenses after Expense Reimbursement	0.97%	0.72%	1.60%	1.29%	1.10%	0.98%

(1)

Based on estimated amounts for the current fiscal year.

(2)

Principal Global Investors, LLC (“PGI”), the investment advisor, has contractually agreed to limit the Fund's expenses by paying, if necessary, expenses normally payable by the Fund, (excluding interest expense, expenses related to fund investments, acquired fund fees and expenses, and tax reclaim recovery expenses and other extraordinary expenses) to maintain a total level of operating expenses (expressed as a percent of average net assets on an annualized basis) not to exceed 0.30% for Class J, 0.05% for Institutional Class, 0.93% for Class R-1, 0.62% for Class R-3, 0.43% for Class R-4 and 0.31% for Class R-5 shares. It is expected that the expense limits will continue through the period ending February 28, 2025; however, Principal Funds, Inc. and PGI, the parties to the agreement, may mutually agree to terminate the expense limits prior to the end of the period. Subject to applicable expense limits, the Fund may reimburse PGI for expenses incurred during the current fiscal year.

204

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years
Class J	$199	$785
Institutional Class	74	391
Class R-1	163	564
Class R-3	131	468
Class R-4	112	409
Class R-5	100	372

With respect to Class J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years
Class J	$99	$785

Portfolio Turnover

The Fund and each underlying fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs. These costs, which are not reflected in Annual Fund Operating Expenses or in the Example, affect the Fund’s and the underlying fund's performance. This is a new fund and does not yet have a portfolio turnover rate to disclose.

Principal Investment Strategies

In selecting underlying funds and target weights, Principal Global Investors, LLC (“PGI”), the Fund’s investment advisor, considers both quantitative measures (e.g., past performance, expected levels of risk and returns, expense levels, diversification, and style consistency) and qualitative factors (e.g., organizational stability, investment experience, investment and risk management processes, and information, trading, and compliance systems). There are no minimum or maximum percentages of assets that the Fund must invest in a specific asset class or underlying fund.

The underlying funds invest in growth and value stocks of small, medium, and large market capitalization companies, fixed-income securities, domestic and foreign (including those in emerging markets) securities, securities denominated in foreign currencies, investment companies (including index funds), and derivatives. A derivative is a financial arrangement, the value of which is derived from, or based on, a traditional security, asset, or market index. The underlying funds principally use equity index futures and options in order to gain exposure to a variety of securities or asset classes or attempt to reduce risk.

205

Principal Risks

Principal Risks of Investing in a Fund of Funds

Principal Risks due to the Fund’s Investments in Underlying Funds

Counterparty Risk. Counterparty risk is the risk that the counterparty to a contract or other obligation will be unable or unwilling to honor its obligations.

•

206

•

Foreign Currency Risk. Risks of investing in securities denominated in, or that trade in, foreign (non-U.S.) currencies include changes in foreign exchange rates and foreign exchange restrictions.

207

Performance

No performance information is shown below because the Fund has not yet had a calendar year of performance. The Fund’s performance is benchmarked against the S&P Target Date 2065+ Index. Performance information provides an indication of the risks of investing in the Fund. Past performance is not necessarily an indication of how the Fund will perform in the future. You may get updated performance information at www.PrincipalAM.com.

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

James W. Fennessey (since 2023), Portfolio Manager

•

Scott Smith (since 2023), Portfolio Manager

•

Randy L. Welch (since 2023), Portfolio Manager

Purchase and Sale of Fund Shares

For Classes R-1, R-3, R-4, R-5, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances.

See Purchase of Fund Shares for more information.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

208

Principal LifeTime Hybrid Income Fund

Objective

The Fund seeks current income, and as a secondary objective, capital appreciation.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment)

	Share Class
	J	Inst.	R-6
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	J	Inst.	R-6
Management Fees	0.00%	0.00%	0.00%
Distribution and/or Service (12b-1) Fees	0.15%	N/A	N/A
Other Expenses	0.13%	0.16%	0.08%
Acquired Fund Fees and Expenses	0.33%	0.33%	0.33%
Total Annual Fund Operating Expenses	0.61%	0.49%	0.41%
Expense Reimbursement(1)	N/A	(0.11)%	(0.06)%
Total Annual Fund Operating Expenses After Expense Reimbursement	0.61%	0.38%	0.35%

(1)

Principal Global Investors, LLC (“PGI”), the investment advisor, has contractually agreed to limit the Fund’s expenses by paying, if necessary, expenses normally payable by the Fund (excluding interest expense, expenses related to fund investments, acquired fund fees and expenses, and tax reclaim recovery expenses and other extraordinary expenses) to maintain a total level of operating expenses (expressed as a percent of average net assets on an annualized basis) not to exceed 0.05% for Institutional Class shares. In addition, for Class R-6 shares, the expense limit will maintain “Other Expenses” (expressed as a percent of average net assets on an annualized basis) not to exceed 0.02% (excluding interest expense, expenses related to fund investments, acquired fund fees and expenses, and tax reclaim recovery expenses and other extraordinary expenses). It is expected that the expense limits will continue through the period ending February 29, 2024; however, Principal Funds, Inc. and PGI, the parties to the agreement, may mutually agree to terminate the expense limits prior to the end of the period. Subject to applicable expense limits, the Fund may reimburse PGI for expenses incurred during the current fiscal year.

209

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Class J	$162	$195	$340	$762
Institutional Class	39	146	263	605
Class R-6	36	126	224	512

With respect to Class J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class J	$62	$195	$340	$762

Portfolio Turnover

Principal Investment Strategies

The Fund invests according to an asset allocation strategy designed for investors primarily seeking current income and secondarily capital appreciation. The Fund’s asset allocation is designed for investors who are approximately 10 years beyond the normal retirement age of 65. The Fund is a fund of funds that invests in underlying funds of Principal Funds, Inc. (“PFI”), with a majority of the Fund’s assets invested in index funds. Its underlying funds consist of domestic and foreign equity funds, fixed-income funds, real asset funds, and other funds that aim to offer diversification beyond traditional equity and fixed-income securities. The diversification of the Fund is designed to moderate overall price volatility. The Fund may add, remove, or substitute underlying funds at any time.

The underlying funds invest in growth and value stocks of large market capitalization companies, fixed-income securities, domestic and foreign securities, securities denominated in foreign currencies, investment companies (including index funds), securitized products, U.S. government and U.S. government-sponsored securities, and derivatives. A derivative is a financial arrangement, the value of which is derived from, or based on, a traditional security, asset, or market index. The underlying funds principally use futures, options, swaps (including, for example, credit default, interest rate, and currency swaps), and forwards in order to gain exposure to a variety of securities or asset classes or attempt to reduce risk.

210

Principal Risks

Principal Risks of Investing in a Fund of Funds

Principal Risks due to the Fund’s Investments in Underlying Funds

Counterparty Risk. Counterparty risk is the risk that the counterparty to a contract or other obligation will be unable or unwilling to honor its obligations.

•

211

•

Foreign Currency Risk. Risks of investing in securities denominated in, or that trade in, foreign (non-U.S.) currencies include changes in foreign exchange rates and foreign exchange restrictions.

212

U.S. Government Securities Risk. Yields available from U.S. government securities are generally lower than yields from many other fixed-income securities.

Performance

Life of Fund returns are measured from the date the Fund’s shares were first sold (September 30, 2014).

For periods prior to the inception date of Class R-6 shares (August 24, 2015) and Class J shares (March 1, 2018), the performance shown in the table for these newer classes is that of the Fund’s Institutional Class shares, adjusted to reflect the respective fees and expenses of each class. These adjustments result in performance for such periods that is no higher than the historical performance of the Institutional Class shares, which were first sold on September 30, 2014.

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	7.43%
Lowest return for a quarter during the period of the bar chart above:	Q2 2022	(8.44)%

213

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	Life of Fund
			09/30/14
Institutional Class Return Before Taxes	(13.20)%	1.79%	2.72%
Institutional Class Return After Taxes on Distributions	(14.48)%	0.44%	1.44%
Institutional Class Return After Taxes on Distributions and Sale of Fund Shares	(7.33)%	1.04%	1.70%
Class J Return Before Taxes	(14.21)%	1.56%	2.48%
Class R-6 Return Before Taxes	(13.15)%	1.82%	2.75%
S&P Target Date Retirement Income Index (reflects no deduction for fees, expenses, or taxes)	(11.18)%	2.33%	3.19%

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Institutional Class shares only and would be different for the other share classes.

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

James W. Fennessey (since 2014), Portfolio Manager

•

Scott Smith (since 2017), Portfolio Manager

•

Randy L. Welch (since 2014), Portfolio Manager

Purchase and Sale of Fund Shares

For Class R-6 and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

214

Principal LifeTime Hybrid 2015 Fund

Objective

The Fund seeks a total return consisting of long-term growth of capital and current income.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment)

	Share Class
	J	Inst.	R-6
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	J	Inst.	R-6
Management Fees	0.00%	0.00%	0.00%
Distribution and/or Service (12b-1) Fees	0.15%	N/A	N/A
Other Expenses	0.10%	0.13%	0.05%
Acquired Fund Fees and Expenses	0.33%	0.33%	0.33%
Total Annual Fund Operating Expenses	0.58%	0.46%	0.38%
Expense Reimbursement(1)	N/A	(0.08)%	(0.03)%
Total Annual Fund Operating Expenses After Expense Reimbursement	0.58%	0.38%	0.35%

(1)

Principal Global Investors, LLC (“PGI”), the investment advisor, has contractually agreed to limit the Fund’s expenses by paying, if necessary, expenses normally payable by the Fund (excluding interest expense, expenses related to fund investments, acquired fund fees and expenses, and tax reclaim recovery expenses and other extraordinary expenses) to maintain a total level of operating expenses (expressed as a percent of average net assets on an annualized basis) not to exceed 0.05% for Institutional Class shares. In addition, for Class R-6 shares, the expense limit will maintain “Other Expenses” (expressed as a percent of average net assets on an annualized basis) not to exceed 0.02% (excluding interest expense, expenses related to fund investments, acquired fund fees and expenses, and tax reclaim recovery expenses and other extraordinary expenses). It is expected that the expense limits will continue through the period ending February 29, 2024; however, Principal Funds, Inc. and PGI, the parties to the agreement, may mutually agree to terminate the expense limits prior to the end of the period. Subject to applicable expense limits, the Fund may reimburse PGI for expenses incurred during the current fiscal year.

215

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Class J	$159	$186	$324	$726
Institutional Class	39	140	250	571
Class R-6	36	119	210	477

With respect to Class J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class J	$59	$186	$324	$726

Portfolio Turnover

Principal Investment Strategies

The Fund operates as a “target date fund” that invests according to an asset allocation strategy designed for investors having a retirement investment goal close to the year in the Fund’s name. The Fund is a fund of funds that invests in underlying funds of Principal Funds, Inc. (“PFI”), with a majority of the Fund’s assets invested in index funds. Its underlying funds consist of domestic and foreign equity funds, fixed-income funds, real asset funds, and other funds that aim to offer diversification beyond traditional equity and fixed-income securities. The asset class diversification of the Fund is designed to moderate overall price volatility. The Fund may add, remove, or substitute underlying funds at any time.

The underlying funds invest in growth and value stocks of small, medium, and large market capitalization companies, fixed-income securities, domestic and foreign securities, securities denominated in foreign currencies, investment companies (including index funds), securitized products, U.S. government and U.S. government-sponsored securities, and derivatives. A derivative is a financial arrangement, the value of which is derived from, or based on, a traditional security, asset, or market index. The underlying funds principally use futures, options, swaps (including, for example, credit default, interest rate, and currency swaps), and forwards in order to gain exposure to a variety of securities or asset classes or attempt to reduce risk.

The Fund’s asset allocation will become more conservative over time as investment goals near (for example, retirement, which is assumed to begin at age 65) and investors become more risk-averse. Approximately 10 years after its target year, the Fund’s underlying fund allocation is expected to match that of the Principal LifeTime Hybrid Income Fund. At that time, the Fund may be combined with the Principal LifeTime Hybrid Income Fund if the Board of Directors determines that the combination is in the best interests of Fund shareholders. It is expected that at the target date in the Fund’s name, the shareholder will begin gradually withdrawing the account’s value.

216

Principal Risks

Principal Risks of Investing in a Fund of Funds

Principal Risks due to the Fund’s Investments in Underlying Funds

Counterparty Risk. Counterparty risk is the risk that the counterparty to a contract or other obligation will be unable or unwilling to honor its obligations.

•

217

•

Foreign Currency Risk. Risks of investing in securities denominated in, or that trade in, foreign (non-U.S.) currencies include changes in foreign exchange rates and foreign exchange restrictions.

218

U.S. Government Securities Risk. Yields available from U.S. government securities are generally lower than yields from many other fixed-income securities.

Performance

Life of Fund returns are measured from the date the Fund’s shares were first sold (September 30, 2014).

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	9.79%
Lowest return for a quarter during the period of the bar chart above:	Q2 2022	(8.93)%

219

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	Life of Fund
			09/30/14
Institutional Class Return Before Taxes	(13.61)%	2.81%	4.06%
Institutional Class Return After Taxes on Distributions	(14.86)%	1.47%	2.79%
Institutional Class Return After Taxes on Distributions and Sale of Fund Shares	(7.55)%	1.86%	2.81%
Class J Return Before Taxes	(14.57)%	2.59%	3.83%
Class R-6 Return Before Taxes	(13.63)%	2.83%	4.09%
S&P Target Date 2015 Index (reflects no deduction for fees, expenses, or taxes)	(12.17)%	3.07%	4.19%

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Institutional Class shares only and would be different for the other share classes.

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

James W. Fennessey (since 2014), Portfolio Manager

•

Scott Smith (since 2017), Portfolio Manager

•

Randy L. Welch (since 2014), Portfolio Manager

Purchase and Sale of Fund Shares

For Class R-6 and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

220

Principal LifeTime Hybrid 2020 Fund

Objective

The Fund seeks a total return consisting of long-term growth of capital and current income.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment)

	Share Class
	J	Inst.	R-6
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	J	Inst.	R-6
Management Fees	0.00%	0.00%	0.00%
Distribution and/or Service (12b-1) Fees	0.15%	N/A	N/A
Other Expenses	0.05%	0.08%	0.02%
Acquired Fund Fees and Expenses	0.33%	0.33%	0.33%
Total Annual Fund Operating Expenses	0.53%	0.41%	0.35%
Expense Reimbursement(1)	N/A	(0.03)%	0.00%
Total Annual Fund Operating Expenses After Expense Reimbursement	0.53%	0.38%	0.35%

(1)

Principal Global Investors, LLC (“PGI”), the investment advisor, has contractually agreed to limit the Fund’s expenses by paying, if necessary, expenses normally payable by the Fund (excluding interest expense, expenses related to fund investments, acquired fund fees and expenses, and tax reclaim recovery expenses and other extraordinary expenses) to maintain a total level of operating expenses (expressed as a percent of average net assets on an annualized basis) not to exceed 0.05% for Institutional Class shares. In addition, for Class R-6 shares, the expense limit will maintain “Other Expenses” (expressed as a percent of average net assets on an annualized basis) not to exceed 0.02% (excluding interest expense, expenses related to fund investments, acquired fund fees and expenses, and tax reclaim recovery expenses and other extraordinary expenses). It is expected that the expense limits will continue through the period ending February 29, 2024; however, Principal Funds, Inc. and PGI, the parties to the agreement, may mutually agree to terminate the expense limits prior to the end of the period. Subject to applicable expense limits, the Fund may reimburse PGI for expenses incurred during the current fiscal year.

221

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Class J	$154	$170	$296	$665
Institutional Class	39	129	227	515
Class R-6	36	113	197	443

With respect to Class J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class J	$54	$170	$296	$665

Portfolio Turnover

Principal Investment Strategies

The Fund operates as a “target date fund” that invests according to an asset allocation strategy designed for investors having a retirement investment goal close to the year in the Fund’s name. The Fund is a fund of funds that invests in underlying funds of Principal Funds, Inc. (“PFI”), with a majority of the Fund’s assets invested in index funds. Its underlying funds consist of domestic and foreign equity funds, fixed-income funds, real asset funds, and other funds that aim to offer diversification beyond traditional equity and fixed-income securities. The asset class diversification of the Fund is designed to moderate overall price volatility. The Fund may add, remove, or substitute underlying funds at any time.

The underlying funds invest in growth and value stocks of small, medium, and large market capitalization companies, fixed-income securities, domestic and foreign securities, securities denominated in foreign currencies, investment companies (including index funds), securitized products, U.S. government and U.S. government-sponsored securities, and derivatives. A derivative is a financial arrangement, the value of which is derived from, or based on, a traditional security, asset, or market index. The underlying funds principally use futures, options, swaps (including, for example, credit default, interest rate, and currency swaps), and forwards in order to gain exposure to a variety of securities or asset classes or attempt to reduce risk.

The Fund’s asset allocation will become more conservative over time as investment goals near (for example, retirement, which is assumed to begin at age 65) and investors become more risk-averse. Approximately 10 years after its target year, the Fund’s underlying fund allocation is expected to match that of the Principal LifeTime Hybrid Income Fund. At that time, the Fund may be combined with the Principal LifeTime Hybrid Income Fund if the Board of Directors determines that the combination is in the best interests of Fund shareholders. It is expected that at the target date in the Fund’s name, the shareholder will begin gradually withdrawing the account’s value.

222

Principal Risks

Principal Risks of Investing in a Fund of Funds

Principal Risks due to the Fund’s Investments in Underlying Funds

Counterparty Risk. Counterparty risk is the risk that the counterparty to a contract or other obligation will be unable or unwilling to honor its obligations.

•

223

•

Foreign Currency Risk. Risks of investing in securities denominated in, or that trade in, foreign (non-U.S.) currencies include changes in foreign exchange rates and foreign exchange restrictions.

224

U.S. Government Securities Risk. Yields available from U.S. government securities are generally lower than yields from many other fixed-income securities.

Performance

Life of Fund returns are measured from the date the Fund’s shares were first sold (September 30, 2014).

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	11.16%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(10.35)%

225

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	Life of Fund
			09/30/14
Institutional Class Return Before Taxes	(14.35)%	3.28%	4.70%
Institutional Class Return After Taxes on Distributions	(15.93)%	1.84%	3.37%
Institutional Class Return After Taxes on Distributions and Sale of Fund Shares	(7.76)%	2.26%	3.34%
Class J Return Before Taxes	(15.23)%	3.10%	4.48%
Class R-6 Return Before Taxes	(14.32)%	3.32%	4.72%
S&P Target Date 2020 Index (reflects no deduction for fees, expenses, or taxes)	(12.82)%	3.14%	4.49%

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Institutional Class shares only and would be different for the other share classes.

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

James W. Fennessey (since 2014), Portfolio Manager

•

Scott Smith (since 2017), Portfolio Manager

•

Randy L. Welch (since 2014), Portfolio Manager

Purchase and Sale of Fund Shares

For Class R-6 and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

226

Principal LifeTime Hybrid 2025 Fund

Objective

The Fund seeks a total return consisting of long-term growth of capital and current income.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment)

	Share Class
	J	Inst.	R-6
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	J	Inst.	R-6
Management Fees	0.00%	0.00%	0.00%
Distribution and/or Service (12b-1) Fees	0.15%	N/A	N/A
Other Expenses	0.05%	0.07%	0.02%
Acquired Fund Fees and Expenses	0.33%	0.33%	0.33%
Total Annual Fund Operating Expenses	0.53%	0.40%	0.35%
Expense Reimbursement(1)	N/A	(0.02)%	0.00%
Total Annual Fund Operating Expenses After Expense Reimbursement	0.53%	0.38%	0.35%

(1)

Principal Global Investors, LLC (“PGI”), the investment advisor, has contractually agreed to limit the Fund’s expenses by paying, if necessary, expenses normally payable by the Fund (excluding interest expense, expenses related to fund investments, acquired fund fees and expenses, and tax reclaim recovery expenses and other extraordinary expenses) to maintain a total level of operating expenses (expressed as a percent of average net assets on an annualized basis) not to exceed 0.05% for Institutional Class shares. In addition, for Class R-6 shares, the expense limit will maintain “Other Expenses” (expressed as a percent of average net assets on an annualized basis) not to exceed 0.02% (excluding interest expense, expenses related to fund investments, acquired fund fees and expenses, and tax reclaim recovery expenses and other extraordinary expenses). It is expected that the expense limits will continue through the period ending February 29, 2024; however, Principal Funds, Inc. and PGI, the parties to the agreement, may mutually agree to terminate the expense limits prior to the end of the period. Subject to applicable expense limits, the Fund may reimburse PGI for expenses incurred during the current fiscal year.

227

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Class J	$154	$170	$296	$665
Institutional Class	39	126	222	503
Class R-6	36	113	197	443

With respect to Class J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class J	$54	$170	$296	$665

Portfolio Turnover

Principal Investment Strategies

The Fund operates as a “target date fund” that invests according to an asset allocation strategy designed for investors having a retirement investment goal close to the year in the Fund’s name. The Fund is a fund of funds that invests in underlying funds of Principal Funds, Inc. (“PFI”), with a majority of the Fund’s assets invested in index funds. Its underlying funds consist of domestic and foreign equity funds, fixed-income funds, real asset funds, and other funds that aim to offer diversification beyond traditional equity and fixed-income securities. The asset class diversification of the Fund is designed to moderate overall price volatility. The Fund may add, remove, or substitute underlying funds at any time.

The underlying funds invest in growth and value stocks of small, medium, and large market capitalization companies, fixed-income securities, domestic and foreign securities, securities denominated in foreign currencies, investment companies (including index funds), securitized products, U.S. government and U.S. government-sponsored securities, and derivatives. A derivative is a financial arrangement, the value of which is derived from, or based on, a traditional security, asset, or market index. The underlying funds principally use futures, options, swaps (including, for example, credit default, interest rate, and currency swaps), and forwards in order to gain exposure to a variety of securities or asset classes or attempt to reduce risk.

The Fund’s asset allocation will become more conservative over time as investment goals near (for example, retirement, which is assumed to begin at age 65) and investors become more risk-averse. Approximately 10 years after its target year, the Fund’s underlying fund allocation is expected to match that of the Principal LifeTime Hybrid Income Fund. At that time, the Fund may be combined with the Principal LifeTime Hybrid Income Fund if the Board of Directors determines that the combination is in the best interests of Fund shareholders. It is expected that at the target date in the Fund’s name, the shareholder will begin gradually withdrawing the account’s value.

228

Principal Risks

Principal Risks of Investing in a Fund of Funds

Principal Risks due to the Fund’s Investments in Underlying Funds

Counterparty Risk. Counterparty risk is the risk that the counterparty to a contract or other obligation will be unable or unwilling to honor its obligations.

•

229

•

Foreign Currency Risk. Risks of investing in securities denominated in, or that trade in, foreign (non-U.S.) currencies include changes in foreign exchange rates and foreign exchange restrictions.

230

U.S. Government Securities Risk. Yields available from U.S. government securities are generally lower than yields from many other fixed-income securities.

Performance

Life of Fund returns are measured from the date the Fund’s shares were first sold (September 30, 2014).

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	12.56%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(12.50)%

231

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	Life of Fund
			09/30/14
Institutional Class Return Before Taxes	(15.17)%	3.76%	5.29%
Institutional Class Return After Taxes on Distributions	(16.64)%	2.41%	4.01%
Institutional Class Return After Taxes on Distributions and Sale of Fund Shares	(8.25)%	2.67%	3.83%
Class J Return Before Taxes	(16.10)%	3.57%	5.07%
Class R-6 Return Before Taxes	(15.21)%	3.79%	5.31%
S&P Target Date 2025 Index (reflects no deduction for fees, expenses, or taxes)	(13.14)%	3.75%	5.11%

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Institutional Class shares only and would be different for the other share classes.

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

James W. Fennessey (since 2014), Portfolio Manager

•

Scott Smith (since 2017), Portfolio Manager

•

Randy L. Welch (since 2014), Portfolio Manager

Purchase and Sale of Fund Shares

For Class R-6 and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

232

Principal LifeTime Hybrid 2030 Fund

Objective

The Fund seeks a total return consisting of long-term growth of capital and current income.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment)

	Share Class
	J	Inst.	R-6
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	J	Inst.	R-6
Management Fees	0.00%	0.00%	0.00%
Distribution and/or Service (12b-1) Fees	0.15%	N/A	N/A
Other Expenses	0.06%	0.07%	0.02%
Acquired Fund Fees and Expenses	0.31%	0.31%	0.31%
Total Annual Fund Operating Expenses	0.52%	0.38%	0.33%
Expense Reimbursement(1)	N/A	(0.02)%	0.00%
Total Annual Fund Operating Expenses After Expense Reimbursement	0.52%	0.36%	0.33%

(1)

Principal Global Investors, LLC (“PGI”), the investment advisor, has contractually agreed to limit the Fund’s expenses by paying, if necessary, expenses normally payable by the Fund (excluding interest expense, expenses related to fund investments, acquired fund fees and expenses, and tax reclaim recovery expenses and other extraordinary expenses) to maintain a total level of operating expenses (expressed as a percent of average net assets on an annualized basis) not to exceed 0.05% for Institutional Class shares. In addition, for Class R-6 shares, the expense limit will maintain “Other Expenses” (expressed as a percent of average net assets on an annualized basis) not to exceed 0.02% (excluding interest expense, expenses related to fund investments, acquired fund fees and expenses, and tax reclaim recovery expenses and other extraordinary expenses). It is expected that the expense limits will continue through the period ending February 29, 2024; however, Principal Funds, Inc. and PGI, the parties to the agreement, may mutually agree to terminate the expense limits prior to the end of the period. Subject to applicable expense limits, the Fund may reimburse PGI for expenses incurred during the current fiscal year.

233

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Class J	$153	$167	$291	$653
Institutional Class	37	120	211	478
Class R-6	34	106	185	418

With respect to Class J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class J	$53	$167	$291	$653

Portfolio Turnover

Principal Investment Strategies

The Fund operates as a “target date fund” that invests according to an asset allocation strategy designed for investors having a retirement investment goal close to the year in the Fund’s name. The Fund is a fund of funds that invests in underlying funds of Principal Funds, Inc. (“PFI”), with a majority of the Fund’s assets invested in index funds. Its underlying funds consist of domestic and foreign equity funds, fixed-income funds, real asset funds, and other funds that aim to offer diversification beyond traditional equity and fixed-income securities. The asset class diversification of the Fund is designed to moderate overall price volatility. The Fund may add, remove, or substitute underlying funds at any time.

The underlying funds invest in growth and value stocks of small, medium, and large market capitalization companies, fixed-income securities, domestic and foreign securities, securities denominated in foreign currencies, investment companies (including index funds), U.S. government and U.S. government-sponsored securities, and derivatives. A derivative is a financial arrangement, the value of which is derived from, or based on, a traditional security, asset, or market index. The underlying funds principally use futures, options, swaps (including, for example, credit default, interest rate, and currency swaps), and forwards in order to gain exposure to a variety of securities or asset classes or attempt to reduce risk.

The Fund’s asset allocation will become more conservative over time as investment goals near (for example, retirement, which is assumed to begin at age 65) and investors become more risk-averse. Approximately 10 years after its target year, the Fund’s underlying fund allocation is expected to match that of the Principal LifeTime Hybrid Income Fund. At that time, the Fund may be combined with the Principal LifeTime Hybrid Income Fund if the Board of Directors determines that the combination is in the best interests of Fund shareholders. It is expected that at the target date in the Fund’s name, the shareholder will begin gradually withdrawing the account’s value.

234

Principal Risks

Principal Risks of Investing in a Fund of Funds

Principal Risks due to the Fund’s Investments in Underlying Funds

Counterparty Risk. Counterparty risk is the risk that the counterparty to a contract or other obligation will be unable or unwilling to honor its obligations.

•

235

•

Foreign Currency Risk. Risks of investing in securities denominated in, or that trade in, foreign (non-U.S.) currencies include changes in foreign exchange rates and foreign exchange restrictions.

236

U.S. Government Securities Risk. Yields available from U.S. government securities are generally lower than yields from many other fixed-income securities.

Performance

Life of Fund returns are measured from the date the Fund’s shares were first sold (September 30, 2014).

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	14.20%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(14.39)%

237

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	Life of Fund
			09/30/14
Institutional Class Return Before Taxes	(16.75)%	4.05%	5.72%
Institutional Class Return After Taxes on Distributions	(18.36)%	2.53%	4.33%
Institutional Class Return After Taxes on Distributions and Sale of Fund Shares	(8.97)%	2.84%	4.15%
Class J Return Before Taxes	(17.64)%	3.83%	5.48%
Class R-6 Return Before Taxes	(16.73)%	4.07%	5.73%
S&P Target Date 2030 Index (reflects no deduction for fees, expenses, or taxes)	(13.97)%	4.17%	5.62%

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Institutional Class shares only and would be different for the other share classes.

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

James W. Fennessey (since 2014), Portfolio Manager

•

Scott Smith (since 2017), Portfolio Manager

•

Randy L. Welch (since 2014), Portfolio Manager

Purchase and Sale of Fund Shares

For Class R-6 and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

238

Principal LifeTime Hybrid 2035 Fund

Objective

The Fund seeks a total return consisting of long-term growth of capital and current income.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment)

	Share Class
	J	Inst.	R-6
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	J	Inst.	R-6
Management Fees	0.00%	0.00%	0.00%
Distribution and/or Service (12b-1) Fees	0.15%	N/A	N/A
Other Expenses	0.07%	0.07%	0.02%
Acquired Fund Fees and Expenses	0.33%	0.33%	0.33%
Total Annual Fund Operating Expenses	0.55%	0.40%	0.35%
Expense Reimbursement(1)	N/A	(0.02)%	0.00%
Total Annual Fund Operating Expenses After Expense Reimbursement	0.55%	0.38%	0.35%

(1)

Principal Global Investors, LLC (“PGI”), the investment advisor, has contractually agreed to limit the Fund’s expenses by paying, if necessary, expenses normally payable by the Fund (excluding interest expense, expenses related to fund investments, acquired fund fees and expenses, and tax reclaim recovery expenses and other extraordinary expenses) to maintain a total level of operating expenses (expressed as a percent of average net assets on an annualized basis) not to exceed 0.05% for Institutional Class shares. In addition, for Class R-6 shares, the expense limit will maintain “Other Expenses” (expressed as a percent of average net assets on an annualized basis) not to exceed 0.02% (excluding interest expense, expenses related to fund investments, acquired fund fees and expenses, and tax reclaim recovery expenses and other extraordinary expenses). It is expected that the expense limits will continue through the period ending February 29, 2024; however, Principal Funds, Inc. and PGI, the parties to the agreement, may mutually agree to terminate the expense limits prior to the end of the period. Subject to applicable expense limits, the Fund may reimburse PGI for expenses incurred during the current fiscal year.

239

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Class J	$156	$176	$307	$689
Institutional Class	39	126	222	503
Class R-6	36	113	197	443

With respect to Class J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class J	$56	$176	$307	$689

Portfolio Turnover

Principal Investment Strategies

The Fund operates as a “target date fund” that invests according to an asset allocation strategy designed for investors having a retirement investment goal close to the year in the Fund’s name. The Fund is a fund of funds that invests in underlying funds of Principal Funds, Inc. (“PFI”), with a majority of the Fund’s assets invested in index funds. Its underlying funds consist of domestic and foreign equity funds, fixed-income funds, real asset funds, and other funds that aim to offer diversification beyond traditional equity and fixed-income securities. The asset class diversification of the Fund is designed to moderate overall price volatility. The Fund may add, remove, or substitute underlying funds at any time.

The underlying funds invest in growth and value stocks of small, medium, and large market capitalization companies, fixed-income securities, domestic and foreign securities, securities denominated in foreign currencies, investment companies (including index funds), U.S. government and U.S. government-sponsored securities, and derivatives. A derivative is a financial arrangement, the value of which is derived from, or based on, a traditional security, asset, or market index. The underlying funds principally use equity index futures and options in order to gain exposure to a variety of securities or asset classes or attempt to reduce risk.

The Fund’s asset allocation will become more conservative over time as investment goals near (for example, retirement, which is assumed to begin at age 65) and investors become more risk-averse. Approximately 10 years after its target year, the Fund’s underlying fund allocation is expected to match that of the Principal LifeTime Hybrid Income Fund. At that time, the Fund may be combined with the Principal LifeTime Hybrid Income Fund if the Board of Directors determines that the combination is in the best interests of Fund shareholders. It is expected that at the target date in the Fund’s name, the shareholder will begin gradually withdrawing the account’s value.

240

Principal Risks

Principal Risks of Investing in a Fund of Funds

Principal Risks due to the Fund’s Investments in Underlying Funds

Counterparty Risk. Counterparty risk is the risk that the counterparty to a contract or other obligation will be unable or unwilling to honor its obligations.

•

241

•

Foreign Currency Risk. Risks of investing in securities denominated in, or that trade in, foreign (non-U.S.) currencies include changes in foreign exchange rates and foreign exchange restrictions.

242

U.S. Government Securities Risk. Yields available from U.S. government securities are generally lower than yields from many other fixed-income securities.

Performance

Life of Fund returns are measured from the date the Fund’s shares were first sold (September 30, 2014).

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	15.37%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(16.18)%

243

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	Life of Fund
			09/30/14
Institutional Class Return Before Taxes	(17.36)%	4.42%	6.16%
Institutional Class Return After Taxes on Distributions	(18.98)%	2.97%	4.88%
Institutional Class Return After Taxes on Distributions and Sale of Fund Shares	(9.25)%	3.18%	4.58%
Class J Return Before Taxes	(18.30)%	4.20%	5.92%
Class R-6 Return Before Taxes	(17.30)%	4.48%	6.20%
S&P Target Date 2035 Index (reflects no deduction for fees, expenses, or taxes)	(15.00)%	4.63%	6.13%

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Institutional Class shares only and would be different for the other share classes.

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

James W. Fennessey (since 2014), Portfolio Manager

•

Scott Smith (since 2017), Portfolio Manager

•

Randy L. Welch (since 2014), Portfolio Manager

Purchase and Sale of Fund Shares

For Class R-6 and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

244

Principal LifeTime Hybrid 2040 Fund

Objective

The Fund seeks a total return consisting of long-term growth of capital and current income.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment)

	Share Class
	J	Inst.	R-6
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	J	Inst.	R-6
Management Fees	0.00%	0.00%	0.00%
Distribution and/or Service (12b-1) Fees	0.15%	N/A	N/A
Other Expenses	0.08%	0.07%	0.02%
Acquired Fund Fees and Expenses	0.35%	0.35%	0.35%
Total Annual Fund Operating Expenses	0.58%	0.42%	0.37%
Expense Reimbursement(1)	N/A	(0.02)%	0.00%
Total Annual Fund Operating Expenses After Expense Reimbursement	0.58%	0.40%	0.37%

(1)

Principal Global Investors, LLC (“PGI”), the investment advisor, has contractually agreed to limit the Fund’s expenses by paying, if necessary, expenses normally payable by the Fund (excluding interest expense, expenses related to fund investments, acquired fund fees and expenses, and tax reclaim recovery expenses and other extraordinary expenses) to maintain a total level of operating expenses (expressed as a percent of average net assets on an annualized basis) not to exceed 0.05% for Institutional Class shares. In addition, for Class R-6 shares, the expense limit will maintain “Other Expenses” (expressed as a percent of average net assets on an annualized basis) not to exceed 0.02% (excluding interest expense, expenses related to fund investments, acquired fund fees and expenses, and tax reclaim recovery expenses and other extraordinary expenses). It is expected that the expense limits will continue through the period ending February 29, 2024; however, Principal Funds, Inc. and PGI, the parties to the agreement, may mutually agree to terminate the expense limits prior to the end of the period. Subject to applicable expense limits, the Fund may reimburse PGI for expenses incurred during the current fiscal year.

245

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Class J	$159	$186	$324	$726
Institutional Class	41	133	233	528
Class R-6	38	119	208	468

With respect to Class J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class J	$59	$186	$324	$726

Portfolio Turnover

Principal Investment Strategies

The Fund operates as a “target date fund” that invests according to an asset allocation strategy designed for investors having a retirement investment goal close to the year in the Fund’s name. The Fund is a fund of funds that invests in underlying funds of Principal Funds, Inc. (“PFI”), with a majority of the Fund’s assets invested in index funds. Its underlying funds consist of domestic and foreign equity funds, fixed-income funds, real asset funds, and other funds that aim to offer diversification beyond traditional equity and fixed-income securities. The asset class diversification of the Fund is designed to moderate overall price volatility. The Fund may add, remove, or substitute underlying funds at any time.

The Fund’s asset allocation will become more conservative over time as investment goals near (for example, retirement, which is assumed to begin at age 65) and investors become more risk-averse. Approximately 10 years after its target year, the Fund’s underlying fund allocation is expected to match that of the Principal LifeTime Hybrid Income Fund. At that time, the Fund may be combined with the Principal LifeTime Hybrid Income Fund if the Board of Directors determines that the combination is in the best interests of Fund shareholders. It is expected that at the target date in the Fund’s name, the shareholder will begin gradually withdrawing the account’s value.

246

Principal Risks

Principal Risks of Investing in a Fund of Funds

Principal Risks due to the Fund’s Investments in Underlying Funds

Counterparty Risk. Counterparty risk is the risk that the counterparty to a contract or other obligation will be unable or unwilling to honor its obligations.

•

247

•

Foreign Currency Risk. Risks of investing in securities denominated in, or that trade in, foreign (non-U.S.) currencies include changes in foreign exchange rates and foreign exchange restrictions.

248

U.S. Government Securities Risk. Yields available from U.S. government securities are generally lower than yields from many other fixed-income securities.

Performance

Life of Fund returns are measured from the date the Fund’s shares were first sold (September 30, 2014).

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	16.41%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(17.67)%

249

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	Life of Fund
			09/30/14
Institutional Class Return Before Taxes	(17.90)%	4.67%	6.49%
Institutional Class Return After Taxes on Distributions	(19.57)%	3.28%	5.25%
Institutional Class Return After Taxes on Distributions and Sale of Fund Shares	(9.49)%	3.49%	4.94%
Class J Return Before Taxes	(18.80)%	4.43%	6.24%
Class R-6 Return Before Taxes	(17.92)%	4.69%	6.52%
S&P Target Date 2040 Index (reflects no deduction for fees, expenses, or taxes)	(15.57)%	4.97%	6.50%

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Institutional Class shares only and would be different for the other share classes.

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

James W. Fennessey (since 2014), Portfolio Manager

•

Scott Smith (since 2017), Portfolio Manager

•

Randy L. Welch (since 2014), Portfolio Manager

Purchase and Sale of Fund Shares

For Class R-6 and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

250

Principal LifeTime Hybrid 2045 Fund

Objective

The Fund seeks a total return consisting of long-term growth of capital and current income.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment)

	Share Class
	J	Inst.	R-6
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	J	Inst.	R-6
Management Fees	0.00%	0.00%	0.00%
Distribution and/or Service (12b-1) Fees	0.15%	N/A	N/A
Other Expenses	0.11%	0.08%	0.03%
Acquired Fund Fees and Expenses	0.36%	0.36%	0.36%
Total Annual Fund Operating Expenses	0.62%	0.44%	0.39%
Expense Reimbursement(1)	N/A	(0.03)%	(0.01)%
Total Annual Fund Operating Expenses After Expense Reimbursement	0.62%	0.41%	0.38%

(1)

Principal Global Investors, LLC (“PGI”), the investment advisor, has contractually agreed to limit the Fund’s expenses by paying, if necessary, expenses normally payable by the Fund (excluding interest expense, expenses related to fund investments, acquired fund fees and expenses, and tax reclaim recovery expenses and other extraordinary expenses) to maintain a total level of operating expenses (expressed as a percent of average net assets on an annualized basis) not to exceed 0.05% for Institutional Class shares. In addition, for Class R-6 shares, the expense limit will maintain “Other Expenses” (expressed as a percent of average net assets on an annualized basis) not to exceed 0.02% (excluding interest expense, expenses related to fund investments, acquired fund fees and expenses, and tax reclaim recovery expenses and other extraordinary expenses). It is expected that the expense limits will continue through the period ending February 29, 2024; however, Principal Funds, Inc. and PGI, the parties to the agreement, may mutually agree to terminate the expense limits prior to the end of the period. Subject to applicable expense limits, the Fund may reimburse PGI for expenses incurred during the current fiscal year.

251

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Class J	$163	$199	$346	$774
Institutional Class	42	138	243	552
Class R-6	39	124	218	492

With respect to Class J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class J	$63	$199	$346	$774

Portfolio Turnover

Principal Investment Strategies

The Fund operates as a “target date fund” that invests according to an asset allocation strategy designed for investors having a retirement investment goal close to the year in the Fund’s name. The Fund is a fund of funds that invests in underlying funds of Principal Funds, Inc. (“PFI”), with a majority of the Fund’s assets invested in index funds. Its underlying funds consist of domestic and foreign equity funds, fixed-income funds, real asset funds, and other funds that aim to offer diversification beyond traditional equity and fixed-income securities. The asset class diversification of the Fund is designed to moderate overall price volatility. The Fund may add, remove, or substitute underlying funds at any time.

The underlying funds invest in growth and value stocks of small, medium, and large market capitalization companies, fixed-income securities, domestic and foreign (including those in emerging markets) securities, securities denominated in foreign currencies, investment companies (including index funds), and derivatives. A derivative is a financial arrangement, the value of which is derived from, or based on, a traditional security, asset, or market index. The underlying funds principally use equity index futures and options in order to gain exposure to a variety of securities or asset classes or attempt to reduce risk.

The Fund’s asset allocation will become more conservative over time as investment goals near (for example, retirement, which is assumed to begin at age 65) and investors become more risk-averse. Approximately 10 years after its target year, the Fund’s underlying fund allocation is expected to match that of the Principal LifeTime Hybrid Income Fund. At that time, the Fund may be combined with the Principal LifeTime Hybrid Income Fund if the Board of Directors determines that the combination is in the best interests of Fund shareholders. It is expected that at the target date in the Fund’s name, the shareholder will begin gradually withdrawing the account’s value.

252

Principal Risks

Principal Risks of Investing in a Fund of Funds

Principal Risks due to the Fund’s Investments in Underlying Funds

Counterparty Risk. Counterparty risk is the risk that the counterparty to a contract or other obligation will be unable or unwilling to honor its obligations.

•

253

•

Foreign Currency Risk. Risks of investing in securities denominated in, or that trade in, foreign (non-U.S.) currencies include changes in foreign exchange rates and foreign exchange restrictions.

254

Performance

Life of Fund returns are measured from the date the Fund’s shares were first sold (September 30, 2014).

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	17.28%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(18.83)%

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	Life of Fund
			09/30/14
Institutional Class Return Before Taxes	(18.27)%	4.92%	6.74%
Institutional Class Return After Taxes on Distributions	(20.02)%	3.58%	5.54%
Institutional Class Return After Taxes on Distributions and Sale of Fund Shares	(9.60)%	3.73%	5.17%
Class J Return Before Taxes	(19.21)%	4.68%	6.48%
Class R-6 Return Before Taxes	(18.28)%	4.94%	6.76%
S&P Target Date 2045 Index (reflects no deduction for fees, expenses, or taxes)	(15.85)%	5.16%	6.73%

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Institutional Class shares only and would be different for the other share classes.

255

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

James W. Fennessey (since 2014), Portfolio Manager

•

Scott Smith (since 2017), Portfolio Manager

•

Randy L. Welch (since 2014), Portfolio Manager

Purchase and Sale of Fund Shares

For Class R-6 and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

256

Principal LifeTime Hybrid 2050 Fund

Objective

The Fund seeks a total return consisting of long-term growth of capital and current income.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment)

	Share Class
	J	Inst.	R-6
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	J	Inst.	R-6
Management Fees	0.00%	0.00%	0.00%
Distribution and/or Service (12b-1) Fees	0.15%	N/A	N/A
Other Expenses	0.13%	0.09%	0.03%
Acquired Fund Fees and Expenses	0.37%	0.37%	0.37%
Total Annual Fund Operating Expenses	0.65%	0.46%	0.40%
Expense Reimbursement(1)	N/A	(0.04)%	(0.01)%
Total Annual Fund Operating Expenses After Expense Reimbursement	0.65%	0.42%	0.39%

(1)

Principal Global Investors, LLC (“PGI”), the investment advisor, has contractually agreed to limit the Fund’s expenses by paying, if necessary, expenses normally payable by the Fund (excluding interest expense, expenses related to fund investments, acquired fund fees and expenses, and tax reclaim recovery expenses and other extraordinary expenses) to maintain a total level of operating expenses (expressed as a percent of average net assets on an annualized basis) not to exceed 0.05% for Institutional Class shares. In addition, for Class R-6 shares, the expense limit will maintain “Other Expenses” (expressed as a percent of average net assets on an annualized basis) not to exceed 0.02% (excluding interest expense, expenses related to fund investments, acquired fund fees and expenses, and tax reclaim recovery expenses and other extraordinary expenses). It is expected that the expense limits will continue through the period ending February 29, 2024; however, Principal Funds, Inc. and PGI, the parties to the agreement, may mutually agree to terminate the expense limits prior to the end of the period. Subject to applicable expense limits, the Fund may reimburse PGI for expenses incurred during the current fiscal year.

257

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Class J	$166	$208	$362	$810
Institutional Class	43	144	254	575
Class R-6	40	127	223	504

With respect to Class J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class J	$66	$208	$362	$810

Portfolio Turnover

Principal Investment Strategies

The Fund operates as a “target date fund” that invests according to an asset allocation strategy designed for investors having a retirement investment goal close to the year in the Fund’s name. The Fund is a fund of funds that invests in underlying funds of Principal Funds, Inc. (“PFI”), with a majority of the Fund’s assets invested in index funds. Its underlying funds consist of domestic and foreign equity funds, fixed-income funds, real asset funds, and other funds that aim to offer diversification beyond traditional equity and fixed-income securities. The asset class diversification of the Fund is designed to moderate overall price volatility. The Fund may add, remove, or substitute underlying funds at any time.

The underlying funds invest in growth and value stocks of small, medium, and large market capitalization companies, fixed-income securities, domestic and foreign (including those in emerging markets) securities, securities denominated in foreign currencies, investment companies (including index funds), and derivatives. A derivative is a financial arrangement, the value of which is derived from, or based on, a traditional security, asset, or market index. The underlying funds principally use equity index futures and options in order to gain exposure to a variety of securities or asset classes or attempt to reduce risk.

The Fund’s asset allocation will become more conservative over time as investment goals near (for example, retirement, which is assumed to begin at age 65) and investors become more risk-averse. Approximately 10 years after its target year, the Fund’s underlying fund allocation is expected to match that of the Principal LifeTime Hybrid Income Fund. At that time, the Fund may be combined with the Principal LifeTime Hybrid Income Fund if the Board of Directors determines that the combination is in the best interests of Fund shareholders. It is expected that at the target date in the Fund’s name, the shareholder will begin gradually withdrawing the account’s value.

258

Principal Risks

Principal Risks of Investing in a Fund of Funds

Principal Risks due to the Fund’s Investments in Underlying Funds

Counterparty Risk. Counterparty risk is the risk that the counterparty to a contract or other obligation will be unable or unwilling to honor its obligations.

•

259

•

Foreign Currency Risk. Risks of investing in securities denominated in, or that trade in, foreign (non-U.S.) currencies include changes in foreign exchange rates and foreign exchange restrictions.

260

Performance

Life of Fund returns are measured from the date the Fund’s shares were first sold (September 30, 2014).

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	18.00%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(19.78)%

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	Life of Fund
			09/30/14
Institutional Class Return Before Taxes	(18.49)%	5.06%	6.96%
Institutional Class Return After Taxes on Distributions	(20.20)%	3.62%	5.66%
Institutional Class Return After Taxes on Distributions and Sale of Fund Shares	(9.74)%	3.72%	5.26%
Class J Return Before Taxes	(19.38)%	4.83%	6.71%
Class R-6 Return Before Taxes	(18.46)%	5.08%	6.97%
S&P Target Date 2050 Index (reflects no deduction for fees, expenses, or taxes)	(15.98)%	5.26%	6.88%

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Institutional Class shares only and would be different for the other share classes.

261

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

James W. Fennessey (since 2014), Portfolio Manager

•

Scott Smith (since 2017), Portfolio Manager

•

Randy L. Welch (since 2014), Portfolio Manager

Purchase and Sale of Fund Shares

For Class R-6 and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

262

Principal LifeTime Hybrid 2055 Fund

Objective

The Fund seeks a total return consisting of long-term growth of capital and current income.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment)

	Share Class
	J	Inst.	R-6
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	J	Inst.	R-6
Management Fees	0.00%	0.00%	0.00%
Distribution and/or Service (12b-1) Fees	0.15%	N/A	N/A
Other Expenses	0.24%	0.14%	0.06%
Acquired Fund Fees and Expenses	0.37%	0.37%	0.37%
Total Annual Fund Operating Expenses	0.76%	0.51%	0.43%
Expense Reimbursement(1)	(0.09)%	(0.09)%	(0.04)%
Total Annual Fund Operating Expenses After Expense Reimbursement	0.67%	0.42%	0.39%

(1)

Principal Global Investors, LLC (“PGI”), the investment advisor, has contractually agreed to limit the Fund’s expenses by paying, if necessary, expenses normally payable by the Fund (excluding interest expense, expenses related to fund investments, acquired fund fees and expenses, and tax reclaim recovery expenses and other extraordinary expenses) to maintain a total level of operating expenses (expressed as a percent of average net assets on an annualized basis) not to exceed 0.30% for Class J and 0.05% for Institutional Class shares. In addition, for Class R-6 shares, the expense limit will maintain “Other Expenses” (expressed as a percent of average net assets on an annualized basis) not to exceed 0.02% (excluding interest expense, expenses related to fund investments, acquired fund fees and expenses, and tax reclaim recovery expenses and other extraordinary expenses). It is expected that the expense limits will continue through the period ending February 29, 2024; however, Principal Funds, Inc. and PGI, the parties to the agreement, may mutually agree to terminate the expense limits prior to the end of the period. Subject to applicable expense limits, the Fund may reimburse PGI for expenses incurred during the current fiscal year.

263

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Class J	$168	$234	$414	$934
Institutional Class	43	154	276	632
Class R-6	40	134	237	538

With respect to Class J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class J	$68	$234	$414	$934

Portfolio Turnover

Principal Investment Strategies

The Fund operates as a “target date fund” that invests according to an asset allocation strategy designed for investors having a retirement investment goal close to the year in the Fund’s name. The Fund is a fund of funds that invests in underlying funds of Principal Funds, Inc. (“PFI”), with a majority of the Fund’s assets invested in index funds. Its underlying funds consist of domestic and foreign equity funds, fixed-income funds, real asset funds, and other funds that aim to offer diversification beyond traditional equity and fixed-income securities. The asset class diversification of the Fund is designed to moderate overall price volatility. The Fund may add, remove, or substitute underlying funds at any time.

The underlying funds invest in growth and value stocks of small, medium, and large market capitalization companies, fixed-income securities, domestic and foreign (including those in emerging markets) securities, securities denominated in foreign currencies, investment companies (including index funds), and derivatives. A derivative is a financial arrangement, the value of which is derived from, or based on, a traditional security, asset, or market index. The underlying funds principally use equity index futures and options in order to gain exposure to a variety of securities or asset classes or attempt to reduce risk.

The Fund’s asset allocation will become more conservative over time as investment goals near (for example, retirement, which is assumed to begin at age 65) and investors become more risk-averse. Approximately 10 years after its target year, the Fund’s underlying fund allocation is expected to match that of the Principal LifeTime Hybrid Income Fund. At that time, the Fund may be combined with the Principal LifeTime Hybrid Income Fund if the Board of Directors determines that the combination is in the best interests of Fund shareholders. It is expected that at the target date in the Fund’s name, the shareholder will begin gradually withdrawing the account’s value.

264

Principal Risks

Principal Risks of Investing in a Fund of Funds

Principal Risks due to the Fund’s Investments in Underlying Funds

Counterparty Risk. Counterparty risk is the risk that the counterparty to a contract or other obligation will be unable or unwilling to honor its obligations.

•

265

•

Foreign Currency Risk. Risks of investing in securities denominated in, or that trade in, foreign (non-U.S.) currencies include changes in foreign exchange rates and foreign exchange restrictions.

266

Performance

Life of Fund returns are measured from the date the Fund’s shares were first sold (September 30, 2014).

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	18.35%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(20.52)%

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	Life of Fund
			09/30/14
Institutional Class Return Before Taxes	(18.50)%	5.15%	7.09%
Institutional Class Return After Taxes on Distributions	(20.33)%	3.86%	5.94%
Institutional Class Return After Taxes on Distributions and Sale of Fund Shares	(9.98)%	3.88%	5.46%
Class J Return Before Taxes	(19.48)%	4.89%	6.82%
Class R-6 Return Before Taxes	(18.44)%	5.18%	7.12%
S&P Target Date 2055 Index (reflects no deduction for fees, expenses, or taxes)	(15.98)%	5.31%	6.96%

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Institutional Class shares only and would be different for the other share classes.

267

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

James W. Fennessey (since 2014), Portfolio Manager

•

Scott Smith (since 2017), Portfolio Manager

•

Randy L. Welch (since 2014), Portfolio Manager

Purchase and Sale of Fund Shares

For Class R-6 and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

268

Principal LifeTime Hybrid 2060 Fund

Objective

The Fund seeks a total return consisting of long-term growth of capital and current income.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment)

	Share Class
	J	Inst.	R-6
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	J	Inst.	R-6
Management Fees	0.00%	0.00%	0.00%
Distribution and/or Service (12b-1) Fees	0.15%	N/A	N/A
Other Expenses	0.43%	0.29%	0.13%
Acquired Fund Fees and Expenses	0.37%	0.37%	0.37%
Total Annual Fund Operating Expenses	0.95%	0.66%	0.50%
Expense Reimbursement(1)	(0.28)%	(0.24)%	(0.11)%
Total Annual Fund Operating Expenses After Expense Reimbursement	0.67%	0.42%	0.39%

(1)

Principal Global Investors, LLC (“PGI”), the investment advisor, has contractually agreed to limit the Fund’s expenses by paying, if necessary, expenses normally payable by the Fund (excluding interest expense, expenses related to fund investments, acquired fund fees and expenses, and tax reclaim recovery expenses and other extraordinary expenses) to maintain a total level of operating expenses (expressed as a percent of average net assets on an annualized basis) not to exceed 0.30% for Class J and 0.05% for Institutional Class shares. In addition, for Class R-6 shares, the expense limit will maintain “Other Expenses” (expressed as a percent of average net assets on an annualized basis) not to exceed 0.02% (excluding interest expense, expenses related to fund investments, acquired fund fees and expenses, and tax reclaim recovery expenses and other extraordinary expenses). It is expected that the expense limits will continue through the period ending February 29, 2024; however, Principal Funds, Inc. and PGI, the parties to the agreement, may mutually agree to terminate the expense limits prior to the end of the period. Subject to applicable expense limits, the Fund may reimburse PGI for expenses incurred during the current fiscal year.

269

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Class J	$168	$275	$498	$1,141
Institutional Class	43	187	344	800
Class R-6	40	149	269	618

With respect to Class J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class J	$68	$275	$498	$1,141

Portfolio Turnover

Principal Investment Strategies

The Fund operates as a “target date fund” that invests according to an asset allocation strategy designed for investors having a retirement investment goal close to the year in the Fund’s name. The Fund is a fund of funds that invests in underlying funds of Principal Funds, Inc. (“PFI”), with a majority of the Fund’s assets invested in index funds. Its underlying funds consist of domestic and foreign equity funds, fixed-income funds, real asset funds, and other funds that aim to offer diversification beyond traditional equity and fixed-income securities. The asset class diversification of the Fund is designed to moderate overall price volatility. The Fund may add, remove, or substitute underlying funds at any time.

The underlying funds invest in growth and value stocks of small, medium, and large market capitalization companies, fixed-income securities, domestic and foreign (including those in emerging markets) securities, securities denominated in foreign currencies, investment companies (including index funds), and derivatives. A derivative is a financial arrangement, the value of which is derived from, or based on, a traditional security, asset, or market index. The underlying funds principally use equity index futures and options in order to gain exposure to a variety of securities or asset classes or attempt to reduce risk.

The Fund’s asset allocation will become more conservative over time as investment goals near (for example, retirement, which is assumed to begin at age 65) and investors become more risk-averse. Approximately 10 years after its target year, the Fund’s underlying fund allocation is expected to match that of the Principal LifeTime Hybrid Income Fund. At that time, the Fund may be combined with the Principal LifeTime Hybrid Income Fund if the Board of Directors determines that the combination is in the best interests of Fund shareholders. It is expected that at the target date in the Fund’s name, the shareholder will begin gradually withdrawing the account’s value.

270

Principal Risks

Principal Risks of Investing in a Fund of Funds

Principal Risks due to the Fund’s Investments in Underlying Funds

Counterparty Risk. Counterparty risk is the risk that the counterparty to a contract or other obligation will be unable or unwilling to honor its obligations.

•

271

•

Foreign Currency Risk. Risks of investing in securities denominated in, or that trade in, foreign (non-U.S.) currencies include changes in foreign exchange rates and foreign exchange restrictions.

272

Performance

Life of Fund returns are measured from the date the Fund’s shares were first sold (September 30, 2014).

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	18.71%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(20.90)%

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	Life of Fund
			09/30/14
Institutional Class Return Before Taxes	(18.52)%	5.28%	7.23%
Institutional Class Return After Taxes on Distributions	(19.97)%	4.18%	6.09%
Institutional Class Return After Taxes on Distributions and Sale of Fund Shares	(9.95)%	4.04%	5.53%
Class J Return Before Taxes	(19.52)%	4.99%	6.95%
Class R-6 Return Before Taxes	(18.48)%	5.30%	7.26%
S&P Target Date 2060 Index (reflects no deduction for fees, expenses, or taxes)	(16.02)%	5.35%	7.01%

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Institutional Class shares only and would be different for the other share classes.

273

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

James W. Fennessey (since 2014), Portfolio Manager

•

Scott Smith (since 2017), Portfolio Manager

•

Randy L. Welch (since 2014), Portfolio Manager

Purchase and Sale of Fund Shares

For Class R-6 and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

274

Principal LifeTime Hybrid 2065 Fund

Objective

The Fund seeks a total return consisting of long-term growth of capital and current income.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment)

	Share Class
	J	Inst.	R-6
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	J	Inst.	R-6
Management Fees	0.00%	0.00%	0.00%
Distribution and/or Service (12b-1) Fees	0.15%	N/A	N/A
Other Expenses	0.74%	1.26%	0.56%
Acquired Fund Fees and Expenses	0.36%	0.36%	0.36%
Total Annual Fund Operating Expenses	1.25%	1.62%	0.92%
Expense Reimbursement(1)	(0.59)%	(1.21)%	(0.54)%
Total Annual Fund Operating Expenses After Expense Reimbursement	0.66%	0.41%	0.38%

(1)

Principal Global Investors, LLC (“PGI”), the investment advisor, has contractually agreed to limit the Fund’s expenses by paying, if necessary, expenses normally payable by the Fund (excluding interest expense, expenses related to fund investments, acquired fund fees and expenses, and tax reclaim recovery expenses and other extraordinary expenses) to maintain a total level of operating expenses (expressed as a percent of average net assets on an annualized basis) not to exceed 0.30% for Class J and 0.05% for Institutional Class shares. In addition, for Class R-6 shares, the expense limit will maintain “Other Expenses” (expressed as a percent of average net assets on an annualized basis) not to exceed 0.02% (excluding interest expense, expenses related to fund investments, acquired fund fees and expenses, and tax reclaim recovery expenses and other extraordinary expenses). It is expected that the expense limits will continue through the period ending February 29, 2024; however, Principal Funds, Inc. and PGI, the parties to the agreement, may mutually agree to terminate the expense limits prior to the end of the period. Subject to applicable expense limits, the Fund may reimburse PGI for expenses incurred during the current fiscal year.

275

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Class J	$167	$338	$630	$1,459
Institutional Class	42	392	767	1,820
Class R-6	39	239	456	1,082

With respect to Class J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class J	$67	$338	$630	$1,459

Portfolio Turnover

Principal Investment Strategies

The Fund operates as a “target date fund” that invests according to an asset allocation strategy designed for investors having a retirement investment goal close to the year in the Fund’s name. The Fund is a fund of funds that invests in underlying funds of Principal Funds, Inc. (“PFI”), with a majority of the Fund’s assets invested in index funds. Its underlying funds consist of domestic and foreign equity funds, fixed-income funds, real asset funds, and other funds that aim to offer diversification beyond traditional equity and fixed-income securities. The asset class diversification of the Fund is designed to moderate overall price volatility. The Fund may add, remove, or substitute underlying funds at any time.

The underlying funds invest in growth and value stocks of small, medium, and large market capitalization companies, fixed-income securities, domestic and foreign (including those in emerging markets) securities, securities denominated in foreign currencies, investment companies (including index funds), and derivatives. A derivative is a financial arrangement, the value of which is derived from, or based on, a traditional security, asset, or market index. The underlying funds principally use equity index futures and options in order to gain exposure to a variety of securities or asset classes or attempt to reduce risk.

The Fund’s asset allocation will become more conservative over time as investment goals near (for example, retirement, which is assumed to begin at age 65) and investors become more risk-averse. Approximately 10 years after its target year, the Fund’s underlying fund allocation is expected to match that of the Principal LifeTime Hybrid Income Fund. At that time, the Fund may be combined with the Principal LifeTime Hybrid Income Fund if the Board of Directors determines that the combination is in the best interests of Fund shareholders. It is expected that at the target date in the Fund’s name, the shareholder will begin gradually withdrawing the account’s value.

276

Principal Risks

Principal Risks of Investing in a Fund of Funds

Principal Risks due to the Fund’s Investments in Underlying Funds

Counterparty Risk. Counterparty risk is the risk that the counterparty to a contract or other obligation will be unable or unwilling to honor its obligations.

•

277

•

Foreign Currency Risk. Risks of investing in securities denominated in, or that trade in, foreign (non-U.S.) currencies include changes in foreign exchange rates and foreign exchange restrictions.

278

Performance

Life of Fund returns are measured from the date the Fund’s shares were first sold (September 6, 2017).

For periods prior to the inception date of Class J shares (March 1, 2018), the performance shown in the table for Class J shares is that of the Fund’s Institutional Class shares, adjusted to reflect the fees and expenses of Class J shares. These adjustments result in performance for such periods that is no higher than the historical performance of the Institutional Class shares, which were first sold on September 6, 2017.

During 2018, Class R-6 experienced a one-time loss of approximately $0.33 per share as a result of a large redemption. If such loss had not been recognized, the total return amounts expressed herein would have been higher. During May of 2019, Class R-6 experienced a one-time gain of approximately $0.35 per share as a result of a reimbursement by PGI, the investment advisor. If such gain had not been recognized, the total return amounts expressed herein would have been lower.

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	19.12%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(21.10)%

279

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	Life of Fund
			09/06/17
Institutional Class Return Before Taxes	(18.54)%	5.42%	6.58%
Institutional Class Return After Taxes on Distributions	(19.84)%	4.55%	5.65%
Institutional Class Return After Taxes on Distributions and Sale of Fund Shares	(10.06)%	4.13%	5.04%
Class J Return Before Taxes	(19.54)%	5.12%	6.27%
Class R-6 Return Before Taxes	(18.48)%	5.46%1	6.62%1,2
S&P Target Date 2065+ Index (reflects no deduction for fees, expenses, or taxes)	(15.96)%	5.38%	6.59%

During May of 2019, Class R-6 experienced a one-time gain of approximately $0.35 per share as a result of a reimbursement by PGI, the investment advisor. If such gain had not been recognized, the total return amounts expressed herein would have been lower.

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Institutional Class shares only and would be different for the other share classes.

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

James W. Fennessey (since 2017), Portfolio Manager

•

Scott Smith (since 2017), Portfolio Manager

•

Randy L. Welch (since 2017), Portfolio Manager

Purchase and Sale of Fund Shares

For Class R-6 and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

280

Principal LifeTime Hybrid 2070 Fund

Objective

The Fund seeks a total return consisting of long-term growth of capital and current income.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment)

	Share Class
	J	Inst.	R-6
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	J	Inst.	R-6
Management Fees	0.00%	0.00%	0.00%
Distribution and/or Service (12b-1) Fees	0.15%	N/A	N/A
Other Expenses(1)	14.67%	32.80%	1.38%
Acquired Fund Fees and Expenses(1)	0.37%	0.37%	0.37%
Total Annual Fund Operating Expenses	15.19%	33.17%	1.75%
Expense Reimbursement(2)	(14.52)%	(32.75)%	(1.36)%
Total Annual Fund Operating Expenses after Expense Reimbursement	0.67%	0.42%	0.39%

(1)

Based on estimated amounts for the current fiscal year.

(2)

Principal Global Investors, LLC (“PGI”), the investment advisor, has contractually agreed to limit the Fund’s expenses by paying, if necessary, expenses normally payable by the Fund (excluding interest expense, expenses related to fund investments, acquired fund fees and expenses, and tax reclaim recovery expenses and other extraordinary expenses) to maintain a total level of operating expenses (expressed as a percent of average net assets on an annualized basis) not to exceed 0.30% for Class J and 0.05% for Institutional Class shares. In addition, for Class R-6 shares, the expense limit will maintain “Other Expenses” (expressed as a percent of average net assets on an annualized basis) not to exceed 0.02% (excluding interest expense, expenses related to fund investments, acquired fund fees and expenses, and tax reclaim recovery expenses and other extraordinary expenses). It is expected that the expense limits will continue through the period ending February 28, 2025; however, Principal Funds, Inc. and PGI, the parties to the agreement, may mutually agree to terminate the expense limits prior to the end of the period. Subject to applicable expense limits, the Fund may reimburse PGI for expenses incurred during the current fiscal year.

281

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years
Class J	$168	$2,923
Institutional Class	43	5,164
Class R-6	40	418

With respect to Class J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years
Class J	$68	$2,923

Portfolio Turnover

The Fund and each underlying fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs. These costs, which are not reflected in Annual Fund Operating Expenses or in the Example, affect the Fund’s and the underlying funds' performance. This is a new fund and does not yet have a portfolio turnover rate to disclose.

Principal Investment Strategies

The Fund operates as a “target date fund” that invests according to an asset allocation strategy designed for investors having a retirement investment goal close to the year in the Fund’s name. The Fund is a fund of funds that invests in underlying funds of Principal Funds, Inc. (“PFI”), with a majority of the Fund’s assets invested in index funds. Its underlying funds consist of domestic and foreign equity funds, fixed-income funds, real asset funds, and other funds that aim to offer diversification beyond traditional equity and fixed-income securities. The asset class diversification of the Fund is designed to moderate overall price volatility. The Fund may add, remove, or substitute underlying funds at any time.

The underlying funds invest in growth and value stocks of small, medium, and large market capitalization companies, fixed-income securities, domestic and foreign (including those in emerging markets) securities, securities denominated in foreign currencies, investment companies (including index funds), and derivatives. A derivative is a financial arrangement, the value of which is derived from, or based on, a traditional security, asset, or market index. The underlying funds principally use equity index futures and options in order to gain exposure to a variety of securities or asset classes or attempt to reduce risk.

The Fund’s asset allocation will become more conservative over time as investment goals near (for example, retirement, which is assumed to begin at age 65) and investors become more risk-averse. Approximately 10 years after its target year, the Fund’s underlying fund allocation is expected to match that of the Principal LifeTime Hybrid Income Fund. At that time, the Fund may be combined with the Principal LifeTime Hybrid Income Fund if the Board of Directors determines that the combination is in the best interests of Fund shareholders. It is expected that at the target date in the Fund’s name, the shareholder will begin gradually withdrawing the account’s value.

282

Principal Risks

Principal Risks of Investing in a Fund of Funds

Principal Risks due to the Fund’s Investments in Underlying Funds

Counterparty Risk. Counterparty risk is the risk that the counterparty to a contract or other obligation will be unable or unwilling to honor its obligations.

•

283

•

Foreign Currency Risk. Risks of investing in securities denominated in, or that trade in, foreign (non-U.S.) currencies include changes in foreign exchange rates and foreign exchange restrictions.

284

Performance

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

James W. Fennessey (since 2023), Portfolio Manager

•

Scott Smith (since 2023), Portfolio Manager

•

Randy L. Welch (since 2023), Portfolio Manager

Purchase and Sale of Fund Shares

For Class R-6 and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

285

Real Estate Securities Fund

Objective

The Fund seeks to generate a total return.

Fees and Expenses of the Fund

This table describes the fees and expenses that you may pay if you buy, hold, and sell shares of the Fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the tables and examples below. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in Class A Shares of Principal Funds, Inc. More information about these and other discounts is available from your financial intermediary and in “Choosing a Share Class and The Costs of Investing” beginning on page 404 of the Fund’s Prospectus, Appendix B to the Prospectus titled “Intermediary-Specific Sales Charge Waivers and Reductions,” and “Multiple Class Structure” beginning on page 4 of the Fund’s Statement of Additional Information.

Shareholder Fees (fees paid directly from your investment)

	Share Class
	A	C	J	Inst.	R-1	R-3	R-4	R-5	R-6
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	5.50%	None	None	None	None	None	None	None	None
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	1.00%	1.00%	None	None	None	None	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	A	C	J	Inst.	R-1	R-3	R-4	R-5	R-6
Management Fees(1)	0.79%	0.79%	0.79%	0.79%	0.79%	0.79%	0.79%	0.79%	0.79%
Distribution and/or Service (12b-1) Fees	0.25%	1.00%	0.15%	N/A	0.35%	0.25%	0.10%	N/A	N/A
Other Expenses	0.16%	0.20%	0.15%	0.11%	0.54%	0.33%	0.29%	0.27%	0.01%
Total Annual Fund Operating Expenses	1.20%	1.99%	1.09%	0.90%	1.68%	1.37%	1.18%	1.06%	0.80%
Expense Reimbursement(2)	N/A	N/A	N/A	(0.04)%	N/A	N/A	N/A	N/A	N/A
Total Annual Fund Operating Expenses after Expense Reimbursement	1.20%	1.99%	1.09%	0.86%	1.68%	1.37%	1.18%	1.06%	0.80%

(1)

Fees have been restated to reflect current fees.

(2)

286

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Class A	$666	$910	$1,173	$1,925
Class C	302	624	1,073	2,113
Class J	211	347	601	1,329
Institutional Class	88	283	495	1,104
Class R-1	171	530	913	1,987
Class R-3	139	434	750	1,646
Class R-4	120	375	649	1,432
Class R-5	108	337	585	1,294
Class R-6	82	255	444	990

With respect to Classes C and J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class C	$202	$624	$1,073	$2,113
Class J	111	347	601	1,329

Portfolio Turnover

Principal Investment Strategies

Under normal circumstances, the Fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in equity securities of companies principally engaged in the real estate industry at the time of purchase. A real estate company has at least 50% of its assets, income, or profits derived from products or services related to the real estate industry. Real estate companies include real estate investment trusts (“REITs”) and companies with substantial real estate holdings such as paper, lumber, hotel, and entertainment companies, as well as those whose products and services relate to the real estate industry, including building supply manufacturers, mortgage lenders, and mortgage servicing companies.

REITs are pooled investment vehicles that invest in income-producing real estate, real estate-related loans, or other types of real estate interests. REITs are corporations or business trusts that are permitted to eliminate corporate level federal income taxes by meeting certain requirements of the Internal Revenue Code.

The Fund invests in equity securities regardless of market capitalization (small, medium, or large). The Fund invests in growth and value equity securities. The Fund concentrates its investments (invest more than 25% of its net assets) in securities in the real estate industry.

287

Principal Risks

•

288

Performance

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q1 2019	17.29%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(22.76)%

289

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Class A Return Before Taxes	(29.54)%	3.34%	6.71%
Class A Return After Taxes on Distributions	(30.12)%	2.38%	5.30%
Class A Return After Taxes on Distributions and Sale of Fund Shares	(17.19)%	2.40%	4.95%
Class C Return Before Taxes	(26.75)%	3.70%	6.64%
Class J Return Before Taxes	(26.07)%	4.65%	7.44%
Institutional Class Return Before Taxes	(25.20)%	4.87%	7.72%
Class R-1 Return Before Taxes	(25.78)%	4.05%	6.86%
Class R-3 Return Before Taxes	(25.56)%	4.37%	7.18%
Class R-4 Return Before Taxes	(25.41)%	4.56%	7.39%
Class R-5 Return Before Taxes	(25.33)%	4.69%	7.52%
Class R-6 Return Before Taxes	(25.14)%	4.96%	7.55%
MSCI US REIT Index (reflects no deduction for fees, expenses, or taxes)	(24.53)%	3.69%	6.48%

Investment Advisor

Principal Global Investors, LLC

Sub-Advisor and Portfolio Managers

Principal Real Estate Investors, LLC

•

Keith Bokota (since 2013), Portfolio Manager

•

Anthony Kenkel (since 2012), Portfolio Manager

•

Kelly D. Rush (since 2000), Portfolio Manager

Purchase and Sale of Fund Shares

For Classes R-1, R-3, R-4, R-5, R-6, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances.

Class C shares are subject to an 8-year automatic conversion plan whereby Class C shares held for eight years after purchase will automatically convert to Class A shares of the same Fund.

See Purchase of Fund Shares for more information.

Tax Information

290

Payments to Broker-Dealers and Other Financial Intermediaries

291

SAM (Strategic Asset Management) Balanced Portfolio

Objective

The Portfolio seeks to provide as high a level of total return (consisting of reinvested income and capital appreciation) as is consistent with reasonable risk.

Fees and Expenses of the Fund

This table describes the fees and expenses that you may pay if you buy, hold, and sell shares of the Fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the tables and examples below. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in Class A Shares of Principal Funds, Inc. More information about these and other discounts is available from your financial intermediary and in “Choosing a Share Class and The Costs of Investing” beginning on page 404 of the Fund’s Prospectus, Appendix B to the Prospectus titled “Intermediary-Specific Sales Charge Waivers and Reductions,” and “Multiple Class Structure” beginning on page 4 of the Fund’s Statement of Additional Information.

Shareholder Fees (fees paid directly from your investment)

	Share Class
	A	C	J	Inst.	R-1	R-3	R-4	R-5
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	5.50%	None	None	None	None	None	None	None
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	1.00%	1.00%	None	None	None	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	A	C	J	Inst.	R-1	R-3	R-4	R-5
Management Fees	0.27%	0.27%	0.27%	0.27%	0.27%	0.27%	0.27%	0.27%
Distribution and/or Service (12b-1) Fees	0.25%	1.00%	0.15%	N/A	0.35%	0.25%	0.10%	N/A
Other Expenses	0.08%	0.11%	0.05%	0.02%	0.54%	0.33%	0.29%	0.27%
Acquired Fund Fees and Expenses	0.54%	0.54%	0.54%	0.54%	0.54%	0.54%	0.54%	0.54%
Total Annual Fund Operating Expenses	1.14%	1.92%	1.01%	0.83%	1.70%	1.39%	1.20%	1.08%

292

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example assumes conversion of the Class C shares to Class A shares after the eighth year. The Example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

	1 year	3 years	5 years	10 years
Class A	$660	$892	$1,143	$1,860
Class C	295	603	1,037	2,041
Class J	203	322	558	1,236
Institutional Class	85	265	460	1,025
Class R-1	173	536	923	2,009
Class R-3	142	440	761	1,669
Class R-4	122	381	660	1,455
Class R-5	110	343	595	1,317

With respect to Classes C and J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class C	$195	$603	$1,037	$2,041
Class J	103	322	558	1,236

Portfolio Turnover

Principal Investment Strategies

The SAM Portfolios operate as funds of funds and invest principally in funds and exchange-traded funds (“ETFs”) of Principal Funds, Inc. and Principal Exchange-Traded Funds (“Underlying Funds”). Each SAM Portfolio generally categorizes each Underlying Fund as a fixed-income, equity, or specialty fund based on its investment profile. Each SAM Portfolio typically allocates its assets among Underlying Funds, and within predetermined percentage ranges, as determined by the SAM Portfolio in accordance with its outlook for the economy, the financial markets, and the relative market valuations of the Underlying Funds. The asset class diversification of the SAM Portfolio is designed to moderate overall price volatility and cushion severe losses in any one investment sector.

The Portfolio generally invests:

•

between 20% and 60% of its assets in fixed-income funds, and less than 40% in any one fixed-income fund; such funds generally invest in fixed-income instruments such as securitized products and corporate bonds;

•

between 40% and 80% of its assets in equity funds, and less than 30% in any one equity fund; such funds generally invest in equity securities of domestic and foreign companies (including in emerging markets), including small, medium, and large market capitalization companies, and growth and value stock; and

•

less than 20% of its assets in specialty funds, and less than 20% in any one specialty fund; such funds generally offer unique combinations of traditional equity securities and fixed-income securities or use alternative investment strategies that aim to offer diversification beyond traditional equity and fixed-income securities and include investments in such assets as infrastructure, commodities, currencies, and natural resources companies.

The Portfolio may temporarily exceed these percentage ranges and may alter the percentage ranges when it deems appropriate.

293

Principal Risks

Principal Risks of Investing in a Fund of Funds

Principal Risks due to the Fund’s Investments in Underlying Funds

•

Foreign Currency Risk. Risks of investing in securities denominated in, or that trade in, foreign (non-U.S.) currencies include changes in foreign exchange rates and foreign exchange restrictions.

294

Performance

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	13.09%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(15.43)%

295

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Class A Return Before Taxes	(21.08)%	2.30%	5.32%
Class A Return After Taxes on Distributions	(22.60)%	0.31%	3.58%
Class A Return After Taxes on Distributions and Sale of Fund Shares	(11.55)%	1.37%	3.83%
Class C Return Before Taxes	(17.85)%	2.68%	5.29%
Class J Return Before Taxes	(17.06)%	3.63%	6.06%
Institutional Class Return Before Taxes	(16.18)%	3.80%	6.27%
Class R-1 Return Before Taxes	(16.92)%	2.93%	5.36%
Class R-3 Return Before Taxes	(16.62)%	3.22%	5.67%
Class R-4 Return Before Taxes	(16.46)%	3.42%	5.87%
Class R-5 Return Before Taxes	(16.37)%	3.55%	6.01%
Russell 3000 Index (reflects no deduction for fees, expenses, or taxes)	(19.22)%	8.79%	12.13%
Bloomberg U.S. Aggregate Bond Index (reflects no deduction for fees, expenses, or taxes)	(13.02)%	0.02%	1.06%
MSCI EAFE Index NTR (reflects withholding taxes on foreign dividends, but no deduction for fees, expenses, or other taxes)	(14.46)%	1.54%	4.67%
SAM Balanced Blended Index (except as noted for MSCI EAFE Index NTR, reflects no deduction for fees, expenses, or taxes)	(15.74)%	4.53%	6.76%

Performance of a blended index shows how the Portfolio’s performance compares to a blend of indices with similar investment objectives. Performance of the components of the blended index is also shown. The weightings for SAM Balanced Blended Index are 45% Russell 3000® Index, 40% Bloomberg U.S. Aggregate Bond Index, and 15% MSCI EAFE Index NTR.

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

Brody Dass (since 2022), Portfolio Manager

•

Todd A. Jablonski (since 2010), Portfolio Manager

•

Yesim Tokat-Acikel (since 2023), Portfolio Manager

Purchase and Sale of Fund Shares

For Classes R-1, R-3, R-4, R-5, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances.

Class C shares are subject to an 8-year automatic conversion plan whereby Class C shares held for eight years after purchase will automatically convert to Class A shares of the same Fund.

See Purchase of Fund Shares for more information.

Tax Information

296

Payments to Broker-Dealers and Other Financial Intermediaries

297

SAM (Strategic Asset Management) Conservative Balanced Portfolio

Objective

The Portfolio seeks to provide a high level of total return (consisting of reinvestment of income and capital appreciation), consistent with a moderate degree of principal risk.

Fees and Expenses of the Fund

This table describes the fees and expenses that you may pay if you buy, hold, and sell shares of the Fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the tables and examples below. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in Class A Shares of Principal Funds, Inc. More information about these and other discounts is available from your financial intermediary and in “Choosing a Share Class and The Costs of Investing” beginning on page 404 of the Fund’s Prospectus, Appendix B to the Prospectus titled “Intermediary-Specific Sales Charge Waivers and Reductions,” and “Multiple Class Structure” beginning on page 4 of the Fund’s Statement of Additional Information.

Shareholder Fees (fees paid directly from your investment)

	Share Class
	A	C	J	Inst.	R-1	R-3	R-4	R-5
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	5.50%	None	None	None	None	None	None	None
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	1.00%	1.00%	None	None	None	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	A	C	J	Inst.	R-1	R-3	R-4	R-5
Management Fees	0.27%	0.27%	0.27%	0.27%	0.27%	0.27%	0.27%	0.27%
Distribution and/or Service (12b-1) Fees	0.25%	1.00%	0.15%	N/A	0.35%	0.25%	0.10%	N/A
Other Expenses	0.09%	0.11%	0.05%	0.03%	0.54%	0.33%	0.29%	0.27%
Acquired Fund Fees and Expenses	0.52%	0.52%	0.52%	0.52%	0.52%	0.52%	0.52%	0.52%
Total Annual Fund Operating Expenses	1.13%	1.90%	0.99%	0.82%	1.68%	1.37%	1.18%	1.06%

298

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example assumes conversion of the Class C shares to Class A shares after the eighth year. The Example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

	1 year	3 years	5 years	10 years
Class A	$659	$889	$1,138	$1,849
Class C	293	597	1,026	2,022
Class J	201	315	547	1,213
Institutional Class	84	262	455	1,014
Class R-1	171	530	913	1,987
Class R-3	139	434	750	1,646
Class R-4	120	375	649	1,432
Class R-5	108	337	585	1,294

With respect to Classes C and J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class C	$193	$597	$1,026	$2,022
Class J	101	315	547	1,213

Portfolio Turnover

The Fund and each underlying fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs. These costs, which are not reflected in Annual Fund Operating Expenses or in the Example, affect the Fund’s and the underlying fund's performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 55.30% of the average value of its portfolio.

Principal Investment Strategies

The Portfolio generally invests:

•

between 40% and 80% of its assets in fixed-income funds, and less than 40% in any one fixed-income fund; such funds generally invest in fixed-income instruments such as high yield securities (or “junk” bonds), securitized products, and corporate bonds;

•

between 20% and 60% of its assets in equity funds, and less than 30% in any one equity fund; such funds generally invest in equity securities of domestic and foreign companies (including in emerging markets), including small, medium, and large market capitalization companies, and growth and value stock; and

•

The Portfolio may temporarily exceed these percentage ranges and may alter the percentage ranges when it deems appropriate.

299

Principal Risks

Principal Risks of Investing in a Fund of Funds

Principal Risks due to the Fund’s Investments in Underlying Funds

•

Foreign Currency Risk. Risks of investing in securities denominated in, or that trade in, foreign (non-U.S.) currencies include changes in foreign exchange rates and foreign exchange restrictions.

300

Performance

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	10.32%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(11.74)%

301

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Class A Return Before Taxes	(19.52)%	1.20%	3.75%
Class A Return After Taxes on Distributions	(20.57)%	(0.34)%	2.27%
Class A Return After Taxes on Distributions and Sale of Fund Shares	(11.12)%	0.55%	2.52%
Class C Return Before Taxes	(16.31)%	1.60%	3.71%
Class J Return Before Taxes	(15.50)%	2.53%	4.46%
Institutional Class Return Before Taxes	(14.50)%	2.69%	4.67%
Class R-1 Return Before Taxes	(15.25)%	1.81%	3.77%
Class R-3 Return Before Taxes	(14.95)%	2.13%	4.09%
Class R-4 Return Before Taxes	(14.89)%	2.31%	4.28%
Class R-5 Return Before Taxes	(14.73)%	2.44%	4.41%
Bloomberg U.S. Aggregate Bond Index (reflects no deduction for fees, expenses, or taxes)	(13.02)%	0.02%	1.06%
Russell 3000 Index (reflects no deduction for fees, expenses, or taxes)	(19.22)%	8.79%	12.13%
MSCI EAFE Index NTR (reflects withholding taxes on foreign dividends, but no deduction for fees, expenses, or other taxes)	(14.46)%	1.54%	4.67%
SAM Conservative Balanced Blended Index (except as noted for MSCI EAFE Index NTR, reflects no deduction for fees, expenses, or taxes)	(14.75)%	3.13%	4.91%

Performance of a blended index shows how the Portfolio’s performance compares to a blend of indices with similar investment objectives. Performance of the components of the blended index is also shown. The weightings for SAM Conservative Balanced Blended Index are 60% Bloomberg U.S. Aggregate Bond Index, 30% Russell 3000® Index, and 10% MSCI EAFE Index NTR.

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

Brody Dass (since 2022), Portfolio Manager

•

Todd A. Jablonski (since 2010), Portfolio Manager

•

Yesim Tokat-Acikel (since 2023), Portfolio Manager

Purchase and Sale of Fund Shares

For Classes R-1, R-3, R-4, R-5, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances.

Class C shares are subject to an 8-year automatic conversion plan whereby Class C shares held for eight years after purchase will automatically convert to Class A shares of the same Fund.

See Purchase of Fund Shares for more information.

Tax Information

302

Payments to Broker-Dealers and Other Financial Intermediaries

303

SAM (Strategic Asset Management) Conservative Growth Portfolio

Objective

The Portfolio seeks to provide long-term capital appreciation.

Fees and Expenses of the Fund

This table describes the fees and expenses that you may pay if you buy, hold, and sell shares of the Fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the tables and examples below. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in Class A Shares of Principal Funds, Inc. More information about these and other discounts is available from your financial intermediary and in “Choosing a Share Class and The Costs of Investing” beginning on page 404 of the Fund’s Prospectus, Appendix B to the Prospectus titled “Intermediary-Specific Sales Charge Waivers and Reductions,” and “Multiple Class Structure” beginning on page 4 of the Fund’s Statement of Additional Information.

Shareholder Fees (fees paid directly from your investment)

	Share Class
	A	C	J	Inst.	R-1	R-3	R-4	R-5
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	5.50%	None	None	None	None	None	None	None
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	1.00%	1.00%	None	None	None	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	A	C	J	Inst.	R-1	R-3	R-4	R-5
Management Fees	0.27%	0.27%	0.27%	0.27%	0.27%	0.27%	0.27%	0.27%
Distribution and/or Service (12b-1) Fees	0.25%	1.00%	0.15%	N/A	0.35%	0.25%	0.10%	N/A
Other Expenses	0.08%	0.10%	0.05%	0.02%	0.54%	0.33%	0.29%	0.27%
Acquired Fund Fees and Expenses	0.55%	0.55%	0.55%	0.55%	0.55%	0.55%	0.55%	0.55%
Total Annual Fund Operating Expenses	1.15%	1.92%	1.02%	0.84%	1.71%	1.40%	1.21%	1.09%

304

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example assumes conversion of the Class C shares to Class A shares after the eighth year. The Example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

	1 year	3 years	5 years	10 years
Class A	$661	$895	$1,148	$1,871
Class C	295	603	1,037	2,043
Class J	204	325	563	1,248
Institutional Class	86	268	466	1,037
Class R-1	174	539	928	2,019
Class R-3	143	443	766	1,680
Class R-4	123	384	665	1,466
Class R-5	111	347	601	1,329

With respect to Classes C and J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class C	$195	$603	$1,037	$2,043
Class J	104	325	563	1,248

Portfolio Turnover

The Fund and each underlying fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs. These costs, which are not reflected in Annual Fund Operating Expenses or in the Example, affect the Fund’s and the underlying fund's performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 52.40% of the average value of its portfolio.

Principal Investment Strategies

The Portfolio generally invests:

•

between 0% and 40% of its assets in fixed-income funds, and less than 30% in any one fixed-income fund; such funds generally invest in fixed-income instruments such as corporate bonds;

•

between 60% and 100% of its assets in equity funds, and less than 40% in any one equity fund; such funds generally invest in equity securities of domestic and foreign companies (including in emerging markets), including small, medium, and large market capitalization companies, and growth and value stock; and

•

The Portfolio may temporarily exceed these percentage ranges and may alter the percentage ranges when it deems appropriate.

305

Principal Risks

Principal Risks of Investing in a Fund of Funds

Principal Risks due to the Fund’s Investments in Underlying Funds

•

Foreign Currency Risk. Risks of investing in securities denominated in, or that trade in, foreign (non-U.S.) currencies include changes in foreign exchange rates and foreign exchange restrictions.

306

Performance

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	15.98%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(19.15)%

307

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Class A Return Before Taxes	(22.61)%	3.24%	6.77%
Class A Return After Taxes on Distributions	(24.58)%	1.33%	5.01%
Class A Return After Taxes on Distributions and Sale of Fund Shares	(11.99)%	2.41%	5.18%
Class C Return Before Taxes	(19.40)%	3.63%	6.72%
Class J Return Before Taxes	(18.72)%	4.59%	7.51%
Institutional Class Return Before Taxes	(17.84)%	4.75%	7.73%
Class R-1 Return Before Taxes	(18.56)%	3.84%	6.80%
Class R-3 Return Before Taxes	(18.27)%	4.18%	7.12%
Class R-4 Return Before Taxes	(18.13)%	4.37%	7.33%
Class R-5 Return Before Taxes	(18.04)%	4.49%	7.45%
Russell 3000 Index (reflects no deduction for fees, expenses, or taxes)	(19.22)%	8.79%	12.13%
Bloomberg U.S. Aggregate Bond Index (reflects no deduction for fees, expenses, or taxes)	(13.02)%	0.02%	1.06%
MSCI EAFE Index NTR (reflects withholding taxes on foreign dividends, but no deduction for fees, expenses, or other taxes)	(14.46)%	1.54%	4.67%
SAM Conservative Growth Blended Index (except as noted for MSCI EAFE Index NTR, reflects no deduction for fees, expenses, or taxes)	(16.82)%	5.82%	8.55%

Performance of a blended index shows how the Portfolio’s performance compares to a blend of indices with similar investment objectives. Performance of the components of the blended index is also shown. The weightings for SAM Conservative Growth Blended Index are 60% Russell 3000® Index, 20% Bloomberg U.S. Aggregate Bond Index, and 20% MSCI EAFE Index NTR.

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

Brody Dass (since 2022), Portfolio Manager

•

Todd A. Jablonski (since 2010), Portfolio Manager

•

Yesim Tokat-Acikel (since 2023), Portfolio Manager

Purchase and Sale of Fund Shares

For Classes R-1, R-3, R-4, R-5, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances.

Class C shares are subject to an 8-year automatic conversion plan whereby Class C shares held for eight years after purchase will automatically convert to Class A shares of the same Fund.

See Purchase of Fund Shares for more information.

Tax Information

308

Payments to Broker-Dealers and Other Financial Intermediaries

309

SAM (Strategic Asset Management) Flexible Income Portfolio

Objective

The Portfolio seeks to provide a high level of total return (consisting of reinvestment of income with some capital appreciation).

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment)

	Share Class
	A	C	J	Inst.	R-1	R-3	R-4	R-5
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	3.75%	None	None	None	None	None	None	None
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	1.00%	1.00%	None	None	None	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	A	C	J	Inst.	R-1	R-3	R-4	R-5
Management Fees	0.27%	0.27%	0.27%	0.27%	0.27%	0.27%	0.27%	0.27%
Distribution and/or Service (12b-1) Fees	0.25%	1.00%	0.15%	N/A	0.35%	0.25%	0.10%	N/A
Other Expenses	0.08%	0.11%	0.04%	0.04%	0.54%	0.33%	0.29%	0.27%
Acquired Fund Fees and Expenses	0.48%	0.48%	0.48%	0.48%	0.48%	0.48%	0.48%	0.48%
Total Annual Fund Operating Expenses	1.08%	1.86%	0.94%	0.79%	1.64%	1.33%	1.14%	1.02%

310

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example assumes conversion of the Class C shares to Class A shares after the eighth year. The Example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

	1 year	3 years	5 years	10 years
Class A	$481	$706	$948	$1,643
Class C	289	585	1,006	1,976
Class J	196	300	520	1,155
Institutional Class	81	252	439	978
Class R-1	167	517	892	1,944
Class R-3	135	421	729	1,601
Class R-4	116	362	628	1,386
Class R-5	104	325	563	1,248

With respect to Classes C and J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class C	$189	$585	$1,006	$1,976
Class J	96	300	520	1,155

Portfolio Turnover

The Fund and each underlying fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs. These costs, which are not reflected in Annual Fund Operating Expenses or in the Example, affect the Fund’s and the underlying fund's performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 57.30% of the average value of its portfolio.

Principal Investment Strategies

The Portfolio generally invests:

•

between 55% and 95% of its assets in fixed-income funds, and less than 40% in any one fixed-income fund; such funds generally invest in fixed-income instruments such as high yield securities (or “junk” bonds), securitized products, and corporate bonds;

•

between 5% and 45% of its assets in equity funds, and less than 30% in any one equity fund; such funds generally invest in equity securities of domestic and foreign companies, including small, medium, and large market capitalization companies, and growth and value stock; and

•

The Portfolio may temporarily exceed these percentage ranges and may alter the percentage ranges when it deems appropriate.

311

Principal Risks

Principal Risks of Investing in a Fund of Funds

Principal Risks due to the Fund’s Investments in Underlying Funds

•

312

Performance

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	7.69%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(8.81)%

313

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Class A Return Before Taxes	(16.68)%	0.81%	2.87%
Class A Return After Taxes on Distributions	(17.43)%	(0.51)%	1.53%
Class A Return After Taxes on Distributions and Sale of Fund Shares	(9.78)%	0.33%	1.83%
Class C Return Before Taxes	(14.92)%	0.81%	2.64%
Class J Return Before Taxes	(14.14)%	1.76%	3.40%
Institutional Class Return Before Taxes	(13.18)%	1.88%	3.58%
Class R-1 Return Before Taxes	(13.91)%	1.03%	2.70%
Class R-3 Return Before Taxes	(13.60)%	1.35%	3.02%
Class R-4 Return Before Taxes	(13.50)%	1.53%	3.21%
Class R-5 Return Before Taxes	(13.33)%	1.66%	3.34%
Bloomberg U.S. Aggregate Bond Index (reflects no deduction for fees, expenses, or taxes)	(13.02)%	0.02%	1.06%
Russell 3000 Index (reflects no deduction for fees, expenses, or taxes)	(19.22)%	8.79%	12.13%
MSCI EAFE Index NTR (reflects withholding taxes on foreign dividends, but no deduction for fees, expenses, or other taxes)	(14.46)%	1.54%	4.67%
SAM Flexible Income Blended Index (except as noted for MSCI EAFE Index NTR, reflects no deduction for fees, expenses, or taxes)	(14.12)%	2.10%	3.58%

Performance of a blended index shows how the Portfolio’s performance compares to a blend of indices with similar investment objectives. Performance of the components of the blended index is also shown. The weightings for SAM Flexible Income Blended Index are 75% Bloomberg U.S. Aggregate Bond Index, 20% Russell 3000® Index, and 5% MSCI EAFE Index NTR.

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

Brody Dass (since 2022), Portfolio Manager

•

Todd A. Jablonski (since 2010), Portfolio Manager

•

Yesim Tokat-Acikel (since 2023), Portfolio Manager

Purchase and Sale of Fund Shares

For Classes R-1, R-3, R-4, R-5, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances.

Class C shares are subject to an 8-year automatic conversion plan whereby Class C shares held for eight years after purchase will automatically convert to Class A shares of the same Fund.

See Purchase of Fund Shares for more information.

Tax Information

314

Payments to Broker-Dealers and Other Financial Intermediaries

315

SAM (Strategic Asset Management) Strategic Growth Portfolio

Objective

The Portfolio seeks to provide long-term capital appreciation.

Fees and Expenses of the Fund

This table describes the fees and expenses that you may pay if you buy, hold, and sell shares of the Fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the tables and examples below. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in Class A Shares of Principal Funds, Inc. More information about these and other discounts is available from your financial intermediary and in “Choosing a Share Class and The Costs of Investing” beginning on page 404 of the Fund’s Prospectus, Appendix B to the Prospectus titled “Intermediary-Specific Sales Charge Waivers and Reductions,” and “Multiple Class Structure” beginning on page 4 of the Fund’s Statement of Additional Information.

Shareholder Fees (fees paid directly from your investment)

	Share Class
	A	C	J	Inst.	R-1	R-3	R-4	R-5
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	5.50%	None	None	None	None	None	None	None
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	1.00%	1.00%	None	None	None	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	A	C	J	Inst.	R-1	R-3	R-4	R-5
Management Fees	0.27%	0.27%	0.27%	0.27%	0.27%	0.27%	0.27%	0.27%
Distribution and/or Service (12b-1) Fees	0.25%	1.00%	0.15%	N/A	0.35%	0.25%	0.10%	N/A
Other Expenses	0.09%	0.14%	0.07%	0.02%	0.54%	0.33%	0.29%	0.27%
Acquired Fund Fees and Expenses	0.56%	0.56%	0.56%	0.56%	0.56%	0.56%	0.56%	0.56%
Total Annual Fund Operating Expenses	1.17%	1.97%	1.05%	0.85%	1.72%	1.41%	1.22%	1.10%

316

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example assumes conversion of the Class C shares to Class A shares after the eighth year. The Example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

	1 year	3 years	5 years	10 years
Class A	$663	$901	$1,158	$1,892
Class C	300	618	1,062	2,089
Class J	207	334	579	1,283
Institutional Class	87	271	471	1,049
Class R-1	175	542	933	2,030
Class R-3	144	446	771	1,691
Class R-4	124	387	670	1,477
Class R-5	112	350	606	1,340

With respect to Classes C and J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class C	$200	$618	$1,062	$2,089
Class J	107	334	579	1,283

Portfolio Turnover

The Fund and each underlying fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs. These costs, which are not reflected in Annual Fund Operating Expenses or in the Example, affect the Fund’s and the underlying fund's performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 49.50% of the average value of its portfolio.

Principal Investment Strategies

The Portfolio generally invests:

•

between 75% and 100% of its assets in equity funds, and less than 50% in any one equity fund; such funds generally invest in equity securities of domestic and foreign companies (including in emerging markets), including small, medium, and large market capitalization companies, and growth and value stock; and

•

less than 20% of its assets in specialty funds, and less than 20% in any one specialty fund; such funds generally offer unique combinations of traditional equity securities or use alternative investment strategies that aim to offer diversification beyond traditional equity securities and include investments in such assets as infrastructure, commodities, currencies, and natural resources companies.

The Portfolio may temporarily exceed these percentage ranges and may alter the percentage ranges when it deems appropriate.

317

Principal Risks

Principal Risks of Investing in a Fund of Funds

Principal Risks due to the Fund’s Investments in Underlying Funds

•

Foreign Currency Risk. Risks of investing in securities denominated in, or that trade in, foreign (non-U.S.) currencies include changes in foreign exchange rates and foreign exchange restrictions.

318

Performance

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	19.17%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(22.15)%

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Class A Return Before Taxes	(23.52)%	3.96%	7.69%
Class A Return After Taxes on Distributions	(25.06)%	1.88%	5.81%
Class A Return After Taxes on Distributions and Sale of Fund Shares	(12.79)%	2.91%	5.93%
Class C Return Before Taxes	(20.46)%	4.32%	7.64%
Class J Return Before Taxes	(19.68)%	5.31%	8.44%
Institutional Class Return Before Taxes	(18.83)%	5.48%	8.67%
Class R-1 Return Before Taxes	(19.53)%	4.51%	7.70%
Class R-3 Return Before Taxes	(19.27)%	4.90%	8.07%
Class R-4 Return Before Taxes	(19.12)%	5.10%	8.27%
Class R-5 Return Before Taxes	(19.00)%	5.23%	8.40%
Russell 3000 Index (reflects no deduction for fees, expenses, or taxes)	(19.22)%	8.79%	12.13%
MSCI EAFE Index NTR (reflects withholding taxes on foreign dividends, but no deduction for fees, expenses, or other taxes)	(14.46)%	1.54%	4.67%
Bloomberg U.S. Aggregate Bond Index (reflects no deduction for fees, expenses, or taxes)	(13.02)%	0.02%	1.06%
SAM Strategic Growth Blended Index (except as noted for MSCI EAFE Index NTR, reflects no deduction for fees, expenses, or taxes)	(17.61)%	6.63%	9.77%

319

Performance of a blended index shows how the Portfolio’s performance compares to a blend of indices with similar investment objectives. Performance of the components of the blended index is also shown. The weightings for SAM Strategic Growth Blended Index are 70% Russell 3000® Index, 25% MSCI EAFE Index NTR, and 5% Bloomberg U.S. Aggregate Bond Index.

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

Brody Dass (since 2022), Portfolio Manager

•

Todd A. Jablonski (since 2010), Portfolio Manager

•

Yesim Tokat-Acikel (since 2023), Portfolio Manager

Purchase and Sale of Fund Shares

For Classes R-1, R-3, R-4, R-5, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances.

Class C shares are subject to an 8-year automatic conversion plan whereby Class C shares held for eight years after purchase will automatically convert to Class A shares of the same Fund.

See Purchase of Fund Shares for more information.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

320

Short-Term Income Fund

Objective

The Fund seeks to provide as high a level of current income as is consistent with prudent investment management and stability of principal.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment)

	Share Class
	A	C	J	Inst.	R-1	R-3	R-4	R-5
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	2.25%	None	None	None	None	None	None	None
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	1.00%	1.00%	None	None	None	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	A	C	J	Inst.	R-1	R-3	R-4	R-5
Management Fees(1)	0.37%	0.37%	0.37%	0.37%	0.37%	0.37%	0.37%	0.37%
Distribution and/or Service (12b-1) Fees	0.15%	1.00%	0.15%	N/A	0.35%	0.25%	0.10%	N/A
Other Expenses	0.11%	0.18%	0.10%	0.04%	0.53%	0.32%	0.28%	0.26%
Total Annual Fund Operating Expenses	0.63%	1.55%	0.62%	0.41%	1.25%	0.94%	0.75%	0.63%

(1)

Fees have been restated to reflect current fees.

321

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example assumes conversion of the Class C shares to Class A shares after the eighth year. The Example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

	1 year	3 years	5 years	10 years
Class A	$288	$422	$568	$994
Class C	258	490	845	1,597
Class J	163	199	346	774
Institutional Class	42	132	230	518
Class R-1	127	397	686	1,511
Class R-3	96	300	520	1,155
Class R-4	77	240	417	930
Class R-5	64	202	351	786

With respect to Classes C and J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class C	$158	$490	$845	$1,597
Class J	63	199	346	774

Portfolio Turnover

Principal Investment Strategies

The Fund seeks to achieve its investment objective by investing in a broad range of high-quality, fixed-income securities. The Fund invests primarily in high-quality short-term bonds and other fixed-income securities that, at the time of purchase, are rated BBB- or higher by S&P Global Ratings (“S&P Global”) or Baa3 or higher by Moody’s Investors Service, Inc. (“Moody’s”) (if securities are rated differently by S&P Global and Moody’s, the highest rating is used; or, if unrated, in the opinion of those selecting such investments, are of comparable quality). The Fund’s investments also include corporate securities, government securities, mortgage-backed and asset-backed securities (securitized products), and foreign securities.

Under normal circumstances, the Fund maintains an effective maturity of five years or less and an average portfolio duration that is within ±15% of the duration of the Bloomberg Credit 1-3 Year Index, which as of January 31, 2023 was 1.87 years.

The Fund invests in derivatives, including Treasury futures, to manage the fixed-income exposure. A derivative is a financial arrangement, the value of which is derived from, or based on, a traditional security, asset, or market index.

Principal Risks

•

322

U.S. Government Securities Risk. Yields available from U.S. government securities are generally lower than yields from many other fixed-income securities.

Performance

323

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	3.37%
Lowest return for a quarter during the period of the bar chart above:	Q1 2022	(2.48)%

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Class A Return Before Taxes	(6.11)%	0.36%	0.85%
Class A Return After Taxes on Distributions	(6.73)%	(0.38)%	0.15%
Class A Return After Taxes on Distributions and Sale of Fund Shares	(3.62)%	(0.02)%	0.35%
Class C Return Before Taxes	(5.87)%	(0.09)%	0.37%
Class J Return Before Taxes	(4.96)%	0.84%	1.06%
Institutional Class Return Before Taxes	(3.83)%	1.06%	1.33%
Class R-1 Return Before Taxes	(4.64)%	0.20%	0.46%
Class R-3 Return Before Taxes	(4.26)%	0.51%	0.78%
Class R-4 Return Before Taxes	(4.16)%	0.69%	0.96%
Class R-5 Return Before Taxes	(4.04)%	0.82%	1.10%
Bloomberg Credit 1-3 Year Index (reflects no deduction for fees, expenses, or taxes)	(3.40)%	1.31%	1.37%

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

John R. Friedl (since 2010), Portfolio Manager

•

Scott J. Peterson (since 2010), Portfolio Manager

Purchase and Sale of Fund Shares

For Classes R-1, R-3, R-4, R-5, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

324

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances.

Class C shares are subject to an 8-year automatic conversion plan whereby Class C shares held for eight years after purchase will automatically convert to Class A shares of the same Fund.

See Purchase of Fund Shares for more information.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

325

SmallCap Fund

On or about May 19, 2023, delete references to Class C shares of this Fund, including information regarding the conversion plan, from the Prospectus.

Objective

The Fund seeks long-term growth of capital.

Fees and Expenses of the Fund

This table describes the fees and expenses that you may pay if you buy, hold, and sell shares of the Fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the tables and examples below. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in Class A Shares of Principal Funds, Inc. More information about these and other discounts is available from your financial intermediary and in “Choosing a Share Class and The Costs of Investing” beginning on page 404 of the Fund’s Prospectus, Appendix B to the Prospectus titled “Intermediary-Specific Sales Charge Waivers and Reductions,” and “Multiple Class Structure” beginning on page 4 of the Fund’s Statement of Additional Information.

Shareholder Fees (fees paid directly from your investment)

	Share Class
	A	C	J	Inst.	R-1	R-3	R-4	R-5	R-6
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	5.50%	None	None	None	None	None	None	None	None
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	1.00%	1.00%	None	None	None	None	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	A	C	J	Inst.	R-1	R-3	R-4	R-5	R-6
Management Fees	0.73%	0.73%	0.73%	0.73%	0.73%	0.73%	0.73%	0.73%	0.73%
Distribution and/or Service (12b-1) Fees	0.25%	1.00%	0.15%	N/A	0.35%	0.25%	0.10%	N/A	N/A
Other Expenses	0.16%	0.27%	0.13%	0.13%	0.54%	0.33%	0.29%	0.27%	0.02%
Total Annual Fund Operating Expenses	1.14%	2.00%	1.01%	0.86%	1.62%	1.31%	1.12%	1.00%	0.75%
Expense Reimbursement(1)	N/A	N/A	N/A	(0.01)%	N/A	N/A	N/A	N/A	0.00%
Total Annual Fund Operating Expenses after Expense Reimbursement	1.14%	2.00%	1.01%	0.85%	1.62%	1.31%	1.12%	1.00%	0.75%

(1)

Principal Global Investors, LLC (“PGI”), the investment advisor, has contractually agreed to limit the Fund’s expenses by paying, if necessary, expenses normally payable by the Fund (excluding interest expense, expenses related to fund investments, acquired fund fees and expenses, and tax reclaim recovery expenses and other extraordinary expenses) to maintain a total level of operating expenses (expressed as a percent of average net assets on an annualized basis) not to exceed 0.85% for Institutional Class shares. In addition, for Class R-6, the expense limit will maintain “Other Expenses” (expressed as a percent of average net assets on an annualized basis) not to exceed 0.02% (excluding interest expense, expenses related to fund investments, acquired fund fees and expenses, and tax reclaim recovery expenses and other extraordinary expenses). It is expected that the expense limits will continue through the period ending February 29, 2024; however, Principal Funds, Inc. and PGI, the parties to the agreement, may mutually agree to terminate the expense limits prior to the end of the period. Subject to applicable expense limits, the Fund may reimburse PGI for expenses incurred during the current fiscal year.

326

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Class A	$660	$892	$1,143	$1,860
Class C	303	627	1,078	2,105
Class J	203	322	558	1,236
Institutional Class	87	273	476	1,060
Class R-1	165	511	881	1,922
Class R-3	133	415	718	1,579
Class R-4	114	356	617	1,363
Class R-5	102	318	552	1,225
Class R-6	77	240	417	930

With respect to Classes C and J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class C	$203	$627	$1,078	$2,105
Class J	103	322	558	1,236

Portfolio Turnover

Principal Investment Strategies

Under normal circumstances, the Fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in equity securities of companies with small market capitalizations at the time of purchase. For this Fund, companies with small market capitalizations are those with market capitalizations within the range of companies comprising the Russell 2000® Index (as of January 31, 2023, this range was between approximately $4.4 million and $10.5 billion). Those managing the Fund’s investments seek to invest in securities of companies that they believe have improving and sustainable business fundamentals, rising investor expectations, and attractive relative valuations.

Principal Risks

•

327

Performance

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	28.39%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(30.54)%

328

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Class A Return Before Taxes	(24.78)%	4.35%	9.56%
Class A Return After Taxes on Distributions	(24.78)%	2.75%	7.84%
Class A Return After Taxes on Distributions and Sale of Fund Shares	(14.67)%	3.11%	7.42%
Class C Return Before Taxes	(21.89)%	4.66%	9.46%
Class J Return Before Taxes	(21.09)%	5.70%	10.35%
Institutional Class Return Before Taxes	(20.17)%	5.88%	10.61%
Class R-1 Return Before Taxes	(20.79)%	5.05%	9.72%
Class R-3 Return Before Taxes	(20.51)%	5.39%	10.06%
Class R-4 Return Before Taxes	(20.38)%	5.59%	10.27%
Class R-5 Return Before Taxes	(20.29)%	5.71%	10.40%
Class R-6 Return Before Taxes	(20.10)%	5.97%	10.43%
Russell 2000 Index (reflects no deduction for fees, expenses, or taxes)	(20.45)%	4.13%	9.01%

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

Phil Nordhus (since 2006), Portfolio Manager

•

Brian W. Pattinson (since 2011), Portfolio Manager

Purchase and Sale of Fund Shares

For Classes R-1, R-3, R-4, R-5, R-6, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances.

Class C shares are subject to an 8-year automatic conversion plan whereby Class C shares held for eight years after purchase will automatically convert to Class A shares of the same Fund.

Effective as of the close of the New York Stock Exchange on March 24, 2023, Class C shares will no longer be available for purchase except in limited circumstances.

See Purchase of Fund Shares for more information.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

329

SmallCap Growth Fund I

Objective

The Fund seeks long-term growth of capital.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment)

	Share Class
	J	Inst.	R-1	R-3	R-4	R-5	R-6
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	None	None	None	None	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	J	Inst.	R-1	R-3	R-4	R-5	R-6
Management Fees	0.85%	0.85%	0.85%	0.85%	0.85%	0.85%	0.85%
Distribution and/or Service (12b-1) Fees	0.15%	N/A	0.35%	0.25%	0.10%	N/A	N/A
Other Expenses	0.15%	0.11%	0.53%	0.32%	0.28%	0.26%	0.01%
Acquired Fund Fees and Expenses	0.02%	0.02%	0.02%	0.02%	0.02%	0.02%	0.02%
Total Annual Fund Operating Expenses	1.17%	0.98%	1.75%	1.44%	1.25%	1.13%	0.88%
Fee Waiver and Expense Reimbursement(1),(2)	(0.02)%	(0.02)%	(0.02)%	(0.02)%	(0.02)%	(0.02)%	(0.02)%
Total Annual Fund Operating Expenses after Fee Waiver and Expense Reimbursement	1.15%	0.96%	1.73%	1.42%	1.23%	1.11%	0.86%

(1)

Principal Global Investors, LLC (“PGI”), the investment advisor, has contractually agreed to waive a portion of the Fund's management fees through the period ending February 29, 2024. The fee waiver will reduce the Fund's management fees by 0.02% (expressed as a percent of average net assets on an annualized basis). It is expected that the fee waiver will continue through the period disclosed; however, Principal Funds, Inc. and PGI, the parties to the agreement may mutually agree to terminate the fee waiver prior to the end of the period.

(2)

330

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Class J	$217	$370	$642	$1,419
Institutional Class	98	310	540	1,200
Class R-1	176	549	947	2,061
Class R-3	145	454	785	1,722
Class R-4	125	395	684	1,510
Class R-5	113	357	620	1,373
Class R-6	88	279	486	1,082

With respect to Class J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class J	$117	$370	$642	$1,419

Portfolio Turnover

Principal Investment Strategies

Under normal circumstances, the Fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in equity securities of companies with small market capitalizations at the time of purchase. For this Fund, companies with small market capitalizations are those with market capitalizations equal to or smaller than the greater of: 1) $6.0 billion or 2) the highest market capitalization of the companies comprising the Russell 2000® Growth Index (as of January 31, 2023, this range was between approximately $4.4 million and $10.5 billion). The Fund invests in growth equity securities, an investment strategy that emphasizes buying equity securities of companies whose potential for growth of capital and earnings is expected to be above average.

Principal Risks

•

331

•

Performance

For periods prior to the inception date of Class R-6 shares (November 25, 2014), the performance shown in the table for Class R-6 shares is that of the Fund’s Institutional Class shares, adjusted to reflect the fees and expenses of Class R-6 shares. These adjustments result in performance for such periods that is no higher than the historical performance of the Institutional Class shares.

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q2 2020	33.84%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(22.08)%

332

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Institutional Class Return Before Taxes	(28.55)%	6.58%	10.80%
Institutional Class Return After Taxes on Distributions	(28.69)%	4.20%	8.31%
Institutional Class Return After Taxes on Distributions and Sale of Fund Shares	(16.80)%	4.96%	8.32%
Class J Return Before Taxes	(29.45)%	6.33%	10.44%
Class R-1 Return Before Taxes	(29.12)%	5.72%	9.87%
Class R-3 Return Before Taxes	(28.86)%	6.06%	10.22%
Class R-4 Return Before Taxes	(28.77)%	6.24%	10.42%
Class R-5 Return Before Taxes	(28.70)%	6.37%	10.55%
Class R-6 Return Before Taxes	(28.48)%	6.65%	10.82%
Russell 2000 Growth Index (reflects no deduction for fees, expenses, or taxes)	(26.37)%	3.51%	9.20%

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Institutional Class shares only and would be different for the other share classes.

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

James W. Fennessey (since 2009), Portfolio Manager

•

Randy L. Welch (since 2009), Portfolio Manager

Sub-Advisors

AllianceBernstein L.P.
Brown Advisory, LLC
Emerald Advisers, LLC

Purchase and Sale of Fund Shares

For Classes R-1, R-3, R-4, R-5, R-6, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances.

See Purchase of Fund Shares for more information.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

333

SmallCap S&P 600 Index Fund

Objective

The Fund seeks long-term growth of capital.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment)

	Share Class
	J	Inst.	R-1	R-3	R-4	R-5	R-6
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	None	None	None	None	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	J	Inst.	R-1	R-3	R-4	R-5	R-6
Management Fees	0.15%	0.15%	0.15%	0.15%	0.15%	0.15%	0.15%
Distribution and/or Service (12b-1) Fees	0.15%	N/A	0.35%	0.25%	0.10%	N/A	N/A
Other Expenses	0.12%	0.09%	0.54%	0.33%	0.29%	0.27%	0.01%
Total Annual Fund Operating Expenses	0.42%	0.24%	1.04%	0.73%	0.54%	0.42%	0.16%
Expense Reimbursement(1)	N/A	(0.03)%	N/A	N/A	N/A	N/A	N/A
Total Annual Fund Operating Expenses after Expense Reimbursement	0.42%	0.21%	1.04%	0.73%	0.54%	0.42%	0.16%

(1)

334

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Class J	$143	$135	$235	$530
Institutional Class	22	74	132	303
Class R-1	106	331	574	1,271
Class R-3	75	233	406	906
Class R-4	55	173	302	677
Class R-5	43	135	235	530
Class R-6	16	52	90	205

With respect to Class J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class J	$43	$135	$235	$530

Portfolio Turnover

Principal Investment Strategies

Under normal circumstances, the Fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in equity securities of companies that compose the Standard & Poor’s (“S&P”) SmallCap 600 Index (the “Index”) at the time of purchase. The Index is designed to represent U.S. equities with risk/return characteristics of the small cap universe. As of January 31, 2023, the market capitalization range of the companies comprising the Index was between approximately $248.6 million and $6.6 billion. Each component stock of the Index is weighted in proportion to its total market value. The Index is rebalanced quarterly.

Note: “Standard & Poor’s SmallCap 600” and “S&P SmallCap 600” are trademarks of S&P Global and have been licensed by Principal. The Fund is not sponsored, endorsed, sold, or promoted by S&P Global, and S&P Global makes no representation regarding the advisability of investing in the Fund.

335

Principal Risks

•

Performance

336

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q4 2020	31.18%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(32.65)%

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Institutional Class Return Before Taxes	(16.33)%	5.61%	10.54%
Institutional Class Return After Taxes on Distributions	(18.41)%	3.48%	8.52%
Institutional Class Return After Taxes on Distributions and Sale of Fund Shares	(8.22)%	4.13%	8.25%
Class J Return Before Taxes	(17.24)%	5.41%	10.27%
Class R-1 Return Before Taxes	(16.99)%	4.76%	9.64%
Class R-3 Return Before Taxes	(16.73)%	5.08%	9.98%
Class R-4 Return Before Taxes	(16.60)%	5.28%	10.18%
Class R-5 Return Before Taxes	(16.50)%	5.41%	10.32%
Class R-6 Return Before Taxes	(16.27)%	5.68%	10.35%
S&P SmallCap 600 Index (reflects no deduction for fees, expenses, or taxes)	(16.11)%	5.88%	10.82%

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Institutional Class shares only and would be different for the other share classes.

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

Jeffrey A. Schwarte (since 2016), Portfolio Manager

•

Aaron J. Siebel (since 2018), Portfolio Manager

337

Purchase and Sale of Fund Shares

For Classes R-1, R-3, R-4, R-5, R-6, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances.

See Purchase of Fund Shares for more information.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

338

SmallCap Value Fund II

Objective

The Fund seeks long-term growth of capital.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment)

	Share Class
	J	Inst.	R-1	R-3	R-4	R-5	R-6
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	None	None	None	None	None	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	J	Inst.	R-1	R-3	R-4	R-5	R-6
Management Fees	0.93%	0.93%	0.93%	0.93%	0.93%	0.93%	0.93%
Distribution and/or Service (12b-1) Fees	0.15%	N/A	0.35%	0.25%	0.10%	N/A	N/A
Other Expenses	0.24%	0.15%	0.54%	0.33%	0.29%	0.27%	0.02%
Acquired Fund Fees and Expenses	0.01%	0.01%	0.01%	0.01%	0.01%	0.01%	0.01%
Total Annual Fund Operating Expenses	1.33%	1.09%	1.83%	1.52%	1.33%	1.21%	0.96%
Fee Waiver and Expense Reimbursement(1),(2)	(0.02)%	(0.12)%	(0.02)%	(0.02)%	(0.02)%	(0.02)%	(0.02)%
Total Annual Fund Operating Expenses after Fee Waiver and Expense Reimbursement	1.31%	0.97%	1.81%	1.50%	1.31%	1.19%	0.94%

(1)

Principal Global Investors, LLC (“PGI”), the investment advisor, has contractually agreed to waive a portion of the Fund's management fees through the period ending February 29, 2024. The fee waiver will reduce the Fund's management fees by 0.02% (expressed as a percent of average net assets on an annualized basis). It is expected that the fee waiver will continue through the period disclosed; however, Principal Funds, Inc. and PGI, the parties to the agreement may mutually agree to terminate the fee waiver prior to the end of the period.

(2)

339

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Class J	$233	$419	$727	$1,600
Institutional Class	99	335	589	1,318
Class R-1	184	574	988	2,146
Class R-3	153	478	827	1,811
Class R-4	133	419	727	1,600
Class R-5	121	382	663	1,464
Class R-6	96	304	529	1,176

With respect to Class J shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class J	$133	$419	$727	$1,600

Portfolio Turnover

Principal Investment Strategies

Under normal circumstances, the Fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in equity securities of companies with small market capitalizations at the time of purchase. For this Fund, companies with small market capitalizations are those with market capitalizations of one or both of the following: $3.5 billion or less, or within the range of companies composing the Russell 2000® Value Index (as of January 31, 2023, this range was between approximately $4.4 million and $7.2 billion). The Fund invests in value equity securities, an investment strategy that emphasizes buying equity securities that appear to be undervalued. The Fund also invests in real estate investment trusts (“REITs”).

Principal Risks

•

340

•

Performance

341

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q4 2020	31.34%
Lowest return for a quarter during the period of the bar chart above:	Q1 2020	(35.49)%

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Institutional Class Return Before Taxes	(9.24)%	5.59%	9.56%
Institutional Class Return After Taxes on Distributions	(13.21)%	2.42%	6.78%
Institutional Class Return After Taxes on Distributions and Sale of Fund Shares	(5.49)%	3.33%	6.90%
Class J Return Before Taxes	(10.42)%	5.19%	9.09%
Class R-1 Return Before Taxes	(10.06)%	4.69%	8.63%
Class R-3 Return Before Taxes	(9.76)%	5.02%	8.97%
Class R-4 Return Before Taxes	(9.65)%	5.22%	9.17%
Class R-5 Return Before Taxes	(9.51)%	5.35%	9.31%
Class R-6 Return Before Taxes	(9.29)%	5.62%	9.54%
Russell 2000 Value Index (reflects no deduction for fees, expenses, or taxes)	(14.49)%	4.13%	8.48%

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Institutional Class shares only and would be different for the other share classes.

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

James W. Fennessey (since 2009), Portfolio Manager

•

Randy L. Welch (since 2009), Portfolio Manager

Sub-Advisors

Hotchkis and Wiley Capital Management, LLC
Vaughan Nelson Investment Management, LP

Purchase and Sale of Fund Shares

342

For Classes R-1, R-3, R-4, R-5, R-6, and Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances.

See Purchase of Fund Shares for more information.

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

343

Tax-Exempt Bond Fund

Objective

The Fund seeks to provide a high level of income that is exempt from federal income tax while protecting investors’ capital.

Fees and Expenses of the Fund

Shareholder Fees (fees paid directly from your investment)

	Share Class
	A	C	Inst.
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	3.75%	None	None
Maximum Deferred Sales Charge (Load) (as a percentage of the offering price or NAV when Sales Load is paid, whichever is less)	1.00%	1.00%	None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Share Class
	A	C	Inst.
Management Fees(1)	0.39%	0.39%	0.39%
Distribution and/or Service (12b-1) Fees	0.25%	1.00%	N/A
Other Expenses:
Interest Expense	0.04%	0.04%	0.04%
Remainder of Other Expenses	0.08%	0.16%	0.11%
Total Other Expenses	0.12%	0.20%	0.15%
Total Annual Fund Operating Expenses	0.76%	1.59%	0.54%
Expense Reimbursement(2)	N/A	N/A	(0.05)%
Total Annual Fund Operating Expenses after Expense Reimbursement	0.76%	1.59%	0.49%

(1)

Fees have been restated to reflect current fees.

(2)

344

Example

This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

	1 year	3 years	5 years	10 years
Class A	$450	$609	$782	$1,282
Class C	262	502	866	1,666
Institutional Class	50	168	297	672

With respect to Class C shares, you would pay the following expenses if you did not redeem your shares (all other classes would be the same as in the above example):

	1 year	3 years	5 years	10 years
Class C	$162	$502	$866	$1,666

Portfolio Turnover

Principal Investment Strategies

Under normal circumstances, the Fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in tax-exempt bonds (securities issued by or on behalf of state or local governments and other public authorities) at the time of purchase. Many of these are from California, Illinois, and New York. Generally, municipal obligations pay interest that is exempt from federal income tax. The Fund’s investment in municipal obligations include industrial revenue bonds. The Fund also invests in inverse floating rate obligations (variable rate debt instruments that pay interest at rates that move in the opposite direction of prevailing interest rates), which are generally more volatile than other types of municipal obligations and may involve leverage. The Fund may invest up to 20% of its assets in below investment grade bonds (sometimes called “high yield bonds” or “junk bonds”), which are rated at the time of purchase Ba1 or lower by Moody’s Investors Service, Inc. (“Moody’s”) and BB+ or lower by S&P Global Ratings (“S&P Global”) (if the bond has been rated by only one of those agencies, that rating will determine whether the bond is below investment grade; if the bond has not been rated by either of those agencies, those selecting such investments will determine whether the bond is of a quality comparable to those rated below investment grade). Under normal circumstances, the Fund maintains an average portfolio duration that is within ±50% of the duration of the Bloomberg Municipal Bond Index, which as of January 31, 2023 was 5.48 years. The Fund is not managed to a particular maturity.

Principal Risks

Counterparty Risk. Counterparty risk is the risk that the counterparty to a contract or other obligation will be unable or unwilling to honor its obligations.

345

Inverse Floating Rate Investments Risk. Inverse floating rate investments are extremely sensitive to changes in interest rates and, in some cases, their market value may be extremely volatile.

Performance

For periods prior to the inception date of Institutional Class shares (May 18, 2015), the performance shown in the table for Institutional Class shares is that of the Fund’s Class A shares, adjusted to reflect the fees and expenses of the Institutional Class shares. However, where the adjustment for fees and expenses results in performance for Institutional Class shares that is higher than the historical performance of the Class A shares, the historical performance of the Class A shares is used (without respect to sales charges, which are not applicable to Institutional Class shares). These adjustments result in performance for such periods that is no higher than the historical performance of the Class A shares.

346

Total Returns as of December 31

Highest return for a quarter during the period of the bar chart above:	Q1 2014	4.35%
Lowest return for a quarter during the period of the bar chart above:	Q1 2022	(7.11)%

Average Annual Total Returns
For the periods ended December 31, 2022

	1 Year	5 Years	10 Years
Class A Return Before Taxes	(15.09)%	(0.01)%	1.58%
Class A Return After Taxes on Distributions	(15.09)%	(0.01)%	1.58%
Class A Return After Taxes on Distributions and Sale of Fund Shares	(7.99)%	0.65%	1.98%
Class C Return Before Taxes	(13.32)%	(0.06)%	1.29%
Institutional Class Return Before Taxes	(11.51)%	1.01%	2.17%
Bloomberg Municipal Bond Index (reflects no deduction for fees, expenses, or taxes)	(8.53)%	1.25%	2.13%

Investment Advisor and Portfolio Managers

Principal Global Investors, LLC

•

James Noble (since 2013), Portfolio Manager

•

James Welch (since 2014), Portfolio Manager

Purchase and Sale of Fund Shares

For Institutional Class shares, there are no minimum initial or subsequent investment requirements for eligible purchasers.

Class C shares are subject to an 8-year automatic conversion plan whereby Class C shares held for eight years after purchase will automatically convert to Class A shares of the same Fund.

347

See Purchase of Fund Shares for more information.

Tax Information

While the Fund intends to distribute income that is exempt from regular federal and possibly some state income taxes, a portion of the Fund’s distributions may be subject to federal income taxes or to the federal individual alternative minimum tax. A portion of the Fund’s distributions likely will be subject to state income taxes depending on your state’s rules. Different rules may apply if you are tax exempt or if your account is tax deferred in which case your distributions would be taxed when withdrawn from the tax-deferred account.

Payments to Broker-Dealers and Other Financial Intermediaries

348

ADDITIONAL INFORMATION ABOUT INVESTMENT STRATEGIES AND RISKS

Each Fund’s investment objective is described in the summary section for each Fund. The summary section also describes each Fund’s principal investment strategies, including the types of securities in which each Fund invests, and the principal risks of investing in each Fund. The principal investment strategies are not the only investment strategies available to each Fund, but they are the ones each Fund primarily uses to achieve its investment objective.

Except for Fundamental Restrictions described in the Registrant’s Statement of Additional Information (“SAI”), the Registrant’s Board (the “Board”) may change any Fund’s objective or investment strategies without a shareholder vote if it determines such a change is in the best interests of the Fund. If there is a material change to a Fund’s investment objective or investment strategies, you should consider whether the Fund remains an appropriate investment for you. There is no guarantee that each Fund will meet its objective.

Each Fund is designed to be a portion of an investor’s portfolio. No Fund is intended to be a complete investment program. Investors should consider the risks of a Fund before making an investment; it is possible to lose money by investing in a Fund.

The following investment strategies and risks (before the “Strategy and Risk Table” below) apply to the Funds and, depending on market conditions, can materially impact the management of the Funds.

Active Management

The performance of a fund that is actively managed (including hybrid funds or passively managed funds that use a sampling approach that includes some actively managed components) will reflect, in part, the ability of those managing the investments of the fund to make investment decisions that are suited to achieving the fund’s investment objective. Actively managed funds may invest differently from the benchmark against which the Fund’s performance is compared. When making decisions about whether to buy or sell equity securities, considerations may include, among other things, a company’s strength in fundamentals, its potential for earnings growth over time, its ability to navigate certain macroeconomic environments, the current price of its securities relative to their perceived worth and relative to others in its industry, and analysis from computer models. When making decisions about whether to buy or sell fixed-income investments, considerations may include, among other things, the strength of certain sectors of the fixed-income market relative to others, interest rates; a range of economic, political, and financial factors; the balance between supply and demand for certain asset classes; the credit quality of individual issuers; the fundamental strengths of corporate and municipal issuers; and other general market conditions.

Models, which may assist portfolio managers and analysts in formulating their securities trading and allocation decisions by providing investment and risk management insights, may also expose a fund to risks. Models may be predictive in nature, which models depend heavily on the accuracy and reliability of historical data that is supplied by others and may be incorrect or incorrectly input. The fund bears the risk that the quantitative models used will not be successful in identifying trends or in determining the size and direction of investment positions that will enable the fund to achieve its investment objective. In addition, “model prices” will often differ substantially from market prices, especially for instruments with complex characteristics, such as derivative instruments.

An active fund’s investment performance depends upon the successful allocation of the fund’s assets among asset classes, geographical regions, industry sectors, and specific issuers and investments. There is no guarantee that these allocation techniques and decisions will produce the desired results. It is possible to lose money on an investment in a fund as a result of these allocation decisions. If a fund’s investment strategies do not perform as expected, the fund could underperform other funds with similar investment objectives or lose money. Moreover, buying and selling securities to adjust the fund’s asset allocation may increase portfolio turnover and generate transaction costs.

Investment advisors with large assets under management in a Fund, or in other funds that have the same strategy as a Fund, may have difficulty fully investing such Fund’s assets according to its investment objective due to potential liquidity constraints and high transaction costs. Typically, small-cap, mid-cap, and emerging market equity funds are more susceptible to such a risk. A Fund may add additional investment advisors or close the Fund to new investors to address such risks.

Passive Management (Index Funds)

Some funds (including index funds and hybrid funds that include a passive component) use a passive, or indexing, investment approach. Funds that are pure index funds do not attempt to manage market volatility, use defensive strategies or reduce the effect of any long-term periods of poor stock or bond performance. Some index funds attempt to fully replicate their relevant target index by investing primarily in the securities held by the index in approximately the same proportion of the weightings in the index. However, because of the difficulty of executing some relatively small securities trades, other index funds may use a “sampling” approach and may not be invested in the less heavily weighted securities held by the index. Some index funds may invest in index futures, swaps, and/or exchange-traded funds on a daily basis in an effort to minimize tracking error relative to the benchmark.

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It is unlikely that an index fund’s performance will perfectly correlate with the performance of the fund’s relevant index. An index fund’s ability to match the performance of its index may be affected by many factors, such as fund expenses, the timing of cash flows into and out of the fund, changes in securities markets, and changes in the composition of the index.

The providers of the Funds' respective underlying indexes do not provide any warranty or accept any liability for the quality, accuracy, or completeness of any index or its related data. Those managing an index fund’s investments manage such fund consistently with the underlying index provided by the index provider and do not provide any warranty or guarantee against the index provider’s or its agent’s errors. Errors in the quality, accuracy, and completeness of the data used to compile an underlying index may occur and may not be identified and corrected in a timely manner, or at all. Such errors may negatively or positively impact the performance of a fund.

Unusual market conditions may cause an index provider to postpone a scheduled rebalance, which could cause a fund’s underlying index to vary from its normal or expected composition. The postponement of a scheduled rebalance, particularly in a time of market volatility, could mean that constituents that would otherwise be removed at rebalance due to changes in market capitalizations, issuer credit ratings, or other reasons may remain, causing the performance and constituents of the underlying index to vary from those expected under normal conditions. Apart from scheduled rebalances, an index provider may carry out additional index rebalances due to unusual market conditions or in order, for example, to correct an error in the selection of index constituents. When an index is rebalanced and an index fund in turn rebalances its portfolio, such fund and its shareholders bear any related transaction costs and market exposure.

Cash Management

The Funds may have uninvested cash balances pending investment in other securities, pending payment of redemptions, or in other circumstances where liquidity is necessary or desirable. A Fund may hold uninvested cash; invest it in cash equivalents such as money market funds, including the Principal Funds, Inc. Government Money Market Fund; lend it to other Funds pursuant to the Funds' interfund lending facility; and/or invest in other instruments that those managing the Fund’s assets deem appropriate for cash management purposes. Generally, these types of investments offer less potential for gains than other types of securities. For example, to attempt to provide returns similar to its benchmark, a Fund (regardless of how it designates usage of derivatives and investment companies in the table below) may invest uninvested cash in derivatives, such as stock index futures contracts, or exchange-traded funds (“ETFs”), including Principal Exchange-Traded Funds ETFs. In selecting such investments, Principal Global Investors, LLC (“PGI”), the Funds’ advisor, may have conflicts of interest due to economic or other incentives to make or retain an investment in certain affiliated funds instead of in other investments that may be appropriate for a Fund.

Liquidity

The Funds have established a liquidity risk management program as required by the U.S. Securities and Exchange Commission’s (the “SEC”) Liquidity Rule. Under the program, PGI assesses, manages, and periodically reviews each Fund’s liquidity risk, which is the risk that a Fund could not meet requests to redeem shares issued by the Fund without significant dilution of the remaining investors’ interests in the Fund. As part of the program, PGI classifies each investment as a “highly liquid investment,” “moderately liquid investment,” “less liquid investment,” or “illiquid investment.” The liquidity of a Fund’s portfolio investments is determined based on relevant market, trading, and investment-specific considerations under the program. To the extent that an investment is deemed to be an illiquid investment or a less liquid investment, a Fund can expect to be exposed to greater liquidity risk.

Certain fund holdings may be deemed to be less liquid or illiquid because they cannot be readily sold without significantly impacting the value of the holdings. A fund is exposed to liquidity risk when trading volume, lack of a market maker, or legal restrictions impair its ability to sell particular securities or close derivative positions at an advantageous price. Funds with principal investment strategies that involve securities of companies with smaller market capitalizations, foreign securities, derivatives, high yield bonds, and bank loans, or securities with substantial market and/or credit risk, tend to have the greatest exposure to liquidity risk.

Liquidity risk also refers to the risk of unusually high redemption requests, redemption requests by certain large shareholders such as institutional investors or asset allocators, or other unusual market conditions that may make it difficult for a fund to sell investments within the allowable time period to meet redemptions. Meeting such redemption requests could require a fund to sell securities at reduced prices or under unfavorable conditions, which would reduce the value of the fund.

Market Volatility and Securities Issuers

The value of a fund’s portfolio securities may decrease in response to overall stock or bond market movements. Markets tend to move in cycles, with periods of rising prices and periods of falling prices. Stocks tend to go up and down in value more than bonds. The value of a security may decline for reasons directly related to the issuer, such as management performance, financial leverage, and reduced demand for the issuer’s goods or services. As a result, the value of an individual security or particular type of security can be more volatile than the market as a whole and can perform differently from the value of the market as a whole.

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Additionally, U.S. and world economies, as well as markets (or certain market sectors), may experience greater volatility in response to the occurrence of natural or man-made disasters and geopolitical events, such as war, acts of terrorism, pandemics, military actions, trade disputes, or political instability. Moreover, if a fund’s investments are concentrated in certain sectors, its performance could be worse than the overall market.

Recent events are impacting the securities markets. Russia's invasion of Ukraine in 2022 has resulted in sanctions being levied by the United States, European Union, and other countries against Russia. Russia's military actions and the resulting sanctions could adversely affect global energy and financial markets and, thus, could affect the value of the fund's investments, even beyond any direct exposure the fund may have to Russian issuers or the adjoining geographic regions. The extent and duration of the military action, sanctions, and resulting market disruptions could be substantial.

Other recent market disruption events include the pandemic spread of the novel coronavirus designated as COVID-19. The transmission of COVID-19 and efforts to contain its spread resulted in border closings and other travel restrictions and disruptions; disruptions to business operations, supply chains, and customer activity; event cancellations and restrictions; service cancellations and reductions; significant challenges in the healthcare industry; and quarantines. As experienced with the COVID-19 pandemic, health crises may exacerbate other pre-existing political, social, economic, market, and financial risks and negatively affect the global economy, as well as the economies of individual countries, the financial performance of individual companies and sectors, and the markets in general in significant ways.

Market disruption events could also impair the information technology and other operational systems upon which a fund’s investment advisor or sub-advisor rely, and could otherwise disrupt the ability of the fund’s service providers to perform essential tasks. In certain cases, an exchange or market may close or issue trading halts on either specific securities or even the entire market, which may result in a fund being, among other things, unable to buy or sell certain securities or financial instruments or accurately price its investments.

Governmental and quasi-governmental authorities and regulators throughout the world, such as the Federal Reserve, have in the past responded to major economic disruptions with a variety of significant fiscal and monetary policy changes, including but not limited to, direct capital infusions into companies, new monetary programs, and dramatic changes to interest rates. Certain of those policy changes were implemented or considered in response to the COVID-19 outbreak and inflationary pressures. Such policy changes may adversely affect the value, volatility, and liquidity of dividend and interest-paying securities.

The impact of current and future market disruption events may last for an extended period of time and could result in a substantial economic downturn or recession. Such events could have significant adverse direct or indirect effects on the funds and their investments, and may result in a fund’s inability to achieve its investment objective, cause funds to experience significant redemptions, cause the postponement of reconstitution/rebalance dates of passive funds’ underlying indices, adversely affect the prices and liquidity of the securities and other instruments in which a fund invests, negatively impact the fund’s performance, and cause losses on your investment in the fund. You should also review this Prospectus and the SAI to understand each fund’s discretion to implement temporary defensive measures, as well as the circumstances in which a fund may satisfy redemption requests in-kind.

Securities Lending

To generate additional income, a Fund may lend its portfolio securities to broker-dealers and other institutional borrowers to the extent permitted under the Investment Company Act of 1940, as amended (the “1940 Act”) or the rules, regulations, or interpretations thereunder. A Fund that lends its securities will continue to receive amounts equal to the interest or dividend payments generated by the loaned securities. In addition to receiving these amounts, the Fund generates income on the loaned securities by receiving a fee from the borrower, and by earning interest on the collateral received from the borrower. A negotiated portion of the income is paid to a securities lending agent (e.g., a bank or trust company) that arranged the loan. During the term of the loan, the Fund’s investment performance will reflect changes in the value of the loaned securities.

A borrower’s obligations under a securities loan is secured continuously by collateral posted by the borrower and held by the custodian in an amount at least equal to the market value of the loaned securities. Generally, cash collateral that a Fund receives from securities lending activities will be invested in the Principal Funds, Inc. Government Money Market Fund, which is managed by PGI and for which PGI receives a management fee. The collateral may also be invested in unaffiliated money market funds.

Securities lending involves exposure to certain risks, including the risk of losses resulting from problems in the settlement and accounting process, the risk of a mismatch between the return on cash collateral reinvestments and the fees each Fund has agreed to pay a borrower, and credit, legal, counterparty, and market risk. A Fund’s participation in a securities lending transaction may affect the amount, timing, and character of distributions derived from such transaction to shareholders. Qualified dividend income does not include “payments in lieu of dividends,” which the Funds anticipate they will receive in securities lending transactions.

351

Temporary Defensive Measures

From time to time, as part of its investment strategy, a Fund may invest without limit in cash and cash equivalents for temporary defensive purposes in response to adverse market, economic, or political conditions. For this purpose, cash equivalents include: bank notes, bank certificates of deposit, bankers’ acceptances, repurchase agreements, commercial paper, and commercial paper master notes, which are floating rate debt instruments without a fixed maturity. In addition, a Fund may purchase U.S. government securities, preferred stocks, and debt securities, whether or not convertible into or carrying rights for common stock. There is no limit on the extent to which a Fund may take temporary defensive measures. In taking such measures, a Fund may lose the benefit of upswings and may limit its ability to meet, or fail to achieve, its investment objective.

352

Strategy and Risk Table

The following table lists each Fund and identifies whether the strategies and risks discussed in this section (listed in alphabetical order and not in order of significance) are principal for a Fund. The risks described below for each Fund that operates as a fund of funds (as identified in the table) include risks at both the fund of funds level and underlying funds level. Each Fund is also subject to the risks of any underlying funds in which it invests.

The SAI contains additional information about investment strategies and their related risks.

INVESTMENT STRATEGIES AND RISKS	CALIFORNIA MUNICIPAL	CORE FIXED INCOME	CORE PLUS BOND	DIVERSIFIED INCOME	DIVERSIFIED INTERNATIONAL
Bank Loans (also known as Senior Floating Rate Interests)				X
Convertible Securities
Counterparty Risk	X		X	X
Derivatives			X	X
Emerging Markets			X	X	X
Equity Securities					X
•Growth Style					X
•Smaller Companies					X
•Value Style					X
Fixed-Income Securities	X	X	X	X
Foreign Currency			X	X	X
Foreign Securities		X	X	X	X
Fund of Funds
Geographic Concentration (Municipal Obligations)	X
Hedging			X	X
High Portfolio Turnover			X
High Yield Securities	X		X	X
Industrial Revenue Bond	X
Industry Concentration
Inverse Floating Rate Investments	X
Investment Company Securities
Leverage	X		X
Municipal Obligations and AMT-Subject Bonds	X
Portfolio Duration	X	X	X	X
Preferred Securities				X
Real Estate Investment Trusts (“REITs”)
Real Estate Securities		X	X
Redemption and Large Transaction Risk	X	X	X	X	X
Repurchase Agreements
Securitized Products		X	X	X
U.S. Government and U.S. Government-Sponsored Securities		X	X
Volatility Mitigation

353

INVESTMENT STRATEGIES AND RISKS	EQUITY INCOME	FINISTERRE EMERGING MARKETS TOTAL RETURN BOND	GLOBAL EMERGING MARKETS	GLOBAL REAL ESTATE SECURITIES	GOVERNMENT & HIGH QUALITY BOND
Bank Loans (also known as Senior Floating Rate Interests)
Convertible Securities		X
Counterparty Risk		X
Derivatives		X			X
Emerging Markets		X	X
Equity Securities	X		X	X
•Growth Style			X	X
•Smaller Companies	X		X	X
•Value Style	X		X	X
Fixed-Income Securities		X			X
Foreign Currency		X	X	X
Foreign Securities	X	X	X	X
Fund of Funds
Geographic Concentration (Municipal Obligations)
Hedging		X
High Portfolio Turnover		X			X
High Yield Securities		X
Industrial Revenue Bond
Industry Concentration				X
Inverse Floating Rate Investments
Investment Company Securities
Leverage		X
Municipal Obligations and AMT-Subject Bonds
Portfolio Duration		X			X
Preferred Securities
Real Estate Investment Trusts (“REITs”)				X
Real Estate Securities				X	X
Redemption and Large Transaction Risk	X	X	X	X	X
Repurchase Agreements
Securitized Products					X
U.S. Government and U.S. Government-Sponsored Securities		X			X
Volatility Mitigation		X

354

INVESTMENT STRATEGIES AND RISKS	GOVERNMENT MONEY MARKET	HIGH INCOME	HIGH YIELD	INFLATION PROTECTION	INTERNATIONAL I
Bank Loans (also known as Senior Floating Rate Interests)		X	X
Convertible Securities
Counterparty Risk	X	X		X
Derivatives		X		X
Emerging Markets					X
Equity Securities					X
•Growth Style					X
•Smaller Companies					X
•Value Style					X
Fixed-Income Securities	X	X	X	X
Foreign Currency				X	X
Foreign Securities		X	X	X	X
Fund of Funds
Geographic Concentration (Municipal Obligations)
Hedging
High Portfolio Turnover				X
High Yield Securities		X	X
Industrial Revenue Bond
Industry Concentration
Inverse Floating Rate Investments
Investment Company Securities	X	X
Leverage		X
Municipal Obligations and AMT-Subject Bonds
Portfolio Duration		X	X	X
Preferred Securities
Real Estate Investment Trusts (“REITs”)
Real Estate Securities
Redemption and Large Transaction Risk	X	X	X	X	X
Repurchase Agreements	X
Securitized Products
U.S. Government and U.S. Government-Sponsored Securities	X			X
Volatility Mitigation

355

INVESTMENT STRATEGIES AND RISKS	LARGECAP GROWTH I	LARGECAP S&P 500 INDEX	LARGECAP VALUE III	MIDCAP	MIDCAP GROWTH
Bank Loans (also known as Senior Floating Rate Interests)
Convertible Securities
Counterparty Risk
Derivatives		X
Emerging Markets
Equity Securities	X	X	X	X	X
•Growth Style	X				X
•Smaller Companies				X	X
•Value Style			X
Fixed-Income Securities
Foreign Currency				X
Foreign Securities				X
Fund of Funds
Geographic Concentration (Municipal Obligations)
Hedging
High Portfolio Turnover					X
High Yield Securities
Industrial Revenue Bond
Industry Concentration		X (1)
Inverse Floating Rate Investments
Investment Company Securities		X
Leverage
Municipal Obligations and AMT-Subject Bonds
Portfolio Duration
Preferred Securities
Real Estate Investment Trusts (“REITs”)
Real Estate Securities
Redemption and Large Transaction Risk	X	X	X	X	X
Repurchase Agreements
Securitized Products
U.S. Government and U.S. Government-Sponsored Securities
Volatility Mitigation

(1)

The Fund will not concentrate (i.e., invest more than 25% of its assets) its investments in a particular industry except to the extent the Index is so concentrated.

356

INVESTMENT STRATEGIES AND RISKS	MIDCAP GROWTH III	MIDCAP S&P 400 INDEX	MIDCAP VALUE I	MONEY MARKET	OVERSEAS
Bank Loans (also known as Senior Floating Rate Interests)
Convertible Securities
Counterparty Risk
Derivatives		X
Emerging Markets					X
Equity Securities	X	X	X		X
•Growth Style	X
•Smaller Companies	X	X	X		X
•Value Style			X		X
Fixed-Income Securities				X
Foreign Currency					X
Foreign Securities				X	X
Fund of Funds
Geographic Concentration (Municipal Obligations)
Hedging
High Portfolio Turnover
High Yield Securities
Industrial Revenue Bond
Industry Concentration		X (1)
Inverse Floating Rate Investments
Investment Company Securities		X
Leverage
Municipal Obligations and AMT-Subject Bonds
Portfolio Duration
Preferred Securities
Real Estate Investment Trusts (“REITs”)			X
Real Estate Securities			X
Redemption and Large Transaction Risk	X	X	X	X	X
Repurchase Agreements				X
Securitized Products
U.S. Government and U.S. Government-Sponsored Securities				X
Volatility Mitigation

(1)

The Fund will not concentrate (i.e., invest more than 25% of its assets) its investments in a particular industry except to the extent the Index is so concentrated.

357

	PRINCIPAL CAPITAL APPRECIATION	PRINCIPAL LIFETIME STRATEGIC INCOME	PRINCIPAL LIFETIME 2010	PRINCIPAL LIFETIME 2015	PRINCIPAL LIFETIME 2020
Bank Loans (also known as Senior Floating Rate Interests)
Convertible Securities
Counterparty Risk		X	X	X	X
Derivatives		X	X	X	X
Emerging Markets
Equity Securities	X	X	X	X	X
•Growth Style		X	X	X	X
•Smaller Companies	X			X	X
•Value Style		X	X	X	X
Fixed-Income Securities		X	X	X	X
Foreign Currency		X	X	X	X
Foreign Securities		X	X	X	X
Fund of Funds		X	X	X	X
Geographic Concentration (Municipal Obligations)
Hedging
High Portfolio Turnover
High Yield Securities
Industrial Revenue Bond
Industry Concentration
Inverse Floating Rate Investments
Investment Company Securities		X	X	X	X
Leverage
Municipal Obligations and AMT-Subject Bonds
Portfolio Duration		X	X	X	X
Preferred Securities
Real Estate Investment Trusts (“REITs”)
Real Estate Securities
Redemption and Large Transaction Risk	X	X	X	X	X
Repurchase Agreements
Securitized Products		X	X	X	X
U.S. Government and U.S. Government-Sponsored Securities		X	X	X	X
Volatility Mitigation

358

INVESTMENT STRATEGIES AND RISKS	PRINCIPAL LIFETIME 2025	PRINCIPAL LIFETIME 2030	PRINCIPAL LIFETIME 2035	PRINCIPAL LIFETIME 2040	PRINCIPAL LIFETIME 2045
Bank Loans (also known as Senior Floating Rate Interests)
Convertible Securities
Counterparty Risk	X	X	X	X	X
Derivatives	X	X	X	X	X
Emerging Markets				X	X
Equity Securities	X	X	X	X	X
•Growth Style	X	X	X	X	X
•Smaller Companies	X	X	X	X	X
•Value Style	X	X	X	X	X
Fixed-Income Securities	X	X	X	X	X
Foreign Currency	X	X	X	X	X
Foreign Securities	X	X	X	X	X
Fund of Funds	X	X	X	X	X
Geographic Concentration (Municipal Obligations)
Hedging
High Portfolio Turnover
High Yield Securities
Industrial Revenue Bond
Industry Concentration
Inverse Floating Rate Investments
Investment Company Securities	X	X	X	X	X
Leverage
Municipal Obligations and AMT-Subject Bonds
Portfolio Duration	X	X	X	X	X
Preferred Securities
Real Estate Investment Trusts (“REITs”)
Real Estate Securities
Redemption and Large Transaction Risk	X	X	X	X	X
Repurchase Agreements
Securitized Products	X	X	X	X
U.S. Government and U.S. Government-Sponsored Securities	X	X	X	X
Volatility Mitigation

359

INVESTMENT STRATEGIES AND RISKS	PRINCIPAL LIFETIME 2050	PRINCIPAL LIFETIME 2055	PRINCIPAL LIFETIME 2060	PRINCIPAL LIFETIME 2065	PRINCIPAL LIFETIME 2070
Bank Loans (also known as Senior Floating Rate Interests)
Convertible Securities
Counterparty Risk	X	X	X	X	X
Derivatives	X	X	X	X	X
Emerging Markets	X	X	X	X	X
Equity Securities	X	X	X	X	X
•Growth Style	X	X	X	X	X
•Smaller Companies	X	X	X	X	X
•Value Style	X	X	X	X	X
Fixed-Income Securities	X	X	X	X	X
Foreign Currency	X	X	X	X	X
Foreign Securities	X	X	X	X	X
Fund of Funds	X	X	X	X	X
Geographic Concentration (Municipal Obligations)
Hedging
High Portfolio Turnover
High Yield Securities
Industrial Revenue Bond
Industry Concentration
Inverse Floating Rate Investments
Investment Company Securities	X	X	X	X	X
Leverage
Municipal Obligations and AMT-Subject Bonds
Portfolio Duration	X	X	X	X	X
Preferred Securities
Real Estate Investment Trusts (“REITs”)
Real Estate Securities
Redemption and Large Transaction Risk	X	X	X	X	X
Repurchase Agreements
Securitized Products
U.S. Government and U.S. Government-Sponsored Securities
Volatility Mitigation

360

INVESTMENT STRATEGIES AND RISKS	PRINCIPAL LIFETIME HYBRID INCOME	PRINCIPAL LIFETIME HYBRID 2015	PRINCIPAL LIFETIME HYBRID 2020	PRINCIPAL LIFETIME HYBRID 2025	PRINCIPAL LIFETIME HYBRID 2030
Bank Loans (also known as Senior Floating Rate Interests)
Convertible Securities
Counterparty Risk	X	X	X	X	X
Derivatives	X	X	X	X	X
Emerging Markets
Equity Securities	X	X	X	X	X
•Growth Style	X	X	X	X	X
•Smaller Companies		X	X	X	X
•Value Style	X	X	X	X	X
Fixed-Income Securities	X	X	X	X	X
Foreign Currency	X	X	X	X	X
Foreign Securities	X	X	X	X	X
Fund of Funds	X	X	X	X	X
Geographic Concentration (Municipal Obligations)
Hedging
High Portfolio Turnover
High Yield Securities
Industrial Revenue Bond
Industry Concentration
Inverse Floating Rate Investments
Investment Company Securities	X	X	X	X	X
Leverage
Municipal Obligations and AMT-Subject Bonds
Portfolio Duration	X	X	X	X	X
Preferred Securities
Real Estate Investment Trusts (“REITs”)
Real Estate Securities
Redemption and Large Transaction Risk	X	X	X	X	X
Repurchase Agreements
Securitized Products	X	X	X	X	X
U.S. Government and U.S. Government-Sponsored Securities	X	X	X	X	X
Volatility Mitigation

361

INVESTMENT STRATEGIES AND RISKS	PRINCIPAL LIFETIME HYBRID 2035	PRINCIPAL LIFETIME HYBRID 2040	PRINCIPAL LIFETIME HYBRID 2045	PRINCIPAL LIFETIME HYBRID 2050	PRINCIPAL LIFETIME HYBRID 2055
Bank Loans (also known as Senior Floating Rate Interests)
Convertible Securities
Counterparty Risk	X	X	X	X	X
Derivatives	X	X	X	X	X
Emerging Markets		X	X	X	X
Equity Securities	X	X	X	X	X
•Growth Style	X	X	X	X	X
•Smaller Companies	X	X	X	X	X
•Value Style	X	X	X	X	X
Fixed-Income Securities	X	X	X	X	X
Foreign Currency	X	X	X	X	X
Foreign Securities	X	X	X	X	X
Fund of Funds	X	X	X	X	X
Geographic Concentration (Municipal Obligations)
Hedging
High Portfolio Turnover
High Yield Securities
Industrial Revenue Bond
Industry Concentration
Inverse Floating Rate Investments
Investment Company Securities	X	X	X	X	X
Leverage
Municipal Obligations and AMT-Subject Bonds
Portfolio Duration	X	X	X	X	X
Preferred Securities
Real Estate Investment Trusts (“REITs”)
Real Estate Securities
Redemption and Large Transaction Risk	X	X	X	X	X
Repurchase Agreements
Securitized Products	X	X
U.S. Government and U.S. Government-Sponsored Securities	X	X
Volatility Mitigation

362

INVESTMENT STRATEGIES AND RISKS	PRINCIPAL LIFETIME HYBRID 2060	PRINCIPAL LIFETIME HYBRID 2065	PRINCIPAL LIFETIME HYBRID 2070	REAL ESTATE SECURITIES	SAM BALANCED
Bank Loans (also known as Senior Floating Rate Interests)
Convertible Securities
Counterparty Risk	X	X	X
Derivatives	X	X	X
Emerging Markets	X	X	X		X
Equity Securities	X	X	X	X	X
•Growth Style	X	X	X	X	X
•Smaller Companies	X	X	X	X	X
•Value Style	X	X	X	X	X
Fixed-Income Securities	X	X	X		X
Foreign Currency	X	X	X		X
Foreign Securities	X	X	X		X
Fund of Funds	X	X	X		X
Geographic Concentration (Municipal Obligations)
Hedging
High Portfolio Turnover
High Yield Securities
Industrial Revenue Bond
Industry Concentration				X
Inverse Floating Rate Investments
Investment Company Securities	X	X	X		X
Leverage
Municipal Obligations and AMT-Subject Bonds
Portfolio Duration	X	X	X		X
Preferred Securities
Real Estate Investment Trusts (“REITs”)				X
Real Estate Securities				X
Redemption and Large Transaction Risk	X	X	X	X	X
Repurchase Agreements
Securitized Products					X
U.S. Government and U.S. Government-Sponsored Securities
Volatility Mitigation

363

INVESTMENT STRATEGIES AND RISKS	SAM CONSERVATIVE BALANCED	SAM CONSERVATIVE GROWTH	SAM FLEXIBLE INCOME	SAM STRATEGIC GROWTH	SHORT-TERM INCOME
Bank Loans (also known as Senior Floating Rate Interests)
Convertible Securities
Counterparty Risk
Derivatives					X
Emerging Markets	X	X		X
Equity Securities	X	X	X	X
•Growth Style	X	X	X	X
•Smaller Companies	X	X	X	X
•Value Style	X	X	X	X
Fixed-Income Securities	X	X	X		X
Foreign Currency	X	X		X
Foreign Securities	X	X	X	X	X
Fund of Funds	X	X	X	X
Geographic Concentration (Municipal Obligations)
Hedging
High Portfolio Turnover
High Yield Securities	X		X
Industrial Revenue Bond
Industry Concentration
Inverse Floating Rate Investments
Investment Company Securities	X	X	X	X
Leverage
Municipal Obligations and AMT-Subject Bonds
Portfolio Duration	X	X	X		X
Preferred Securities
Real Estate Investment Trusts (“REITs”)
Real Estate Securities					X
Redemption and Large Transaction Risk	X	X	X	X	X
Repurchase Agreements
Securitized Products	X		X		X
U.S. Government and U.S. Government-Sponsored Securities					X
Volatility Mitigation

364

INVESTMENT STRATEGIES AND RISKS	SMALLCAP	SMALLCAP GROWTH I	SMALLCAP S&P 600 INDEX	SMALLCAP VALUE II	TAX-EXEMPT BOND
Bank Loans (also known as Senior Floating Rate Interests)
Convertible Securities
Counterparty Risk					X
Derivatives			X
Emerging Markets
Equity Securities	X	X	X	X
•Growth Style		X
•Smaller Companies	X	X	X	X
•Value Style				X
Fixed-Income Securities					X
Foreign Currency
Foreign Securities
Fund of Funds
Geographic Concentration (Municipal Obligations)					X
Hedging
High Portfolio Turnover
High Yield Securities					X
Industrial Revenue Bond					X
Industry Concentration			X (1)
Inverse Floating Rate Investments					X
Investment Company Securities			X
Leverage					X
Municipal Obligations and AMT-Subject Bonds					X
Portfolio Duration					X
Preferred Securities
Real Estate Investment Trusts (“REITs”)				X
Real Estate Securities				X
Redemption and Large Transaction Risk	X	X	X	X	X
Repurchase Agreements
Securitized Products
U.S. Government and U.S. Government-Sponsored Securities
Volatility Mitigation

(1)

The Fund will not concentrate (i.e., invest more than 25% of its assets) its investments in a particular industry except to the extent the Index is so concentrated.

Bank Loans (also known as Senior Floating Rate Interests)

Bank loans typically hold the most senior position in the capital structure of a business entity (the “Borrower”), are secured by specific collateral, and have a claim on the Borrower’s assets and/or stock that is senior to that held by the Borrower’s unsecured subordinated debtholders and stockholders. The proceeds of bank loans primarily are used to finance leveraged buyouts, recapitalizations, mergers, acquisitions, stock repurchases, dividends, and, to a lesser extent, to finance internal growth and for other corporate purposes. Bank loans are typically structured and administered by a financial institution that acts as the agent of the lenders participating in the bank loan. The Funds may purchase bank loans that are rated below-investment-grade (sometimes called “junk”) or will be comparable if unrated, which means they are more likely to default than investment-grade loans. A default could lead to non-payment of income, which would result in a reduction of income to the fund, and there can be no assurance that the liquidation of any collateral would satisfy the Borrower’s obligation in the event of non-payment of scheduled interest or principal payments, or that such collateral could be readily liquidated.

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Most bank loans are not traded on any national securities exchange. Bank loans generally have less liquidity than investment-grade bonds, and there may be less public information available about them. Bank loan interests may not be considered “securities,” and purchasers, therefore, may not be entitled to rely on the anti-fraud protections of the federal securities laws.

The primary and secondary market for bank loans may be subject to irregular trading activity, wide bid/ask spreads, and extended trade settlement periods, which may cause a fund to be unable to realize full value and, thus, cause a material decline in a fund’s net asset value. Because transactions in bank loans may be subject to extended settlement periods, a fund may not receive proceeds from the sale of a bank loan for a period of time after the sale. As a result, sale proceeds may not be available to make additional investments or to meet a fund’s redemption obligations for a period of time after the sale of the bank loans, which could lead to a fund having to sell other investments, borrow to meet obligations, or borrow to remain fully invested while awaiting settlement.

Bank loans pay interest at rates that are periodically reset by reference to a base lending rate plus a spread. These base lending rates are generally the prime rate offered by a designated U.S. bank, the London InterBank Offered Rate (LIBOR), the Secured Overnight Financing Rate (SOFR), a similar reference rate, or the prime rate offered by one or more major U.S. banks.

Bank loans generally are subject to mandatory and/or optional prepayment. Because of these prepayment conditions and because there may be significant economic incentives for the borrower to repay, prepayments may occur.

Convertible Securities

Convertible securities are usually fixed-income securities that a fund has the right to exchange for equity securities at a specified conversion price. Convertible securities could also include corporate bonds, notes, or preferred stocks of U.S. or foreign issuers. Convertible securities allow a fund to realize additional returns if the market price of the equity securities exceeds the conversion price. For example, a fund may hold fixed-income securities that are convertible into shares of common stock at a conversion price of $10 per share. If the market value of the shares of common stock reached $12, the fund could realize an additional $2 per share by converting its fixed-income securities.

Convertible securities have lower yields than comparable fixed-income securities. In addition, at the time a convertible security is issued, the conversion price exceeds the market value of the underlying equity securities. Thus, convertible securities may provide lower returns than non-convertible fixed-income securities or equity securities depending upon changes in the price of the underlying equity securities. However, convertible securities permit a fund to realize some of the potential appreciation of the underlying equity securities with less risk of losing its initial investment.

Depending on the features of the convertible security, a fund will treat a convertible security as a fixed-income security, equity security, or preferred security for purposes of investment policies and limitations because of the unique characteristics of convertible securities. Funds that invest in convertible securities may invest in convertible securities that are below investment grade (sometimes referred to as “junk”). Many convertible securities are relatively illiquid.

Counterparty Risk

Counterparty risk is the risk that the counterparty to a contract or other obligation will be unable or unwilling to honor its obligations. If a counterparty fails to meet its contractual obligations, goes bankrupt, or otherwise experiences a business interruption, a fund could miss investment opportunities or otherwise hold investments it would prefer to sell, resulting in losses for the fund. In addition, a fund may suffer losses if a counterparty fails to comply with applicable laws or other requirements. Counterparty risk is pronounced during unusually adverse market conditions and is particularly acute in environments in which financial services firms are exposed to systemic risks.

Derivatives

Generally, a derivative is a financial arrangement, the value of which is derived from, or based on, a traditional security, asset, or market index. A fund may invest in certain derivative strategies to earn income, manage or adjust the risk profile of the fund, replace more direct investments, or obtain exposure to certain markets. A fund may enter into forward commitment agreements, which call for the fund to purchase or sell a security on a future date at a fixed price. A fund may also enter into contracts to sell its investments either on demand or at a specific interval.

The risks associated with derivative investments include:

•

increased volatility of a fund and/or the failure of the investment to mitigate volatility as intended;

•

the inability of those managing investments of the fund to correctly predict the direction of securities prices, interest rates, currency exchange rates, asset values, and other economic factors;

•

losses caused by unanticipated market movements, which may be substantially greater than a fund’s initial investment and are potentially unlimited;

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•

the possibility that there may be no liquid secondary market, which may make it difficult or impossible to close out a position when desired;

•

the possibility that the counterparty may fail to perform its obligations; and

•

the inability to close out certain hedged positions to avoid adverse tax consequences.

There are many different types of derivatives and many different ways to use them. The specific derivatives that are principal strategies of each Fund are listed in its Fund Summary.

•

Commodity index-linked notes are derivative debt instruments issued by U.S. and foreign banks, brokerage firms, insurance companies, and other corporations with principal and/or coupon payments linked to the performance of commodity indices. These notes expose a fund to movements in commodity prices. They are also subject to credit, counterparty, and interest rate risk. Commodity index-linked notes are often leveraged, increasing the volatility of each note’s market value relative to changes in the underlying commodity index. At the maturity of the note, a fund may receive more or less principal than it originally invested. A fund may also receive interest payments on the note that are less than the stated coupon interest payments.

•

Credit default swap agreements may be entered into by a fund as a “buyer” or “seller” of credit protection. Credit default swap agreements involve special risks because they may be difficult to value, are highly susceptible to liquidity and credit risk, and generally pay a return to the party that has paid the premium only in the event of an actual default by the issuer of the underlying obligation (as opposed to a credit downgrade or other indication of financial difficulty). Credit default swaps can increase credit risk because a fund has exposure to both the issuer of the referenced obligation and the counterparty to the credit default swap.

•

Foreign currency contracts (such as foreign currency options and foreign currency forward and swap agreements) may be used by funds to increase exposure to a foreign currency or to shift exposure to foreign currency fluctuations from one country to another. A forward currency contract involves a privately negotiated obligation to purchase or sell a specific currency at a future date at a price set in the contract. For currency contracts, there is also a risk of government action through exchange controls that would restrict the ability of a fund to deliver or receive currency.

•

Forwards, futures contracts, and options thereon (including commodities futures); options (including put or call options); and swap agreements and over-the-counter swap agreements (e.g., interest rate swaps, total return swaps, and credit default swaps) may be used by funds for hedging purposes in order to try to mitigate or protect against potential losses due to changing interest rates, securities prices, asset values, currency exchange rates, and other market conditions; non-hedging purposes to seek to increase the fund’s income or otherwise enhance return; and as a low-cost method of gaining exposure to a particular market without investing directly in those securities or assets.

These derivative investments are subject to special risk considerations, particularly the imperfect correlation between the change in market value of the instruments held by a fund and the price of the derivative instrument. If a fund has insufficient cash, it may have to sell securities from its portfolio to meet daily variation margin requirements, even when it may be disadvantageous to do so. Options and swap agreements also involve counterparty risk. With respect to options, there may be difference in trading hours for the options markets and the markets for the underlying securities (rate movements can take place in the underlying markets that cannot be reflected in the options markets) and an insufficient liquid secondary market for particular options.

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Index/structured securities are derivative securities whose value or performance is linked to other equity securities (such as depositary receipts), currencies, interest rates, indices, or other financial indicators (reference indices).

Emerging Markets

The Funds consider a security to be tied economically to an emerging market if the issuer of the security has its principal place of business or principal office in an emerging market, has its principal securities trading market in an emerging market, or derives a majority of its revenue from emerging markets.

Usually, the term “emerging market” (also called a “developing market”) means any market that is considered to be an emerging market by the international financial community (such as markets tied to securities included in the MSCI Emerging Markets Index or Bloomberg Emerging Markets USD Aggregate Bond Index). Emerging markets generally exclude the U.S., Canada, Japan, Hong Kong, Singapore, Australia, New Zealand, and most nations located in Western Europe.

Investments in companies in emerging markets are subject to higher risks than investments in companies in more developed markets. These risks include:

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increased social, political, and economic instability;

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a smaller market for these securities and low or nonexistent trading volume that results in a lack of liquidity and greater price volatility;

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•

lack of publicly available information, including reports of payments of dividends or interest on outstanding securities;

•

foreign government policies that may restrict opportunities, including restrictions on investment in issuers or industries deemed sensitive to national interests;

•

relatively new capital market structure or market-oriented economy;

•

the possibility that recent favorable economic developments may be slowed or reversed by unanticipated political or social events in these countries;

•

restrictions that may make it difficult or impossible for a fund to vote proxies, exercise shareholder rights, pursue legal remedies, and obtain judgments in foreign courts; and

•

possible losses through the holding of securities in domestic and foreign custodial banks and depositories.

In addition, many developing markets have experienced substantial and, in some periods, extremely high rates of inflation for many years. Inflation and rapid fluctuations in inflation rates have had and may continue to have negative effects on the economies, currencies, interest rates, and securities markets of those markets.

Repatriation of investment income, capital, and proceeds of sales by foreign investors may require governmental registration and/or approval in some developing markets. A fund could be adversely affected by delays in or a refusal to grant any required governmental registration or approval for repatriation.

Further, the economies of developing markets generally are heavily dependent upon international trade and, accordingly, have been and may continue to be adversely affected by trade barriers, exchange controls, managed adjustments in relative currency values, and other protectionist measures imposed or negotiated by the countries with which they trade.

The SEC, the U.S. Department of Justice, and other U.S. authorities may be limited in their ability to pursue bad actors, including instances of fraud in emerging markets. For example, in certain emerging markets, there are significant legal obstacles to obtaining information needed for investigations or litigation. Similar limitations apply to the pursuit of actions against individuals, including officers, who may have engaged in fraud or wrongdoing. In addition, local authorities often are constrained in their ability to assist U.S. authorities and overseas investors more generally. There are also legal or other obstacles to seeking access to funds in a foreign country.

Equity Securities

Equity securities include common stocks, convertible securities, depositary receipts, rights (an offering of common stock to investors who currently own shares, which entitle them to buy subsequent issues at a discount from the offering price), and warrants (the right to purchase securities from the issuer at a specified price, normally higher than the current market price). Common stocks, the most familiar type, represent an equity (ownership) interest in a corporation. The value of a company’s stock may fall as a result of factors directly relating to that company, such as decisions made by its management or lower demand for the company’s products or services. A stock’s value may also fall because of factors affecting not just the company, but also companies in the same industry or in a number of different industries, such as increases in production costs. The value of a company’s stock may also be affected by changes in financial markets that are relatively unrelated to the company or its industry, such as changes in interest rates or currency exchange rates. In addition, a company’s stock generally pays dividends only after the company invests in its own business and makes required payments to holders of its bonds and other debt. For this reason, the value of a company’s stock will usually react more strongly than its bonds and other debt to actual or perceived changes in the company’s financial condition or prospects.

Some funds focus their investments on certain market capitalization ranges. Market capitalization is defined as total current market value of a company’s outstanding equity securities. The market capitalization of companies in a fund’s portfolios and their related indexes will change over time, and, except to the extent consistent with its principal investment strategies (for example, for an index fund that uses a replication strategy), a fund will not automatically sell a security just because it falls outside of the market capitalization range of its index(es).

Growth Style

The prices of growth stocks may be based largely on expectations of future earnings, and their prices can decline rapidly and significantly in reaction to negative news about such factors as earnings, revenues, the economy, political developments, or other news. Growth stocks may underperform value stocks and stocks in other broad style categories (and the stock market as a whole) over any period of time and may shift in and out of favor with investors generally, sometimes rapidly, depending on changes in market, economic, and other factors. As a result, a fund that holds substantial investments in growth stocks may underperform other funds that invest more broadly or favor different investment styles. Because growth companies typically reinvest their earnings, growth stocks typically do not pay dividends at levels associated with other types of stocks, if at all.

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Smaller Companies

Investments in companies with smaller market capitalizations may involve greater risks and price volatility (wide, rapid fluctuations) than investments in larger, more mature companies. Small company stocks may decline in price as large company stocks rise, or rise in price while larger company stocks decline. The net asset value of a fund that invests a substantial portion of its assets in small company stocks may be more volatile than the net asset value of a fund that invests solely in larger company stocks. Small companies may be less significant within their industries and may be at a competitive disadvantage relative to their larger competitors. Smaller companies may be less mature than larger companies. At this earlier stage of development, the companies may have limited product lines, reduced market liquidity for their shares, limited financial resources, or less depth in management than larger or more established companies. While smaller companies may be subject to these additional risks, they may also realize more substantial growth than larger or more established companies.

Unseasoned issuers are companies with a record of less than three years continuous operation, including the operation of predecessors and parents. Many unseasoned issuers also may be small companies and involve the risks and price volatility associated with smaller companies. Unseasoned issuers by their nature have only a limited operating history that can be used for evaluating the company’s growth prospects. As a result, these securities may place a greater emphasis on current or planned product lines and the reputation and experience of the company’s management and less emphasis on fundamental valuation factors than would be the case for more mature growth companies.

Value Style

Value stocks present the risk that they may decline in price or never reach their expected full market value because the market fails to recognize the stock’s intrinsic worth. Value stocks may underperform growth stocks and stocks in other broad style categories (and the stock market as a whole) over any period of time and may shift in and out of favor with investors generally, sometimes rapidly, depending on changes in market, economic, and other factors. As a result, a fund that holds substantial investments in value stocks may underperform other funds that invest more broadly or favor different investment styles.

Fixed-Income Securities

Fixed-income securities include bonds and other debt instruments that are used by issuers to borrow money from investors (examples include corporate bonds, convertible securities, asset-and mortgage-backed securities, and municipal, agency, and U.S. government securities). The issuer of a fixed-income security generally pays the investor a fixed, variable, or floating rate of interest. The amount borrowed must be repaid at maturity. Some debt securities, such as zero coupon bonds, do not pay current interest, but are sold at a discount from their face values.

Fixed-income securities are sensitive to changes in interest rates. Interest rate changes can be sudden and unpredictable, and are influenced by a number of factors, including governmental policy, monetary policy, inflation expectations, perceptions of risk, and supply and demand for fixed-income securities. In general, fixed-income security prices rise when interest rates fall and fall when interest rates rise. An increase in interest rates from a low interest rate environment may lead to heightened volatility, rapid sales of fixed-income securities, and redemptions alongside reduced liquidity and dealer market-making capacity in fixed-income markets.

If interest rates fall, issuers of callable bonds may call (repay) securities with high interest rates before their maturity dates; this is known as call risk. In this case, a fund would likely reinvest the proceeds from these securities at lower interest rates, resulting in a decline in the fund's income. Very low interest rates, including rates that fall below zero (where banks charge for depositing money), may detract from a Fund’s performance and its ability to maintain positive returns to the extent the Fund is exposed to such interest rates. To the extent a Fund holds an investment with a negative interest rate to maturity, the Fund would generate a negative return on that investment. Floating rate securities generally are less sensitive to interest rate changes but may decline in value if their interest rates do not rise as much, or as quickly, as interest rates in general. Conversely, floating rate securities will not generally increase in value if interest rates decline.

As of December 31, 2021, the United Kingdom’s Financial Conduct Authority, which regulates the London InterBank Offered Rate (“LIBOR”), no longer publishes non-U.S. dollar LIBOR, 1-week U.S. dollar LIBOR, or 2-month U.S. dollar LIBOR rates. The remaining, most widely used U.S. dollar LIBOR rates will no longer be published after June 30, 2023. The effect of LIBOR's discontinuation or replacement on new or existing financial instruments or operational processes will vary depending on a number of factors, including, for example, fallback provisions in contracts, replacement language in contracts, and legislative action. In addition, LIBOR’s discontinuation or replacement may affect the value, liquidity, or return on certain Fund investments and may result in costs in connection with closing out positions and entering into new trades. These impacts are likely to persist until new reference rates and fallbacks for both legacy and new instruments and contracts are commercially accepted and market practices become settled.

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The U.S. Federal Reserve, along with a steering committee comprised of large U.S. financial institutions known as the Alternative Reference Rates Committee, intends to replace U.S. dollar LIBOR with the Secured Overnight Financing Rate (“SOFR”), a new index calculated by short-term repurchase agreements, backed by Treasury securities. On March 15, 2022, the Adjustable Interest Rate (LIBOR) Act was signed into law. This law provides a statutory fallback mechanism to replace LIBOR with a benchmark rate that is selected by the U.S. Federal Reserve Board and based on SOFR for certain contracts that reference LIBOR without adequate fallback provisions. Bank working groups and regulators in other countries have suggested other alternatives for their markets.

Fixed-income securities are also affected by the credit quality of the issuer. Investment-grade debt securities are medium and high-quality securities. Some bonds, such as lower grade or “junk” bonds, may have speculative characteristics and may be particularly sensitive to economic conditions and the financial condition of the issuers. Credit risk refers to the possibility that the issuer of the security will not be able to make principal and interest payments when due.

Additionally, a Fund's investments in companies with smaller market capitalizations may involve greater risks, price volatility (wide, rapid fluctuations), and less liquidity than investments in larger, more mature companies.

Foreign Currency

Certain of a fund’s investments will be denominated in foreign currencies or traded in securities markets in which settlements are made in foreign currencies. Any income on such investments is generally paid to a fund in foreign currencies. In addition, funds may engage in foreign currency transactions for both hedging and investment purposes, as well as to increase exposure to a foreign currency or to shift exposure to foreign currency fluctuations from one country to another.

The value of foreign currencies relative to the U.S. dollar varies continually, causing changes in the dollar value of a fund’s portfolio investments (even if the local market price of the investments is unchanged) and changes in the dollar value of a fund’s income available for distribution to its shareholders. The effect of changes in the dollar value of a foreign currency on the dollar value of a fund’s assets and on the net investment income available for distribution may be favorable or unfavorable. Transactions in non-U.S. currencies are also subject to many of the risks of investing in foreign (non-U.S.) securities; for example, changes in foreign economies and political climates are more likely to affect a fund that has foreign currency exposure than a fund that invests exclusively in U.S. companies and currency. There also may be less government supervision of foreign markets, resulting in non-uniform accounting practices and less publicly available information. Transactions in foreign currencies, foreign currency denominated debt, and certain foreign currency options, futures contracts, and forward contracts (and similar instruments) may give rise to ordinary income or loss to the extent such income or loss results from fluctuations in the value of the foreign currency concerned.

A fund may incur costs in connection with conversions between various currencies. In addition, a fund may be required to liquidate portfolio assets, or may incur increased currency conversion costs, to compensate for a decline in the dollar value of a foreign currency occurring between the time when a fund declares and pays a dividend, or between the time when a fund accrues and pays an operating expense in U.S. dollars. To protect against a change in the foreign currency exchange rate between the date on which a fund contracts to purchase or sell a security and the settlement date for the purchase or sale, to gain exposure to one or more foreign currencies, or to “lock in” the equivalent of a dividend or interest payment in another currency, a fund might purchase or sell a foreign currency on a spot (i.e., cash) basis at the prevailing spot rate.

Currency hedging involves some of the same general risks and considerations as other transactions with similar instruments (i.e., derivative instruments) and hedging. Currency transactions are also subject to additional risks. Because currency control is of great importance to the issuing governments and influences economic planning and policy, purchases and sales of currency and related instruments can be adversely affected by government exchange controls, limitations or restrictions on repatriation of currency, and manipulations or exchange restrictions imposed by governments. These forms of governmental actions can result in losses to a fund if it is unable to deliver or receive currency or monies in settlement of obligations. They could also cause hedges the fund has entered into to be rendered useless, resulting in full currency exposure as well as incurring transaction costs. Settlement of a currency forward contract for the purchase of most currencies must occur at a bank based in the issuing nation. The ability to establish and close out positions on trading options on currency futures contracts is subject to the maintenance of a liquid market that may not always be available.

Foreign Securities

The Funds consider a security to be tied economically to countries outside the U.S. (a “foreign security”) if the issuer of the security has its principal place of business or principal office outside the U.S., has its principal securities trading market outside the U.S., or derives a majority of its revenue from outside the U.S.

There may be less publicly available information about foreign companies than U.S. companies, and information about foreign securities in which the Funds invest may be less reliable or complete. Foreign companies, including those listed on U.S. securities exchanges, may not be subject to the same uniform accounting, auditing, and financial reporting practices as are required of U.S. companies with respect to such matters as insider trading rules, tender offer regulation, accounting

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standards or auditor oversight, stockholder proxy requirements, and the requirements mandating timely and accurate disclosure of information. For example, the Chinese government has taken positions that prevent the Public Company Accounting Oversight Board from inspecting the audit work and practices of accounting firms in mainland China and Hong Kong for compliance with U.S. law and professional standards. In addition, securities of many foreign companies are less liquid and more volatile than securities of comparable U.S. companies. Commissions on foreign securities exchanges may be generally higher than those on U.S. exchanges.

Foreign markets also have different clearance and settlement procedures than those in U.S. markets. In certain markets, there have been times when settlements have been unable to keep pace with the volume of securities transactions, making it difficult to conduct these transactions. Delays in settlement could result in temporary periods when a portion of fund assets is not invested and earning no return. If a fund is unable to make intended security purchases due to settlement problems, the fund may miss attractive investment opportunities. In addition, a fund may incur a loss as a result of a decline in the value of its portfolio if it is unable to sell a security.

With respect to certain foreign countries, there is the possibility of nationalization, expropriation, or confiscatory taxation, political or social instability, or diplomatic developments that could affect a fund’s investments in those countries. In addition, a fund may also suffer losses due to differing accounting practices and treatments. Investments in foreign securities are subject to laws of the foreign country that may limit the amount and types of foreign investments. Changes of governments or of economic or monetary policies, in the U.S. or abroad, changes in dealings between nations, currency convertibility, or exchange rates could result in investment losses for a fund.

Foreign securities are often traded with less frequency and volume and, therefore, may have greater price volatility than is the case with many U.S. securities. Brokerage commissions, custodial services, and other costs relating to investment in foreign countries are generally more expensive than in the U.S. Though the fund intends to acquire the securities of foreign issuers where there are public trading markets, economic or political turmoil in a country in which a fund has a significant portion of its assets or deterioration of the relationship between the U.S. and a foreign country may reduce the liquidity of a fund’s portfolio. The fund may have difficulty meeting a large number of redemption requests. Furthermore, there may be difficulties in obtaining or enforcing judgments against foreign issuers.

A fund may invest in a foreign company by purchasing depositary receipts. Depositary receipts are certificates of ownership of shares in a foreign-based issuer held by a bank or other financial institution. They are alternatives to purchasing the underlying security but are subject to the foreign securities risks to which they relate.

A fund may file claims to recover foreign withholding taxes on dividend and interest income (if any) received from issuers in certain countries and capital gains on the disposition of stocks or securities where such withholding tax reclaim is possible. Whether or when a fund will receive a withholding tax refund is within the control of the tax authorities in such countries. Where a fund expects to recover withholding taxes, the net asset value of a fund generally includes accruals for such tax refunds. If the likelihood of recovery materially decreases, accruals in the fund’s net asset value for such refunds may be written down partially or in full, which will adversely affect the fund’s net asset value. Shareholders in the fund at the time an accrual is written down will bear the impact of the resulting reduction in net asset value regardless of whether they were shareholders during the accrual period. Conversely, if a fund receives a tax refund that has not been previously accrued, shareholders in the fund at the time of the successful recovery will benefit from the resulting increase in the fund’s net asset value. Shareholders who sold their shares prior to such time will not benefit from such increase in the fund’s net asset value.

If a fund’s portfolio invests significantly in a certain geographic region, any negative development affecting that region will have a greater impact on the fund than a fund that is not as heavily invested in that region. For example, with respect to funds that invest significantly in China or the EU:

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Investing in China involves certain heightened risks and considerations, including, among others: frequent trading suspensions and government interventions (including by nationalizing assets); currency exchange rate fluctuations or blockages; limits on using brokers and on foreign ownership; different financial reporting standards, as described above; higher dependence on exports and international trade; political and social instability; infectious disease outbreaks; regional and global conflicts; increased trade tariffs, embargoes, and other trade limitations; custody and other risks associated with programs used to access Chinese securities; and uncertainties in tax rules that could result in unexpected tax liabilities for the Fund. Significant portions of the Chinese securities markets may become rapidly illiquid, as Chinese issuers have the ability to suspend the trading of their equity securities. Moreover, actions by the U.S. government, such as delisting of certain Chinese companies from U.S. securities exchanges or otherwise restricting their operations in the U.S., may negatively impact the value of such securities held by the funds.

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Funds that invest in the United Kingdom (the “UK”) face risks related to the UK's departure from the European Union (the “EU”), commonly known as “Brexit.” Brexit has resulted in significant uncertainties and instability in the financial

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markets, and considerable uncertainty remains related to the potential consequences associated with the exit, how new trade agreements will be conducted, and whether the UK's exit will increase the likelihood of other countries also departing the EU. Brexit may have significant political and financial consequences in the UK, as well as in European markets and the broader global economy, which may result in increased volatility and illiquidity, and potentially lower economic growth in markets in the UK, Europe, and globally.

Fund of Funds

The performance and risks of a fund of funds directly correspond to the performance and risks of the underlying funds in which the fund invests.

As of October 31, 2022, the Principal LifeTime Funds, Principal LifeTime Hybrid Funds, and SAM Portfolios assets were allocated among the underlying funds as identified in the tables below.

Underlying Fund	Principal LifeTime Strategic Income Fund	Principal LifeTime 2010 Fund	Principal LifeTime 2015 Fund	Principal LifeTime 2020 Fund	Principal LifeTime 2025 Fund	Principal LifeTime 2030 Fund	Principal LifeTime 2035 Fund
Blue Chip Fund	3.5%	3.5%	3.8%	4.6%	5.4%	6.4%	7.5%
Core Fixed Income Fund	36.0	36.3	34.3	32.6	30.7	34.7	25.1
Diversified International Fund	4.0	4.0	4.3	5.3	6.6	7.8	9.3
Diversified Real Asset Fund	2.6	2.4	2.5	2.4	2.7	—	—
Equity Income Fund	3.6	3.6	3.9	4.7	5.6	6.6	7.7
High Income Fund	6.9	6.9	6.6	5.9	5.2	4.9	4.2
Inflation Protection Fund	7.2	7.2	6.9	6.2	5.3	—	—
International Small Company Fund	0.8	0.7	0.8	1.0	1.2	1.4	1.7
LargeCap Growth Fund I	3.5	3.5	3.8	4.6	5.4	6.4	7.4
LargeCap S&P 500 Index Fund	3.6	3.6	3.9	4.7	5.5	6.5	7.6
LargeCap Value Fund III	3.6	3.6	4.0	4.8	5.6	6.6	7.7
MidCap Fund	0.6	0.6	0.6	0.8	0.9	1.0	1.5
MidCap Growth Fund III	1.6	1.6	1.7	2.1	2.5	3.0	3.2
MidCap Value Fund I	2.3	2.3	2.5	3.0	3.5	4.1	4.9
Origin Emerging Markets Fund	1.0	0.9	1.1	1.3	1.5	1.8	2.1
Overseas Fund	1.9	1.9	2.2	2.6	3.2	3.8	4.5
Real Estate Securities Fund	—	—	—	—	—	2.4	2.5
Short-Term Income Fund	15.9	16.0	15.6	11.6	7.0	—	—
SmallCap Growth Fund I	0.7	0.7	0.7	0.9	1.1	1.3	1.5
SmallCap Value Fund II	0.7	0.7	0.8	0.9	1.1	1.3	1.6
Total	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%

Underlying Fund	Principal LifeTime 2040 Fund	Principal LifeTime 2045 Fund	Principal LifeTime 2050 Fund	Principal LifeTime 2055 Fund	Principal LifeTime 2060 Fund	Principal LifeTime 2065 Fund
Blue Chip Fund	8.7%	9.5%	10.1%	10.1%	10.1%	10.1%
Core Fixed Income Fund	14.9	7.7	3.3	3.3	3.3	3.3
Diversified International Fund	10.9	12.2	12.8	12.8	13.0	12.9
Equity Income Fund	8.9	9.8	10.4	10.4	10.4	10.4
High Income Fund	3.1	2.0	1.1	1.1	1.1	1.1
International Small Company Fund	2.0	2.2	2.3	2.3	2.3	2.3
LargeCap Growth Fund I	8.6	9.5	10.1	10.1	10.1	10.1
LargeCap S&P 500 Index Fund	8.9	9.8	10.4	10.4	10.3	10.3
LargeCap Value Fund III	9.0	9.9	10.5	10.5	10.5	10.5
MidCap Fund	1.7	1.9	2.1	2.1	2.0	2.0
MidCap Growth Fund III	3.7	4.1	4.3	4.3	4.3	4.3
MidCap Value Fund I	5.7	6.3	6.7	6.7	6.7	6.7
Origin Emerging Markets Fund	2.6	2.8	3.0	3.0	3.0	3.0
Overseas Fund	5.3	5.8	6.2	6.2	6.2	6.2
Real Estate Securities Fund	2.5	2.5	2.5	2.5	2.5	2.5
SmallCap Growth Fund I	1.7	2.0	2.1	2.1	2.1	2.1
SmallCap Value Fund II	1.8	2.0	2.1	2.1	2.1	2.2
Total	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%

Underlying Fund	Principal LifeTime Hybrid Income Fund	Principal LifeTime Hybrid 2015 Fund	Principal LifeTime Hybrid 2020 Fund	Principal LifeTime Hybrid 2025 Fund	Principal LifeTime Hybrid 2030 Fund	Principal LifeTime Hybrid 2035 Fund
Bond Market Index Fund	35.7%	34.1%	32.5%	30.6%	34.2%	24.9%

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Underlying Fund	Principal LifeTime Hybrid Income Fund	Principal LifeTime Hybrid 2015 Fund	Principal LifeTime Hybrid 2020 Fund	Principal LifeTime Hybrid 2025 Fund	Principal LifeTime Hybrid 2030 Fund	Principal LifeTime Hybrid 2035 Fund
Diversified International Fund	6.3	7.1	8.4	10.4	12.2	14.7
Diversified Real Asset Fund	2.6	2.5	2.5	2.6	—	—
High Income Fund	6.9	6.6	5.9	5.2	4.8	4.1
Inflation Protection Fund	7.1	6.7	6.1	5.2	—	—
International Small Company Fund	0.7	0.8	1.0	1.2	1.4	1.7
LargeCap S&P 500 Index Fund	17.7	19.1	23.3	27.4	32.5	37.8
MidCap S&P 400 Index Fund	4.6	5.0	6.0	7.0	8.4	9.8
Origin Emerging Markets Fund	0.7	0.8	0.8	1.0	1.3	1.4
Real Estate Securities Fund	—	—	—	—	2.4	2.4
Short-Term Income Fund	16.2	15.7	11.6	7.1	—	—
SmallCap S&P 600 Index Fund	1.5	1.6	1.9	2.3	2.8	3.2
Total	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%

Underlying Fund	Principal LifeTime Hybrid 2040 Fund	Principal LifeTime Hybrid 2045 Fund	Principal LifeTime Hybrid 2050 Fund	Principal LifeTime Hybrid 2055 Fund	Principal LifeTime Hybrid 2060 Fund	Principal LifeTime Hybrid 2065 Fund
Bond Market Index Fund	14.8%	7.6%	3.3%	3.3%	3.3%	3.3%
Diversified International Fund	17.1	18.7	20.0	20.1	20.3	20.0
High Income Fund	3.0	2.0	1.1	1.1	1.1	1.1
International Small Company Fund	2.0	2.2	2.3	2.3	2.4	2.3
LargeCap S&P 500 Index Fund	44.0	48.5	51.2	51.1	50.6	51.2
MidCap S&P 400 Index Fund	11.3	12.6	13.2	13.2	13.2	13.2
Origin Emerging Markets Fund	1.7	1.9	2.0	2.0	2.1	2.0
Real Estate Securities Fund	2.4	2.4	2.4	2.4	2.4	2.4
SmallCap S&P 600 Index Fund	3.7	4.1	4.5	4.5	4.6	4.5
Total	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%

Underlying Fund	SAM Balanced Portfolio	SAM Conservative Balanced Portfolio	SAM Conservative Growth Portfolio	SAM Flexible Income Portfolio	SAM Strategic Growth Portfolio
Blue Chip Fund	11.7%	8.3%	15.4%	3.9%	17.1%
Bond Market Index Fund	8.7	14.8	3.6	20.6	2.9
Core Fixed Income Fund	10.9	19.4	4.9	26.3	—
Diversified International Fund	4.7	2.9	6.7	2.1	7.2
Diversified Real Asset Fund	4.5	2.8	4.8	—	2.7
Equity Income Fund	10.4	9.2	13.9	6.6	15.6
Finisterre Emerging Markets Total Return Bond Fund	1.3	2.3	0.8	1.9	—
Global Real Estate Securities Fund	0.4	0.6	0.4	0.6	—
Government & High Quality Bond Fund	2.6	4.9	1.0	6.5	—
Government Money Market Fund	1.0	0.9	0.9	0.9	0.7
High Yield Fund	2.7	3.0	1.1	1.4	—
Inflation Protection Fund	2.1	3.4	0.7	5.0	—
International Small Company Fund	1.0	0.6	1.4	—	2.4
LargeCap Growth Fund I	1.7	—	2.6	—	3.2
LargeCap Value Fund III	3.1	—	4.3	—	5.3
MidCap Fund	4.5	2.8	6.3	—	7.0
Origin Emerging Markets Fund	3.4	2.1	4.6	0.7	6.1
Overseas Fund	1.6	0.7	1.8	—	4.0
Principal Active High Yield ETF	—	—	—	2.1	—
Principal Capital Appreciation Fund	8.2	5.6	11.3	3.8	13.6
Principal U.S. Mega-Cap ETF	6.1	3.7	8.3	2.6	9.4
Principal U.S. Small-Cap Multi-Factor ETF	1.3	0.9	2.1	—	2.8
Short-Term Income Fund	3.2	4.8	1.1	6.2	—
Small-MidCap Dividend Income Fund	—	—	—	1.3	—
Spectrum Preferred and Capital Securities Income Fund	4.9	6.3	2.0	7.5	—
Total	100.0%	100.0%	100.0%	100.0%	100.0%

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A fund of funds indirectly bears its pro-rata share of the expenses of the underlying funds in which it invests, as well as directly incurring expenses. Therefore, investment in a fund of funds is more costly than investing directly in shares of the underlying funds. Generally, if an underlying fund offers multiple classes of shares for investment by funds of funds, the Funds will purchase shares of the class with the lowest expense ratio (expressed as a percent of average net assets on an annualized basis) at the time of purchase.

If you are considering investing in a Principal LifeTime Fund or Principal LifeTime Hybrid Fund, you should take into account your estimated retirement date and risk tolerance. In general, each Principal LifeTime Fund or Principal LifeTime Hybrid Fund is managed with the assumption that the investor will invest in a Principal LifeTime Fund or Principal LifeTime Hybrid Fund whose stated date is closest to the date the shareholder retires. Choosing a fund targeting an earlier date represents a more conservative choice; choosing a fund with a later date represents a more aggressive choice. It is important to note that the retirement year of the fund you select should not necessarily represent the specific year you intend to start drawing retirement assets. It should be a guide only. Generally, the potential for higher returns over time is accompanied by the higher risk of a decline in the value of your principal. Investors should realize that the Principal LifeTime Funds or Principal LifeTime Hybrid Funds are not a complete solution to their retirement needs. Investors must weigh many factors when considering when to retire, what their retirement needs will be, and what sources of income they may have.

There are five Strategic Asset Management (“SAM”) Portfolios: Flexible Income, Conservative Balanced, Balanced, Conservative Growth, and Strategic Growth. The SAM Portfolios offer long-term investors different asset allocation strategies having different levels of potential investment risk and reward. The SAM Portfolios share the same risks but often with different levels of exposure. In general, relative to the other Portfolios:

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the Balanced Portfolio should offer investors the potential for a medium level of income and a medium level of capital growth, while exposing them to a medium level of principal risk,

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the Conservative Balanced Portfolio should offer investors the potential for a medium-to-high level of income and a medium-to-low level of capital growth, while exposing them to a medium-to-low level of principal risk,

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the Conservative Growth Portfolio should offer investors the potential for a low-to-medium level of income and a medium-to-high level of capital growth, while exposing them to a medium-to-high level of principal risk,

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the Flexible Income Portfolio should offer investors the potential for a high level of income and a low level of capital growth, while exposing them to a low level of principal risk, and

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the Strategic Growth Portfolio should offer investors the potential for a high level of capital growth, and a corresponding level of principal risk.

Funds of funds can be subject to payment-in-kind liquidity risk: if an underlying fund pays a redemption request by the fund wholly or partly by a distribution-in-kind of portfolio securities rather than in cash, the fund may hold such portfolio securities until those managing the investments of the fund determine that it is appropriate to dispose of them.

Management of funds of funds entails potential conflicts of interest: a fund of fund may invest in affiliated underlying funds, and those who manage the fund’s investments and their affiliates may earn different fees from different underlying funds and may have an incentive to allocate more fund of fund assets to underlying funds from which they receive higher fees.

Geographic Concentration (Municipal Obligations)

Greater risks may arise from the geographic concentration (a particular state, such as California, Illinois, or New York, or a particular country or region) of investments, as well as the current and past financial condition of municipal issuers in the case of a municipal fund. In addition to factors affecting the state or regional economy, certain constitutional amendments, legislative measures, executive orders, administrative regulations, court decisions, and voter initiatives could result in adverse consequences affecting municipal obligations. See the SAI for a more detailed description of these risks.

Hedging

Hedging is a strategy that can be used to attempt to mitigate or protect against potential losses due to changing interest rates, securities prices, asset values, currency exchange rates, and other market conditions. The success of a fund’s hedging strategy will be subject to the ability of those managing the fund’s investments to correctly assess the degree of correlation between the performance of the instruments used in the hedging strategy and the performance of the investments in the portfolio being hedged. Since the characteristics of many securities change as markets change or time passes, the success of a fund’s hedging strategy will also be subject to the ability of those managing the fund’s investments to continually recalculate, readjust, and execute hedges in an efficient and timely manner. For a variety of reasons, those managing the fund’s investments may not seek to establish a perfect correlation between such hedging instruments and the portfolio holdings being hedged. Such imperfect correlation may prevent a fund from achieving the intended hedge or expose a fund to risk of loss. In addition, it is not possible to hedge fully or perfectly against any risk, and hedging entails its own costs.

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High Portfolio Turnover

“Portfolio turnover” is the term used in the industry for measuring the amount of trading that occurs in a fund’s portfolio during the year. For example, a 100% turnover rate means that, on average, every security in the portfolio has been replaced once during the year. Funds with high turnover rates (more than 100%) often have higher transaction costs (which are paid by the fund), may result in higher taxes when fund shares are held in a taxable account, and may lower the fund’s performance. High portfolio turnover can result in a lower capital gain distribution due to higher transaction costs added to the basis of the assets or can result in lower ordinary income distributions to shareholders when the transaction costs cannot be added to the basis of assets. Both events reduce fund performance.

Please consider all the factors when you compare the turnover rates of different funds. You should also be aware that the “total return” line in the Financial Highlights section reflects portfolio turnover costs.

No turnover rate can be calculated for the Government Money Market or Money Market Funds because of the short maturities of the securities in which they invest.

High Yield Securities

Below investment grade securities are fixed-income securities that are rated at the time of purchase Ba1 or lower by Moody’s Investors Service, Inc. (“Moody’s”) and BB+ or lower by S&P Global Ratings (“S&P Global”) (if the security has been rated by only one of those agencies, that rating will determine if the security is below investment grade; if the security has not been rated by either of those agencies, those managing investments of a Fund will determine whether the security is of a quality comparable to those rated below investment grade).

Below investment grade securities are sometimes referred to as high yield or “junk bonds” and are considered speculative, particularly with respect to the issuer’s continuing ability to meet principal and interest payments. Such securities could be in default at time of purchase. Each fund of funds may invest in underlying funds that may invest in such securities.

Investing in high yield securities involves special risks in addition to those associated with investing in investment grade securities:

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High yield securities may be less liquid than investment grade securities.

•

The secondary market on which high yield securities are traded may be less liquid, which may reduce the price of the security and adversely affect, and cause large fluctuations in, the daily price of the Fund’s shares.

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Analysis of the creditworthiness of issuers of high yield securities is more complex. To the extent a Fund invests in high yield securities, its ability to meet its objective may be more dependent on such credit analyses.

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High yield securities may be more susceptible to real or perceived adverse economic and competitive industry conditions. Although high yield securities prices tend to be less sensitive to interest rate changes than those of investment grade securities, they tend to be more sensitive to adverse economic downturns or individual corporate developments. Adverse publicity and investor perceptions, whether or not based on fundamental analysis, may decrease the value and liquidity of high yield securities, especially in a thinly traded market.

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If the issuer of high yield securities defaults, a Fund may incur additional expenses to seek recovery.

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If an issuer of high yield securities undergoes a corporate restructuring, such high yield securities may become exchanged for or converted into reorganized equity of the underlying issuer. Moreover, to the extent that a bond indenture or loan agreement does not contain sufficiently protective covenants or otherwise permits the issuer to take certain actions to the Fund’s detriment (such as distributing cash to equity holders, incurring additional indebtedness, and disposing of assets), the underlying value of the high yield security may decline.

The use of credit ratings for evaluating high yield securities also involves certain risks. For example, credit ratings reflect the safety of principal and interest payments, not the market value risk of high yield securities. Also, credit rating agencies may fail to change credit ratings in a timely manner to reflect subsequent events. If a credit rating agency changes the rating of a portfolio security held by a Fund, the Fund may retain the security.

Industrial Revenue Bond

The Fund will be sensitive to, and its performance will depend to a greater extent on, the overall condition and performance of industrial revenue bonds. These revenue bonds are issued by or on behalf of public authorities to obtain funds to finance various public and/or privately operated facilities, including those for business and manufacturing, housing, sports, pollution control, airport, mass transit, port, and parking facilities. These bonds are normally secured only by the revenues from the project and not by state or local government tax payments. Consequently, the credit quality of these bonds is dependent upon the ability of the user of the facilities financed by the bonds and any guarantor to meet its financial obligations. Payment

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of interest on and repayment of principal on such bonds are the responsibility of the user and/or any guarantor. These bonds are subject to a wide variety of risks, many of which relate to the nature of the specific project. Generally, the value and credit quality of these bonds are sensitive to the risks related to an economic slowdown.

Industry Concentration

A fund that concentrates its investments (invests more than 25% of its net assets) in a particular industry (or group of industries) is more exposed to the overall condition of the particular industry than a fund that invests in a wider variety of industries. A particular industry could be affected by economic, business, supply-and-demand, political, or regulatory factors. Companies within the same industry could react similarly to such factors. As a result, a fund’s concentration in a particular industry would increase the possibility that the fund’s performance will be affected by such factors.

Inverse Floating Rate Investments

Inverse floating rate investments are variable rate debt instruments that pay interest at rates that move in the opposite direction of prevailing interest rates. Inverse floating rate investments tend to underperform the market for fixed-rate bonds in a rising interest rate environment. Inverse floating rate investments have varying degrees of liquidity. Inverse floating rate investments in which the funds may invest may include derivative instruments, such as residual interest bonds or tender option bonds. Such instruments are typically created by a special purpose trust that holds long-term fixed-rate bonds and sells two classes of beneficial interests: short-term floating rate interests, which are sold to third-party investors, and the inverse floating residual interests, which are purchased by the funds. The funds generally invest in inverse floating rate investments that include embedded leverage, thus exposing the funds to greater risks and increased costs. The market value of a “leveraged” inverse floating rate investment generally will fluctuate in response to changes in market rates of interest to a greater extent than the value of an unleveraged investment.

Investment Company Securities

Securities of other investment companies, including shares of closed-end investment companies, unit investment trusts, various ETFs, and other open-end investment companies, represent interests in professionally managed portfolios that may invest in a variety of instruments. Certain types of investment companies, such as closed-end investment companies, issue a fixed number of shares that trade on a stock exchange or over-the-counter at a premium or a discount to their net asset value. Others are continuously offered at net asset value but may also be traded in the secondary market. ETFs are often structured to perform in a similar fashion to a broad-based securities index. Investing in ETFs involves generally the same risks as investing directly in the underlying instruments. Investing in ETFs involves the risk that they will not perform in exactly the same fashion, or in response to the same factors, as the index or underlying instruments. Shares of ETFs may trade at prices other than net asset value.

A fund that invests in another investment company is subject to the risks associated with direct ownership of the securities in which such investment company invests. Fund shareholders indirectly bear their proportionate share of the expenses of each such investment company, including its advisory and administrative fees. The Fund would also continue to pay its own advisory fees and other expenses. Consequently, the Fund and its shareholders would, in effect, absorb two levels of fees with respect to investments in other investment companies.

For the Government Money Market Fund, PGI currently waives the management fee in an amount equal to the expenses of the underlying funds' fees in which the Government Money Market Fund invests.

A fund may invest in affiliated underlying funds, and those who manage such fund’s investments and their affiliates may earn different fees from different underlying funds and may have an incentive to allocate more fund assets to underlying funds from which they receive higher fees.

Leverage

If a fund makes investments in futures contracts, forward contracts, swaps, and other derivative instruments, these instruments provide the economic effect of financial leverage by creating additional investment exposure, as well as the potential for greater loss. If a fund uses leverage through activities such as borrowing, entering into short sales, purchasing securities on margin or on a “when-issued” basis, or purchasing derivative instruments in an effort to increase its returns, the fund has the risk of magnified capital losses that occur when losses affect an asset base, enlarged by borrowings or the creation of liabilities, that exceeds the net assets of the fund. The net asset value of a fund employing leverage will be more volatile and sensitive to market movements. Leverage may involve the creation of a liability that requires the fund to pay interest. Leveraging may cause a fund to liquidate portfolio positions to satisfy its obligations when it may not be advantageous to do so. To the extent that a fund is not able to close out a leveraged position because of market illiquidity, a fund’s liquidity may be impaired.

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Municipal Obligations and AMT-Subject Bonds

Municipal obligations are subject to the risk that litigation, legislation, or other political events, local business or economic conditions, credit rating downgrades, or the bankruptcy of the issuer could have a significant effect on an issuer’s ability to make payments of principal and/or interest or otherwise affect the value of such obligations. Certain municipalities may have difficulty meeting their obligations due to, among other reasons, changes in underlying demographics. Municipal obligations can be significantly affected by political changes as well as uncertainties in the municipal market related to government regulation, taxation, legislative changes, or the rights of municipal security holders. Because many municipal obligations are issued to finance similar projects, especially those relating to education, health care, transportation, utilities, and water and sewer, conditions in those sectors can affect the overall municipal market. Municipal obligations include general obligation bonds, which are backed by the “full faith and credit” of the issuer, which has the power to tax residents to pay bondholders. Timely payments depend on the issuer’s credit quality, ability to raise tax revenues, and ability to maintain an adequate tax base. General obligation bonds generally are not backed by revenues from a specific project or source. Municipal obligations also include revenue bonds, which are generally backed by revenue from a specific project or tax. The issuer of a revenue bond makes interest and principal payments from revenues generated from a particular source or facility, such as a tax on particular property or revenues generated from a municipal water or sewer utility or an airport. Revenue bonds generally are not backed by the full faith and credit and general taxing power of the issuer. The market for municipal obligations/bonds may be less liquid than for taxable bonds. There may be less information available on the financial condition of issuers of municipal obligations than for public corporations. Municipal obligations may be susceptible to periods of economic stress, which could affect the market values and marketability of many or all municipal obligations of issuers in a state, U.S. territory, or possession.

AMT-subject bonds are municipal obligations issued to finance certain “private activities,” such as bonds used to finance airports, housing projects, student loan programs, and water and sewer projects. Interest on AMT-subject bonds is an item of tax preference for purposes of the federal individual alternative minimum tax (“AMT”). See “Tax Considerations” for a discussion of the tax consequences of investing in the Fund.

Current federal income tax laws limit the types and volume of bonds qualifying for the federal income tax exemption of interest, which may affect the ability of the Fund to purchase sufficient amounts of tax-exempt bonds.

Portfolio Duration

Average duration is a mathematical calculation of the average life of a bond (or for a bond fund, the average life of the fund’s underlying bonds, weighted by the percentage of the fund’s assets that each represents) that serves as a useful measure of its price risk. Duration is an estimate of how much the value of the bonds held by a fund will fluctuate in response to a change in interest rates. For example, if a fund has an average duration of 4 years and interest rates rise by 1%, the value of the bonds held by the fund will decline by approximately 4%, and if the interest rates decline by 1%, the value of the bonds held by the fund will increase by approximately 4%. Longer term bonds and zero coupon bonds are generally more sensitive to interest rate changes. Duration, which measures price sensitivity to interest rate changes, is not necessarily equal to average maturity.

Preferred Securities

Preferred securities include preferred stock and various types of junior subordinated debt and trust preferred securities. Preferred securities may pay fixed-rate or adjustable-rate distributions and generally have a payment “preference” over common stock, but are junior to the issuer’s senior debt in a liquidation of the issuer’s assets. Preference would mean that a company must pay on its preferred securities before paying on its common stock, and that any claims of the preferred security holder would typically be ahead of common stockholders’ claims on assets in a corporate liquidation.

Holders of preferred securities usually have no right to vote for corporate directors or on other matters. The market value of preferred securities is sensitive to changes in interest rates as they are typically fixed-income securities; the fixed-income payments are expected to be the primary source of long-term investment return. While some preferred securities are issued with a final maturity date, others are perpetual in nature. In certain instances, a final maturity date may be extended and/or the final payment of principal may be deferred at the issuer’s option for a specified time without triggering an event of default for the issuer. In addition, an issuer of preferred securities may have the right to redeem the securities before their stated maturity date. For instance, for certain types of preferred securities, a redemption may be triggered by a change in federal income tax or securities laws. As with call provisions, a redemption by the issuer may reduce the return of the security held by the fund. Preferred securities may be subject to provisions that allow an issuer, under certain circumstances to skip (indefinitely) or defer (possibly up to 10 years) distributions. If a fund owns a preferred security that is deferring its distribution, the fund may be required to report income for tax purposes while it is not receiving any income.

Preferred securities are typically issued by corporations, generally in the form of interest or dividend bearing instruments, or by an affiliated business trust of a corporation, generally in the form of beneficial interests in subordinated debentures or similarly structured securities. The preferred securities market is generally divided into the $25 par “retail” and the $1,000

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par “institutional” segments. The $25 par segment includes securities that are listed on the New York Stock Exchange (“NYSE”) (exchange traded), which trade and are quoted with accrued dividend or interest income, and which are often callable at par value five years after their original issuance date. The institutional segment includes $1,000 par value securities that are not exchange-listed (over the counter), which trade and are quoted on a “clean” price, i.e., without accrued dividend or interest income, and which often have a minimum of 10 years of call protection from the date of their original issuance. Preferred securities can also be issued by real estate investment trusts and involve risks similar to those associated with investing in real estate investment trust companies.

Real Estate Investment Trusts (“REITs”)

REITs involve certain unique risks in addition to the risks associated with investing in the real estate industry in general (such as possible declines in the value of real estate, lack of availability of mortgage funds, or extended vacancies of property). REITs are characterized as: equity REITs, which primarily own property and generate revenue from rental income; mortgage REITs, which invest in real estate mortgages; and hybrid REITs, which combine the characteristics of both equity and mortgage REITs. Equity REITs may be affected by changes in the value of the underlying property owned by the REITs, while mortgage REITs may be affected by the quality of any credit extended. REITs are dependent upon management skills, are not diversified, and are subject to heavy cash flow dependency, risks of default by borrowers, and self-liquidation. A fund that invests in a REIT is subject to the REIT’s expenses, including management fees, and will remain subject to the fund’s advisory fees with respect to the assets so invested. REITs are also subject to the possibilities of failing to qualify for the special tax treatment accorded REITs under the Internal Revenue Code and failing to maintain their exemptions from registration under the 1940 Act.

Regular REIT dividends received by a Fund from a REIT will not qualify for the corporate dividends-received deduction and generally will not constitute qualified dividend income for U.S. income tax purposes. Any distribution of income attributable to regular REIT dividends from a Fund’s investment in a REIT will not qualify for the deduction that would be available to a non-corporate shareholder were the shareholder to own such REIT directly.

Investment in REITs also involves risks similar to those associated with investing in small market capitalization companies. REITs may have limited financial resources, may trade less frequently and in a limited volume, and may be subject to more abrupt or erratic price movements than larger company securities.

Real Estate Securities

Investing in securities of companies in the real estate industry subjects a fund to the special risks associated with the real estate market and the real estate industry in general. Generally, companies in the real estate industry are considered to be those that have principal activity involving the development, ownership, construction, management, or sale of real estate; have significant real estate holdings, such as hospitality companies, healthcare facilities, supermarkets, mining, lumber, and/or paper companies; and/or provide products or services related to the real estate industry, such as financial institutions that make and/or service mortgage loans and manufacturers or distributors of building supplies. Securities of companies in the real estate industry are sensitive to factors such as loss to casualty or condemnation, changes in real estate values, property taxes, interest rates, cash flow of underlying real estate assets, occupancy rates, government regulations affecting zoning, land use and rents, and the management skill and creditworthiness of the issuer. Companies in the real estate industry may also be subject to liabilities under environmental and hazardous waste laws.

Redemption and Large Transaction Risk

Ownership of a fund’s shares may be concentrated in one or a few large investors (such as funds of funds, institutional investors, and asset allocation programs) that may redeem or purchase shares in large quantities. These transactions may cause a fund to sell securities to meet redemptions or to invest additional cash at times it would not otherwise do so, which may result in increased transaction costs, increased expenses, changes to expense ratios, and adverse effects to fund performance. Such transactions may also accelerate the realization of taxable income if sales of portfolio securities result in gains. Moreover, reallocations by large shareholders among share classes of a fund may result in changes to the expense ratios of affected classes, which may increase the expenses paid by shareholders of the class that experienced the redemption.

As an example, as of October 31, 2022, series of the Registrant, Principal Variable Contracts, Funds, Inc. (“PVC”), and Principal Exchange-Traded Funds owned the following percentages, in the aggregate, of the outstanding shares of the underlying funds listed below. PGI is the advisor to the PFI and PVC funds of funds and is committed to minimizing the potential impact of redemption and large transaction risk on underlying funds to the extent consistent with pursuing the investment objectives of the funds of funds that it manages. However, PGI and its affiliates may face conflicts of interest in fulfilling responsibilities to all such funds.

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Fund	Total Percentage of Outstanding Shares Owned
Core Fixed Income Fund	69.56%
Diversified International Fund	75.34%
Equity Income Fund	32.09%
Finisterre Emerging Markets Total Return Bond Fund	45.58%
Global Real Estate Securities Fund	2.70%
Government & High Quality Bond Fund	48.13%
Government Money Market Fund	99.58%
High Income Fund	31.19%
High Yield Fund	11.60%
Inflation Protection Fund	43.38%
LargeCap Growth Fund I	18.31%
LargeCap S&P 500 Index Fund	48.45%
LargeCap Value Fund III	73.19%
MidCap Fund	4.36%
MidCap Growth Fund III	57.85%
MidCap S&P 400 Index Fund	45.82%
MidCap Value Fund I	27.95%
Overseas Fund	68.13%
Principal Capital Appreciation Fund	37.66%
Real Estate Securities Fund	7.62%
Short-Term Income Fund	36.63%
SmallCap Growth Fund I	13.60%
SmallCap S&P 600 Index Fund	32.45%
SmallCap Value Fund II	28.98%

Repurchase Agreements

Repurchase agreements typically involve the purchase of debt securities from a financial institution such as a bank, savings and loan association, or broker-dealer. A repurchase agreement provides that the fund sells back to the seller and that the seller repurchases the underlying securities at a specified price on a specific date. Repurchase agreements may be viewed as loans by the fund collateralized by the underlying securities. This arrangement results in a fixed rate of return that is not subject to market fluctuation while the fund holds the security. In the event of a default or bankruptcy by a selling financial institution, the affected fund bears a risk of loss, including incurring costs and delays. Repurchase agreements may involve more risk than investments in U.S. government securities. To minimize such risks, the fund enters into repurchase agreements only with parties those managing the investments of the fund deem creditworthy (those that are large, well-capitalized and well-established financial institutions). In addition, the value of the securities collateralizing the repurchase agreement is, and during the entire term of the repurchase agreement remains, at least equal to the acquisition price the Fund pays to the seller of the securities.

Securitized Products

Securitized products are fixed-income instruments that represent interests in underlying pools of collateral or assets. The value of the securitized product is derived from the performance, value, and cash flows of the underlying asset(s).

A fund’s investments in securitized products are subject to risks similar to traditional fixed-income securities, such as credit, interest rate, liquidity, prepayment, extension, and default risk, as well as additional risks associated with the nature of the assets and the servicing of those assets. Prepayment risk may make it difficult to calculate the average life of a fund’s investment in securitized products. Securitized products are generally issued as pass-through certificates, which represent the right to receive principal and interest payments collected on the underlying pool of assets, which are passed through to the security holder. Therefore, repayment depends on the cash flows generated by the underlying pool of assets. The securities may be rated as investment-grade or below-investment-grade.

The specific securitized products that are principal strategies of each Fund are listed in its Fund Summary.

•

Mortgage-backed securities (“MBS”) represent an interest in a pool of underlying mortgage loans secured by real property. MBS are sensitive to changes in interest rates but may respond to these changes differently from other

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fixed-income securities due to the possibility of prepayment of the underlying mortgage loans. If interest rates fall and the underlying loans are prepaid faster than expected, the fund may have to reinvest the prepaid principal in lower yielding securities, thus reducing the fund’s income. Conversely, rising interest rates tend to discourage refinancings and the underlying loans may be prepaid more slowly than expected, reducing a fund’s potential to reinvest the principal in higher yielding securities and extending the duration of the underlying loans. In addition, when market conditions result in an increase in default rates on the underlying loans and the foreclosure values of the underlying real estate is less than the outstanding amount due on the underlying loan, collection of the full amount of accrued interest and principal on these investments may be doubtful. The risk of such defaults is generally higher in the case of underlying mortgage pools that include sub-prime mortgages (mortgages granted to borrowers whose credit histories would not support conventional mortgages).

•

Commercial mortgage-backed securities (“CMBS”) represent an interest in a pool of underlying commercial mortgage loans secured by real property such as retail, office, hotel, multi-family, and industrial properties. CMBS are issued in several classes with different levels of yield and credit protection, and the CMBS class in which a fund invests influences the interest rate, credit, and prepayment risks. Many of the loans related to CMBS do not allow voluntary prepayment, which can help mitigate or eliminate prepayment risk.

•

Asset-backed securities (“ABS”) are backed by non-mortgage assets such as company receivables, company loans, truck and auto loans, student loans, leases, and credit card receivables. ABS entail credit risk. They also may present a risk that, in the event of default, the liquidation value of the underlying assets may be inadequate to pay any unpaid interest or principal.

U.S. Government and U.S. Government-Sponsored Securities

U.S. government securities, such as Treasury bills, notes, and bonds and mortgage-backed securities guaranteed by the Government National Mortgage Association (Ginnie Mae), are supported by the full faith and credit of the United States; others are supported by the right of the issuer to borrow from the U.S. Treasury; others are supported by the discretionary authority of the U.S. government to purchase the agency’s obligations; and still others are supported only by the credit of the issuing agency, instrumentality, or enterprise.

Although U.S. government-sponsored enterprises such as the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National Mortgage Association (Fannie Mae) may be chartered or sponsored by Congress, they are not funded by Congressional appropriations, and their securities are not issued by the U.S. Treasury nor supported by the full faith and credit of the U.S. government.

There is no assurance that the U.S. government would provide financial support to its agencies and instrumentalities if not required to do so. In addition, certain governmental entities have been subject to regulatory scrutiny regarding their accounting policies and practices and other concerns that may result in legislation, changes in regulatory oversight, and/or other consequences that could adversely affect the credit quality, availability, or investment character of securities issued by these entities. The value and liquidity of U.S. government securities may be affected adversely by changes in the ratings of those securities.

Volatility Mitigation

Volatility mitigation strategies may increase fund transaction costs, which could increase losses or reduce gains. These strategies may not protect the fund from market declines and may reduce the fund’s participation in market gains.

PORTFOLIO HOLDINGS INFORMATION

A description of the Registrant’s policies and procedures with respect to disclosure of the Funds' portfolio securities is available in the Funds' SAI.

MANAGEMENT OF THE FUNDS

The Manager and Advisor

Principal Global Investors, LLC (“PGI”), an indirect subsidiary of Principal Financial Group, Inc. (“Principal®”), serves as the manager and advisor for the Funds. Through the Management Agreement with the Registrant, PGI provides investment advisory services and certain corporate administrative services for the Funds.

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Advisor:	Principal Global Investors, LLC (doing business as Principal Asset Management), 711 High Street, Des Moines, IA 50392, is part of a diversified global asset management organization that utilizes specialized investment teams and affiliates to provide institutional investors and individuals with diverse investment capabilities, including fixed income, equities, real estate, currency, asset allocation, and stable value. In addition to its asset management offices in the U.S., PGI has asset management offices of affiliate advisors located in Europe, Asia, Latin America, and Australia. PGI has been a registered investment advisor since 1998.
Funds:	In fulfilling its investment advisory responsibilities, PGI provides day-to-day discretionary investment services (directly making decisions to purchase or sell securities) for all or a portion of the following Funds:
	•California Municipal
	•Core Fixed Income
	•Core Plus Bond
	•Diversified Income (emerging market debt, with services provided by Principal Finisterre, an investment team within PGI; and one or more strategies that seek to track the performance of an index related to a particular sector or asset class)
	•Diversified International
	•Equity Income (services provided by Principal Edge, an investment team within PGI)
	•Finisterre Emerging Markets Total Return Bond (services provided by Principal Finisterre, an investment team within PGI)
	•Global Emerging Markets
	•Government & High Quality Bond
	•Government Money Market
	•High Income (services provided by Principal® Asset Allocation)
	•High Yield
	•LargeCap Growth I (services provided by Principal® Asset Allocation)
	•LargeCap S&P 500 Index
	•LargeCap Value III (services provided by Principal® Asset Allocation)
	•MidCap (services provided by Principal Aligned, an investment team within PGI)
	•MidCap Growth (services provided by Principal Dynamic Growth, an investment team within PGI)
	•MidCap Growth III (services provided by Principal® Asset Allocation)
	•MidCap S&P 400 Index
	•MidCap Value I (services provided by Principal® Asset Allocation)
	•Money Market
	•Overseas (services provided by Principal® Asset Allocation)
	•Principal Capital Appreciation (services provided by Principal Edge, an investment team within PGI)
	•Principal LifeTime Funds (services provided by Principal® Asset Allocation)
	•Principal LifeTime Hybrid Funds (services provided by Principal® Asset Allocation)
	•SAM (Strategic Asset Management) Portfolios (services provided by Principal® Asset Allocation)
	•Short-Term Income
	•SmallCap
	•SmallCap Growth I (services provided by Principal® Asset Allocation)
	•SmallCap S&P 600 Index
	•SmallCap Value II (services provided by Principal® Asset Allocation)
	•Tax-Exempt Bond

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Several of the Funds have multiple sub-advisors. A team within Principal® Asset Allocation, an investment team within PGI and whose members are identified in each Fund Summary and listed below, determines the portion of those Funds’ assets that PGI and each sub-advisor will manage and may reallocate Fund assets among PGI and the sub-advisors from time-to-time. This team agrees on allocation decisions and shares authority and responsibility for day-to-day portfolio management, with no limitation on the authority of one portfolio manager in relation to another.

The decision to reallocate Fund assets between PGI acting in a discretionary advisory capacity and the sub-advisors may be based on a variety of factors, including, but not limited to: the investment capacity of PGI and each sub-advisor, portfolio diversification, volume of net cash flows, fund liquidity, investment performance, investment strategies, changes in PGI or each sub-advisor’s firm or investment professionals, or changes in the number of sub-advisors. Ordinarily, reallocations of Fund assets among sub-advisors occur as a sub-advisor liquidates assets in the normal course of portfolio management or with net new cash flows; however, at times, existing Fund assets may be reallocated among PGI and/or the sub-advisors.

The Fund Summaries identified the portfolio managers and the Funds they manage. Additional information about the portfolio managers follows. With respect to the biographies of PGI portfolio managers, references to Principal® encompass various entities and groups within the Principal organization, such as its majority- and wholly-owned subsidiaries, as well as investment teams within PGI.

As reflected in the Fund Summaries, the day-to-day portfolio management, for some Funds, is shared by multiple portfolio managers. In each such case, the portfolio managers operate as a team, sharing authority and responsibility for research and the day-to-day management of the portfolio. However, for the MidCap Fund, Mr. Nolin has ultimate decision making authority. Mr. Rozycki may make investment decisions in Mr. Nolin’s absence.

William C. Armstrong has been with Principal® since 1992. He earned a bachelor’s degree from Kearney State College and an M.B.A. from the University of Iowa. Mr. Armstrong has earned the right to use the Chartered Financial Analyst designation.

Paul H. Blankenhagen has been with Principal® since 1992. He earned a bachelor’s degree in Finance from Iowa State University and a master’s degree from Drake University. Mr. Blankenhagen has earned the right to use the Chartered Financial Analyst designation.

Damien Buchet has been with Principal® since 2015. He earned his degree from the EDHEC School of Business Administration. Mr. Buchet has earned the right to use the Chartered Financial Analyst designation.

Jessica S. Bush has been with Principal® since 2006. She earned a bachelor’s degree in Business Administration from the University of Michigan. She has earned the right to use the Chartered Financial Analyst designation.

Juliet Cohn has been with Principal® since 2003. She earned a bachelor’s degree in Mathematics from Trinity College, Cambridge, England.

Daniel R. Coleman has been with Principal® since 2001. He earned a bachelor’s degree in Finance from the University of Washington and an M.B.A. from New York University.

Christopher T. Corbett has been with Principal® since 2006. He earned a B.B.A. in Accounting and an M.B.A. in Finance from the University of Notre Dame. Mr. Corbett has earned the right to use the Chartered Financial Analyst designation.

Brody Dass has been with Principal® since 2015. He earned a bachelor’s degree from the University of Iowa. Mr. Dass has earned the right to use the Chartered Financial Analyst designation.

Bryan C. Davis has been with Principal® since 1993. He earned a bachelor’s degree in Finance from the University of Iowa. Mr. Davis has earned the right to use the Chartered Financial Analyst designation.

Mark P. Denkinger has been with Principal® since 1990. He earned a bachelor’s degree in Finance and an M.B.A. with a Finance emphasis from the University of Iowa. Mr. Denkinger has earned the right to use the Chartered Financial Analyst designation.

James W. Fennessey has been with Principal® since 2000. Mr. Fennessey earned a bachelor’s degree in Business Administration, with an emphasis in Finance, and a minor in Economics from Truman State University. He has earned the right to use the Chartered Financial Analyst designation.

John R. Friedl has been with Principal® since 1998. He earned a bachelor’s degree in Communications and History from the University of Washington and a master’s degree in Finance from Seattle University. Mr. Friedl has earned the right to use the Chartered Financial Analyst designation.

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Zach Gassmann has been with Principal® since 2007. He received a bachelor’s degree in Accounting from Simpson College and a master’s degree in Financial Management from Drake University. Mr. Gassmann has earned the right to use the Chartered Financial Analyst designation.

Erika Isley has been with Principal® since 2000. She earned a bachelor’s degree in Business Management from Upper Iowa University and an M.B.A. from Drake University.

Todd A. Jablonski has been with Principal® since 2010. He earned a bachelor’s degree in Economics from the University of Virginia and an M.B.A. with an emphasis in Quantitative Finance from New York University’s Stern School of Business. Mr. Jablonski has earned the right to use the Chartered Financial Analyst designation.

Theodore Jayne has been with Principal® since 2015. He earned a bachelor’s degree in Anthropology from Harvard University. Mr. Jayne has earned the right to use the Chartered Financial Analyst designation.

Jeffrey Kilkenny was with Principal® from 1999-2006 and rejoined Principal® in 2012. He earned a bachelor’s degree in Finance from the University of Iowa. Mr. Kilkenny has earned the right to use the Chartered Financial Analyst designation.

James Noble has been with Principal® since 2010. He earned a bachelor’s degree in Finance and an M.B.A. from Hofstra University. Mr. Noble has earned the right to use the Chartered Financial Analyst designation.

K. William Nolin has been with Principal® since 1993. He earned a bachelor’s degree in Finance from the University of Iowa and an M.B.A. from the Yale School of Management. Mr. Nolin has earned the right to use the Chartered Financial Analyst designation.

Phil Nordhus has been with Principal® since 1990. He earned a bachelor’s degree in Economics from Kansas State University and an M.B.A. from Drake University. Mr. Nordhus has earned the right to use the Chartered Financial Analyst designation.

Brian W. Pattinson has been with Principal® since 1994. He earned a bachelor’s degree and an M.B.A. in Finance from the University of Iowa. Mr. Pattinson has earned the right to use the Chartered Financial Analyst designation.

Scott J. Peterson has been with Principal® since 2002. He earned a bachelor’s degree in Mathematics from Brigham Young University and an M.B.A. from New York University’s Stern School of Business. Mr. Peterson has earned the right to use the Chartered Financial Analyst designation.

Sarah E. Radecki has been with Principal® since 1999. She earned bachelor’s degrees in Political Science and Economics from Saint Mary’s College of California and a master’s degree in Economics from the University of California at Santa Barbara. Ms. Radecki has earned the right to use the Chartered Financial Analyst designation.

Josh Rank has been with Principal® since 2013. He earned a bachelor’s degree in Finance from Iowa State University. Mr. Rank has earned the right to use the Chartered Financial Analyst designation.

Tracy Reeg has been with Principal® since 1993. She earned a bachelor’s degree in Finance from the University of Northern Iowa.

Benjamin E. Rotenberg has been with Principal® since 2014. He earned a bachelor’s degree in International Relations and Russian from Pomona College. He has earned the right to use the Chartered Financial Analyst and the Chartered Alternative Investment Analyst designations.

Tom Rozycki has been with Principal® since 2001. He earned a bachelor’s degree in Finance from Drake University. Mr. Rozycki has earned the right to use the Chartered Financial Analyst designation.

Jeffrey A. Schwarte has been with Principal® since 1993. He earned a bachelor’s degree in Accounting from the University of Northern Iowa. Mr. Schwarte has earned the right to use the Chartered Financial Analyst designation.

Marc R. Shapiro has been with Principal® since 2004. He earned a bachelor’s degree in Finance and Marketing from Emery University.

Aaron J. Siebel has been with Principal® since 2005. He earned a bachelor’s degree in Finance from the University of Iowa. Mr. Siebel has earned the right to use the Chartered Financial Analyst designation.

Darrin E. Smith has been with Principal® since 2007. He earned a bachelor’s degree in Economics from Iowa State University and an M.B.A. from Drake University. Mr. Smith has earned the right to use the Chartered Financial Analyst designation.

Scott Smith has been with Principal® since 1999. He earned a bachelor’s degree in Finance from Iowa State University.

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Yesim Tokat-Acikel has been with Principal® since 2023. Prior to that, Ms. Tokat-Acikel was a Managing Director, Head of Multi-Asset Research, Co-Head of ESG, and Portfolio Manager for PGIM Quantitative Solutions, a business of Prudential Financial, since 2010. She earned a bachelor’s degree in Industrial Engineering from Bilkent University, a master’s degree in Industrial Engineering from the University of Arizona, and a PhD in Financial Economics from the University of California, Santa Barbara.

May Tong has been with Principal® since 2021. Prior to that, Ms. Tong was a Senior Vice President, Portfolio Manager for Franklin Templeton Multi-Asset Solutions since 2018. Prior to that, Ms. Tong was a Portfolio Manager and Head of Portfolio Implementation and Management for Voya Investment Management’s Multi-Asset Strategies and Solutions Team since 2011. She earned a bachelor’s degree in Accounting and Finance from Boston College and an M.B.A. from Columbia University. She has earned the right to use the Chartered Financial Analyst designation.

Nedret Vidinli has been with Principal® since 2010. He earned a bachelor’s degree in Business Administration at Drake University and an M.B.A. at Benedictine University. Mr. Vidinli has earned the right to use the Chartered Financial Analyst designation.

Christopher Watson has been with Principal® since 2011. He earned a B.A. Hons from McGill University, Montreal and an M.B.A. from IMD Lausanne. Mr. Watson has earned the right to use the Chartered Financial Analyst designation.

James Welch has been with Principal® since 2014. He earned a bachelor’s degree in Economics from the Pennsylvania State University.

Randy L. Welch has been with Principal® since 1989. He earned a bachelor’s degree in Business/Finance from Grand View College and an M.B.A. from Drake University. Mr. Welch is an affiliate member of the Chartered Financial Analysts (CFA) Institute.

The Sub-Advisors

PGI has signed contracts with various sub-advisors. Under the sub-advisory agreements, the sub-advisor agrees to assume the obligations of PGI to provide investment advisory services to the portion of the assets of a specific Fund allocated to it by PGI. For these services, PGI pays the sub-advisor a fee.

PGI or the sub-advisor provides the Board with a recommended investment program. The program must be consistent with the Fund’s investment objective and policies. Within the scope of the approved investment program, the sub-advisor advises the Fund on its investment policy and determines which securities are bought or sold, and in what amounts.

The Fund Summaries identified the sub-advisors, portfolio managers, and the Funds they manage. Additional information follows.

Sub-Advisor:	AllianceBernstein L.P. (“AllianceBernstein”), 501 Commerce Street, Nashville, TN 37203, was founded in 1971 as an independent investment advisor registered with the SEC.
Fund(s):	a portion of SmallCap Growth I
Sub-Advisor:	Barrow, Hanley, Mewhinney & Strauss, LLC (doing business as Barrow Hanley Global Investors) (“Barrow Hanley”), 2200 Ross Avenue, 31st Floor, Dallas, Texas 75201, is an investment advisory firm that was founded in 1979.
Fund(s):	a portion of LargeCap Value III and a portion of Overseas
Sub-Advisor:	BlackRock Financial Management, Inc. (“BlackRock”), 55 East 52nd Street, New York, New York 10055, is a registered investment advisor organized in 1994. BlackRock and its affiliates manage investment company and other portfolio assets.
	Sub-Sub-Advisor: BlackRock International Limited (“BIL”), Exchange Place One, 1 Semple Street, Edinburgh EH3 8BL, Scotland, is a registered investment advisor that was founded in 1995.
Fund(s):	Inflation Protection
	BlackRock and BIL, with PGI’s consent, have entered into a sub-sub-advisory agreement for the Inflation Protection Fund. Under the agreement, BIL has agreed to carry out certain investment advisory obligations of BlackRock to manage the Inflation Protection Fund’s assets. BlackRock will allocate to BIL a portion of the Inflation Protection Fund assets it manages.

Chris Allen has been with BIL since 2009. He earned an M.A. degree in Mathematics from Oxford University. Mr. Allen has earned the right to use the Chartered Financial Analyst designation.

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Akiva Dickstein has been with BlackRock since 2009. He earned a B.A. degree in Economics from Yale University and an M.A. degree in Physics from Princeton University.

David Rogal has been with BlackRock since 2009. He earned a B.A. degree in Economics and Biology from Cornell University in 2006.

Sub-Advisor:	Brown Advisory, LLC (“Brown”), 901 South Bond Street, Suite 400, Baltimore, Maryland 21231, is a registered investment advisor that works with institutions, corporations, nonprofits, families, and individuals.
Fund(s):	a portion of LargeCap Growth I and a portion of SmallCap Growth I
Sub-Advisor:	Causeway Capital Management LLC (“Causeway”), 11111 Santa Monica Boulevard, 15th Floor, Los Angeles, CA 90025, is a registered investment advisor founded in 2001.
Fund(s):	a portion of Overseas
Sub-Advisor:	Eagle Asset Management, Inc., 880 Carillon Parkway, St. Petersburg, FL 33716, became an investment advisor in 1984.
Fund(s):	a portion of MidCap Growth III
Sub-Advisor:	Emerald Advisers, LLC (“Emerald”), 3175 Oregon Pike, Leola, PA 17540, was founded in 1991 and manages institutional separate account and mutual fund investment portfolios for corporations, public and private pension funds, and for individual retail investors.
Fund(s):	a portion of SmallCap Growth I
Sub-Advisor:	Hotchkis and Wiley Capital Management, LLC, 601 S. Figueroa Street, 39th Floor, Los Angeles, CA 90017, is an investment advisory firm founded in 1980 that manages value portfolios for institutional and individual investors.
Fund(s):	a portion of SmallCap Value II
Sub-Advisor:	Insight North America LLC (“INA”), 200 Park Avenue, New York, New York 10166, is part of the group of affiliated companies providing investment advisory services under the brand “Insight Investment” or “Insight”. Investment advisory services in North America are provided through two different investment advisors registered with the SEC using the brand Insight Investment: INA and Insight Investment International Limited.
Fund(s):	a portion of High Income
Sub-Advisor:	Los Angeles Capital Management LLC (“Los Angeles Capital”), 11150 Santa Monica Boulevard, Suite 200, Los Angeles, CA 90025, founded in 2002, is a registered investment advisor offering risk-controlled, active equity management services to a broad range of institutional investors.
Fund(s):	a portion of MidCap Value I
Sub-Advisor:	Nuveen Asset Management, LLC (“Nuveen Asset Management”), 333 West Wacker Drive, Chicago, IL 60606, is an investment advisor registered with the SEC providing investment management services in a variety of investment strategies across multiple asset classes.
Fund(s):	a portion of Diversified Income Fund (senior loan investment strategy)
Sub-Advisor:	Origin Asset Management LLP (doing business as Principal Origin) (“Origin”), One Carey Lane, London, EC2V 8AE, UK, manages global equity securities for institutional clients.
Fund(s):	International I

The portfolio managers operate as a team, sharing authority and responsibility for research and the day-to-day management of the portfolio with no limitation on the authority of one portfolio manager in relation to another.

Chris Carter has been with Origin since 2005. Mr. Carter is a graduate of Gonville & Caius College, University of Cambridge, with an M.A. Honours Degree in Economics and Philosophy.

Tarlock Randhawa has been with Origin since 2005. Mr. Randhawa is a graduate of Brunel University with a B.Sc. Joint Honours Degree in Mathematics & Management.

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Nerys Weir was with Origin from 2008 to 2016 and rejoined Origin in 2019. Ms. Weir is a graduate of Leicester University with a B.A. Honours Degree in Ancient History and Archaeology.

Sub-Advisor:	PineBridge Investments LLC (“PineBridge”), Park Avenue Tower, 65 East 55th Street, New York, NY 10022, founded in 2010, is an investment advisor registered with the SEC that focuses on active, high conviction investing.
Fund(s):	a portion of Diversified Income (U.S. investment grade corporate bond sleeve)
Sub-Advisor:	Polen Capital Credit, LLC (f/k/a DDJ Capital Management, LLC) (“Polen Credit”), 1075 Main Street, Suite 320, Waltham, MA 02451, is an SEC registered investment advisor. Polen Credit was formed in 1996 and presently manages U.S. opportunistic high yield, upper tier U.S. high yield, bank loan, and total return credit investment strategies, along with various customized fixed-income solutions, on behalf of domestic and international investors.
Fund(s):	a portion of Diversified Income (high yield strategy) and a portion of High Income
Sub-Advisor:	Post Advisory Group, LLC (“Post”), 2049 Century Park East, Suite 3050, Los Angeles, CA 90067, founded in 1992, is a global investment manager specializing in high yield securities with a multi-strategy, value-oriented investment approach.
Fund(s):	a portion of Diversified Income (high yield strategy) and a portion of High Income
Sub-Advisor:	Principal Real Estate Investors, LLC (doing business as Principal Real Estate) (“Principal - REI”), 711 High Street, Des Moines, IA 50392, was founded in 2000 and manages commercial real estate across the spectrum of public and private equity and debt investments, primarily for institutional investors.
Fund(s):	Global Real Estate Securities, Real Estate Securities, and a portion of Diversified Income (CMBS strategy)

Keith Bokota has been with Principal - REI since 2007. He earned a bachelor’s degree in Finance and International Business from Georgetown University. Mr. Bokota has earned the right to use the Chartered Financial Analyst designation.

Simon Hedger has been with Principal - REI since 2003. He earned an M.B.A. from the University of New England and is an associate member of both the Royal Institute of Chartered Surveyors and of the Australian Property Institute. He is a U.K. qualified chartered surveyor (ARICS).

Anthony Kenkel has been with Principal - REI since 2005. He earned a bachelor’s degree in Finance from Drake University and an M.B.A. from the University of Chicago Graduate School of Business. Mr. Kenkel has earned the right to use the Chartered Financial Analyst and Financial Risk Manager designations.

Kelly D. Rush has been with Principal - REI since 2000 and the predecessor firms since 1987. He earned a B.A. in Finance and an M.B.A. in Business Administration from the University of Iowa. Mr. Rush has earned the right to use the Chartered Financial Analyst designation.

Sub-Advisor:	Robert W. Baird & Co. Incorporated (“Baird”), 777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202, was founded in 1919. Baird provides investment management services for individuals and institutional clients including pension and profit sharing plans.
Fund(s):	a portion of MidCap Growth III
Sub-Advisor:	Spectrum Asset Management, Inc. (“Spectrum”), 2 High Ridge Park, Stamford, CT 06905, founded in 1987, manages portfolios of preferred securities for corporate, pension fund, insurance, and endowment clients; open-end and closed-end mutual funds; and separately managed account programs for high net worth individual investors, as well as provides volatility mitigation solutions for some client portfolios.
Fund(s):	a portion of Diversified Income (preferred securities strategy)

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Sub-Advisor:	T. Rowe Price Associates, Inc. (“T. Rowe Price”), 100 East Pratt Street, Baltimore, MD 21202, has over 75 years of investment management experience.
Fund(s):	a portion of LargeCap Growth I
Sub-Advisor:	Vaughan Nelson Investment Management, L.P. (“Vaughan Nelson”), 600 Travis Street, Suite 3800, Houston, Texas 77002, was founded in 1970.
Fund(s):	a portion of SmallCap Value II
Sub-Advisor:	Victory Capital Management Inc. (“Victory Capital”), 15935 La Cantera Pkwy, San Antonio, TX 78256, is an SEC-registered investment advisor that provides asset management services to individual and institutional clients through multiple investment franchises.
Fund(s):	a portion of MidCap Value I
Sub-Advisor:	Westwood Management Corp. (“Westwood”), 200 Crescent Court, Suite 1200, Dallas, Texas 75201, is a registered investment advisor that was founded in 1983.
Fund(s):	a portion of LargeCap Value III

The SAI provides additional information about each portfolio manager’s compensation, other accounts managed by the portfolio manager, and the portfolio manager’s ownership of securities in the Funds.

Participating Affiliate Agreement

In rendering investment advisory services to a Fund, the advisor and each sub-advisor may use the resources of one or more of its respective foreign (non-U.S.) affiliates that are not registered under the Investment Advisers Act of 1940, as amended, to provide portfolio management, research, and trading services to the Fund. Under a Participating Affiliate Agreement, and pursuant to applicable guidance from the Staff of the SEC, U.S. registered advisors are allowed to use investment advisory and trading resources of such unregistered advisory affiliates subject to the regulatory supervision of the registered advisor. For example, some Principal Fund Complex assets are managed by employees of Principal Global Investors (Europe) Limited pursuant to such an arrangement. Each such affiliate and any of their respective employees who provide services to a Fund are considered under the Participating Affiliate Agreement to be “supervised persons” of the advisor or sub-advisor (as applicable) as that term is defined in the Investment Advisers Act of 1940, as amended.

Fees Paid to PGI

Each Fund pays PGI a fee for its services, which includes the fee PGI pays to sub-advisors, as applicable.

The fee each Fund paid (as a percentage of the Fund’s average daily net assets) for the fiscal year ended October 31, 2022 was:

Fund/Portfolio	Percentage of the Fund’s Average Daily Net Assets
California Municipal	0.41%
Core Fixed Income	0.38%
Core Plus Bond	0.55%
Diversified Income	0.70%
Diversified International	0.74%
Equity Income	0.50%
Finisterre Emerging Markets Total Return Bond	0.75%
Global Emerging Markets	1.05%
Global Real Estate Securities	0.86%
Government & High Quality Bond	0.48%
Government Money Market	0.15%
High Income	0.61%
High Yield	0.51%
Inflation Protection	0.38%
International I	0.72%
LargeCap Growth I	0.60%
LargeCap S&P 500 Index	0.15%

Fund/Portfolio	Percentage of the Fund’s Average Daily Net Assets
LargeCap Value III	0.75%
MidCap	0.58%
MidCap Growth	0.65%
MidCap Growth III	0.86%
MidCap S&P 400 Index	0.15%
MidCap Value I	0.64%
Money Market	0.40%
Overseas	0.94%
Principal Capital Appreciation	0.44%
Principal LifeTime Strategic Income	0.00%
Principal LifeTime 2010	0.00%
Principal LifeTime 2015	0.00%
Principal LifeTime 2020	0.00%
Principal LifeTime 2025	0.00%
Principal LifeTime 2030	0.00%
Principal LifeTime 2035	0.00%
Principal LifeTime 2040	0.00%

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Fund/Portfolio	Percentage of the Fund’s Average Daily Net Assets
Principal LifeTime 2045	0.00%
Principal LifeTime 2050	0.00%
Principal LifeTime 2055	0.00%
Principal LifeTime 2060	0.00%
Principal LifeTime 2065	0.00%
Principal LifeTime Hybrid Income	0.00%
Principal LifeTime Hybrid 2015	0.00%
Principal LifeTime Hybrid 2020	0.00%
Principal LifeTime Hybrid 2025	0.00%
Principal LifeTime Hybrid 2030	0.00%
Principal LifeTime Hybrid 2035	0.00%
Principal LifeTime Hybrid 2040	0.00%
Principal LifeTime Hybrid 2045	0.00%
Principal LifeTime Hybrid 2050	0.00%
Principal LifeTime Hybrid 2055	0.00%

Fund/Portfolio	Percentage of the Fund’s Average Daily Net Assets
Principal LifeTime Hybrid 2060	0.00%
Principal LifeTime Hybrid 2065	0.00%
Real Estate Securities	0.79%
SAM Balanced	0.27%
SAM Conservative Balanced	0.27%
SAM Conservative Growth	0.27%
SAM Flexible Income	0.27%
SAM Strategic Growth	0.27%
Short-Term Income	0.39%
SmallCap	0.73%
SmallCap Growth I	0.85%
SmallCap S&P 600 Index	0.15%
SmallCap Value II	0.93%
Tax-Exempt Bond	0.40%

The management fee schedules for the Principal LifeTime 2070 and Principal LifeTime Hybrid 2070 Funds, which have not completed a full fiscal year, are as follows:

Fund	All Assets
Principal LifeTime 2070	0.00%
Principal LifeTime Hybrid 2070	0.00%

Availability of the discussions regarding the basis for the Board’s approval of various management and sub-advisory agreements is as follows:

	Annual Report to Shareholders for the period ending October 31, 2022		Semi-Annual Report to Shareholders for the period ending April 30, 2023
Fund/Portfolio	Management Agreement	Sub-Advisory Agreement	Management Agreement
Principal LifeTime 2070			X
Principal LifeTime Hybrid 2070			X
All Other Funds/Portfolios	X	X

Voluntary Waivers

Government Money Market and Money Market Funds

PGI has voluntarily agreed to limit the Fund's expenses to the extent necessary to maintain a 0% yield. The voluntary expense limit may be revised or terminated at any time without notice to the shareholders.

Manager of Managers

The Registrant operates as a Manager of Managers. Under an order received from the SEC (the “Order”), the Registrant and PGI may enter into and materially amend agreements with unaffiliated and wholly-owned affiliated sub-advisors (affiliated sub-advisors that are at least 95% owned, directly or indirectly, by PGI or an affiliated person of PGI) without obtaining shareholder approval, including to:

•

hire one or more sub-advisors;

•

change sub-advisors; and

•

reallocate management fees between PGI and sub-advisors.

Although there is no present intent to do so, the Funds may, in the future, rely on current SEC Staff guidance that expands relief under the Order to allow PGI to enter into and materially amend agreements with majority-owned affiliated sub-advisors (affiliated sub-advisors that are at least 50% owned, directly or indirectly, by PGI or an affiliated person of PGI), and, further, to all sub-advisors regardless of the degree of affiliation with PGI.

In order to rely on the varying degrees of relief granted by the Order and/or the SEC Staff guidance, a Fund must receive approval from its shareholders (or, in the case of a new Fund, the Fund’s sole initial shareholder before the Fund is available to the other purchasers).

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The shareholders of each Fund have approved such Fund’s reliance on the Order, as supplemented by the SEC Staff guidance, as follows:

Funds/Portfolios	Unaffiliated Sub-Advisors	Wholly-Owned Affiliated Sub-Advisors	Majority-Owned Affiliated Sub-Advisors	Any Other Sub-Advisors Regardless of Degree of Affiliation
California Municipal and Tax-Exempt Bond	X
Principal LifeTime 2070 and Principal LifeTime Hybrid 2070	X	X	X	X
All Other Funds/Portfolios	X	X	X

PGI has ultimate responsibility for the investment performance of each Fund that utilizes a sub-advisor due to its responsibility to oversee sub-advisors and recommend their hiring, termination, and replacement.

In accordance with a separate exemptive order that the Registrant and PGI have obtained from the SEC, the Board may approve a new sub-advisory agreement or a material amendment to an existing sub-advisory agreement at a meeting that is not in person, provided that the Board Members are able to participate in the meeting using a means of communication that allows them to hear each other simultaneously during the meeting and the other conditions in the exemptive order are met.

PRICING OF FUND SHARES

Each Fund’s shares are bought and sold at the current share price. The share price of each class of each Fund is calculated each day the New York Stock Exchange (“NYSE”) is open. Share prices are not calculated on the days on which the NYSE is closed for trading, generally: New Year’s Day; Martin Luther King, Jr. Day; Washington’s Birthday/ Presidents’ Day; Good Friday; Memorial Day; Juneteenth; Independence Day; Labor Day; Thanksgiving Day; and Christmas. The share price is determined as of the close of business of the NYSE (normally, 3:00 p.m. Central Time). When an order to buy or sell shares is received, the share price used to fill the order is the next price calculated after the order is received (in proper form) at the transaction processing center in Kansas City, Missouri. To process your transaction (purchase, redemption, or exchange) on the day it is received, it must be received (with complete information):

•

on a day that the NYSE is open and

•

before the close of trading on the NYSE (normally, 3:00 p.m. Central Time).

Orders received after the close of the NYSE or on days that the NYSE is not open will be processed on the next day that the NYSE is open for normal trading. The Funds will not treat an intraday unscheduled disruption in NYSE trading as a closure of the NYSE and will price shares as of 3:00 p.m. Central Time, if the particular disruption directly affects only the NYSE.

If we receive an application or purchase request for a new mutual fund account or subsequent purchase into an existing account that is accompanied by a check and the application or purchase request does not contain complete information, we may hold the application (and check) for up to two business days while we attempt to obtain the necessary information. If we receive the necessary information within two business days, we will process the order using the next share price calculated. If we do not receive the information within two business days, we will return the application and check to you.

For all Funds, except the Money Market Fund, the share price is calculated by:

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taking the current market value of the total assets of the Fund,

•

subtracting liabilities of the Fund,

•

dividing the remainder proportionately into the classes of the Fund,

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subtracting the liability of each class, and

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dividing the remainder by the total number of shares outstanding for that class.

With respect to any portion of a Fund’s assets invested in other registered investment companies, that portion of the Fund’s NAV is calculated based on the price (NAV or market, as applicable) of such other registered investment companies.

The securities of the Government Money Market and Money Market Funds are valued at amortized cost. The calculation procedure is described in the SAI.

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Notes:

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If market quotations are not readily available for a security owned by a Fund, its fair value is determined using a policy adopted by the Board. Fair valuation pricing is subjective and creates the possibility that the fair value determined for a security may differ materially from the value that could be realized upon the sale of the security.

•

A Fund’s securities may be traded on foreign securities markets that generally complete trading at various times during the day before the close of the NYSE. Foreign securities and currencies are converted to U.S. dollars using the exchange rate in effect at the close of the NYSE. Securities traded outside of the Western Hemisphere are valued using a fair value policy adopted by the Fund. These fair valuation procedures are intended to discourage shareholders from investing in the Fund for the purpose of engaging in market timing or arbitrage transactions.

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The trading of foreign securities generally or in a particular country or countries may not take place on all days the NYSE is open or may trade on days the NYSE is closed. Thus, the value of the foreign securities held by the Fund may change on days when shareholders are unable to purchase or redeem shares.

•

Certain securities issued by companies in emerging markets may have more than one quoted valuation at any point in time. These may be referred to as local price and premium price. The premium price is often a negotiated price that may not consistently represent a price at which a specific transaction can be effected. The Fund has a policy to value such securities at a price at which PGI expects the securities may be sold.

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The securities of the Government Money Market and Money Market Funds are valued at amortized cost. The calculation procedure is described in the SAI.

CONTACT PRINCIPAL FUNDS, INC.

Contact information for Principal Funds, Inc. (“Principal Funds”) is as follows:

Mailing Addresses:
Regular Mail	Overnight Mail
Principal Funds P.O. Box 219971 Kansas City, MO 64121-9971	Principal Funds 430 W. 7th Street, Ste. 219971 Kansas City, MO 64105-1407

You may speak with a Client Relations Specialist by calling 1-800-222-5852, between 7:00 a.m. and 7:00 p.m. Central Time on any day that the NYSE is open.

To obtain Automated Clearing House (“ACH”) or wire instructions, please contact a Client Relations Specialist.

For additional information about Principal Funds, Inc., go to www.PrincipalAM.com.

PURCHASE OF FUND SHARES

Principal Funds, Inc. offers funds in multiple share classes: A, C, J, Institutional, R-1, R-3, R-4, R-5, R-6, and S. Funds available in multiple share classes have the same investments, but differing expenses. Institutional Class and Classes A, C, J, R-1, R-3, R-4, R-5, and R-6 shares are available in this Prospectus.

The Funds reserve the right to refuse or cancel any purchase orders, including those by exchange, for any reason. For example, the Funds do not intend to permit market timing because short-term or other excessive trading into and out of the Funds may harm performance by disrupting portfolio management strategies and by increasing expenses. Accordingly, the Funds may reject any purchase orders from market timers or investors that, in PGI’s opinion, may be disruptive to the Funds. For these purposes, PGI may consider an investor’s trading history in the Funds or other funds advised by PGI and accounts under common ownership or control.

PGI may recommend to the Board, and the Board may elect, to close certain Funds or share classes to new investors or to close certain Funds or share classes to new and existing investors.

The Registrant will not issue certificates for shares.

No salesperson, broker-dealer, or other person is authorized to give information or make representations about a Fund other than those contained in this Prospectus. Information or representations not contained in this Prospectus may not be relied upon as having been provided or made by the Registrant, a Fund, PGI, any sub-advisor, or Principal Funds Distributor, Inc.

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Procedures for Opening an Account

Classes A and C Shares

Shares of the Funds are generally purchased through Financial Professionals. Financial Professionals may establish shareholder accounts according to their procedures or they may establish shareholder accounts directly with the Funds by visiting our website to obtain the appropriate forms.

Your Financial Professional can help you buy shares of the Funds by mail, through bank wire, direct deposit, or Automatic Investment Plan (“AIP”). No wires are accepted on days when the NYSE is closed or when the Federal Reserve is closed (because the bank that would receive your wire is closed). An investment in a Fund may be held in various types of accounts, including individual, joint ownership, trust, and business accounts. The Funds also offer a range of custodial accounts for those who wish to invest for retirement and/or education expenses. Prospective shareholders should consult with their Financial Professional before making decisions about the account and type of investment that are appropriate for them.

Class J Shares

Class J shares are currently available through registered representatives of:

•

Principal Securities, Inc. (“PSI”) who are also employees of Principal Life distribution channels used to directly market certain products and services of subsidiaries of Principal Financial Group, Inc. as well as provide retirement plan services and education on topics such as investing and retirement. These PSI registered representatives are with Principal Connection (part of Principal Bank), and

•

Selected broker-dealers that have entered into a selling agreement to offer Class J shares.

Class J shares are also available through an online IRA rollover tool on www.principal.com.

For more information about Class J shares of the Funds, please call Principal Connection at 1-800-247-8000.

Institutional Class and Classes R-1, R-3, R-4, R-5, and R-6 Shares

Shares of the Funds are generally purchased through Financial Professionals. There are no sales charges on Institutional Class and Classes R-1, R-3, R-4, R-5, and R-6 shares of the Funds.

Shareholder accounts in these share classes are generally maintained under an open account system. Under this system, an account is opened and maintained for each investor (generally within an omnibus account, plan level account, or institutional investor). Each investment is confirmed by sending the investor a statement of account showing the current purchase or sale and the total number of shares owned. The statement of account is treated by the Funds as evidence of ownership of Fund shares. Contact your Financial Professional for additional information on how to buy shares.

Verification of Identity

To help the government fight the funding of terrorism and money laundering activities, Federal law requires financial institutions to obtain, verify, and record information that identifies each person who opens an account. When you open an account, we (or your Financial Professional) may ask for your name, address, date of birth, and other information that will allow us (or your Financial Professional) to verify your identity. We (or your Financial Professional) may also ask to see your driver’s license or other identifying documents.

If concerns arise with verification of your identity, no transactions, other than redemptions, will be permitted while we attempt to reconcile the concerns. If we are unable to verify your identity on a timely basis, we may close your account or take such other action as we deem appropriate.

The Funds will not establish accounts with foreign addresses. If an existing shareholder with a U.S. address moves to a foreign location and updates the address on the shareholder’s account, we are unable to process any purchases or exchanges on that account. The Funds will not establish accounts that are for the benefit of a business/organization that is illegal under Federal and/or state law (such as a marijuana clinic) or a person who owns or receives income from such an entity or whose source of funds is illegal.

Eligible Purchasers

You must be an eligible purchaser for a particular share class to buy shares of a Fund available in that share class. At the sole discretion of the Distributor, the Fund may broaden or limit the designation of eligible purchasers, permit certain types of investors to open new accounts, impose further restrictions on purchases, or reject any purchase orders, all without prior notice. The Funds' shares may not be offered in every state. Please check with your Financial Professional or our home office for state availability.

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Institutional Class and Classes R-1, R-3, R-4, R-5, and R-6 Shares

Some eligible purchasers (as listed below) purchase shares through plans or other intermediaries; such plans or intermediaries may impose fees in addition to those charged by the Funds. The services or share classes available to you may vary depending upon how you wish to purchase shares of the Fund. Each investor’s financial considerations are different. You should speak with your Financial Professional to help you decide which share class is best for you.

Eligible purchasers currently include, but are not limited to:	Inst.	R-1	R-3	R-4	R-5	R-6
retirement and pension plans to which Principal Life Insurance Company (“Principal Life”) provides recordkeeping services	X	X	X	X	X	X
separate accounts of Principal Life	X	X	X	X	X	X
Principal Life or any of its subsidiaries or affiliates	X	X	X	X	X	X
any fund distributed by PFD if the fund seeks to achieve its investment objective by investing primarily in shares of mutual funds	X	X	X	X	X	X
clients of Principal Global Investors, LLC	X	X	X	X	X	X
certain employer sponsored retirement plans with plan level omnibus accounts	X	X	X	X	X	X
certain pension plans and employee benefit plans	X	X	X	X	X	X
certain retirement account investment vehicles administered by foreign or domestic pension plans	X	X	X	X	X	X
an investor who buys shares through an omnibus account with certain intermediaries, such as a broker-dealer, bank, or other financial institution, pursuant to a written agreement between the intermediary and PFD or its affiliate	X	X	X	X	X	X
certain retirement plan clients that have an organization, approved by Principal Life, for purposes of providing plan recordkeeping services	X	X	X	X	X	X
investors investing at least $1,000,000 per fund	X					X
sponsors, recordkeepers, or administrators of wrap account, mutual fund asset allocation, or fee-based programs or participants in those programs	X					X
certain institutional investors that provide recordkeeping for retirement plans or other employee benefit plans	X					X
institutional clients that Principal Life has approved for purposes of providing plan recordkeeping	X					X
institutional investors investing for their own account, including banks, trust companies, financial intermediaries, corporations, endowments and foundations	X					X
collective trust funds, fund of funds or other pooled investment vehicles, and entities acting for the account of a public entity	X					X
certain clients of a private banking division pursuant to a written agreement between the bank and PFD or its affiliate	X					X
the portfolio manager of any advisor to the fund	X
certain institutional investors with special arrangements (for example, insurance companies, employee benefit plans, retirement plans, and Section 529 Plans, among others)	X					X
retirement plans and IRAs investing through a retirement marketplace enabled by state legislation	X

Class R-1 Shares

Effective January 31, 2017, the Registrant no longer offers Class R-1 shares for purchase from new retirement plans, except in limited circumstances. However, if a retirement plan currently offers Class R-1 shares, such plan will be allowed to continue to invest in this share class through Funds it currently offers in its plans or Funds it adds to its plans.

Government Money Market Fund

The Fund is not offered for sale, and will not be sold, in Nebraska, New Hampshire, Oklahoma, or Montana or to residents of Nebraska, New Hampshire, Oklahoma, or Montana.

MidCap Fund

For retail investors (i.e., non-employer sponsored retirement plan investors), effective as of the close of the NYSE on June 14, 2013, and for employer-sponsored retirement plan investors, effective as of the close of the NYSE on August 15, 2013, the MidCap Fund is no longer available for purchases from new investors except in limited circumstances, such as the following:

•

Shareholders, including those in omnibus accounts, who owned shares of the MidCap Fund as of June 14, 2013 (for retail investors, i.e., non-employer sponsored retirement plan investors) or August 15, 2013 (for employer-sponsored retirement plan investors), may continue to make purchases, exchanges, and dividend or capital gains reinvestment in existing accounts.

•

Registered Investment Advisor (RIA) and bank trust firms that have an investment allocation to the MidCap Strategy (i.e., investments in the same strategy used in collective investment trust, separately managed accounts, individually managed accounts, or insurance separate accounts) in a fee-based, wrap, or advisory account, may continue to add new clients, purchase shares, and exchange into the MidCap Fund. The MidCap Fund will not be available to new RIA and bank trust firms.

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•

Shareholders through accounts at private banks may continue to purchase shares and exchange into the MidCap Fund. Private banks that have an investment allocation to the MidCap Strategy may add new clients to the MidCap Fund. The MidCap Fund will not be available to private bank or private bank platforms not already investing in the MidCap Strategy.

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Shareholders in broker/dealer wrap or fee-based programs that have an investment allocation to the MidCap Fund may continue to purchase shares and exchange into the MidCap Fund. Existing broker/dealer wrap or fee-based programs may add new participants.

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Shareholders in certain types of retirement plans (including 401(k)s, SEPs, SIMPLEs, 403(b)s, etc.) may continue to purchase shares and exchange into the MidCap Fund. New participants in these plans may elect to purchase shares of the MidCap Fund.

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Shareholders within brokerage accounts may continue to purchase shares of the MidCap Fund; however, new brokerage accounts will not be permitted to begin investing in the MidCap Fund after June 14, 2013.

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529 plans that include the MidCap Fund within their investment options may continue to purchase shares and exchange into the MidCap Fund.

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Investors who have a direct investment in the MidCap Strategy may, subject to the approval of the Distributor, purchase shares in the MidCap Fund.

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Shareholders that invest through accounts with Principal Securities, Inc.

At the sole discretion of the Distributor, the MidCap Fund may permit certain types of investors to open new accounts, impose further restrictions on purchases, or reject any purchase orders, all without prior notice.

Money Market Fund

The Money Market Fund qualifies as a retail money market fund; therefore, it uses amortized cost to value its portfolio securities, transacts at a $1.00 share price, and maintains a $1.00 stable NAV.

Natural Persons. As a retail money market fund, the Money Market Fund has adopted policies and procedures reasonably designed to limit all beneficial owners of the Fund to natural persons (whether investing directly or through an intermediary). A natural person is an individual human being with sole or shared voting and/or investment power over the investment. New sales or exchanges into the Money Market Fund by investors who do not meet the definition of a natural person (whether investing directly or through an intermediary) will not be allowed. If a non-natural person invests (whether directly or through an intermediary) in the Money Market Fund, the Money Market Fund will involuntarily redeem those investors. The Money Market Fund will provide 60-days advance notice prior to involuntarily redeeming shares owned by investors who do not meet the definition of a natural person (whether investing directly or through an intermediary).

Investment Company Purchasers

Each Fund is an investment company registered with the SEC under the 1940 Act. If a purchaser of Fund shares is also a registered investment company or a private fund relying on Section 3(c)(1) or Section 3(c)(7) of the 1940 Act, it may be limited by the 1940 Act in the amount of Fund shares it can purchase (i.e., Section 12(d)(1)(A)). Such purchaser must comply with such limitations or avail itself, if possible, of any applicable exemptions from such limitations (e.g., a registered investment company may rely on Rule 12d1-4 of the 1940 Act).

Minimum Investments

Classes A, C, and J Shares

Principal Funds has a minimum initial investment amount of $1,000 and a minimum subsequent investment amount of $100. Initial and subsequent investment minimums apply on a per-Fund basis for each Fund in which a shareholder invests.

Shareholders must meet the minimum initial investment amount of $1,000 unless an Automatic Investment Plan (“AIP”) is established. With an AIP, the minimum initial investment is $100. Accounts or automatic payroll deduction plans established with an AIP that do not meet the minimum initial investment must maintain subsequent automatic investments that total at least $1,200 annually.

Minimum initial and subsequent investments may be waived on accounts set up for: certain employee benefit plans; retirement plans qualified under Internal Revenue Code Section 401(a); payroll deduction plans submitting contributions in an electronic format devised and/or approved by the Fund; and purchases through an omnibus account with a broker-dealer, investment advisor, or other financial institution.

Institutional Class and Classes R-1, R-3, R-4, R-5, and R-6 Shares

There are no minimum initial or subsequent investment requirements for an investor who otherwise qualifies as an eligible purchaser.

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Payment

Classes A, C, and J Shares

Payments are to be made via personal or financial institution check (for example, a bank or cashier’s check), bank wire, direct deposit, or Automatic Investment Plan (“AIP”). No wires are accepted on days when the NYSE is closed or when the Federal Reserve is closed (because the bank that would receive your wire is closed). We consider your purchase of Fund shares by check to be your authorization to make an automated clearing house (“ACH”) debit entry to your account. We reserve the right to refuse any payment that we feel presents a fraud or money laundering risk. Examples of the types of payments we will not accept are cash, starter checks, money orders, travelers’ checks, credit card checks, and foreign checks.

The Funds may, in their discretion and under certain limited circumstances, accept securities as payment for Fund shares at the applicable net asset value (“‘NAV”). For federal income tax purposes, a purchase of shares with securities will be treated as a sale or exchange of such securities on which the investor will generally realize a taxable gain or loss. Each Fund will value securities used to purchase its shares using the same method the Registrant uses to value its portfolio securities as described in this Prospectus.

You may reinvest your redemption proceeds, dividend payment, or capital gain distribution without an initial sales charge or contingent deferred sales charge, in the same share class of any other Fund of Principal Funds within 90 days of the date of the redemption. To purchase the shares without a sales charge (initial or contingent deferred) as described in this section, the shareholder must notify Principal Funds at the time of reinvestment that the shareholder is reinvesting proceeds within 90 days of the date of redemption. The original redemption will be considered a sale for federal (and state) income tax purposes even if the proceeds are reinvested within 90 days. If a loss is realized on the sale, the reinvestment may be subject to the “wash sale” rules resulting in the postponement of the recognition of the loss for tax purposes.

Your Financial Professional can help you make a direct deposit from your paycheck (if your employer approves) or from a government allotment. Direct deposit allows you to deposit automatically all or part of your paycheck (or government allotment) to your Principal Funds account(s). You can request a Direct Deposit Authorization Form to give to your employer or the governmental agency (either of which may charge a fee for this service). Shares will be purchased on the day the ACH notification is received by the transfer agent’s bank. On days when the NYSE is closed, but the bank receiving the ACH notification is open, your purchase will be priced at the next calculated share price.

Your Financial Professional can help you establish an Automatic Investment Plan (“AIP”). You may make regular monthly investments with automatic deductions from your bank or other financial institution account. You select the day of the month the deduction is to be made (if none is selected, the investment will be made on the 15th of the month). If that date is a non-trading day, we will process the deduction on the next trading day. If the next trading day falls in the next month or year, we will process the deduction on the day before your selected day.

Institutional Class and Classes R-1, R-3, R-4, R-5, and R-6 Shares

Payments are generally to be made through your plan or intermediary. We reserve the right to refuse any payment that we feel presents a fraud or money laundering risk. Examples of the types of payments we will not accept are cash, starter checks, money orders, travelers’ checks, credit card checks, and foreign checks.

For Institutional Class shareholders investing through a retirement marketplace enabled by state legislation, please contact Principal Funds by calling 1-800-222-5852, between 7:00 a.m. and 7:00 p.m. Central Time on any day that the NYSE is open.

Automatic Conversion of Class C Shares

Effective April 19, 2021, Class C shares held for eight years after purchase will automatically convert to Class A shares of the same Fund. The automatic conversion will generally occur on the 22nd day of each month or, if the 22nd day is not a business day, on the next business day (each, a “Conversion Date”). If the eighth anniversary of a purchase of Class C shares falls on a Conversion Date, a shareholder’s Class C shares will be automatically converted on that date. If the eighth anniversary occurs between Conversion Dates, a shareholder’s Class C shares will be automatically converted on the next Conversion Date after such anniversary. Automatic conversions will be on the basis of the NAV per share, without the imposition of any sales charge (including a CDSC), fee, or other charge. Automatic conversions of Class C shares will constitute tax-free exchanges for federal income tax purposes.

Class C shares of a Fund acquired through a reinvestment of dividends and distributions will convert to Class A shares of the Fund on the Conversion Date pro rata with the converting Class C shares of that Fund that were not acquired through reinvestment of dividends and distributions.

Class C shares held through a financial intermediary in certain omnibus accounts may be converted by the financial intermediary once it is determined that the Class C shares have been held for the required period. It is the financial intermediary’s (and not the Fund’s) responsibility to maintain appropriate supporting records and to ensure that the

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shareholder is credited with the proper holding period, and it is the responsibility of the shareholder or their financial intermediary to determine that the shareholder is eligible for the conversion. Additionally, some intermediaries may have adopted different policies and procedures related to the conversion of Class C shares, including shorter schedules for conversion. Please consult with your financial intermediary if you have any questions.

Redemption of Fund Shares

Under normal circumstances, you may redeem shares of any class of the Funds at any time. There is no fee for any redemption. The Board has determined that it is not necessary to impose a fee upon the redemption of Fund shares because the Fund has adopted transfer restrictions as described in EXCHANGE OF FUND SHARES.

The shares you redeem will have the NAV per share that is next computed after the Fund receives and accepts your redemption order in proper and complete form. The amount you receive will be reduced by any applicable CDSC except as noted below; see CHOOSING A SHARE CLASS AND THE COSTS OF INVESTING—One-Time Fee—Contingent Deferred Sales Charge (“CDSC”)—CDSC Waiver. Your redemption proceeds will generally be sent on the next business day (a day when the NYSE is open for normal business) following the date on which your request is received and accepted in proper and complete form. Although you can redeem your shares at any time, if you purchased shares by check or ACH and subsequently request a redemption of those shares, your redemption proceeds will generally be delayed for seven calendar days after the purchase to allow a sufficient period of time to ensure your recent payment has been cleared by the relevant bank. To redeem shares purchased by check or ACH within the previous seven days, the Funds require redemption requests with respect to those shares to be submitted in writing or by telephone, unless you contact the Fund and make an alternate arrangement.

Under unusual circumstances, a Fund may suspend redemptions, or postpone payments for more than seven days, as permitted by federal securities law.

Under normal circumstances, the Funds expect to meet redemption requests through holdings of cash, the sale of investments held in cash equivalents, and/or by selling liquid index futures or other instruments used for cash management purposes. In situations in which such holdings are not sufficient to meet redemption requests, a Fund will typically borrow money through the Fund’s interfund lending facility or through a bank line-of-credit. No Fund can borrow under the bank line-of-credit while also a lender under the interfund lending facility. Funds may also choose to sell portfolio assets for the purpose of meeting such requests. Each Fund further reserves the right to distribute “in kind” securities from the Fund’s portfolio in lieu (in whole or in part) of cash under certain circumstances, including under stressed market conditions.

The agreement for the above-mentioned line of credit is with The Bank of New York Mellon.

Classes A, C, and J Shares

You will be charged a $10 wire fee if you have the sale proceeds wired to your bank. It may take additional business days for your financial institution to post this payment to your account at that financial institution. At your request, the check will be sent overnight (a $15 overnight fee will be deducted from your account unless other arrangements are made).

Distributions from IRA, SEP, SIMPLE, 403(b), and SAR-SEP accounts may be taken as:

•

lump sum of the entire interest in the account,

•

partial interest in the account, or

•

periodic payments of either a fixed amount or an amount based on certain life expectancy calculations.

Tax penalties may apply to distributions before the participant reaches age 59½.

Selling shares may create a gain or a loss for federal (and state) income tax purposes. You should maintain accurate records for use in preparing your income tax returns.

Generally, sales proceeds are:

•

payable to all owners on the account (as shown in the account registration) and

•

mailed to the address on the account (if not changed within the last 15 days) or sent by wire or ACH to previously authorized U.S. bank account (if not added or changed within the last 15 days).

For other payment arrangements, please call Principal Funds. You should also call Principal Funds for special instructions that may apply to sales from accounts:

•

when an owner has died;

•

for certain employee benefit plans; or

•

owned by corporations, partnerships, agents, or fiduciaries.

Except as described above, you may redeem shares of the Funds in any of the following ways:

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By Mail

To sell shares by mail, you must:

•

Send a letter or our distribution form, which is signed by an owner of the account,

•

Specify the account number, and

•

Specify the number of shares or the dollar amount to be sold.

If you send a letter rather than our distribution form, the letter must be in a form acceptable to the Fund.

By Telephone or Website, in amounts of $100,000 or less

To sell shares by telephone:

•

The request may be made by a shareholder or by the shareholder’s Financial Professional.

•

The combined amount requested from all funds to which the redemption request relates is $100,000 or less.

•

The address on the account must not have been changed within the last 15 days and telephone privileges must apply to the account from which the shares are being sold.

•

Wire or ACH to a previously authorized U.S. bank account that must not have been added or changed within the last 15 days.

•

If our phone lines are busy or our website is unavailable, you may need to send in a written sell order.

Telephone and/or Website redemption privileges are NOT available for all account types.

Class A shares of Money Market Fund: Sell shares by checkwriting

•

Checkwriting must be elected on initial application or by written request to Principal Funds. Such election continues in effect until the Fund receives written notice revoking or changing the election.

•

The Fund can only sell shares after your check making the Fund investment has cleared your bank.

•

Checks must be written for at least $250. The Fund reserves the right to increase the minimum check amount.

•

The rules of the bank on which the checks are drawn concerning checking accounts apply.

•

If the account does not have sufficient funds to cover the check, it is marked “Insufficient Funds” and returned (the Fund may revoke checkwriting on accounts on which “Insufficient Funds” checks are drawn).

•

Accounts may not be closed by withdrawal check (accounts continue to earn dividends until checks clear and the exact value of the account is not known until the check is received by the bank).

•

Checkwriting is available only for non-qualified accounts.

•

Neither the Fund, the bank, nor PGI shall incur any liability for honoring the checks, selling shares to pay checks, or for returning checks unpaid.

•

Checkwriting may be converted to a point-of-purchase debit from your account. This only applies if such service is available at the business with which you are doing business.

Institutional Class and Classes R-1, R-3, R-4, R-5, and R-6 Shares

You may redeem shares of the Funds in any of the following ways:

Through an Employer Sponsored Retirement Plan Administrator or Record-Keeper

If you own Fund shares in an eligible retirement or employee benefit plan, you must sell your shares through the plan’s administrator or record-keeper.

Through your Financial Professional

If your Fund shares are held for you in nominee form, you must sell those shares through your intermediary or dealer.

By Mail

To sell shares by mail, you must:

•

Send a letter or our distribution form, which is signed by an owner of the account,

•

Specify the account number, and

•

Specify the number of shares or the dollar amount to be sold.

If you send a letter rather than our distribution form, the letter must be in a form acceptable to the Fund.

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By Telephone

To sell shares by telephone:

•

Telephone privileges must apply to the account from which the shares are sold.

•

A shareholder or the shareholder’s Financial Professional may request to sell shares by telephone.

•

A maximum amount (listed below) of redemption requests will be permitted per day per account, as the combined amount from all funds, provided the proceeds are to be sent to a previously authorized U.S. bank account that must not have been added or changed within the last 15 days:

•

$10,000,000 for Institutional Class.

•

$500,000 for Classes R-1, R-3, R-4, R-5, and R-6.

•

A maximum of $500,000 of redemption requests will be permitted per day, as the combined amount from all funds, provided the proceeds are to be sent by check through the mail to the address on the account and such address must not have changed within the last 15 days.

•

If our telephone lines are busy, you may need to send in a written sell order.

Classes A, C, J, and Institutional Shares - Systematic Withdrawal Plans

You may set up a systematic withdrawal plan on a monthly, quarterly, semiannual, or annual basis to sell enough shares to provide a fixed amount of money ($100 minimum amount; the required minimum is waived to the extent necessary to meet the required minimum distribution as defined by the Internal Revenue Code).

You can set up a systematic withdrawal plan by:

•

completing the applicable section of the application,

•

sending us your written instructions,

•

completing a Systematic Withdrawal Plan Request form, or

•

calling us if you have telephone privileges on the account (telephone privileges may not be available for all types of accounts).

Your systematic withdrawal plan continues until:

•

you instruct us to stop or

•

your Fund account balance is zero.

When you set up the withdrawal plan, you select which day you want the sale made (if none is selected, the sale will be made on the 15th of the month). If the selected date is not a trading day, the sale will take place on the preceding trading day (if that day falls in the month or year before your selected date, the transaction will take place on the next trading day after your selected date). If telephone privileges apply to the account, you may change the date or amount by telephoning us. Sales made under your systematic withdrawal plan will reduce and may eventually exhaust your account. The Fund from which the systematic withdrawal is made makes no recommendation as to either the number of shares or the fixed amount that you withdraw.

Distributions in Kind

Payment for shares of the Funds tendered for redemption is ordinarily made by check. However, the Funds may determine that it would be detrimental to the remaining shareholders of a Fund to make payment of a redemption order wholly or partly in cash. Under certain circumstances, therefore, each of the Funds may pay the redemption proceeds in whole or in part by a distribution of “in kind” of securities from the Fund’s portfolio in lieu of cash. If a Fund pays the redemption proceeds in kind, the redeeming shareholder might incur brokerage or other costs in selling the securities for cash. In addition, the securities received will be subject to market risk until sold. Typically, such in kind redemptions would be distributed pro rata. Each Fund will value securities used to pay redemptions in kind using the same method the Registrant uses to value its portfolio securities as described in this Prospectus.

Money Market Fund

Liquidity Fees on Redemptions and Redemption Gates. As a retail money market fund, the Money Market Fund has adopted policies and procedures regarding the imposition of liquidity fees on redemptions and/or redemption gates in the event that its level of weekly liquid assets falls below a designated threshold, subject to the actions of the Money Market Fund’s Board. The imposition of liquidity fees or redemption gates affects checkwriting and exchanges into the Money Market Fund.

Imposition. If at any time, the Money Market Fund has invested less than 30% of its total assets in weekly liquid assets, the Money Market Fund’s Board, in its discretion, may impose liquidity fees of up to 2% of the value of the shares redeemed (discretionary liquidity fee) and/or suspend redemptions (redemption gate). The Board must determine that taking such action is in the best interests of the Money Market Fund. In addition, if at the end of a business day, the Money Market Fund has invested less than 10% of its total assets in weekly liquid assets, the Money Market Fund must impose a 1%

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liquidity fee on shareholder redemptions (default liquidity fee) unless the Money Market Fund’s Board determines that not doing so or imposing a lower or higher (not to exceed 2%) fee level is in the best interests of the Money Market Fund. The discretionary liquidity fee, redemption gate, or default liquidity fee will be applied to all shares for which redemption requests are submitted.

Duration. Discretionary Liquidity Fee. A discretionary liquidity fee will commence when the Board determines to impose it (as early as the same day the Board makes the determination) and will remain in place until the Board determines that imposing the discretionary liquidity fee is no longer in the best interests of the Money Market Fund. However, if at the end of a business day, the Money Market Fund’s level of weekly liquid assets equals or exceeds 30% of its total assets, the Money Market Fund must cease charging the discretionary liquidity fee, effective the beginning of the next business day.

Redemption Gate. A redemption gate will commence when the Board determines to impose it and will remain in place until the Board determines that imposing the redemption gate is no longer in the best interests of the Money Market Fund. However, the redemption gate must be lifted on the earlier of (1) the beginning of the next business day, following a business day that ended with the Money Market Fund’s level of weekly liquid assets equaling or exceeding 30% of its total assets or (2) the beginning of the next business day, following 10 business days after instituting the redemption gate (the Money Market Fund cannot impose a redemption gate for more than 10 business days in any rolling 90 calendar day period).

Default Liquidity Fee. Assuming the default liquidity fee goes into effect, such fee will commence at the beginning of the business day following the business day in which the Money Market Fund’s level of weekly liquid assets fell below 10% and will remain in place until the Board determines that imposing the default liquidity fee is no longer in the best interests of the Money Market Fund. However, if at the end of a business day, the Money Market Fund’s level of weekly liquid assets equals or exceeds 30% of its total assets, the Money Market Fund must cease charging the default liquidity fee, effective the beginning of the next business day.

Investor Communications. The Money Market Fund will communicate the imposition or lifting of a liquidity fee and/or redemption gate in various ways, including:

•

filing a prospectus supplement,

•

filing Form N-CR, and/or

•

posting information on its website.

Use of Fee Proceeds

The liquidity fees imposed by the Money Market Fund will be used to offset the costs of liquidity incurred by the Fund for redeeming shareholders and to protect the Fund’s NAV.

Tax Consequences to the Money Market Fund and Investors of the Fund’s Receipt of Liquidity Fees

It is currently anticipated that shareholders of money market funds that impose a liquidity fee may generally treat the fee on the redemption as offsetting the shareholder’s amount realized on the redemption (thereby decreasing the shareholder’s gain, or increasing the shareholder’s loss, on the redeemed amount). The fund anticipates using 100% of a liquidity fee to help repair a market-based net asset value per share that was below $1.00.

Liquidity fees are expected to be non-taxable to the Fund. A money market fund that uses amortized cost to maintain a stable share price of $1.00 may need to distribute to its remaining shareholders sufficient value to prevent the fund from breaking the buck on the upside (i.e., by rounding up to $1.01 in pricing its shares), if the imposition of liquidity fees causes the fund’s market-based net asset value to reach $1.0050. To the extent that the fund has sufficient earnings and profits to support the distribution, the additional dividends would be taxable as ordinary income to shareholders and would be eligible for deduction by the funds. Any distribution in excess of the fund’s earnings and profits is treated as a return of capital, which would reduce your cost basis in the fund shares.

Liquidation. If the Government Money Market Fund or Money Market Fund, at the end of a business day, has invested less than 10% of its total assets in weekly liquid assets or if the Government Money Market Fund’s or Money Market Fund’s price per share, rounded to the nearest one percent, has deviated from $1.00 or the Board determines that such deviation is likely to occur, the Board can irrevocably approve the liquidation of the Government Money Market Fund or Money Market Fund. The Money Market Fund does not have to impose liquidity fees or redemption gates prior to making the determination to liquidate.

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EXCHANGE OF FUND SHARES

An exchange between Funds is a redemption of shares of one Fund and a concurrent purchase of shares in another Fund with the redemption proceeds. All exchanges completed on the same day are considered a single exchange for purposes of the exchange limitations described below. To prevent excessive exchanges, and under other circumstances where the Board or PGI believes it is in the best interests of the Fund, the Fund reserves the right to revise or terminate this exchange privilege, limit the amount or further limit the number of exchanges, reject any exchange, or close an account.

Classes A, C, and J Shares

Your shares in the Funds (except Money Market) may be exchanged without a sales charge or CDSC for the same class of any other Principal Funds. However, the original purchase date of the shares from which an exchange is made is used to determine if newly acquired shares are subject to a CDSC when they are sold. The Fund reserves the right to revise or terminate the exchange privilege at any time.

You may exchange shares by:

•

sending a written request to Principal Funds,

•

using our website, or

•

calling us, if you have telephone privileges on the account.

Exchanges from Money Market Fund

Class A shares of Money Market Fund may be exchanged into:

•

Class A shares of other Funds.

•

If Money Market Fund shares were acquired by direct purchase, a sales charge will be imposed on the exchange into other Class A shares.

•

If Money Market Fund shares were acquired by (1) exchange from other Funds, (2) conversion of Class B shares, or (3) reinvestment of dividends earned on Class A shares that were acquired through exchange, no sales charge will be imposed on the exchange into other Class A shares.

•

Class C shares of other Funds - subject to the applicable CDSC.

Automatic Exchange Election

This election authorizes an exchange from one Fund of Principal Funds to another Fund of Principal Funds on a monthly, quarterly, semi-annual, or annual basis. You can set up an automatic exchange by:

•

completing the Automatic Exchange Election section of the application,

•

calling us if telephone privileges apply to the account from which the exchange is to be made,

•

sending us your written instructions, or

•

completing an Automatic Exchange Election form.

Your automatic exchange continues until:

•

you instruct us to stop (by calling us if telephone privileges apply to the account or sending us your written instructions) or

•

your Fund account balance of the account from which shares are redeemed is zero.

You may specify the day of the exchange (if none is selected, the exchange will be made on the 15th of the month). If the selected day is not a trading day, the sale will take place on the preceding trading day (if that day falls in the month or year before your selected date, the transaction will take place on the next trading day after your selected date). If telephone privileges apply to the account, you may change the date or amount by telephoning us.

General

•

An exchange by any joint owner is binding on all joint owners.

•

If you do not have an existing account in the Fund to which the exchange is being made, a new account is established. The new account has the same owner(s), dividend and capital gain options, and dealer of record as the account from which the shares are being exchanged.

•

All exchanges are subject to the minimum investment and eligibility requirements of the Fund being acquired.

•

You may acquire shares of a Fund only if its shares are legally offered in your state of residence.

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When money is exchanged or transferred from one account registration or tax identification number to another, the account holder is relinquishing his or her rights to the money. Therefore, exchanges and transfers can only be accepted by telephone if the exchange (transfer) is between:

•

accounts with identical ownership,

•

an account with a single owner to one with joint ownership if the owner of the single owner account is also an owner of the account with joint ownership,

•

a single owner to a Uniform Transfers to Minors Act (“UTMA”) account if the owner of the single owner account is also the custodian on the UTMA account, or

•

a single or jointly owned account to an IRA account to fund the yearly IRA contribution of the owner (or one of the owners in the case of a jointly owned account).

The exchange is treated as a sale of shares for federal (and state) income tax purposes and may result in a capital gain or loss.

Fund shares used to fund an employee benefit plan may be exchanged only for shares of other Funds available to the employee benefit plan. Such an exchange must be made by following the procedures provided in the employee benefit plan and the written service agreement.

Institutional Class and Classes R-1, R-3, R-4, R-5, and R-6 Shares

A shareholder, which may include a beneficial owner of shares held in nominee name or a participant in a participant-directed employee benefit plan, may exchange Fund shares under certain circumstances. In addition to any restrictions an intermediary (which may include, without limitation, an employee retirement plan or other employee benefit plan, plan administrator, plan record keeper, or managed account provider) imposes, Fund shares may be exchanged, without charge, for shares of the same share class of any other Fund of the Principal Funds, provided that:

•

the shareholder has not exchanged shares of the Fund within 30 days preceding the exchange, unless the shareholder is exchanging into the Money Market Fund,

•

the share class of such other Fund is available through the intermediary,

•

the share class of such other Fund is available in the shareholder’s state of residence, and

•

with respect to shares purchased through an intermediary that is willing and able to impose the 30-day exchange or repurchase restriction described below, the shareholder has not exchanged shares of the Fund within 30 days preceding the exchange, unless the shareholder is exchanging into the Money Market Fund.

With respect to shares purchased through an intermediary that is willing and able to impose a 30-day exchange or repurchase restriction, an order to purchase shares of any Fund, except shares of the Money Market Fund, will be rejected if the shareholder redeemed shares from that Fund within the preceding 30-day period. The 30-day exchange or purchase restriction does not apply to exchanges or purchases made on a scheduled basis such as scheduled periodic portfolio rebalancing transactions or to transactions by managers of funds of funds in shares of the underlying Funds.

If Fund shares are purchased through an intermediary that is unable or unwilling to impose the 30-day exchange or repurchase restriction described above, Fund management may waive this restriction based on:

•

exchange and repurchase limitations that the intermediary is able to impose if, in management’s judgment, such limitations are reasonably likely to prevent excessive trading in Fund shares; or

•

the implementation of other transaction monitoring management believes is reasonably likely to identify and prevent excessive trading in Fund shares.

The Funds' transfer agent employs transaction monitoring that management believes is reasonably likely to identify and prevent excessive trading in Fund shares. The 30-day exchange or repurchase restriction described above is not imposed with respect to shares held directly with the Funds' transfer agent. However, such shares may be purchased through an intermediary that imposes such an exchange or repurchase restriction.

Shares of the Government Money Market Fund are not available for exchanges.

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DIVIDENDS AND DISTRIBUTIONS

Dividends are based on estimates of income, expenses, and shareholder activity for the Fund. Actual income, expenses, and shareholder activity may differ from estimates; consequently, differences, if any, will be included in the calculation of subsequent dividends. Each Fund pays its net investment income to record date shareholders. The payment schedule is as follows:

Fund	Daily	Monthly	Quarterly (March, June, September, and December)	Yearly (in December)
California Municipal	X
Core Fixed Income	X
Core Plus Bond		X
Diversified Income		X
Diversified International				X
Equity Income			X
Finisterre Emerging Markets Total Return Bond		X
Global Emerging Markets				X
Global Real Estate Securities				X
Government & High Quality Bond	X
Government Money Market	X
High Income		X
High Yield	X
Inflation Protection				X
International I				X
LargeCap Growth I				X
LargeCap S&P 500 Index				X
LargeCap Value III				X
MidCap				X
MidCap Growth				X
MidCap Growth III				X
MidCap S&P 400 Index				X
MidCap Value I				X
Money Market	X
Overseas				X
Principal Capital Appreciation				X
Principal LifeTime 2010, 2015, 2020, 2025, 2030, 2035, 2040, 2045, 2050, 2055, 2060, 2065, 2070				X
Principal LifeTime Hybrid 2015, 2020, 2025, 2030, 2035, 2040, 2045, 2050, 2055, 2060, 2065, 2070				X
Principal LifeTime Hybrid Income				X
Principal LifeTime Strategic Income				X
Real Estate Securities			X
SAM Balanced			X
SAM Conservative Balanced			X
SAM Conservative Growth				X
SAM Flexible Income		X
SAM Strategic Growth				X
Short-Term Income	X
SmallCap				X
SmallCap Growth I				X
SmallCap S&P 600 Index				X
SmallCap Value II				X
Tax-Exempt Bond	X

For more details on the payment schedule, go to: www.principal.com/tax-center.

Daily dividend funds declare dividends of daily net investments income each day their shares are priced. Daily funds distribute their accumulated declared dividends monthly. You may ask to have your dividends paid to you in cash. If you do not request cash payment, your dividend will be applied to purchase additional shares of the Fund monthly.

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Net realized capital gains, if any, are distributed annually in December. Payments are made to shareholders of record on the business day before the payable date. Capital gains may be taxable at different rates, depending on the length of time that the Fund holds its assets.

The Government Money Market and Money Market Funds do not seek to realize any capital gains or losses. If capital gains or losses were to occur, they could result in an increase or decrease in dividends.

Dividend and capital gains distributions will be reinvested, without a sales charge, in shares of the Fund from which the distribution is paid; however, you may authorize (on your application or at a later time) the distribution to be:

•

invested in shares of another of the Principal Funds without a sales charge (distributions of a Fund may be directed only to one receiving Fund); or

•

paid in cash, if the amount is $10 or more.

Generally, for federal income tax purposes, Fund distributions are taxable as ordinary income, except that any distributions of long-term capital gains will be taxed as such, regardless of how long Fund shares have been held. Special tax rules apply to Fund distributions to Individual Retirement Accounts and other retirement plans. A tax advisor should be consulted to determine the suitability of the Fund as an investment by such a plan and the tax treatment of distributions by the Fund. A tax advisor can also provide information on the potential impact of possible foreign, state, and local taxes. A Fund’s investments in foreign securities may be subject to foreign withholding taxes. In that case, the Fund’s yield on those securities would be decreased.

To the extent that distributions the Fund pays are derived from a source other than net income (such as a return of capital), you will receive a notice disclosing the source of such distributions. Furthermore, such notice will be posted monthly on our website at www.principal.com/tax-center. You may request a copy of all such notices, free of charge, by telephoning 1-800-222-5852. The amounts and sources of distributions included in such notices are estimates only and you should not rely upon them for purposes of reporting income taxes. The Fund will send shareholders a Form 1099-DIV for the calendar year that will tell shareholders how to report these distributions for federal income tax purposes.

A Fund’s payment of income dividends and capital gains has the effect of reducing the share price by the amount of the payment. Distributions from a Fund, whether received in cash or reinvested in additional shares, may be subject to federal (and state) income tax. For these reasons, buying shares of a Fund shortly before it makes a distribution may be disadvantageous to you.

FREQUENT PURCHASES AND REDEMPTIONS

The Funds are not designed for, and do not knowingly accommodate, frequent purchases and redemptions of Fund shares. If you intend to trade frequently and/or use market timing investment strategies, you should not purchase these Funds.

Frequent purchases and redemptions pose a risk to the Funds because they may:

•

Disrupt the management of the Funds by:

•

forcing the Funds to hold short-term (liquid) assets rather than investing for long-term growth, which results in lost investment opportunities for the Funds; and

•

causing unplanned portfolio turnover;

•

Hurt the portfolio performance of the Funds; and

•

Increase expenses of the Funds due to:

•

increased broker-dealer commissions and

•

increased recordkeeping and related costs.

Certain Funds may be at greater risk of harm due to frequent purchases and redemptions. For example, those Funds that invest in foreign securities may appeal to investors attempting to take advantage of time-zone arbitrage. The Funds have adopted procedures to “fair value” foreign securities owned by the Funds each day to discourage these market timing transactions in shares of the Funds.

The Board has also adopted policies and procedures with respect to frequent purchases and redemptions of shares of the Funds. The Funds monitor shareholder trading activity to identify and take action against abuses. When we do identify abusive trading, we will apply our policies and procedures in a fair and uniform manner. While our policies and procedures are designed to identify and protect against abusive trading practices, there can be no certainty that we will identify and prevent abusive trading in all instances. If we are not able to identify such excessive trading practices, the Funds and their

402

shareholders may be harmed. The harm of undetected excessive trading in shares of the underlying funds in which the funds of funds invest could flow through to the funds of funds as they would for any fund shareholder. If we, or a Fund, deem abusive trading practices to be occurring, we will take action that may include, but is not limited to:

•

Rejecting exchange instructions from the shareholder or other person authorized by the shareholder to direct exchanges;

•

Restricting submission of exchange requests by, for example, allowing exchange requests to be submitted by 1st class U.S. mail only and disallowing requests made by facsimile, overnight courier, telephone, or via the internet;

•

Limiting the number of exchanges during a year; and

•

Taking such other action as directed by the Fund.

We expect the Government Money Market Fund to be used by shareholders for short-term investing and by certain selected accounts utilizing the Fund as a sweep vehicle. Therefore, reasonably frequent purchases and redemptions of Fund shares by shareholders do not present risks for other shareholders of the Fund, and the policies and procedures adopted by the Board of the Fund as applicable to other Funds are generally not applicable with respect to frequent purchases and redemptions of Fund shares.

The Funds have reserved the right to accept or reject, without prior written notice, any exchange requests. In some instances, an exchange may be completed before a determination of abusive trading. In those instances, we will reverse the exchange and return the account holdings to the positions held before the exchange. We will give the shareholder written notice in this instance.

Institutional Class and Classes R-1, R-3, R-4, R-5, and R-6 Shares

In addition to taking any of the foregoing actions, if we, or a Fund, deem abusive trading practices to be occurring, we may require a holding period of a minimum of 30 days before permitting exchanges among the Funds where there is evidence of at least one round-trip exchange (exchange or redemption of shares that were purchased within 30 days of the exchange/redemption).

The Funds have adopted an exchange frequency restriction for these classes, described above in “Exchange of Fund Shares” to limit excessive trading in fund shares.

TAX CONSIDERATIONS

It is a policy of each Fund to make distributions of substantially all of its respective investment income and any net realized capital gains. Shareholders are responsible for federal income tax (and any other taxes, including state and local income taxes, if applicable) on dividends and capital gains distributions whether such dividends or distributions are paid in cash or are reinvested in additional shares. Special tax rules apply to distributions from IRAs and other retirement accounts. You should consult a tax advisor to determine the suitability of the Fund as an investment by such a plan and the tax treatment of Fund distributions.

Generally, dividends paid by the Funds from interest, dividends, or net short-term capital gains will be taxed as ordinary income. Distributions properly designated by the Fund as deriving from net gains on securities held for more than one year are taxable as such (generally at a 15% tax rate for individuals and taxable trusts, some individuals and taxable trusts will be subject to a 20% tax rate), regardless of how long you have held your shares. Distributions of investment income properly designated by the Fund as derived from “qualified dividend income” will be taxed at the rates applicable to long-term capital gains. Some high-income individuals and taxable trusts will be subject to a Medicare 3.8% tax on unearned net investment income.

A return of capital is a non-dividend distribution that is not paid out of the earnings and profits of the Fund. A return of capital distribution is generally not taxed until your investment in the Fund has been recovered. A return of capital reduces your cost basis in the Fund, which may increase your tax liability upon the sale of your Fund shares or upon subsequent distributions in respect of your investment in the Fund.

Because of tax law requirements, you must provide the Fund with an accurate and certified taxpayer identification number (for individuals, generally a Social Security number) to avoid “back-up” withholding, which is imposed at a rate of 24%. The Fund is required, in certain cases, to withhold and remit to the U.S. Treasury 24% of ordinary income dividends and capital gain dividends, and the proceeds of redemption of shares, paid to any shareholder who has provided either an incorrect tax identification number or no number at all, who is subject to backup withholding by the Internal Revenue Service for failure to report the receipt of interest or dividend income properly, or who has failed to certify to the Fund that it is not subject to backup withholding or that it is a corporation or other “exempt recipient.”

A shareholder recognizes gain or loss on the sale or redemption of shares of the Fund in an amount equal to the difference between the proceeds of the sales or redemption and the shareholder’s adjusted tax basis in the shares. All or a portion of any loss so recognized may be disallowed if the shareholder purchases other shares of the Fund within 30 days before

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or after the sale or redemption. In general, any gain or loss arising from (or treated as arising from) the sale or redemption of shares of the Fund is considered capital gain or loss (long-term capital gain or loss if the shares were held for longer than one year). However, any capital loss arising from the sales or redemption of shares held for six months or less is disallowed to the extent of the amount of exempt-interest dividends received on such shares and (to the extent not disallowed) is treated as a long-term capital loss to the extent of the amount of capital gain dividends received on such shares. Capital losses in any year are deductible only to the extent of capital gains plus, in the case of a noncorporate taxpayer, $3,000 of ordinary income under current rules.

If a shareholder incurs a sales charge in acquiring shares of the Fund, disposes of such shares less than 91 days after they are acquired, and subsequently acquires shares of the Fund or another fund at a reduced sales charge pursuant to a right to reinvest at such reduced sales charge acquired in connection with the acquisition of the shares disposed of, then the sales charge on the shares disposed of (to the extent of the reduction in the sales charge on the shares subsequently acquired) shall not be taken into account in determining gain or loss on the shares disposed of but shall be treated as incurred on the acquisition of the shares subsequently acquired.

Any gain resulting from the redemption or exchange of your shares will generally also be subject to tax. For shares acquired after January 1, 2012, you will need to select a cost basis method to be used to calculate your reported gains and losses prior to or at the time of any redemption or exchange. If you do not select a method, the Funds' default method of average cost will be applied to the transactions. The cost basis method used on your account could significantly affect your taxes due and should be carefully considered. You should consult your tax advisor for more information on your own tax situation, including possible foreign, state, and local taxes.

Investments by a Fund in certain debt instruments or derivatives may cause the Fund to recognize taxable income in excess of the cash generated by such instruments. As a result, the Fund could be required at times to liquidate other investments to satisfy its distribution requirements under the Internal Revenue Code. The Fund’s use of derivatives will also affect the amount, timing, and character of the Fund’s distributions.

Under U.S. Treasury Regulations, non-corporate Fund shareholders meeting certain holding period requirements may be able to deduct up to 20% of qualified REIT dividends passed through and reported to them by the Fund. The 20% deduction applies to qualified REIT dividends distributed during 2018-2025 tax years.

Early in each calendar year, each Fund will notify you of the amount and tax status of distributions paid to you for the preceding year.

A dividend or distribution made shortly after the purchase of shares of a Fund by a shareholder, although in effect a return of capital to that shareholder, would be taxable to that shareholder as described above, subject to a holding period requirement for dividends designated as qualified dividend income.

The information contained in this Prospectus is not a complete description of the federal, state, local, or foreign tax consequences of investing in the Funds. You should consult your tax advisor before investing in the Funds.

Funds Investing in Securities Generating Tax-Exempt Income

Distributions designated as “exempt-interest dividends” by a Fund investing in securities generating tax-exempt income are generally not subject to federal income tax. However, if you receive Social Security or railroad retirement benefits, you should consult your tax advisor to determine what effect, if any, an investment in such Funds may have on the federal taxation of your benefits. Some Funds may invest in “AMT-subject bonds,” which are municipal obligations issued to finance certain “private activities,” such as bonds used to finance airports, housing projects, student loan programs, and water and sewer projects. Interest on AMT-subject bonds is an item of tax preference for purposes of the federal individual alternative minimum tax (“AMT”). A portion of such Funds' distributions may, therefore, be subject to federal income taxes or to the federal individual alternative minimum tax. Some Funds may invest a portion of their assets in securities that generate income that is not exempt from federal (or state and local) income tax. Income exempt from federal tax may be subject to state and local income tax. In addition, any capital gains distributed by such Funds will be taxable as described in this section. A portion of the dividends paid by such Funds may be exempt from California State personal income tax, but not from California State franchise tax or California State corporate income tax. Corporate taxpayers should consult their tax advisor concerning the California state tax treatment of investments in such Funds.

Choosing a Share Class and the Costs of Investing

Before you invest, you should understand the characteristics of each share class so you can be sure to choose the class that is right for you. Fund and share class selections must be made at the time of purchase.

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Classes differ regarding the costs associated with buying, redeeming, and holding shares. Which class is best for you depends upon:

•

the dollar amount you are investing,

•

the amount of time you plan to hold the investment,

•

any plans to make additional investments in the Principal Funds, and

•

eligibility to purchase the class.

The following sections describe the fees and expenses you may pay if you invest in a Fund. You may pay both one-time fees and ongoing fees. Fees and expenses are important because they lower your earnings. Before investing, you should be sure you understand the nature of different costs. Your Financial Professional can help you with this process and can help you choose the share class and Fund or Funds that are appropriate for you based upon your investment objective, risk tolerance, and other factors. Financial Professionals may receive different compensation depending upon which class of shares you purchase.

Fees and Expenses of the Funds

Classes A, C, and J Shares

These share classes may include a front-end sales charge and/or contingent deferred sales charge. There is no sales charge on shares of the Funds purchased with reinvested dividends or other distributions. You may obtain more information about sales charge reductions and waivers from your Financial Professional.

In some cases, the initial sales charge or contingent deferred sales charge may be waived or reduced. Appendix B to this Prospectus, titled “Intermediary-Specific Sales Charge Waivers and Reductions,” contains information about intermediary-specific sales charge waivers and reductions that will be available if you purchase Fund shares through those intermediaries. The Prospectus discusses the initial sales charge or contingent deferred sales charge waivers or reductions that will be available if you purchase Fund shares directly from the Fund or through another intermediary not listed on Appendix B.

In all instances, to receive a waiver or reduction in the initial sales charge or contingent deferred sales charge, you or your Financial Professional must let the Fund know at the time you purchase or redeem shares that you qualify for such a waiver or reduction. It may be necessary for you to provide information and records, such as account statements, to determine your eligibility. If you or your Financial Professional do not let the Fund know that you are eligible for a waiver or reduction, you may not receive a sales charge discount to which you are otherwise entitled.

Class C Shares

Class C shares may not be suitable for large investments. Due to the higher expenses associated with Class C shares, it may be more advantageous for investors currently purchasing, intending to purchase, or with existing assets in amounts that may qualify for a reduced sales charge on Class A shares, including through Rights of Accumulation and/or Statement of Intent, to purchase Class A shares. Class C shares have higher annual expenses than Class A shares because they are subject to higher distribution fees.

The Fund seeks to prevent investments in Class C shares by shareholders with at least $1 million of investments in Principal Funds eligible for inclusion pursuant to Rights of Accumulation. If you are making an initial purchase of Principal Funds of $1,000,000 or more and have selected Class C shares, the purchase will be of Class A shares of the Fund(s) you have selected. If you are making subsequent purchases into your existing Principal Funds Class C share accounts and the combined value of the subsequent investment and your existing Classes A, C, and J share accounts combined for Rights of Accumulation purposes exceeds $1,000,000, the subsequent investment will be applied to purchase Class A shares of the Fund(s) you have selected.

Institutional Class and Classes R-1, R-3, R-4, R-5, and R-6 Shares

Fund shares are sold without a front-end sales charge and do not have a contingent deferred sales charge. There is no sales charge on Fund shares purchased with reinvested dividends or other distributions.

However, if you purchase Institutional Class or Class R-6 shares through certain programs offered by certain financial intermediaries, you may be required to pay a commission and/or other forms of compensation to the broker, or to your Financial Professional or other financial intermediary. Shares of each Fund are usually available in other share classes that have different fees and expenses.

One-Time Fee - Initial Sales Charge

Class A Shares

The offering price for Class A shares is the NAV next calculated after receipt of an investor’s order in proper form by the Fund or its servicing agent, plus any applicable initial sales charge as shown in the table below. The right-hand column in the table indicates what portion of the sales charge is paid to Financial Professionals and their brokerage firms (“dealers”) for selling Class A shares.

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Note:

Because of rounding in the calculation of the offering price, the actual maximum front-end sales charge paid by an investor may be higher or lower than the percentages noted.

For more information regarding compensation paid to dealers, see “Distribution Plans and Intermediary Compensation.”

Fund(s):

California Municipal, Tax-Exempt Bond

	Class A Sales Charge as % of:		Dealer Allowance as % of Offering Price
Amount of Purchase	Offering Price	Amount Invested	Dealer Allowance as % of Offering Price
Less than $100,000	3.75%	3.90%	3.00%
$100,000 but less than $250,000	2.75%	2.83%	2.25%
$250,000 or more	0.00%	0.00%	0.00%*

The Distributor may pay authorized dealers commissions on purchases of Class A shares over $250,000 calculated as follows: 1.00% on purchases between $250,000 and $4,999,999, 0.75% on purchases between $5 million and $9,999,999, 0.50% on purchases between $10 million and 49,999,999, and 0.25% on purchases of $50 million or more. The commission rate is determined based on the cumulative investments over the life of the account combined with the investments in existing Classes A, C, and J shares.

Fund(s):

Core Fixed Income, Government & High Quality Bond

	Class A Sales Charge as % of:		Dealer Allowance as % of Offering Price
Amount of Purchase	Offering Price	Amount Invested	Dealer Allowance as % of Offering Price
Less than $100,000	2.25%	2.30%	2.00%
$100,000 but less than $250,000	1.75%	1.78%	1.50%
$250,000 but less than $500,000	1.25%	1.27%	1.00%
$500,000 or more	0.00%	0.00%	0.00%*

The Distributor may pay authorized dealers commissions on purchases of Class A shares over $500,000 calculated as follows: 1.00% on purchases between $500,000 and $4,999,999, 0.50% on purchases between $5 million and $49,999,999, and 0.25% on purchases of $50 million or more. The commission rate is determined based on the cumulative investments over the life of the account combined with the investments in existing Classes A, C, and J shares.

Fund(s)/Portfolio(s):

Core Plus Bond, Diversified Income, High Yield, Principal LifeTime 2010, Principal LifeTime 2020, Principal LifeTime 2030, Principal LifeTime Strategic Income, SAM Flexible Income

	Class A Sales Charge as % of:		Dealer Allowance of Offering Price
Amount of Purchase	Offering Price	Amount Invested	Dealer Allowance of Offering Price
Less than $100,000	3.75%	3.90%	3.00%
$100,000 but less than $250,000	2.75%	2.83%	2.25%
$250,000 but less than $500,000	1.50%	1.52%	1.00%
$500,000 or more	0.00%	0.00%	0.00%*

Fund(s):

Short-Term Income

	Class A Sales Charge as % of:		Dealer Allowance as % of Offering Price
Amount of Purchase	Offering Price	Amount Invested	Dealer Allowance as % of Offering Price
Less than $100,000	2.25%	2.30%	2.00%
$100,000 but less than $250,000	1.75%	1.78%	1.50%
$250,000 or more	0.00%	0.00%	0.00%*

The Distributor may pay authorized dealers commissions on purchases of Class A shares over $250,000 calculated as follows: 1.00% on purchases between $250,000 and $4,999,999, 0.50% on purchases between $5 million and 49,999,999, and 0.25% on purchases of $50 million or more. The commission rate is determined based on the cumulative investments over the life of the account combined with the investments in existing Classes A, C, and J shares.

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Fund(s):

LargeCap S&P 500 Index

	Class A Sales Charge as % of:		Dealer Allowance as % of Offering Price
Amount of Purchase	Offering Price	Amount Invested	Dealer Allowance as % of Offering Price
Less than $50,000	1.50%	1.52%	1.25%
$50,000 but less than $100,000	1.25%	1.27%	1.00%
$100,000 but less than $250,000	1.00%	1.01%	0.75%
$250,000 but less than $500,000	0.75%	0.76%	0.50%
$500,000 but less than $1,000,000	0.50%	0.50%	0.25%
$1,000,000 or more	0.00%	0.00%	0.25%

All other Funds/Portfolios (except Money Market Fund, for which there is no Class A sales charge)

	Class A Sales Charge as % of:		Dealer Allowance as % of Offering Price
Amount of Purchase	Offering Price	Amount Invested	Dealer Allowance as % of Offering Price
Less than $50,000	5.50%	5.82%	4.75%
$50,000 but less than $100,000	4.75%	4.99%	4.00%
$100,000 but less than $250,000	3.75%	3.90%	3.00%
$250,000 but less than $500,000	3.00%	3.09%	2.50%
$500,000 but less than $1,000,000	2.00%	2.04%	1.75%
$1,000,000 or more	0.00%	0.00%	0.00%*

The Distributor may pay authorized dealers commissions on purchases of Class A shares over $1 million calculated as follows: 1.00% on purchases between $1,000,000 and $4,999,999, 0.50% on purchases between $5 million and $49,999,999, and 0.25% on purchases of $50 million or more. The commission rate is determined based on the cumulative investments over the life of the account combined with the investments in existing Classes A, C, and J shares.

Initial Sales Charge Waiver or Reduction

Class A shares of the Funds may be purchased without a sales charge or at a reduced sales charge. The availability of certain sales charge waivers and reductions will depend on whether you purchase your shares directly from the Fund or through a financial intermediary. Intermediaries may have different policies and procedures regarding the availability of initial (front-end) sales charge waivers or reductions. Such intermediary-specific sales charge variations are described in Appendix B to this prospectus, titled “Intermediary-Specific Sales Charge Waivers and Reductions.” If you purchase Fund shares through an intermediary listed on Appendix B, you will be eligible to the receive only the intermediary’s applicable waivers and reductions described on Appendix B. If you purchase Fund shares directly from the Fund or through an intermediary not listed on Appendix B, you will be eligible to receive only the following initial sales charge waivers and reductions. In all instances, it is your responsibility to notify the Fund or your financial intermediary at the time of purchase of any relationship or other facts qualifying you for sales charge waivers or reductions.

Initial Sales Charge Waiver - For Purchases of Fund Shares From the Fund or Through Intermediaries Not Listed on Appendix B

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No initial sales charge will apply to purchases of Fund shares if the purchase is of sufficient size as disclosed in the preceding “Class A Sales Charges” table.

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You may reinvest the Funds' Class A share redemption proceeds without a sales charge within 90 days of the redemption, if you previously paid a sales charge. Shares invested directly within the Class A Money Market Fund are not eligible for this waiver; however, shares in the Money Market Fund that were obtained by exchange of another Fund that imposed an initial sales charge are eligible.

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A Fund’s Class A shares may be purchased without an initial sales charge by the following individuals, groups, and/or entities:

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current and former Directors of Principal Funds, member companies of Principal®, and their active or retired employees, officers, directors, brokers, or agents (for the life of the account). This also includes their immediate family members (spouse, domestic partner, children (regardless of age and including in-laws), and parents, including in-laws) and trusts created by or primarily for the benefit of these individuals;

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any employee or registered representative (and their immediate family members and employees) of an authorized broker-dealer or company that makes available shares of a Fund;

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clients investing in Class A shares through a “wrap account” or investment product offered through broker-dealers, registered investment advisors, and other financial institutions under which clients may pay a fee to the broker-dealer, registered investment advisor, or financial institution;

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•

any investor who buys Class A shares through an omnibus account held by financial intermediaries, such as a bank, broker-dealer, or other financial institution, and that does not accept or charge the initial sales charge;

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financial intermediaries who offer shares to self-directed investment brokerage accounts;

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retirement plans or benefit plans, or participants in such plans, where the plan’s investments in the Fund are part of an omnibus account. For clarification, such plans do not include individual retirement arrangements under IRC Section 408, such as Simplified Employee Pensions (SEP), SIMPLE IRAs or other IRAs; and

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shareholders who acquired Class A shares of Principal Capital Appreciation Fund through that fund's acquisition of Class J shares of the LargeCap Blend Fund II.

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The following two bullet points are only applicable to intermediaries that are affiliated with Principal Financial Group, Inc. A Fund’s Class A shares may be purchased without an initial sales charge by the following individuals, groups, and/or entities:

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Premier Credit Union when the shares are owned directly with Principal Funds; and

•

non-ERISA clients of Principal Global Investors LLC.

Initial Sales Charge Reduction - For Purchases of Fund Shares From the Fund or Through Intermediaries Not Listed on Appendix B

(1)

Rights of Accumulation. The sales charge varies with the size of your purchase. Purchases made by (i) you, your spouse or domestic partner, your children (including children of your spouse or domestic partner) age 25 or under, and/or a trust created by or primarily for the benefit of such persons (together “a Qualified Purchaser”) will be combined along with the value of existing Classes A, C, and J shares of Principal Funds owned by such persons, plus (ii) the value of holdings by you or an immediate family member which includes your spouse, domestic partner, parent, legal guardian, child, sibling, stepchild, and father- or mother-in law of Classes A, C, and R Units of the Scholar’s Edge 529 Plan, to determine the applicable sales charge. Class A shares of the Money Market Fund are not included in the calculation unless they were acquired in exchange from other Principal Fund shares. If the total amount being invested in the Principal Funds is near a sales charge breakpoint, you should consider increasing the amount invested to take advantage of a lower sales charge.

(2)

Statement of Intent (SOI). Qualified Purchasers may obtain reduced sales charges by signing an SOI. The SOI is a nonbinding obligation on the Qualified Purchaser to purchase the full amount indicated in the SOI. Purchases made by you, your spouse or domestic partner, or the children of you, your spouse or domestic partner up to and including the age of 25 and/or a trust created by or primarily for the benefit of such persons (together “a Qualified Purchaser”) will be combined along with the value of existing Classes A, C, and J shares of Principal Funds owned by such persons. Purchases of Class A shares of Money Market Fund are not included. The sales charge is based on the total amount to be invested in a 13-month period. If the intended investment is not made (or shares are sold during the 13-month period), sufficient shares will be sold to pay the additional sales charge due. If a shareholder who signs an SOI dies within the 13-month period, no additional front-end sales charge will be required and the SOI will be considered met. An SOI is not available for 401(a) plan purchases.

(3)

The maximum sales charge that applies to purchases of Class A shares by qualified plans administered by Expertplan, Inc. that were previously converted from B share plans is the sales charge that applies to purchases of at least $250,000 but less than $500,000 as described in the sales charge tables; the regular sales charge applies to purchases of $500,000 or more in such accounts and to all purchases of the Diversified Income Fund, LargeCap S&P 500 Index Fund, and Short-Term Income Fund shares.

(4)

The maximum sales charge for all purchases made in an account that is included in a SIMPLE IRA, SEP, SAR-SEP, non-qualified deferred compensation, or payroll deduction plan established before March 1, 2002 with Principal Management Corporation as the Funds' transfer agent, is the sales charge that applies to purchases of at least $100,000 but less than $250,000 as described in the sales charge tables; the regular sales charge applies to purchases of $250,000 or more in such accounts and to all purchases of the Diversified Income Fund, LargeCap S&P 500 Index Fund, and Short-Term Income Fund shares. The reduced sales charge applies to purchases made by or on behalf of participants to such plans who became participants on or before July 28, 2007.

Class C Shares

Purchases of Class C shares are not subject to a front-end sales load. The offering price for Class C shares is the NAV next calculated after receipt of an investor’s order in proper form by the Fund or its servicing agent, with no initial sales charge. The Distributor currently pays authorized dealers commissions of up to 1.00% of the amount invested in Class C shares.

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Institutional Class and Classes J, R-1, R-3, R-4, R-5, and R-6 Shares

Purchases of these classes of shares are not subject to a front-end sales load. The offering price for such shares is the NAV next calculated after receipt of an investor’s order in proper form by the Fund or its servicing agent, with no initial sales charge.

One-Time Fee - Contingent Deferred Sales Charge (“CDSC”)

If you sell (redeem) shares and the CDSC is imposed, it will reduce the amount of sales proceeds.

The CDSC is based on the lesser of the market value at the time of redemption or the initial purchase price of the shares sold. The CDSC does not apply to shares purchased with reinvested dividends or other distributions. The CDSC is not charged on exchanges. However, the original purchase date of the shares from which an exchange is made determines if the newly acquired shares are subject to the CDSC when they are sold.

If you sell some but not all of the shares in your account, the shares not subject to a CDSC will be sold first. Other shares will be sold in the order purchased (first in, first out). The CDSC does not apply to shares redeemed according to a systematic withdrawal plan limited to no more than 1.00% per month (measured cumulatively for non-monthly plans) of the value of the Fund account at the time, and beginning on the date, the systematic withdrawal plan is established.

Class A Shares

Class A shares purchased in amounts that are of sufficient size to qualify for a 0.00% sales charge, as disclosed in the “Class A Sales Charges” table, are generally subject to a CDSC of 1.00% (0.25% for the LargeCap S&P 500 Index Fund) if the shares are redeemed during the first 18 months after purchase (12 months after purchase for the California Municipal, Short-Term Income, and Tax-Exempt Bond Funds), unless the dealer, at its discretion, has waived the commission. The Distributor may pay authorized dealers commissions up to 1.00% of the price of such purchases.

There is no CDSC on Class A shares of the Money Market Fund that are directly purchased by the shareholder. However, for Class A Money Market Fund shares that are obtained through an exchange of shares from another Fund, the CDSC originally applicable to the purchase of such Fund’s shares will continue to apply.

The CDSC generally will not be imposed on redemptions of shares purchased through an omnibus account with certain financial intermediaries, such as a bank or other financial institution, where no sales charge payments were advanced for purchases made through these entities.

Class C Shares

Each initial and subsequent purchase of Class C shares is subject to a CDSC of 1.00% for a period of 12 months from the date of purchase. Shares will be redeemed first from shares purchased through reinvested dividends and capital gain distributions, which are not subject to the CDSC, and then in order of purchase. Within 90 days after the sale of Class C shares, you may reinvest any amount of the sale proceeds in Class C shares and those shares purchased will not be subject to the 12-month CDSC.

Class J Shares

If you sell your Class J shares within 18 months of purchase, a CDSC may be imposed on the shares sold. The CDSC, if any, is determined by multiplying by 1.00% the lesser of the market value at the time of redemption or the initial purchase price of the shares sold. Within 90 days after the sale of Class J shares, you may reinvest the amount of the sale proceeds into any Principal Funds Class J shares Fund; shares purchased by redemption proceeds are not subject to the eighteen-month CDSC.

Institutional Class and Classes R-1, R-3, R-4, R-5, and R-6 Shares

These share classes are not subject to a CDSC.

CDSC Waiver

The CDSC may be waived on Classes A, C, and J shares of the Funds; waivers vary depending on how shares are purchased. Certain waivers and reductions apply when shares are purchased directly from the Fund; others apply when shares are purchased through an intermediary. Intermediaries may have different policies and procedures regarding the availability of waivers or reductions of the CDSC. Such intermediary-specific sales charge variations are described in Appendix B to this Prospectus, titled “Intermediary-Specific Sales Charge Waivers and Reductions.” If you purchase Fund shares through an intermediary listed on Appendix B, you will be eligible to the receive only the intermediary’s applicable waivers and reductions described on Appendix B. If you purchase Fund shares directly from the Fund or through an intermediary not listed on Appendix B, you will be eligible to receive only the following CDSC waivers and reductions. In all instances, it is your responsibility to notify the Fund or your financial intermediary at the time of redemption of any facts qualifying you for sales charge waivers or reductions.

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CDSC Waiver - For Purchases of Fund Shares From the Fund or Through Intermediaries Not Listed on Appendix B

For Classes A, C, and J shares, the CDSC is waived on shares:

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redeemed within 90 days after an account is re-registered due to a shareholder’s death;

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redeemed to pay surrender fees;

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redeemed to pay retirement plan fees;

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redeemed involuntarily from accounts with small balances;

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redeemed due to the shareholder’s disability (as defined by the Internal Revenue Code) provided the shares were purchased before the disability;

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redeemed from retirement plans to satisfy minimum distribution rules under the Internal Revenue Code;

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redeemed from a retirement plan to assure the plan complies with the Internal Revenue Code;

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redeemed from retirement plans qualified under Section 401(a) of the Internal Revenue Code due to the plan participant’s death, disability, retirement, or separation from service after attaining age 55;

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redeemed from retirement plans to satisfy excess contribution rules under the Internal Revenue Code; or

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redeemed using a systematic withdrawal plan (up to 1% per month (measured cumulatively with respect to non-monthly plans) of the value of the fund account at the time, and beginning on the date, the systematic withdrawal plan begins). (The free withdrawal privilege not used in a calendar year is not added to the free withdrawal privileges for any following year.)

For Class J shares, the CDSC also is waived on shares:

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redeemed that were purchased pursuant to the Small Amount Force Out program (SAFO); or

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of the Money Market Fund redeemed within 30 days of the initial purchase if the redemption proceeds are transferred to another Principal IRA, defined as either a fixed or variable annuity issued by Principal Life Insurance Company to fund an IRA, a Principal Bank IRA product, or a WRAP account IRA sponsored by Principal Securities, Inc.

Ongoing Fees

The ongoing fees are the operating expenses of a Fund, which are described in the “Annual Fund Operating Expenses” table included in the Summary for each Fund. These expenses reduce the value of each share you own. Because they are ongoing, they increase the cost of investing in the Funds.

Each fund of funds, as a shareholder in the underlying funds, bears its pro rata share of the operating expenses incurred by each underlying fund. The investment return of each fund of funds is net of the underlying funds’ operating expenses.

Each Fund pays ongoing fees to PGI and others who provide services to the Fund. These fees include:

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Management Fee (all Classes) — Through the Management Agreement with the Registrant, PGI has agreed to provide investment advisory services and corporate administrative services to the Funds.

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Distribution Fee (Classes A, C, J, R-1, R-3, and R-4) — Each Fund has adopted a distribution plan under Rule 12b-1 of the 1940 Act for the foregoing classes, with the exception of the Money Market Fund, Class A. Under the plan, these classes of each Fund pay a distribution fee based on the average daily NAV of the Fund. These fees pay distribution and other expenses for the sale of Fund shares and for services provided to shareholders. Because they are ongoing fees, over time, these fees may exceed other types of sales charges.

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Other Expenses (all Classes) — A portion of expenses that are allocated to all classes of the Funds. Other expenses include interest expense, expenses related to fund investments, and index licensing fees. Additional examples of other expenses include:

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Transfer Agent Fee (all Classes) — Principal Shareholder Services, Inc. (“PSS”) has entered into a Transfer Agency Agreement with the Registrant under which PSS provides transfer agent services to these classes. For Class J shares, these services are currently provided at a rate that includes a profit; for Classes A, C, and Institutional Class shares, these services are currently provided at cost. The Fund does not pay for these services for Classes R-1, R-3, R-4, R-5, and R-6 shares.

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Certain Operating Expenses (Institutional Class and Classes A, C, J, and R-6) — Expenses of registering and qualifying shares for sale, the cost of producing and distributing reports and prospectuses to shareholders of these classes, the cost of shareholder meetings held solely for shareholders of these classes, and other operating expenses of the Fund.

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Service Fee (Classes R-1, R-3, R-4, and R-5) — PGI has entered into a Service Agreement with the Registrant under which PGI is required to provide certain personal services to shareholders (plan sponsors) and beneficial owners (plan members), such as responding to plan sponsor and plan member inquiries.

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Administrative Services Fee (Classes R-1, R-3, R-4, and R-5) — PGI has entered into an Administrative Services Agreement with the Registrant under which PGI is required to provide shareholder and administrative services for retirement plans and other beneficial owners of Fund shares.

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Acquired Fund Fees and Expenses (all Classes) — Fees and expenses charged by other investment companies in which a Fund invests a portion of its assets.

DISTRIBUTION PLANS AND INTERMEDIARY COMPENSATION

Distribution and/or Service (12b-1) Fees

Principal Funds Distributor, Inc. (“PFD” or the “Distributor”) is the distributor for the shares of Principal Funds, Inc. PFD is an affiliate of Principal Life Insurance Company, a subsidiary of Principal Financial Group, Inc., and a member of Principal®.

The Funds have adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act (the “12b-1 Plan”) for each of the Classes A, C, J, R-1, R-3, and R-4 shares of the Funds. Under the 12b-1 Plan, except as noted below, each Fund makes payments from its assets attributable to the particular share class to the Funds’ Distributor for distribution-related expenses and for providing services to shareholders of that share class. Payments under the 12b-1 Plan are made by the Funds to the Distributor pursuant to the 12b-1 Plan regardless of the expenses incurred by the Distributor. When the Distributor receives Rule 12b-1 fees, it may pay some or all of them to financial intermediaries whose customers are shareholders of the Funds for sales support services and for providing services to shareholders of that share class. Financial intermediaries may include, among others, broker-dealers, registered investment advisors, banks, trust companies, pension plan consultants, retirement plan administrators, and insurance companies. These financial intermediaries include Principal Securities, Inc., a broker-dealer affiliated with PGI. Because Rule 12b-1 fees are paid out of Fund assets and are ongoing fees, over time they will increase the cost of your investment in the Funds and may cost you more than other types of sales charges.

The maximum annual Rule 12b-1 fee for distribution-related expenses and/or for providing services to shareholders under each 12b-1 Plan (as a percentage of average daily net assets) is:

Share Class	Maximum Annualized Rule 12b-1 Fee
A(1)	0.25%(2)
C	1.00%
J	0.15%
R-1	0.35%
R-3	0.25%
R-4	0.10%

(1)

Class A shares of the Money Market Fund are not subject to Rule 12b-1 fees.

(2)

The maximum annualized Rule 12b-1 fee for Class A shares of the Government & High Quality Bond, LargeCap S&P 500 Index, and Short-Term Income Funds is 0.15%.

The Distributor generally uses Rule 12b-1 fees to finance any activity that is primarily intended to result in the sale of shares and for providing services to shareholders of the share class, and the activities vary depending on the share class. In addition to shareholder services, examples of such sales or distribution-related expenses include, but are not limited to:

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Compensation to salespeople and selected dealers, including ongoing commission payments.

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Printing of prospectuses and statements of additional information and reports for other-than-existing shareholders, and preparing and conducting sales seminars.

Examples of services to shareholders include furnishing information as to the status of shareholder accounts, responding to telephone and written inquiries of shareholders, and assisting shareholders with tax information.

Payments under the 12b-1 Plans will not automatically terminate for Funds that are closed to new investors or to additional purchases by existing shareholders. The Board will determine whether to terminate, modify, or leave unchanged the 12b-1 Plans when the Board directs the implementation of the closure of a Fund.

Classes A and C Shares

Generally, to receive 12b-1 fees from the Distributor, dealers or other intermediaries must be the dealer of record for shares with average daily net assets of at least $100,000. Generally, Class A shares must be held for three months before these fees are paid. In the case of Class C shares, generally these fees are not paid until such shares have been held for twelve months.

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Class J Shares

Effective December 31, 2015, the Distributor has contractually agreed to limit the distribution fees attributable to Class J normally payable by the Money Market Fund. This waiver is in place through February 29, 2024 and will reduce the Money Market Fund’s distribution fees by 0.15%. It is expected that the fee waiver will continue through the period disclosed; however, Principal Funds, Inc. and the Distributor, the parties to the agreement, may agree to terminate the fee waiver prior to the end of the period.

Effective January 1, 2021, the Distributor has voluntarily agreed to limit the distribution fees attributable to Class J, reducing the Funds’ distribution fees for Class J shares by 0.020%.* This voluntary waiver may be revised or terminated at any time without notice to shareholders.

For the period from December 31, 2016 to December 31, 2020, the voluntary waiver was 0.030%.

Commissions, Finder’s Fees, and Ongoing Payments

See “Choosing a Share Class and The Costs of Investing” for more details.

Class A Shares

All or a portion of the initial sales charge that you pay may be paid by the Distributor to intermediaries selling Class A shares. The Distributor may pay these intermediaries a commission of up to 1.00% on purchases of $1,000,000 or more (or $250,000 or $500,000 or more depending on the Fund purchased), which are not subject to initial sales charges.

Classes A, J, R-1, R-3, and R-4 Shares

Additionally, the Distributor generally makes ongoing 12b-1 fee payments to your intermediary at a rate that varies by class, as noted above under “Distribution and/or Service (12b-1) Fees.”

Class C Shares

The Distributor will pay, at the time of your purchase, a commission to your intermediary equal to 1.00% of your investment. Additionally, the Distributor generally makes ongoing 12b-1 fee payments to your intermediary as noted above under “Distribution and/or Service (12b-1) Fees.”

Additional Payments to Intermediaries

Shares of the Funds are sold primarily through intermediaries, such as brokers, dealers, investment advisors, banks, trust companies, pension plan consultants, retirement plan administrators, and insurance companies.

Classes A, C, and J Shares

In addition to payments pursuant to 12b-1 plans, sales charges, commissions, and finder’s fees, including compensation for referrals, PGI or its affiliates enter into agreements with some intermediaries pursuant to which the intermediaries receive payments for providing services relating to Fund shares. Examples of such services are administrative, networking, recordkeeping, sub-transfer agency, and shareholder services. In some situations, the Fund will reimburse PGI or its affiliates for making such payments; in others, the Fund may make such additional payments directly to intermediaries.

PGI or its affiliates also pay, without reimbursement from the Fund, compensation from their own resources to certain intermediaries that support the distribution of shares of the Fund or provide services to Fund shareholders.

Such additional payments vary, but generally do not exceed: (a) 0.25% of the current year’s sales of Fund shares by that intermediary and/or (b) 0.25% of average net asset value of Fund shares held by clients of such intermediary.

Institutional Class and Classes R-1, R-3, R-4, R-5, and R-6 Shares

In addition to payments pursuant to applicable 12b-1 plans, PGI or its affiliates enter into agreements with some intermediaries pursuant to which the intermediaries receive payments for providing services relating to Fund shares. Examples of such services are administrative, networking, recordkeeping, sub-transfer agency, and/or shareholder services. For Classes R-1, R-3, R-4, and R-5 shares, such compensation is generally paid out of the Service Fees and Administrative Services Fees that are disclosed in this Prospectus as Other Expenses. For Institutional Class shares, in some situations the Fund will reimburse PGI or its affiliates for making such payments; in others, the Fund may make such payments directly to the intermediaries.

For Institutional Class shares, such payments vary, but generally do not exceed: (a) 0.10% of the current year’s sales of Fund shares by that intermediary or (b) 0.10% of the average net asset value of Fund shares held by clients of such intermediary.

412

Principal Life Insurance Company is one such intermediary that provides services relating to Fund shares held in employee benefit plans, and it is typically paid all of the Service Fees and Administrative Services Fees pertaining to such plans, and it also is paid other compensation described in this section as payable to intermediaries.

The Distributor and its affiliates do not pay compensation to intermediaries (other than to affiliates of the Distributor) for distribution services or other services to Fund shareholders for Class R-6 shares. For more information, see the SAI.

Institutional Class and Classes A, C, J, R-1, R-3, R-4, R-5, and R-6 Shares

The intermediary may pay to its Financial Professionals some or all of the amounts the Distributor and its affiliates pay to the intermediary. The amounts paid to intermediaries vary by share class and by Fund.

In some cases, the Distributor and its affiliates will provide payments or reimbursements in connection with the costs of conferences, educational seminars, training, and marketing efforts related to the Funds. Such activities may be sponsored by intermediaries or the Distributor. The costs associated with such activities may include travel, lodging, entertainment, and meals. In some cases, the Distributor will also provide payment or reimbursement for expenses associated with transactions (“ticket”) charges and general marketing expenses.

For more information, see the SAI.

The payments described in this Prospectus may create a conflict of interest by influencing your Financial Professional or your intermediary to recommend the Fund over another investment, or to recommend one share class of the Fund over another share class. Ask your Financial Professional or visit your intermediary’s website for more information about the total amounts paid to them by PGI and its affiliates, and by sponsors of other investment companies your Financial Professional may recommend to you.

Your intermediary may charge you additional fees other than those disclosed in this Prospectus. Ask your Financial Professional about any fees and commissions they charge.

FUND ACCOUNT INFORMATION

Statements

You will receive quarterly statements for the Funds you own, or if you purchase through a third-party intermediary, on a periodic basis established by such intermediary. Such statements provide the number and value of shares you own, transactions during the period, dividends declared or paid, and other information. The year-end statement includes information for all transactions that took place during the year. Please review your statement as soon as you receive it. Keep your statements, as you may need them for tax reporting purposes.

Generally, each time you buy, sell, or exchange shares in Principal Funds, you will receive a confirmation shortly thereafter. It summarizes all the key information - what you bought or sold, the amount of the transaction, and other important information.

Certain purchases and sales are only included on your quarterly statement. These include accounts:

•

when the only activity during the quarter are:

•

purchases of shares from reinvested dividends and/or capital gains,

•

purchases under an Automatic Investment Plan,

•

sales under a Systematic Withdrawal Plan,

•

purchases or sales under an Automatic Exchange Election, or

•

conversion of Class C shares into Class A shares

•

used to fund certain individual retirement or individual pension plans, or

•

established under a payroll deduction plan.

If you need information about your account(s) at other times, you may call us or access your account on the internet.

Orders Placed by Intermediaries

Principal Funds may have an agreement with your intermediary, such as a broker-dealer, third party administrator, or trust company, that permits the intermediary to receive orders on behalf of the Fund until 3:00 p.m. Central Time. The agreement may include authorization for your intermediary to designate other intermediaries (“sub-designees”) to receive orders on behalf of the Fund on the same terms that apply to the intermediary. In such cases, if your intermediary or a sub-designee receives your order in correct form by 3:00 p.m. Central Time, transmits it to the Fund, and pays for it in accordance with the agreement, the Fund will price the order at the next NAV per share it computes after your intermediary or sub-designee received your order.

The time at which the Fund prices orders and the time until which the Fund or your intermediary or sub-designee will accept orders may change in the case of an emergency or if the NYSE closes at a time other than 3:00 p.m. Central Time.

413

Transactions through Financial Institutions/Professionals

Financial institutions and dealers may charge their customers a processing or service fee in connection with the purchase or redemption of Fund shares. The amount and applicability of such a fee is determined and disclosed to its customers by each individual financial institution or dealer. Processing or service fees typically are fixed, nominal dollar amounts and are in addition to the sales and other charges described in this Prospectus and the SAI.

Your financial institution or dealer will provide you with specific information about any processing or service fees you will be charged.

Telephone and Internet Instructions

The Funds reserve the right to refuse telephone and/or internet instructions. You are liable for a loss resulting from a fraudulent telephone or internet instruction that we reasonably believe is genuine. We use reasonable procedures to assure instructions are genuine. If the procedures are not followed, we may be liable for loss due to unauthorized or fraudulent transactions. The procedures include: recording all telephone instructions, requiring the use of a password (Personal Identification Number) for internet instructions, requesting personal identification information, and sending written confirmation to the shareholder’s address of record.

If you elect telephone privileges, instructions regarding your account(s) may be given to us via the telephone or internet. Your instructions:

•

may be given by calling us;

•

may be given via our website for certain transactions (for security purposes you need a username and password to use any of the internet services, including viewing your account information online. If you do not have a username or password, you may obtain one at our website); or

•

may be given to your Financial Professional (a person employed by or affiliated with broker/dealer firms) who will in turn contact us with your instructions.

Instructions received from one owner are binding on all owners. In the case of an account owned by a corporation or trust, instructions received from an authorized person are binding on the corporation/trust unless we have a written notification requiring that more than one authorized person execute written instructions.

Signature Guarantees

Certain transactions require that your signature be guaranteed. A signature guarantee may help protect your account against fraud. If required, the signature(s) must be guaranteed by a commercial bank, trust company, credit union, savings and loan, national securities exchange member, or brokerage firm that participates in a Medallion program recognized by the Securities Transfer Association. A signature guaranteed by a notary public or savings bank is not acceptable. We reserve the right to require a signature guarantee on any transaction.

Signature guarantees are required in any of the following circumstances:	A	C	J	Inst.	R-1	R-3	R-4	R-5	R-6
if you sell more than $100,000 (in the aggregate) from the Funds	X	X	X
if you sell more than $500,000 (in the aggregate) from the Funds				X	X	X	X	X	X
if you sell more than $10,000,000 if you have the proceeds sent electronically to a previously authorized U.S. bank account				X
if a sales proceeds check is payable to a party other than the account shareholder(s)				X	X	X	X	X	X
if a sales proceeds check is payable to a party other than the account shareholder(s) or Principal Life, Principal Bank, a retirement plan trustee or custodian that has agreed in writing to accept a transfer of assets from the Fund or Principal Securities, Inc. payable through Pershing	X	X	X
to change ownership of an account	X	X	X	X	X	X	X	X	X
to add telephone transaction services and/or wire or ACH redemption privileges to an existing account if there is not a common owner between the bank account and mutual fund account	X	X	X	X	X	X	X	X	X
to change bank account information designated under an existing telephone withdrawal plan if there is not a common owner between the bank account and mutual fund account	X	X	X	X	X	X	X	X	X
to wire or ACH to a shareholder’s U.S. bank account not previously authorized or when the request does not include a voided check or deposit slip indicating a common owner between the bank account and mutual fund account	X	X	X	X	X	X	X	X	X
to exchange or transfer among accounts with different ownership	X	X	X	X	X	X	X	X	X
to have a sales proceeds check mailed to an address other than the address on the account or to the address on the account if it has been changed within the preceding 15 days	X	X	X	X	X	X	X	X	X

Reservation of Rights

Principal Funds reserves the right to amend or terminate the special plans described in this Prospectus. Shareholders will be notified of any such action to the extent required by law.

414

Such plans include, for example, automatic investment, systematic withdrawal, waiver of Fund minimums for certain accounts, and waiver or reduction of the sales charge or contingent deferred sales charge for certain purchasers.

Classes A, C, and J Shares - Minimum Account Balance

Each Fund has a minimum required account balance of $1,000. The Fund reserves the right to redeem all shares in your account if the value of your account falls below $1,000. The Fund will mail the redemption proceeds to you. An involuntary redemption of a small account will not be triggered by market conditions alone. The Fund will notify you before involuntarily redeeming your account. You will have 30 days to make an additional investment of an amount that brings your account up to the required minimum. Each Fund reserves the right to increase the required minimum.

Householding

To avoid sending duplicate copies of materials to households, mailings for accounts held by members of your household may be combined so that only one copy of each Prospectus and Annual and Semi-Annual Reports will be mailed. In addition, your account information may be included with other householded accounts on the same quarterly and annual statements. The consolidation of these mailings, called householding, benefits Principal Funds and its shareholders by reduced printing and mailing expenses. If you prefer to receive multiple copies of these materials, you may write or call Principal Funds. Householding will be stopped within 30 days after we receive your request.

Multiple Translations

This Prospectus may be translated into other languages. In the event of any inconsistencies or ambiguity as to the meaning of any word or phrase in a translation, the English text will prevail.

Financial Statements

Shareholders will receive annual financial statements for the Funds, audited by the Funds' independent registered public accounting firm. Shareholders will also receive semi-annual financial statements that are unaudited.

415

APPENDIX A—DESCRIPTION OF BOND RATINGS

Moody’s Investors Service, Inc. Rating Definitions:

Long-Term Obligation Ratings

Ratings assigned on Moody’s global long-term obligation rating scales are forward-looking opinions of the relative credit risk of financial obligations issued by non-financial corporates, financial institutions, structured finance vehicles, project finance vehicles, and public sector entities. Long-term ratings are assigned to issuers or obligations with an original maturity of one year or more and reflect both on the likelihood of a default or impairment on contractual financial obligations and the expected financial loss suffered in the event of default or impairment.1

For certain structured finance, preferred stock and hybrid securities in which payment default events are either not defined or do not match investor’s expectations for timely payment, the ratings reflect the likelihood of impairment and the expected financial loss in the event of impairment.

Aaa:	Obligations rated Aaa are judged to be of the highest quality, subject to the lowest level of credit risk.
Aa:	Obligations rated Aa are judged to be of high quality and are subject to very low credit risk.
A:	Obligations rated A are considered upper-medium grade and are subject to low credit risk.
Baa:	Obligations rated Baa are subject to moderate credit risk. They are considered medium-grade and as such may possess certain speculative characteristics.
Ba:	Obligations rated Ba are judged to be speculative and are subject to substantial credit risk.
B:	Obligations rated B are considered speculative and are subject to high credit risk.
Caa:	Obligations rated Caa are judged to be speculative of poor standing and are subject to very high credit risk.
Ca:	Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.
C:	Obligations rated C are the lowest rated class of bonds and are typically in default, with little prospect for recovery of principal or interest.
NOTE:	Moody’s appends numerical modifiers, 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category, the modifier 2 indicates a mid-range ranking, and the modifier 3 indicates a ranking in the lower end of that generic rating category. Additionally, a “(hyb)” indicator is appended to all ratings of hybrid securities issued by banks, issuers, financial companies, and securities firms.*

By their terms, hybrid securities allow for the omission of scheduled dividends, interest, or principal payments, which can potentially result in impairment if such an omission occurs. Hybrid securities may also be subject to contractually allowable write-downs of principal that could result in impairment. Together the hybrid indicator, the long-term obligation rating assigned to a hybrid security is an expression of the relative credit risk associated with that security.

SHORT-TERM NOTES: Short-term ratings are assigned to obligations with an original maturity of thirteen months or less and reflect both on the likelihood of a default or impairment on contractual financial obligations and the expected financial loss suffered in the event of default. Moody’s employs the following three designations, all judged to be investment grade, to indicate the relative repayment ability of rated issuers:

Issuers rated Prime-1 (or related supporting institutions) have a superior ability to repay short-term debt obligations.

Issuers rated Prime-2 (or related supporting institutions) have a strong ability to repay short-term debt obligations.

Issuers rated Prime-3 (or related supporting institutions) have an acceptable ability to repay short-term obligations.

Issuers rated Not Prime do not fall within any of the Prime rating categories.

US MUNICIPAL SHORT-TERM DEBT: The Municipal Investment Grade (MIG) scale is used to rate US municipal bonds of up to five years maturity. MIG ratings are divided into three levels - MIG 1 through MIG 3 - while speculative grade short-term obligations are designated SG.

MIG 1 denotes superior credit quality, afforded excellent protection from highly reliable liquidity support, or demonstrated broad-based access to the market for refinancing.

MIG 2 denotes strong credit quality with ample margins of protection, although not as large as in the preceding group.

A-1

MIG 3 notes are of acceptable credit quality. Liquidity and cash-flow protection may be narrow and market access for refinancing is likely to be less well-established.

SG denotes speculative-grade credit quality and may lack sufficient margins of protection.

Description of S&P Global Ratings’ Credit Rating Definitions:

S&P Global’s credit rating, both long-term and short-term, is a forward-looking opinion of the creditworthiness of an obligor with respect to a specific obligation. This assessment takes into consideration the creditworthiness of guarantors, insurers, or other forms of credit enhancement on the obligation.

The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment as to market price or suitability for a particular investor.

The ratings are statements of opinion as of the date they are expressed furnished by the issuer or obtained by S&P Global Ratings from other sources S&P Global Ratings considers reliable. S&P Global Ratings does not perform an audit in connection with any rating and may, on occasion, rely on unaudited financial information. The ratings may be changed, suspended, or withdrawn as a result of changes in, or unavailability of, such information, or for other circumstances.

The ratings are based, in varying degrees, on the following considerations:

•

Likelihood of payment - capacity and willingness of the obligor to meet its financial commitment on an obligation in accordance with the terms of the obligation;

•

Nature of and provisions of the financial obligation;

•

Protection afforded by, and relative position of, the financial obligation in the event of bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditor’s rights.

LONG-TERM CREDIT RATINGS:

AAA:	Obligations rated ‘AAA’ have the highest rating assigned by S&P Global Ratings. The obligor’s capacity to meet its financial commitment on the obligation is extremely strong.
AA:	Obligations rated ‘AA’ differ from the highest-rated issues only in small degree. The obligor’s capacity to meet its financial commitment on the obligation is very strong.
A:	Obligations rated ‘A’ have a strong capacity to meet financial commitment on the obligation although they are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories.
BBB:	Obligations rated ‘BBB’ exhibit adequate protection parameters; however, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to meet financial commitment on the obligation.
BB, B, CCC, CC and C:	Obligations rated ‘BB’, ‘B’, ‘CCC’, ‘CC’, and ‘C’ are regarded, on balance, as having significant speculative characteristics. ‘BB’ indicates the lowest degree of speculation and ‘C’ the highest degree of speculation. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major risk exposures to adverse conditions.
BB:	Obligations rated ‘BB’ are less vulnerable to nonpayment than other speculative issues. However it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation.
B:	Obligations rated ‘B’ are more vulnerable to nonpayment than ‘BB’ but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair this capacity.
CCC:	Obligations rated ‘CCC’ are currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. If adverse business, financial, or economic conditions occur, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.
CC:	Obligations rated ‘CC’ are currently highly vulnerable to nonpayment. The ‘CC’ rating is used when a default has not yet occurred but S&P Global Ratings expects default to be a virtual certainty, regardless of anticipated time to default.
C:	The rating ‘C’ is highly vulnerable to nonpayment, the obligation is expected to have lower relative seniority or lower ultimate recovery compared to higher rated obligations.

A-2

Obligations rated ‘D’ are in default, or in breach of an imputed promise. For non-hybrid capital instruments,

the ‘D’ rating category is used when payments on an obligation are not made on the date due, unless S&P

Global Ratings believes that such payments will be made within five business days in the absence of a

stated grace period or within the earlier of the stated grace period or 30 calendar days. The rating will also

be used upon filing for bankruptcy petition or the taking of similar action and where default is a virtual

certainty. If an obligation is subject to a distressed exchange offer the rating is lowered to ‘D’.

Plus (+) or Minus (-): The ratings from ‘AA’ to ‘CCC’ may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories.

NR:	Indicates that no rating has been requested, that there is insufficient information on which to base a rating or that S&P Global Ratings does not rate a particular type of obligation as a matter of policy.

SHORT-TERM CREDIT RATINGS: Ratings are graded into four categories, ranging from ‘A-1’ for the highest quality obligations to ‘D’ for the lowest.

A-1:	This is the highest category. The obligor’s capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor’s capacity to meet its financial commitment on these obligations is extremely strong.
A-2:	Issues carrying this designation are somewhat more susceptible to the adverse effects of the changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor’s capacity to meet its financial commitment on the obligation is satisfactory.
A-3:	Issues carrying this designation exhibit adequate capacity to meet their financial obligations. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet it financial commitment on the obligation.
B:	Issues rated ‘B’ are regarded as vulnerable and have significant speculative characteristics. The obligor has capacity to meet financial commitments; however, it faces major ongoing uncertainties which could lead to obligor’s inadequate capacity to meet its financial obligations.
C:	This rating is assigned to short-term debt obligations that are currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions to meet its financial commitment on the obligation.
D:	This rating indicates that the issue is either in default or in breach of an imputed promise. For non-hybrid capital instruments, the ‘D’ rating category is used when payments on an obligation are not made on the date due, unless S&P Global Ratings believes that such payments will be made within five business days in the absence of a stated grace period or within the earlier of the stated grace period or 30 calendar days. The rating will also be used upon filing for bankruptcy petition or the taking of similar action and where default is a virtual certainty. If an obligation is subject to a distressed exchange offer the rating is lowered to ‘D’.

MUNICIPAL SHORT-TERM NOTE RATINGS: S&P Global Ratings rates U.S. municipal notes with a maturity of less than three years as follows:

SP-1:	A strong capacity to pay principal and interest. Issues that possess a very strong capacity to pay debt service is given a “+” designation.
SP-2:	A satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the terms of the notes.
SP-3:	A speculative capacity to pay principal and interest.

A-3

APPENDIX B—INTERMEDIARY-SPECIFIC SALES CHARGE WAIVERS AND REDUCTIONS

Certain intermediaries have different policies and procedures regarding the availability of sales charge waivers and reductions, which are discussed below. In all instances, it is the purchaser’s responsibility to notify the Fund or the purchaser’s financial intermediary at the time of purchase of any relationship or other facts qualifying the purchaser for sales charge waivers or reductions. In order to receive a waiver or reduction offered by one intermediary or the Fund, the purchaser must purchase Fund shares from the Fund or intermediary offering the waiver or reduction. Please see the section of the prospectus entitled “CHOOSING A SHARE CLASS AND THE COSTS OF INVESTING” for more information on sales charges and waivers available for different classes.

Currently, the following intermediaries have implemented a schedule of sales charge waivers and reductions described below:

Ameriprise Financial

Class A Shares Front-End/Initial Sales Charge Waivers on Class A Shares Available at Ameriprise Financial

The following information applies to Class A purchases if you have an account with or otherwise purchase fund shares through Ameriprise Financial.

Shareholders purchasing Fund shares through an Ameriprise Financial brokerage account are eligible for the following front-end sales change waivers (also referred to as initial sales charge waivers), which may differ from those disclosed elsewhere in this Fund’s prospectus or SAI:

•

Employer-sponsored retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit sharing and money purchase pension plans and defined benefit plans). For purposes of this provision, employer-sponsored retirement plans do not include SEP IRAs, Simple IRAs or SAR-SEPs.

•

Shares purchased through reinvestment of capital gains distributions and dividend reinvestment when purchasing shares of the same Fund (but not any other fund within the same fund family).

•

Shares exchanged from Class C shares of the same fund in the month of or following the 7-year anniversary of the purchase date. To the extent that this prospectus elsewhere provides for a waiver with respect to exchanges of Class C shares or conversion of Class C shares following a shorter holding period, that waiver will apply.

•

Employees and registered representatives of Ameriprise Financial or its affiliates and their immediate family members.

•

Shares purchased by or through qualified accounts (including IRAs, Coverdell Education Savings Accounts, 401(k)s, 403(b) TSCAs subject to ERISA and defined benefit plans) that are held by a covered family member, defined as an Ameriprise financial advisor and/or the advisor’s spouse, advisor’s lineal ascendant (mother, father, grandmother, grandfather, great grandmother, great grandfather), advisor’s lineal descendant (son, step-son, daughter, step-daughter, grandson, granddaughter, great grandson, great granddaughter, including through adoption) or any spouse of a covered family member who is a lineal descendant.

•

Shares purchased from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within 90 days following the redemption, (2) the redemption and purchase occur in the same account, and (3) redeemed shares were subject to a front-end or deferred sales load (i.e., Rights of Reinstatement).

Edward D. Jones & Co., L.P.

Effective on or after March 1, 2021, the following information supersedes prior information with respect to transactions and positions held in fund shares through an Edward Jones system. If you purchase fund shares on the Edward Jones commission and fee-based platforms, you are eligible only for the following sales charge discounts (also referred to as “breakpoints”) and waivers, which can differ from discounts and waivers described elsewhere in the mutual fund prospectus or statement of additional information (“SAI”) or through another broker-dealer. In all instances, it is your responsibility to inform Edward Jones at the time of purchase of any relationship, holdings of Principal Funds, Inc., or other facts qualifying the purchaser for discounts or waivers. Edward Jones can ask for documentation of such circumstance. You should contact Edward Jones if you have questions regarding your eligibility for these discounts and waivers.

Breakpoints at Edward Jones

•

Breakpoint pricing, otherwise known as volume pricing, at dollar thresholds as described in the prospectus.

B-1

Rights of Accumulation (“ROA”) at Edward Jones

•

The applicable sales charge on a purchase of Class A shares is determined by taking into account all share classes (except certain money market funds and any assets held in group retirement plans) of Principal Funds, Inc. held by the shareholder or in an account grouped by Edward Jones with other accounts for the purpose of providing certain pricing considerations (“pricing groups”). If grouping assets as a shareholder, this includes all share classes held on the Edward Jones platform and/or held on another platform. The inclusion of eligible fund family assets in the ROA calculation is dependent on the shareholder notifying Edward Jones of such assets at the time of calculation. Money market funds are included only if such shares were sold with a sales charge at the time of purchase or acquired in exchange for shares purchased with a sales charge.

•

The employer maintaining a SEP IRA plan and/or SIMPLE IRA plan may elect to establish or change ROA for the IRA accounts associated with the plan to a plan-level grouping as opposed to including all share classes at a shareholder or pricing group level.

•

ROA is determined by calculating the higher of cost minus redemptions or market value (current shares x NAV).

Letter of Intent (“LOI”) at Edward Jones

•

Through an LOI, shareholders can receive the sales charge and breakpoint discounts for purchases shareholders intend to make over a 13-month period from the date Edward Jones receives the LOI. The LOI combines the current market value of any existing qualifying holdings and account types with the value that the shareholder intends to buy over a 13-month period to calculate the front-end sales charge and any breakpoint discounts. Each purchase the shareholder makes during that 13-month period will receive the sales charge and breakpoint discount that applies to the total amount. The inclusion of eligible fund family assets in the LOI calculation is dependent on the shareholder notifying Edward Jones of such assets at the time of calculation. Purchases made before the LOI is received by Edward Jones are not adjusted under the LOI and will not reduce the sales charge previously paid. Sales charges will be adjusted if the LOI is not met.

•

If the employer maintaining a SEP IRA plan and/or SIMPLE IRA plan has elected to establish or change ROA for the IRA accounts associated with the plan to a plan-level grouping, LOIs will also be at the plan-level and may only be established by the employer.

Sales Charge Waivers at Edward Jones

Sales charges are waived for the following shareholders and in the following situations:

•

Associates of Edward Jones and its affiliates and their family members who are in the same pricing group (as determined by Edward Jones under its policies and procedures) as the associate. This waiver will continue for the remainder of the associate’s life if the associate retires from Edward Jones in good-standing and remains in good standing pursuant to Edward Jones’ policies and procedures.

•

Shares purchased in an Edward Jones fee-based program.

•

Shares purchased through reinvestment of capital gains distributions and dividend reinvestment.

•

Shares purchased from the proceeds of redeemed shares of the same fund family so long as the following conditions are met: 1) the proceeds are from the sale of shares within 60 days of the purchase, and 2) the sale and purchase are made in the same share class and the same account or the purchase is made in an individual retirement account with proceeds from liquidations in a non-retirement account.

•

Shares exchanged into Class A shares from another share class so long as the exchange is into the same fund and was initiated at the discretion of Edward Jones. Edward Jones is responsible for any remaining CDSC due to the fund company, if applicable. Any future purchases are subject to the applicable sales charge as disclosed in the prospectus.

•

Exchanges from Class C shares to Class A shares of the same fund, generally, in the 84th month following the anniversary of the purchase date or earlier at the discretion of Edward Jones.

Contingent Deferred Sales Charge (“CDSC”) Waivers at Edward Jones

If the shareholder purchases shares that are subject to a CDSC and those shares are redeemed before the CDSC is expired, the shareholder is responsible to pay the CDSC, except in the following conditions:

•

Death or disability of the shareholder.

•

Systematic withdrawals with up to 10% per year of the account value.

B-2

•

Return of excess contributions from an Individual Retirement Account (IRA).

•

Shares sold as part of a required minimum distribution for IRA and retirement accounts if the redemption is taken in or after the year the shareholder reaches qualified age based on applicable IRA regulations.

•

Shares sold to pay Edward Jones fees or costs in such cases where the transaction is initiated by Edward Jones.

•

Shares exchanged in an Edward Jones fee-based program.

•

Shares acquired through NAV reinstatement.

•

Shares redeemed at the discretion of Edward Jones for Minimum Balances, as described below.

Other Important Information Regarding Transactions Through Edward Jones

Minimum Purchase Amounts (Per Fund & Account)

•

Initial purchase minimum: $250

•

Subsequent purchase minimum: none

Minimum Balances

Edward Jones has the right to redeem at its discretion fund holdings with a balance of $250 or less. The following are examples of accounts that are not included in this policy:

•

A fee-based account held on an Edward Jones platform

•

A 529 account held on an Edward Jones platform

•

An account with an active systematic investment plan or LOI Exchanging Share Classes

•

At any time it deems necessary, Edward Jones has the authority to change a share class to Class A shares of the same fund at NAV.

Janney Montgomery Scott

Effective May 1, 2020, if you purchase fund shares through a Janney Montgomery Scott LLC (“Janney”) brokerage account, you will be eligible for the following load waivers (front-end sales charge waivers and contingent deferred sales charge (“CDSC”), or back-end sales charge, waivers) and discounts, which may differ from those disclosed elsewhere in this fund’s Prospectus or SAI.

Front-end Sales Charge* Waivers on Class A Shares Available at Janney

•

Shares purchased through reinvestment of capital gains distributions and dividend reinvestment when purchasing shares of the same fund (but not any other fund within the fund family).

•

Shares purchased by employees and registered representatives of Janney or its affiliates and their family members as designated by Janney.

•

Shares purchased from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within ninety (90) days following the redemption, (2) the redemption and purchase occur in the same account, and (3) redeemed shares were subject to a front-end or deferred sales load (i.e., right of reinstatement).

•

Shares acquired through a right of reinstatement.

•

Class C shares that are no longer subject to a contingent deferred sales charge and are converted to Class A shares of the same fund pursuant to Janney’s policies and procedures.

CDSC Waivers on Class A and C Shares Available at Janney

•

Shares sold upon the death or disability of the shareholder.

•

Shares sold as part of a systematic withdrawal plan as described in the fund’s Prospectus.

•

Shares sold in connection with a return of excess contributions from an IRA account.

B-3

•

Shares sold as part of a required minimum distribution for IRA and retirement accounts if the redemption is taken in or after the year the shareholder reaches their qualified age based on applicable IRS regulations.

•

Shares sold to pay Janney fees but only if the transaction is initiated by Janney.

•

Shares acquired through a right of reinstatement.

•

Shares exchanged into the same share class of a different fund.

Front-end Sales Charge* Discounts Available at Janney: Breakpoints, Rights of Accumulation, and/or Letters of Intent

•

Breakpoints as described in the fund’s Prospectus.

•

Rights of accumulation (“ROA”), which entitle shareholders to breakpoint discounts, will be automatically calculated based on the aggregated holding of fund family assets held by accounts within the purchaser’s household at Janney. Eligible fund family assets not held at Janney may be included in the ROA calculation only if the shareholder notifies his or her financial advisor about such assets.

•

Letters of intent (“LOI”) which allow for breakpoint discounts based on anticipated purchases within a fund family, over a 13-month time period. Eligible fund family assets not held at Janney Montgomery Scott may be included in the calculation of letters of intent only if the shareholder notifies his or her financial advisor about such assets.

*Also referred to as an “initial sales charge.”

Merrill Lynch

Shareholders purchasing Fund shares through a Merrill Lynch platform or account will be eligible only for the following load waivers (front-end sales charge waivers and contingent deferred, or back-end, sales charge waivers) and discounts, which may differ from those disclosed elsewhere in this Fund’s prospectus or SAI.

Front-end Sales Load Waivers on Class A Shares Available at Merrill Lynch

•

Employer-sponsored retirement, deferred compensation and employee benefit plans (including health savings accounts) and trusts used to fund those plans, provided that the shares are not held in a commission-based brokerage account and shares are held for the benefit of the plan.

•

Shares purchased by a 529 Plan (does not include 529 Plan units or 529-specific share classes or equivalents).

•

Shares purchased through a Merrill Lynch affiliated investment advisory program.

•

Shares exchanged due to the holdings moving from a Merrill Lynch affiliated investment advisory program to a Merrill Lynch brokerage (non-advisory) account pursuant to Merrill Lynch’s policies relating to sales load discounts and waivers.

•

Shares purchased by third party investment advisors on behalf of their advisory clients through Merrill Lynch’s platform.

•

Shares of funds purchased through the Merrill Edge Self-Directed platform.

•

Shares purchased through reinvestment of capital gains distributions and dividend reinvestment when purchasing shares of the same fund (but not any other fund within the fund family).

•

Shares exchanged from Class C (i.e. level-load) shares of the same fund pursuant to Merrill Lynch’s policies relating to sales load discounts and waivers.

•

Employees and registered representatives of Merrill Lynch or its affiliates and their family members.

•

Directors or Trustees of the Fund, and employees of the Fund’s investment adviser or any of its affiliates, as described in this prospectus.

•

Eligible shares purchased from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within 90 days following the redemption, (2) the redemption and purchase occur in the same account, and (3) redeemed shares were subject to a front-end or deferred sales load (known as Rights of Reinstatement). Automated transactions (i.e. systematic purchases and withdrawals) and purchases made after shares are automatically sold to pay Merrill Lynch’s account maintenance fees are not eligible for reinstatement.

CDSC Waivers on Class A, B and C Shares Available at Merrill Lynch

•

Death or disability of the shareholder.

•

Shares sold as part of a systematic withdrawal plan as described in the Fund’s prospectus.

B-4

•

Return of excess contributions from an IRA Account.

•

Shares sold as part of a required minimum distribution for IRA and retirement accounts pursuant to the Internal Revenue Code.

•

Shares sold to pay Merrill Lynch fees but only if the transaction is initiated by Merrill Lynch.

•

Shares acquired through a right of reinstatement.

•

Shares held in retirement brokerage accounts, that are exchanged for a lower cost share class due to transfer to certain fee based accounts or platforms (applicable to A and C shares only).

•

Shares received through an exchange due to the holdings moving from a Merrill Lynch affiliated investment advisory program to a Merrill Lynch brokerage (non-advisory) account pursuant to Merrill Lynch’s policies relating to sales load discounts and waivers.

Front-end load Discounts Available at Merrill Lynch: Breakpoints, Rights of Accumulation & Letters of Intent

•

Breakpoints as described in this prospectus.

•

Rights of Accumulation (ROA) which entitle shareholders to breakpoint discounts as described in the Fund’s prospectus will be automatically calculated based on the aggregated holding of fund family assets held by accounts (including 529 program holdings, where applicable) within the purchaser’s household at Merrill Lynch. Eligible fund family assets not held at Merrill Lynch may be included in the ROA calculation only if the shareholder notifies his or her financial advisor about such assets.

•

Letters of Intent (LOI) which allow for breakpoint discounts based on anticipated purchases within a fund family, through Merrill Lynch, over a 13-month period of time.

Morgan Stanley Wealth Management

Initial Sales Charge Waivers on Class A Shares Available at Morgan Stanley Wealth Management

Effective July 1, 2018, if you purchase Class A Fund shares through a Morgan Stanley Wealth Management transactional brokerage account you will be eligible only for the following initial sales charge waivers, which differ from those disclosed elsewhere in this prospectus or the SAI.

•

Morgan Stanley employee and employee-related accounts according to Morgan Stanley’s account linking rules.

•

Shares purchased through reinvestment of dividends and capital gains distributions when purchasing shares of the same fund.

•

Shares purchased through a Morgan Stanley self-directed brokerage account.

•

Class C (i.e., level-load) shares that are no longer subject to a contingent deferred sales charge and are converted to Class A shares of the same fund pursuant to Morgan Stanley Wealth Management’s share class conversion program.

•

Shares purchased from the proceeds of redemptions within the same fund family, provided (i) the repurchase occurs within 90 days following the redemption, (ii) the redemption and purchase occur in the same account, and (iii) redeemed shares were subject to a front-end or deferred sales charge.

Oppenheimer & Co. Inc.

Effective June 12, 2020, shareholders purchasing Fund shares through an Oppenheimer & Co. Inc. (“OPCO”) platform or account are eligible only for the following load waivers (front-end sales charge waivers and contingent deferred, or back-end, sales charge waivers) and discounts, which may differ from those disclosed elsewhere in this Fund’s prospectus or SAI.

Front-end Sales Load Waivers on Class A Shares Available at OPCO

•

Shares purchased by or through a 529 Plan.

B-5

•

Shares purchased through a OPCO affiliated investment advisory program.

•

Shares purchased through reinvestment of capital gains distributions and dividend reinvestment when purchasing shares of the same fund (but not any other fund within the fund family).

•

A shareholder in the Fund’s Class C shares will have their shares converted at net asset value to Class A shares (or the appropriate share class) of the Fund if the shares are no longer subject to a CDSC and the conversion is in line with the policies and procedures of OPCO.

•

Employees and registered representatives of OPCO or its affiliates and their family members.

•

Directors or Trustees of the Fund, and employees of the Fund’s investment adviser or any of its affiliates, as described in this prospectus.

CDSC Waivers on A, B and C Shares Available at OPCO

•

Death or disability of the shareholder.

•

Shares sold as part of a systematic withdrawal plan as described in the Fund’s prospectus.

•

Return of excess contributions from an IRA Account.

•

Shares sold as part of a required minimum distribution for IRA and retirement accounts due to the shareholder reaching the qualified age based on applicable IRS regulations as described in the prospectus.

•

Shares sold to pay OPCO fees but only if the transaction is initiated by OPCO.

•

Shares acquired through a right of reinstatement.

Front-end Load Discounts Available at OPCO: Breakpoints, Rights of Accumulation & Letters of Intent

•

Breakpoints as described in this prospectus.

•

Rights of Accumulation (ROA) which entitle shareholders to breakpoint discounts will be automatically calculated based on the aggregated holding of fund family assets held by accounts within the purchaser’s household at OPCO. Eligible fund family assets not held at OPCO may be included in the ROA calculation only if the shareholder notifies his or her financial advisor about such assets.

Raymond James

Effective March 1, 2019, shareholders purchasing fund shares through a Raymond James & Associates, Inc., Raymond James Financial Services, Inc. or each entity’s affiliates (“Raymond James”) platform or account, or through an introducing broker-dealer or independent registered investment adviser for which Raymond James provides trade execution, clearance, and/or custody services, will be eligible only for the following load waivers (front-end sales charge waivers and contingent deferred, or back-end, sales charge waivers) and discounts, which may differ from those disclosed elsewhere in this fund’s prospectus or SAI.

Front-end Sales Load Waivers on Class A Shares Available at Raymond James

•

Shares purchased in an investment advisory program.

•

Shares purchased within the same fund family through a systematic reinvestment of capital gains and dividend distributions.

•

Employees and registered representatives of Raymond James or its affiliates and their family members as designated by Raymond James.

•

B-6

CDSC Waivers on Classes A and C Shares Available at Raymond James

•

Death or disability of the shareholder.

•

Shares sold as part of a systematic withdrawal plan as described in the fund’s prospectus.

•

Return of excess contributions from an IRA Account.

•

Shares sold as part of a required minimum distribution for IRA and retirement accounts due to the shareholder reaching their qualified age based on applicable IRS regulations as described in the fund’s prospectus.

•

Shares sold to pay Raymond James fees but only if the transaction is initiated by Raymond James.

•

Shares acquired through a right of reinstatement.

Front-end Load Discounts Available at Raymond James: Breakpoints, Rights of Accumulation, and/or Letters of Intent

•

Breakpoints as described in this prospectus.

•

Rights of accumulation which entitle shareholders to breakpoint discounts will be automatically calculated based on the aggregated holding of fund family assets held by accounts within the purchaser’s household at Raymond James. Eligible fund family assets not held at Raymond James may be included in the calculation of rights of accumulation only if the shareholder notifies his or her financial advisor about such assets.

•

Letters of intent which allow for breakpoint discounts based on anticipated purchases within a fund family, over a 13-month time period. Eligible fund family assets not held at Raymond James may be included in the calculation of letters of intent only if the shareholder notifies his or her financial advisor about such assets.

Robert W. Baird & Co. Incorporated

Effective June 15, 2020, shareholders purchasing fund shares through a Robert W. Baird & Co. Incorporated (“Baird”) platform or account will only be eligible for the following sales charge waivers (front-end sales charge waivers and CDSC waivers) and discounts, which may differ from those disclosed elsewhere in this prospectus or the SAI

Front-end Sales Charge Waivers on Investors A-shares Available at Baird

•

Shares purchased through reinvestment of capital gains distributions and dividend reinvestment when purchasing share of the same fund.

•

Share purchase by employees and registers representatives of Baird or its affiliate and their family members as designated by Baird.

•

Shares purchase from the proceeds of redemptions from another Principal Funds, Inc. Fund, provided (1) the repurchase occurs within 90 days following the redemption, (2) the redemption and purchase occur in the same accounts, and (3) redeemed shares were subject to a front-end or deferred sales charge (known as rights of reinstatement).

•

A shareholder in the Funds Investor C Shares will have their share converted at net asset value to Investor A shares of the fund if the shares are no longer subject to CDSC and the conversion is in line with the policies and procedures of Baird.

•

Employer-sponsored retirement plans or charitable accounts in a transactional brokerage account at Baird, including 401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit sharing and money purchase pension plans and defined benefit plans. For purposes of this provision, employer-sponsored retirement plans do not include SEP IRAs, Simple IRAs or SAR-SEPs.

CDSC Waivers on Investor A and C shares Available at Baird

•

Shares sold due to death or disability of the shareholder.

•

Shares sold as part of a systematic withdrawal plan as described in the Fund’s Prospectus.

•

Shares bought due to returns of excess contributions from an IRA Account.

•

Shares sold to pay Baird fees but only if the transaction is initiated by Baird.

•

Shares acquired through a right of reinstatement.

B-7

Front-end Sales Charge Discounts Available at Baird: Breakpoints and/or Rights of Accumulations

•

Breakpoints as described in this prospectus.

•

Rights of accumulations which entitles shareholders to breakpoint discounts will be automatically calculated based on the aggregated holding of Principal Funds, Inc.’s assets held by accounts within the purchaser’s household at Baird. Eligible Principal Funds, Inc.’s assets not held at Baird may be included in the rights of accumulations calculation only if the shareholder notifies his or her financial advisor about such assets.

•

Letters of Intent (LOI) allow for breakpoint discounts based on anticipated purchases of Principal Funds, Inc.’s funds through Baird, over a 13-month period of time.

Stifel, Nicolaus & Company, Incorporated

Effective July 1, 2020, shareholders purchasing Fund shares through a Stifel, Nicolaus & Company, Incorporated (“Stifel”) platform or account or who own shares for which Stifel or an affiliate is the broker-dealer of record are eligible for the following additional sales charge waiver.

Front-end Sales Load Waivers on Class A Shares Available at Stifel

•

Class C shares that have been held for more than seven (7) years will be converted to Class A shares of the same Fund pursuant to Stifel’s policies and procedures.

•

All other sales charge waivers and reductions described elsewhere in the Fund’ Prospectus or SAI still apply.

US Bancorp Investments, Inc. (“USBI”)

Effective February 2021, Shareholders who purchase fund shares through a USBI platform or account or who own shares for which USBI or an affiliate is the broker-dealer of record, where the shares are held in an omnibus account at the fund, and who are invested in Class C shares will have their shares converted at NAV to Class A shares (or the appropriate share class) of the fund if the shares are no longer subject to a CDSC and the conversion is in line with the policies and procedures of USBI.

(updated March 1, 2021)

B-8

APPENDIX C — FINANCIAL HIGHLIGHTS

The following financial highlights tables are intended to help you understand each Fund’s financial performance for the periods shown. Certain information reflects returns for a single Fund share. The total returns in each table represent the rate that an investor would have earned or lost each period on an investment in the Fund (assuming reinvestment of all distributions). This information has been derived from the financial statements audited by Ernst & Young LLP, Independent Registered Public Accounting Firm, whose report, along with each Fund’s financial statements, is included in Principal Funds, Inc. Annual Report to Shareholders for the fiscal year ended October 31, 2022, which is available upon request, and incorporated by reference into the SAI.

To request a free copy of the latest Annual or Semi-Annual report for the Funds, you may telephone 1-800-222-5852.

C-1

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Total Dividends and Distributions	Net Asset Value, End of Period
CALIFORNIA MUNICIPAL FUND
Class A shares
2022	$11.02	$0.25	$(1.75)	$(1.50)	$(0.25)	$(0.25)	$9.27
2021	10.85	0.24	0.17	0.41	(0.24)	(0.24)	11.02
2020	10.80	0.25	0.01	0.26	(0.21)	(0.21)	10.85
2019	10.10	0.32	0.67	0.99	(0.29)	(0.29)	10.80
2018	10.53	0.36	(0.46)	(0.10)	(0.33)	(0.33)	10.10
Class C shares
2022	11.05	0.16	(1.76)	(1.60)	(0.16)	(0.16)	9.29
2021	10.87	0.15	0.18	0.33	(0.15)	(0.15)	11.05
2020	10.82	0.16	0.01	0.17	(0.12)	(0.12)	10.87
2019	10.12	0.24	0.66	0.90	(0.20)	(0.20)	10.82
2018	10.55	0.27	(0.46)	(0.19)	(0.24)	(0.24)	10.12
Institutional shares
2022	11.03	0.27	(1.76)	(1.49)	(0.27)	(0.27)	9.27
2021	10.86	0.26	0.18	0.44	(0.27)	(0.27)	11.03
2020	10.81	0.28	0.01	0.29	(0.24)	(0.24)	10.86
2019	10.10	0.35	0.68	1.03	(0.32)	(0.32)	10.81
2018	10.54	0.38	(0.46)	(0.08)	(0.36)	(0.36)	10.10

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated using the traded net asset value which may differ from the reported net asset value. The traded net asset value is the net asset value which a shareholder would have paid or received from a subscription or redemption.

(c)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(d)

Excludes interest expense and fees paid through inverse floater agreements. See “Operating Policies” in notes to financial statements.

(e)

Reflects Manager's contractual expense limit.

C-2

Financial Highlights
Principal Funds, Inc.

Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Expenses to Average Net Assets (Excluding Interest Expense and Fees)	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


(13.86)%(b)(c)	$328,411	0.78%	0.72%(d)	2.42%	38.9%
3.89(b)(c)	471,777	0.79	0.76(d)	2.11	13.2
2.44(c)	446,357	0.79	0.76(d)	2.29	40.1
9.94(c)	420,656	0.81	0.78(d)	3.08	42.3
(1.00)(c)	283,709	0.83	0.77(d)	3.45	49.0

(14.55)(c)	26,031	1.60	1.54(d)	1.59	38.9
3.05(c)	39,213	1.59	1.56(d)	1.31	13.2
1.61(c)	41,166	1.60	1.57(d)	1.49	40.1
9.01(c)	41,462	1.65	1.62(d)	2.26	42.3
(1.82)(c)	33,333	1.67	1.61(d)	2.62	49.0

(13.65)	198,684	0.53(e)	0.47(d)(e)	2.68	38.9
4.05	217,309	0.54(e)	0.51(d)(e)	2.36	13.2
2.70	166,577	0.54(e)	0.51(d)(e)	2.60	40.1
10.34	132,152	0.54(e)	0.51(d)(e)	3.35	42.3
(0.84)	96,073	0.57(e)	0.51(d)(e)	3.71	49.0

C-3

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Total Dividends and Distributions	Net Asset Value, End of Period
CORE FIXED INCOME FUND
Class A shares
2022	$9.95	$0.16	$(1.72)	$(1.56)	$(0.20)	$(0.20)	$8.19
2021	10.17	0.13	(0.16)	(0.03)	(0.19)	(0.19)	9.95
2020	9.78	0.18	0.43	0.61	(0.22)	(0.22)	10.17
2019	9.18	0.24	0.64	0.88	(0.28)	(0.28)	9.78
2018	9.56	0.28	(0.37)	(0.09)	(0.29)	(0.29)	9.18
Class C shares
2022	10.02	0.08	(1.74)	(1.66)	(0.12)	(0.12)	8.24
2021	10.24	0.05	(0.16)	(0.11)	(0.11)	(0.11)	10.02
2020	9.85	0.10	0.43	0.53	(0.14)	(0.14)	10.24
2019	9.23	0.16	0.66	0.82	(0.20)	(0.20)	9.85
2018	9.62	0.21	(0.38)	(0.17)	(0.22)	(0.22)	9.23
Class J shares
2022	9.98	0.17	(1.72)	(1.55)	(0.22)	(0.22)	8.21
2021	10.19	0.15	(0.15)	–	(0.21)	(0.21)	9.98
2020	9.81	0.19	0.43	0.62	(0.24)	(0.24)	10.19
2019	9.20	0.25	0.65	0.90	(0.29)	(0.29)	9.81
2018	9.59	0.30	(0.39)	(0.09)	(0.30)	(0.30)	9.20
Institutional shares
2022	9.99	0.18	(1.72)	(1.54)	(0.23)	(0.23)	8.22
2021	10.20	0.16	(0.15)	0.01	(0.22)	(0.22)	9.99
2020	9.81	0.20	0.44	0.64	(0.25)	(0.25)	10.20
2019	9.20	0.27	0.65	0.92	(0.31)	(0.31)	9.81
2018	9.59	0.31	(0.38)	(0.07)	(0.32)	(0.32)	9.20
R-1 shares
2022	9.99	0.11	(1.72)	(1.61)	(0.16)	(0.16)	8.22
2021	10.20	0.08	(0.15)	(0.07)	(0.14)	(0.14)	9.99
2020	9.82	0.13	0.42	0.55	(0.17)	(0.17)	10.20
2019	9.21	0.20	0.65	0.85	(0.24)	(0.24)	9.82
2018	9.59	0.24	(0.37)	(0.13)	(0.25)	(0.25)	9.21

(a)

Calculated based on average shares outstanding during the period.

(b)

(c)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(d)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(e)

Excludes expense reimbursement from Manager and/or Distributor.

(f)

Reflects Manager's contractual expense limit.

C-4

Financial Highlights
Principal Funds, Inc.

Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


(15.89)%(b)(c)	$199,804	0.76%	–%	1.71%	13.7%
(0.18)(b)(c)	293,606	0.78	–	1.30	15.8
6.32(c)	337,294	0.82	–	1.77	21.0
9.73(c)	261,383	0.88	–	2.52	19.8
(0.94)(c)	226,417	0.88	–	3.01	9.2

(16.63)(c)	18,318	1.62	–	0.84	13.7
(1.10)(c)	31,255	1.61	–	0.48	15.8
5.42(c)	53,725	1.63	–	0.97	21.0
8.99(c)	49,336	1.71	–	1.71	19.8
(1.82)(c)	52,031	1.67	–	2.21	9.2

(15.74)(c)	84,794	0.62(d)	0.64(e)	1.85	13.7
(0.05)(c)	114,866	0.64(d)	0.66(e)	1.44	15.8
6.34(c)	132,319	0.68(d)	0.71(e)	1.91	21.0
9.94(c)	97,925	0.77(d)	0.80(e)	2.64	19.8
(0.91)(c)	85,102	0.74(d)	0.77(e)	3.15	9.2

(15.60)	636,066	0.47(f)	–	2.00	13.7
0.06	770,550	0.54(f)	–	1.55	15.8
6.56	674,265	0.58(f)	–	2.02	21.0
10.14	519,888	0.58(f)	–	2.82	19.8
(0.75)	413,469	0.58(f)	–	3.30	9.2

(16.27)	7,203	1.26	–	1.20	13.7
(0.69)	11,332	1.29	–	0.79	15.8
5.65	12,967	1.33	–	1.28	21.0
9.28	15,209	1.36	–	2.07	19.8
(1.41)	16,422	1.36	–	2.53	9.2

C-5

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Total Dividends and Distributions	Net Asset Value, End of Period
CORE FIXED INCOME FUND
R-3 shares
2022	$10.01	$0.14	$(1.72)	$(1.58)	$(0.19)	$(0.19)	$8.24
2021	10.22	0.11	(0.15)	(0.04)	(0.17)	(0.17)	10.01
2020	9.83	0.16	0.43	0.59	(0.20)	(0.20)	10.22
2019	9.22	0.23	0.64	0.87	(0.26)	(0.26)	9.83
2018	9.61	0.27	(0.38)	(0.11)	(0.28)	(0.28)	9.22
R-4 shares
2022	10.00	0.16	(1.73)	(1.57)	(0.20)	(0.20)	8.23
2021	10.21	0.13	(0.15)	(0.02)	(0.19)	(0.19)	10.00
2020	9.83	0.18	0.42	0.60	(0.22)	(0.22)	10.21
2019	9.22	0.24	0.65	0.89	(0.28)	(0.28)	9.83
2018	9.60	0.28	(0.37)	(0.09)	(0.29)	(0.29)	9.22
R-5 shares
2022	9.98	0.17	(1.73)	(1.56)	(0.21)	(0.21)	8.21
2021	10.19	0.14	(0.15)	(0.01)	(0.20)	(0.20)	9.98
2020	9.81	0.19	0.42	0.61	(0.23)	(0.23)	10.19
2019	9.20	0.25	0.65	0.90	(0.29)	(0.29)	9.81
2018	9.59	0.29	(0.38)	(0.09)	(0.30)	(0.30)	9.20
R-6 shares
2022	9.98	0.19	(1.72)	(1.53)	(0.24)	(0.24)	8.21
2021	10.19	0.17	(0.15)	0.02	(0.23)	(0.23)	9.98
2020	9.80	0.21	0.44	0.65	(0.26)	(0.26)	10.19
2019	9.20	0.27	0.65	0.92	(0.32)	(0.32)	9.80
2018	9.58	0.32	(0.37)	(0.05)	(0.33)	(0.33)	9.20

(a)

Calculated based on average shares outstanding during the period.

(b)

Reflects Manager's contractual expense limit.

C-6

Financial Highlights
Principal Funds, Inc.

Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


(15.97)%	$10,025	0.95%	1.52%	13.7%
(0.38)	12,325	0.98	1.10	15.8
6.07	19,911	1.02	1.59	21.0
9.61	24,860	1.05	2.38	19.8
(1.21)	27,890	1.05	2.83	9.2

(15.83)	10,822	0.76	1.71	13.7
(0.19)	14,605	0.79	1.29	15.8
6.17	13,116	0.83	1.77	21.0
9.82	17,519	0.86	2.57	19.8
(0.92)	19,693	0.86	3.02	9.2

(15.76)	18,198	0.64	1.81	13.7
(0.07)	32,242	0.67	1.41	15.8
6.31	38,478	0.71	1.89	21.0
9.97	35,845	0.74	2.68	19.8
(0.91)	33,909	0.74	3.11	9.2

(15.54)	8,288,998	0.38	2.10	13.7
0.18	9,159,603	0.41(b)	1.67	15.8
6.69	8,278,200	0.45(b)	2.15	21.0
10.14	5,666,716	0.48(b)	2.86	19.8
(0.55)	2,034,970	0.48(b)	3.40	9.2

C-7

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
CORE PLUS BOND FUND
Class A shares
2022	$10.99	$0.20	$(2.05)	$(1.85)	$(0.17)	$(0.13)	$(0.30)
2021	11.57	0.17	(0.03)	0.14	(0.19)	(0.53)	(0.72)
2020	11.13	0.24	0.54	0.78	(0.34)	–	(0.34)
2019	10.36	0.30	0.78	1.08	(0.31)	–	(0.31)
2018	10.98	0.30	(0.60)	(0.30)	(0.32)	–	(0.32)
Class J shares
2022	11.08	0.20	(2.07)	(1.87)	(0.17)	(0.13)	(0.30)
2021	11.66	0.18	(0.03)	0.15	(0.20)	(0.53)	(0.73)
2020	11.21	0.25	0.54	0.79	(0.34)	–	(0.34)
2019	10.43	0.30	0.79	1.09	(0.31)	–	(0.31)
2018	11.06	0.31	(0.61)	(0.30)	(0.33)	–	(0.33)
Institutional shares
2022	10.98	0.23	(2.04)	(1.81)	(0.20)	(0.13)	(0.33)
2021	11.57	0.21	(0.04)	0.17	(0.23)	(0.53)	(0.76)
2020	11.13	0.28	0.53	0.81	(0.37)	–	(0.37)
2019	10.35	0.34	0.79	1.13	(0.35)	–	(0.35)
2018	10.98	0.34	(0.60)	(0.26)	(0.37)	–	(0.37)
R-1 shares
2022	10.98	0.15	(2.05)	(1.90)	(0.12)	(0.13)	(0.25)
2021	11.56	0.11	(0.02)	0.09	(0.14)	(0.53)	(0.67)
2020	11.13	0.19	0.52	0.71	(0.28)	–	(0.28)
2019	10.35	0.25	0.79	1.04	(0.26)	–	(0.26)
2018	10.98	0.25	(0.60)	(0.35)	(0.28)	–	(0.28)

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Reflects Manager's contractual expense limit.

(d)

(e)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(f)

Excludes expense reimbursement from Manager and/or Distributor.

C-8

Financial Highlights
Principal Funds, Inc.

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$8.84	(17.03)%(b)	$69,698	0.84%(c)	–%	2.04%	160.7%
10.99	1.24(b)	94,268	0.84(c)	–	1.54	181.5
11.57	6.98(b)(d)	100,498	0.88(c)	–	2.12	167.0
11.13	10.63(b)(d)	89,060	0.88(c)	–	2.75	138.6
10.36	(2.74)(b)	78,179	0.88(c)	–	2.80	134.0

8.91	(17.08)(b)	103,790	0.85(e)	0.93(f)	2.04	160.7
11.08	1.25(b)	142,242	0.82(e)	0.91(f)	1.56	181.5
11.66	7.07(b)(d)	155,238	0.83(e)	0.92(f)	2.17	167.0
11.21	10.66(b)(d)	137,858	0.88(e)	0.97(f)	2.76	138.6
10.43	(2.76)(b)	131,877	0.82(e)	0.91(f)	2.86	134.0

8.84	(16.89)(d)	350,465	0.56(c)	–	2.34	160.7
10.98	1.54(d)	398,554	0.56(c)	–	1.85	181.5
11.57	7.41	318,810	0.57(c)	–	2.44	167.0
11.13	11.10	1,156,182	0.46(c)	–	3.18	138.6
10.35	(2.42)	2,925,885	0.46(c)	–	3.22	134.0

8.83	(17.50)	3,181	1.38(c)	–	1.51	160.7
10.98	0.71	3,719	1.38(c)	–	1.03	181.5
11.56	6.45	4,234	1.38(c)	–	1.65	167.0
11.13	10.15	4,758	1.33(c)	–	2.30	138.6
10.35	(3.27)	4,308	1.33(c)	–	2.35	134.0

C-9

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
CORE PLUS BOND FUND
R-3 shares
2022	$10.91	$0.18	$(2.04)	$(1.86)	$(0.15)	$(0.13)	$(0.28)
2021	11.49	0.15	(0.03)	0.12	(0.17)	(0.53)	(0.70)
2020	11.06	0.22	0.52	0.74	(0.31)	–	(0.31)
2019	10.29	0.28	0.78	1.06	(0.29)	–	(0.29)
2018	10.91	0.28	(0.59)	(0.31)	(0.31)	–	(0.31)
R-4 shares
2022	11.16	0.20	(2.08)	(1.88)	(0.17)	(0.13)	(0.30)
2021	11.74	0.17	(0.03)	0.14	(0.19)	(0.53)	(0.72)
2020	11.29	0.25	0.53	0.78	(0.33)	–	(0.33)
2019	10.50	0.30	0.80	1.10	(0.31)	–	(0.31)
2018	11.13	0.31	(0.61)	(0.30)	(0.33)	–	(0.33)
R-5 shares
2022	10.92	0.21	(2.04)	(1.83)	(0.18)	(0.13)	(0.31)
2021	11.50	0.18	(0.03)	0.15	(0.20)	(0.53)	(0.73)
2020	11.07	0.25	0.53	0.78	(0.35)	–	(0.35)
2019	10.30	0.31	0.79	1.10	(0.33)	–	(0.33)
2018	10.93	0.32	(0.61)	(0.29)	(0.34)	–	(0.34)

(a)

Calculated based on average shares outstanding during the period.

(b)

Reflects Manager's contractual expense limit.

C-10

Financial Highlights
Principal Funds, Inc.

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$8.77	(17.25)%	$13,893	1.07%(b)	1.81%	160.7%
10.91	1.03	20,465	1.07(b)	1.33	181.5
11.49	6.83	20,466	1.07(b)	1.93	167.0
11.06	10.45	17,923	1.02(b)	2.61	138.6
10.29	(2.89)	16,316	1.02(b)	2.65	134.0

8.98	(17.08)	5,015	0.88(b)	2.00	160.7
11.16	1.19	6,969	0.88(b)	1.52	181.5
11.74	7.06	8,449	0.88(b)	2.16	167.0
11.29	10.63	11,540	0.83(b)	2.79	138.6
10.50	(2.75)	10,643	0.83(b)	2.84	134.0

8.78	(16.98)	38,423	0.76(b)	2.16	160.7
10.92	1.34	44,691	0.76(b)	1.64	181.5
11.50	7.15	49,176	0.76(b)	2.23	167.0
11.07	10.78	38,543	0.71(b)	2.93	138.6
10.30	(2.68)	43,741	0.71(b)	2.97	134.0

C-11

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Tax Return of Capital Distribution	Total Dividends and Distributions
DIVERSIFIED INCOME FUND(b)
Class A shares
2022	$13.87	$0.55	$(2.27)	$(1.72)	$(0.56)	$(0.01)	$(0.57)
2021	12.57	0.56	1.32	1.88	(0.58)	–	(0.58)
2020	13.72	0.60	(1.15)	(0.55)	(0.56)	(0.04)	(0.60)
2019	13.20	0.69	0.48	1.17	(0.65)	–	(0.65)
2018	14.16	0.65	(1.01)	(0.36)	(0.58)	(0.02)	(0.60)
Class C shares
2022	13.78	0.45	(2.25)	(1.80)	(0.47)	–	(0.47)
2021	12.49	0.47	1.29	1.76	(0.47)	–	(0.47)
2020	13.63	0.50	(1.14)	(0.64)	(0.47)	(0.03)	(0.50)
2019	13.12	0.58	0.47	1.05	(0.54)	–	(0.54)
2018	14.07	0.54	(1.00)	(0.46)	(0.48)	(0.01)	(0.49)
Institutional shares
2022	13.79	0.59	(2.24)	(1.65)	(0.61)	(0.01)	(0.62)
2021	12.50	0.61	1.31	1.92	(0.63)	–	(0.63)
2020	13.66	0.64	(1.16)	(0.52)	(0.60)	(0.04)	(0.64)
2019	13.14	0.73	0.48	1.21	(0.69)	–	(0.69)
2018	14.10	0.69	(1.01)	(0.32)	(0.64)	–	(0.64)
R-6 shares
2022	13.78	0.58	(2.23)	(1.65)	(0.61)	(0.01)	(0.62)
2021	12.49	0.62	1.30	1.92	(0.63)	–	(0.63)
2020	13.64	0.64	(1.15)	(0.51)	(0.60)	(0.04)	(0.64)
2019	13.14	0.73	0.46	1.19	(0.69)	–	(0.69)
2018	14.09	0.71	(1.01)	(0.30)	(0.65)	–	(0.65)

(a)

Calculated based on average shares outstanding during the period.

(b)

Effective March 1, 2022, Global Diversified Income Fund changed its name to Diversified Income Fund.

(c)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(d)

Reflects Manager's contractual expense limit.

(e)

(f)

Excludes dividends and interest expense on short sales and short sale fees and reverse repurchase agreement expense. See “Operating Policies” in notes to financial statements.

C-12

Financial Highlights
Principal Funds, Inc.

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Expenses to Average Net Assets (Excluding Dividends and Interest Expense)	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$11.58	(12.68)%(c)	$1,156,493	1.01%(d)	N/A%	4.31%	72.1%
13.87	15.13(c)	1,475,288	1.02(d)	N/A%	4.10	93.6
12.57	(4.01)(c)(e)	1,246,664	1.01(d)	N/A%	4.69	79.7
13.72	9.17(c)(e)	1,422,501	1.02(d)	1.02%(d)(f)	5.10	87.3
13.20	(2.67)(c)	1,474,030	1.07(d)	1.06(d)(f)	4.68	106.9

11.51	(13.30)(c)	269,493	1.77(d)	N/A	3.50	72.1
13.78	14.24(c)	469,597	1.76(d)	N/A	3.48	93.6
12.49	(4.71)(c)(e)	828,186	1.77(d)	N/A	3.94	79.7
13.63	8.30(c)(e)	1,403,821	1.79(d)	1.79(d)(f)	4.36	87.3
13.12	(3.34)(c)	1,761,951	1.82(d)	1.81(d)(f)	3.93	106.9

11.52	(12.31)	1,769,364	0.68(d)	N/A	4.63	72.1
13.79	15.52	2,448,424	0.68(d)	N/A	4.48	93.6
12.50	(3.71)	2,686,381	0.68(d)	N/A	5.03	79.7
13.66	9.49	4,658,602	0.69(d)	0.69(d)(f)	5.43	87.3
13.14	(2.36)	4,978,450	0.76(d)	0.75(d)(f)	5.00	106.9

11.51	(12.31)	43,433	0.67(d)	N/A	4.49	72.1
13.78	15.54	101,194	0.68(d)	N/A	4.54	93.6
12.49	(3.70)(e)	133,451	0.67(d)	N/A	5.04	79.7
13.64	9.43(e)	250,055	0.67(d)	0.67(d)(f)	5.42	87.3
13.14	(2.26)	210,815	0.73(d)	0.72(d)(f)	5.11	106.9

C-13

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
DIVERSIFIED INTERNATIONAL FUND
Class A shares
2022	$16.33	$0.21	$(3.85)	$(3.64)	$(0.50)	$(1.42)	$(1.92)
2021	12.74	0.18	3.52	3.70	(0.11)	–	(0.11)
2020	12.52	0.11	0.34	0.45	(0.23)	–	(0.23)
2019	12.26	0.18	0.79	0.97	(0.15)	(0.56)	(0.71)
2018	13.96	0.20	(1.71)	(1.51)	(0.19)	–	(0.19)
Class J shares
2022	16.13	0.22	(3.79)	(3.57)	(0.52)	(1.42)	(1.94)
2021	12.58	0.20	3.48	3.68	(0.13)	–	(0.13)
2020	12.37	0.12	0.34	0.46	(0.25)	–	(0.25)
2019	12.13	0.19	0.78	0.97	(0.17)	(0.56)	(0.73)
2018	13.82	0.21	(1.69)	(1.48)	(0.21)	–	(0.21)
Institutional shares
2022	16.25	0.25	(3.82)	(3.57)	(0.55)	(1.42)	(1.97)
2021	12.68	0.24	3.49	3.73	(0.16)	–	(0.16)
2020	12.47	0.15	0.34	0.49	(0.28)	–	(0.28)
2019	12.23	0.09	0.93	1.02	(0.22)	(0.56)	(0.78)
2018	13.93	0.26	(1.71)	(1.45)	(0.25)	–	(0.25)
R-1 shares
2022	16.25	0.15	(3.83)	(3.68)	(0.43)	(1.42)	(1.85)
2021	12.68	0.11	3.52	3.63	(0.06)	–	(0.06)
2020	12.46	0.06	0.33	0.39	(0.17)	–	(0.17)
2019	12.20	0.14	0.79	0.93	(0.11)	(0.56)	(0.67)
2018	13.89	0.14	(1.70)	(1.56)	(0.13)	–	(0.13)

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Includes 0.03% of expenses associated with the reclaim of foreign taxes paid. The expense is not subject to the Manager's contractual expense limit.

(d)

Reflects Manager's contractual expense limit.

(e)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(f)

Excludes expense reimbursement from Manager and/or Distributor.

(g)

C-14

Financial Highlights
Principal Funds, Inc.

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$10.77	(25.02)%(b)	$193,894	1.23%(c)	–%	1.65%	57.0%
16.33	29.16(b)	267,701	1.18	–	1.16	48.7
12.74	3.59(b)	209,868	1.20(d)	–	0.90	45.1
12.52	8.93(b)	217,243	1.27(d)	–	1.52	51.0
12.26	(10.99)(b)	217,118	1.31	–	1.42	51.1

10.62	(24.93)(b)	125,792	1.12(c)(e)	1.14(f)	1.76	57.0
16.13	29.35(b)	178,815	1.05(e)	1.08(f)	1.28	48.7
12.58	3.67(b)	143,722	1.09(e)	1.15(f)	1.01	45.1
12.37	9.03(b)	153,026	1.16(e)	1.27(f)	1.63	51.0
12.13	(10.89)(b)	155,540	1.17(e)	1.20(f)	1.56	51.1

10.71	(24.77)	402,288	0.88(c)(d)	–	1.99	57.0
16.25	29.63(g)	557,003	0.85(d)	–	1.50	48.7
12.68	3.86(g)	400,116	0.85(d)	–	1.26	45.1
12.47	9.43	357,306	0.79(d)	–	0.81	51.0
12.23	(10.60)	10,407,141	0.83(d)	–	1.91	51.1

10.72	(25.32)	2,144	1.66(c)	–	1.19	57.0
16.25	28.65	3,061	1.63	–	0.68	48.7
12.68	3.12	2,905	1.61(d)	–	0.47	45.1
12.46	8.50	3,655	1.63(d)	–	1.16	51.0
12.20	(11.34)	3,998	1.71	–	0.99	51.1

C-15

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
DIVERSIFIED INTERNATIONAL FUND
R-3 shares
2022	$16.28	$0.19	$(3.83)	$(3.64)	$(0.48)	$(1.42)	$(1.90)
2021	12.70	0.17	3.51	3.68	(0.10)	–	(0.10)
2020	12.49	0.10	0.33	0.43	(0.22)	–	(0.22)
2019	12.21	0.18	0.79	0.97	(0.13)	(0.56)	(0.69)
2018	13.90	0.18	(1.70)	(1.52)	(0.17)	–	(0.17)
R-4 shares
2022	16.52	0.22	(3.89)	(3.67)	(0.50)	(1.42)	(1.92)
2021	12.88	0.18	3.57	3.75	(0.11)	–	(0.11)
2020	12.66	0.12	0.34	0.46	(0.24)	–	(0.24)
2019	12.38	0.19	0.81	1.00	(0.16)	(0.56)	(0.72)
2018	14.10	0.21	(1.73)	(1.52)	(0.20)	–	(0.20)
R-5 shares
2022	16.48	0.23	(3.88)	(3.65)	(0.52)	(1.42)	(1.94)
2021	12.85	0.21	3.56	3.77	(0.14)	–	(0.14)
2020	12.64	0.14	0.33	0.47	(0.26)	–	(0.26)
2019	12.37	0.21	0.80	1.01	(0.18)	(0.56)	(0.74)
2018	14.07	0.23	(1.72)	(1.49)	(0.21)	–	(0.21)
R-6 shares
2022	16.27	0.26	(3.82)	(3.56)	(0.56)	(1.42)	(1.98)
2021	12.69	0.23	3.52	3.75	(0.17)	–	(0.17)
2020	12.48	0.17	0.34	0.51	(0.30)	–	(0.30)
2019(d)	11.76	0.21	0.51	0.72	–	–	–

(a)

Calculated based on average shares outstanding during the period.

(b)

Includes 0.03% of expenses associated with the reclaim of foreign taxes paid. The expense is not subject to the Manager's contractual expense limit.

(c)

Reflects Manager's contractual expense limit.

(d)

Period from March 1, 2019, date operations commenced, through October 31, 2019.

(e)

Total return amounts have not been annualized.

(f)

Computed on an annualized basis.

C-16

Financial Highlights
Principal Funds, Inc.

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$10.74	(25.09)%	$9,164	1.35%(b)	1.50%	57.0%
16.28	29.03	14,118	1.32	1.06	48.7
12.70	3.38	10,932	1.30(c)	0.78	45.1
12.49	8.88	12,322	1.32(c)	1.48	51.0
12.21	(11.07)	15,377	1.40	1.30	51.1

10.93	(24.92)	6,467	1.16(b)	1.69	57.0
16.52	29.21	10,683	1.13	1.15	48.7
12.88	3.65	10,680	1.11(c)	0.98	45.1
12.66	9.09	17,271	1.13(c)	1.54	51.0
12.38	(10.94)	27,665	1.21	1.50	51.1

10.89	(24.85)	23,589	1.04(b)	1.76	57.0
16.48	29.41	41,789	1.01	1.35	48.7
12.85	3.72	32,242	0.99(c)	1.11	45.1
12.64	9.21	41,586	1.01(c)	1.78	51.0
12.37	(10.74)	47,424	1.09	1.63	51.1

10.73	(24.66)	3,254,802	0.78(b)(c)	2.08	57.0
16.27	29.71	4,491,999	0.74(c)	1.51	48.7
12.69	4.03	10,370,769	0.73(c)	1.38	45.1
12.48	6.12(e)	11,175,055	0.73(c)(f)	2.68(f)	51.0

C-17

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
EQUITY INCOME FUND
Class A shares
2022	$41.63	$0.56	$(4.79)	$(4.23)	$(0.49)	$(1.61)	$(2.10)
2021	30.66	0.51	10.94	11.45	(0.48)	–	(0.48)
2020	33.25	0.55	(1.68)	(1.13)	(0.51)	(0.95)	(1.46)
2019	30.97	0.56	3.75	4.31	(0.60)	(1.43)	(2.03)
2018	31.55	0.64	0.87	1.51	(0.57)	(1.52)	(2.09)
Class C shares
2022	40.42	0.26	(4.63)	(4.37)	(0.21)	(1.61)	(1.82)
2021	29.78	0.22	10.62	10.84	(0.20)	–	(0.20)
2020	32.33	0.31	(1.62)	(1.31)	(0.29)	(0.95)	(1.24)
2019	30.17	0.32	3.64	3.96	(0.37)	(1.43)	(1.80)
2018	30.78	0.40	0.85	1.25	(0.34)	(1.52)	(1.86)
Class J shares
2022	41.68	0.60	(4.80)	(4.20)	(0.53)	(1.61)	(2.14)
2021	30.70	0.55	10.94	11.49	(0.51)	–	(0.51)
2020	33.29	0.57	(1.69)	(1.12)	(0.52)	(0.95)	(1.47)
2019	31.01	0.56	3.76	4.32	(0.61)	(1.43)	(2.04)
2018(f)	32.68	0.01	(1.68)	(1.67)	–	–	–
Institutional shares
2022	41.69	0.69	(4.79)	(4.10)	(0.62)	(1.61)	(2.23)
2021	30.71	0.64	10.95	11.59	(0.61)	–	(0.61)
2020	33.31	0.66	(1.68)	(1.02)	(0.63)	(0.95)	(1.58)
2019	31.02	0.68	3.76	4.44	(0.72)	(1.43)	(2.15)
2018	31.59	0.76	0.87	1.63	(0.68)	(1.52)	(2.20)

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

(d)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(e)

Excludes expense reimbursement from Manager and/or Distributor.

(f)

Period from October 9, 2018, date operations commenced, through October 31, 2018.

(g)

Total return amounts have not been annualized.

(h)

Computed on an annualized basis.

(i)

Reflects Manager's contractual expense limit.

C-18

Financial Highlights
Principal Funds, Inc.

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$35.30	(10.64)%(b)	$1,176,246	0.86%	–%	1.48%	16.9%
41.63	37.51(b)	1,424,668	0.86	–	1.33	22.0
30.66	(3.49)(b)	1,049,990	0.88	–	1.79	16.9
33.25	15.12(b)	1,200,974	0.91	–	1.81	21.5
30.97	4.77(b)	1,094,052	0.89	–	2.02	13.2

34.23	(11.33)(b)(c)	97,145	1.62	–	0.72	16.9
40.42	36.49(b)(c)	125,768	1.61	–	0.61	22.0
29.78	(4.23)(b)	120,112	1.63	–	1.05	16.9
32.33	14.26(b)	155,071	1.65	–	1.08	21.5
30.17	4.03(b)	178,958	1.62	–	1.30	13.2

35.34	(10.55)(b)	76,630	0.77(d)	0.79(e)	1.58	16.9
41.68	37.60(b)	86,651	0.77(d)	0.79(e)	1.42	22.0
30.70	(3.44)(b)	61,063	0.82(d)	0.85(e)	1.84	16.9
33.29	15.16(b)	69,728	0.90(d)	0.93(e)	1.81	21.5
31.01	(5.11)(b)(g)	62,247	0.82(d)(h)	1.33(e)(h)	0.63(h)	13.2

35.36	(10.32)(c)	7,731,338	0.52(i)	–	1.82	16.9
41.69	37.97(c)	9,001,763	0.52(i)	–	1.68	22.0
30.71	(3.14)	6,372,962	0.52(i)	–	2.14	16.9
33.31	15.57	6,190,503	0.52(i)	–	2.19	21.5
31.02	5.17	5,471,644	0.52(i)	–	2.40	13.2

C-19

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
EQUITY INCOME FUND
R-1 shares
2022	$41.43	$0.36	$(4.76)	$(4.40)	$(0.28)	$(1.61)	$(1.89)
2021	30.52	0.31	10.88	11.19	(0.28)	–	(0.28)
2020	33.10	0.39	(1.66)	(1.27)	(0.36)	(0.95)	(1.31)
2019	30.84	0.41	3.74	4.15	(0.46)	(1.43)	(1.89)
2018	31.42	0.50	0.84	1.34	(0.40)	(1.52)	(1.92)
R-3 shares
2022	41.49	0.48	(4.77)	(4.29)	(0.41)	(1.61)	(2.02)
2021	30.56	0.43	10.90	11.33	(0.40)	–	(0.40)
2020	33.14	0.49	(1.67)	(1.18)	(0.45)	(0.95)	(1.40)
2019	30.87	0.52	3.72	4.24	(0.54)	(1.43)	(1.97)
2018	31.45	0.58	0.86	1.44	(0.50)	(1.52)	(2.02)
R-4 shares
2022	41.58	0.55	(4.78)	(4.23)	(0.48)	(1.61)	(2.09)
2021	30.62	0.50	10.93	11.43	(0.47)	–	(0.47)
2020	33.21	0.54	(1.67)	(1.13)	(0.51)	(0.95)	(1.46)
2019	30.94	0.57	3.73	4.30	(0.60)	(1.43)	(2.03)
2018	31.51	0.65	0.86	1.51	(0.56)	(1.52)	(2.08)
R-5 shares
2022	41.64	0.60	(4.79)	(4.19)	(0.53)	(1.61)	(2.14)
2021	30.67	0.55	10.93	11.48	(0.51)	–	(0.51)
2020	33.26	0.58	(1.67)	(1.09)	(0.55)	(0.95)	(1.50)
2019	30.98	0.61	3.74	4.35	(0.64)	(1.43)	(2.07)
2018	31.55	0.69	0.86	1.55	(0.60)	(1.52)	(2.12)

(a)

Calculated based on average shares outstanding during the period.

C-20

Financial Highlights
Principal Funds, Inc.

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$35.14	(11.09)%	$1,942	1.39%	0.96%	16.9%
41.43	36.76	2,957	1.38	0.80	22.0
30.52	(3.99)	2,424	1.39	1.27	16.9
33.10	14.59	2,746	1.39	1.34	21.5
30.84	4.25	2,909	1.39	1.58	13.2

35.18	(10.81)	30,045	1.08	1.27	16.9
41.49	37.21	33,754	1.07	1.12	22.0
30.56	(3.68)	24,058	1.08	1.59	16.9
33.14	14.92	31,298	1.08	1.68	21.5
30.87	4.56	40,698	1.08	1.80	13.2

35.26	(10.65)	27,590	0.89	1.45	16.9
41.58	37.48	32,675	0.88	1.30	22.0
30.62	(3.50)	28,701	0.89	1.76	16.9
33.21	15.11	36,352	0.89	1.83	21.5
30.94	4.79	33,554	0.89	2.04	13.2

35.31	(10.54)	147,468	0.77	1.57	16.9
41.64	37.62	179,232	0.76	1.43	22.0
30.67	(3.37)	129,146	0.77	1.89	16.9
33.26	15.28	158,549	0.77	1.95	21.5
30.98	4.91	116,047	0.77	2.16	13.2

C-21

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Tax Return of Capital Distribution
FINISTERRE EMERGING MARKETS TOTAL RETURN BOND FUND
Institutional shares
2022	$10.28	$0.49	$(2.21)	$(1.72)	$(0.64)	$–	$–
2021	10.24	0.39	0.07	0.46	(0.29)	(0.09)	(0.04)
2020	10.51	0.39	(0.09)	0.30	(0.40)	(0.17)	–
2019	9.81	0.43	0.76	1.19	(0.49)	–	–
2018	10.47	0.37	(0.45)	(0.08)	(0.28)	(0.30)	–

(a)

Calculated based on average shares outstanding during the period.

(b)

Reflects Manager's contractual expense limit.

C-22

Financial Highlights
Principal Funds, Inc.

Total Dividends and Distributions	Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$(0.64)	$7.92	(17.17)%	$378,572	0.84%(b)	5.24%	117.4%
(0.42)	10.28	4.47	770,197	0.85(b)	3.69	170.3
(0.57)	10.24	2.90	226,511	0.85(b)	3.78	285.3
(0.49)	10.51	12.52	241,465	0.87(b)	4.21	312.5
(0.58)	9.81	(0.86)	28,216	1.12(b)	3.62	399.2

C-23

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
GLOBAL EMERGING MARKETS FUND(b)
Class A shares
2022	$31.87	$0.37	$(10.12)	$(9.75)	$(0.31)	$(1.75)	$(2.06)
2021	26.98	0.20	4.73	4.93	(0.04)	–	(0.04)
2020	25.02	0.13	2.55	2.68	(0.44)	(0.28)	(0.72)
2019	24.03	0.47	1.20	1.67	(0.17)	(0.51)	(0.68)
2018	29.17	0.23	(5.10)	(4.87)	(0.27)	–	(0.27)
Class J shares
2022	30.64	0.38	(9.67)	(9.29)	(0.37)	(1.75)	(2.12)
2021	25.94	0.25	4.53	4.78	(0.08)	–	(0.08)
2020	24.09	0.17	2.45	2.62	(0.49)	(0.28)	(0.77)
2019	23.15	0.48	1.16	1.64	(0.19)	(0.51)	(0.70)
2018	28.11	0.25	(4.92)	(4.67)	(0.29)	–	(0.29)
Institutional shares
2022	31.58	0.47	(10.01)	(9.54)	(0.43)	(1.75)	(2.18)
2021	26.72	0.32	4.66	4.98	(0.12)	–	(0.12)
2020	24.78	0.22	2.54	2.76	(0.54)	(0.28)	(0.82)
2019	23.83	0.58	1.14	1.72	(0.26)	(0.51)	(0.77)
2018	28.92	0.33	(5.07)	(4.74)	(0.35)	–	(0.35)
R-1 shares
2022	31.32	0.24	(9.93)	(9.69)	(0.18)	(1.75)	(1.93)
2021	26.60	0.06	4.66	4.72	–	–	–
2020	24.66	0.02	2.50	2.52	(0.30)	(0.28)	(0.58)
2019	23.66	0.34	1.20	1.54	(0.03)	(0.51)	(0.54)
2018	28.74	0.09	(5.03)	(4.94)	(0.14)	–	(0.14)

(a)

Calculated based on average shares outstanding during the period.

(b)

Effective January 3, 2022, International Emerging Markets Fund changed its name to Global Emerging Markets Fund.

(c)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(d)

Reflects Manager's contractual expense limit.

(e)

Includes 0.01% of expenses associated with the reclaim of foreign taxes paid. The expense is not subject to the Manager's contractual expense limit.

(f)

During the year ended October 31, 2020, the fund experienced a significant one time gain of approximately $0.11/share as a result of a settlement in a litigation proceeding. If such gain had not been recognized, the total return amounts expressed herein would have been lower.

(g)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(h)

Excludes expense reimbursement from Manager and/or Distributor.

(i)

C-24

Financial Highlights
Principal Funds, Inc.

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$20.06	(32.46)%(c)	$60,893	1.55%(d)	–%	1.44%	34.7%
31.87	18.27(c)	91,585	1.56(d)(e)	–	0.63	43.9
26.98	10.84(c)(f)	76,952	1.55(d)	–	0.55	53.9
25.02	7.22(c)	77,559	1.57(d)	–	1.91	148.3
24.03	(16.88)(c)	79,698	1.62(d)(e)	–	0.81	118.1

19.23	(32.31)(c)	61,730	1.37(g)	1.52(h)	1.58	34.7
30.64	18.46(c)	99,899	1.38(e)(g)	1.48(h)	0.80	43.9
25.94	11.01(c)(f)	89,271	1.37(g)	1.62(h)	0.73	53.9
24.09	7.41(c)	88,924	1.41(g)	1.78(h)	2.06	148.3
23.15	(16.80)(c)	92,909	1.53(e)(g)	1.63(h)	0.88	118.1

19.86	(32.20)	60,449	1.20(d)	–	1.90	34.7
31.58	18.66	73,485	1.21(d)(e)	–	0.98	43.9
26.72	11.21(f)(i)	62,738	1.20(d)	–	0.90	53.9
24.78	7.60(i)	111,045	1.22(d)	–	2.39	148.3
23.83	(16.61)	98,961	1.31(d)(e)	–	1.14	118.1

19.70	(32.73)	1,114	2.00	–	0.97	34.7
31.32	17.74	1,702	1.99(e)	–	0.20	43.9
26.60	10.29(f)	1,458	2.02(d)	–	0.06	53.9
24.66	6.72	1,970	2.04(d)	–	1.41	148.3
23.66	(17.29)	2,066	2.13(e)	–	0.30	118.1

C-25

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
GLOBAL EMERGING MARKETS FUND(b)
R-3 shares
2022	$31.46	$0.31	$(9.96)	$(9.65)	$(0.27)	$(1.75)	$(2.02)
2021	26.64	0.17	4.65	4.82	–	–	–
2020	24.72	0.09	2.52	2.61	(0.41)	(0.28)	(0.69)
2019	23.70	0.41	1.20	1.61	(0.08)	(0.51)	(0.59)
2018	28.78	0.16	(5.02)	(4.86)	(0.22)	–	(0.22)
R-4 shares
2022	31.69	0.38	(10.05)	(9.67)	(0.33)	(1.75)	(2.08)
2021	26.82	0.22	4.69	4.91	(0.04)	–	(0.04)
2020	24.84	0.14	2.54	2.68	(0.42)	(0.28)	(0.70)
2019	23.83	0.42	1.24	1.66	(0.14)	(0.51)	(0.65)
2018	28.93	0.23	(5.07)	(4.84)	(0.26)	–	(0.26)
R-5 shares
2022	31.66	0.40	(10.02)	(9.62)	(0.36)	(1.75)	(2.11)
2021	26.79	0.26	4.69	4.95	(0.08)	–	(0.08)
2020	24.84	0.17	2.54	2.71	(0.48)	(0.28)	(0.76)
2019	23.87	0.47	1.21	1.68	(0.20)	(0.51)	(0.71)
2018	28.98	0.25	(5.06)	(4.81)	(0.30)	–	(0.30)
R-6 shares
2022	31.60	0.44	(9.95)	(9.51)	(0.46)	(1.75)	(2.21)
2021	26.74	0.36	4.65	5.01	(0.15)	–	(0.15)
2020	24.79	0.26	2.52	2.78	(0.55)	(0.28)	(0.83)
2019	23.84	0.15	1.58	1.73	(0.27)	(0.51)	(0.78)
2018	28.93	0.35	(5.08)	(4.73)	(0.36)	–	(0.36)

(a)

Calculated based on average shares outstanding during the period.

(b)

Effective January 3, 2022, International Emerging Markets Fund changed its name to Global Emerging Markets Fund.

(c)

Includes 0.01% of expenses associated with the reclaim of foreign taxes paid. The expense is not subject to the Manager's contractual expense limit.

(d)

(e)

Reflects Manager's contractual expense limit.

(f)

C-26

Financial Highlights
Principal Funds, Inc.

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$19.79	(32.54)%	$3,733	1.69%	1.23%	34.7%
31.46	18.09	6,358	1.68(c)	0.53	43.9
26.64	10.67(d)	5,693	1.71(e)	0.39	53.9
24.72	7.05	6,052	1.73(e)	1.70	148.3
23.70	(17.04)	6,718	1.82(c)	0.55	118.1

19.94	(32.40)	2,335	1.50	1.51	34.7
31.69	18.32	3,585	1.49(c)	0.69	43.9
26.82	10.85(d)(f)	3,184	1.52(e)	0.56	53.9
24.84	7.28(f)	4,440	1.54(e)	1.72	148.3
23.83	(16.89)	7,036	1.63(c)	0.80	118.1

19.93	(32.32)	4,563	1.38	1.60	34.7
31.66	18.48	8,234	1.37(c)	0.79	43.9
26.79	10.98(d)(f)	8,537	1.40(e)	0.68	53.9
24.84	7.40(f)	10,943	1.42(e)	1.96	148.3
23.87	(16.81)	13,593	1.51(c)	0.88	118.1

19.88	(32.14)(f)	2,165	1.09(e)	1.71	34.7
31.60	18.79(f)	4,121	1.10(c)(e)	1.12	43.9
26.74	11.31(d)(f)	3,086	1.09(e)	1.07	53.9
24.79	7.66(f)	7,834	1.14(e)	0.63	148.3
23.84	(16.58)	437,789	1.22(c)(e)	1.21	118.1

C-27

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
GLOBAL REAL ESTATE SECURITIES FUND
Class A shares
2022	$10.83	$0.14	$(3.03)	$(2.89)	$(0.21)	$(0.04)	$(0.25)
2021	7.98	0.12	2.80	2.92	(0.07)	–	(0.07)
2020	10.11	0.13	(1.83)	(1.70)	(0.12)	(0.31)	(0.43)
2019	8.62	0.12	1.79	1.91	(0.36)	(0.06)	(0.42)
2018	8.87	0.16	–	0.16	(0.26)	(0.15)	(0.41)
Institutional shares
2022	11.76	0.19	(3.30)	(3.11)	(0.24)	(0.04)	(0.28)
2021	8.64	0.16	3.04	3.20	(0.08)	–	(0.08)
2020	10.90	0.17	(1.97)	(1.80)	(0.15)	(0.31)	(0.46)
2019	9.25	0.17	1.93	2.10	(0.39)	(0.06)	(0.45)
2018	9.49	0.20	–	0.20	(0.29)	(0.15)	(0.44)
R-3 shares
2022	11.68	0.13	(3.26)	(3.13)	(0.20)	(0.04)	(0.24)
2021	8.61	0.12	3.02	3.14	(0.07)	–	(0.07)
2020	10.88	0.13	(1.97)	(1.84)	(0.12)	(0.31)	(0.43)
2019	9.24	0.12	1.92	2.04	(0.34)	(0.06)	(0.40)
2018	9.48	0.15	0.01	0.16	(0.25)	(0.15)	(0.40)
R-4 shares
2022	11.70	0.15	(3.27)	(3.12)	(0.21)	(0.04)	(0.25)
2021	8.61	0.13	3.03	3.16	(0.07)	–	(0.07)
2020	10.88	0.13	(1.96)	(1.83)	(0.13)	(0.31)	(0.44)
2019	9.24	0.14	1.92	2.06	(0.36)	(0.06)	(0.42)
2018	9.48	0.18	–	0.18	(0.27)	(0.15)	(0.42)
R-5 shares
2022	11.74	0.18	(3.28)	(3.10)	(0.25)	(0.04)	(0.29)
2021	8.64	0.14	3.03	3.17	(0.07)	–	(0.07)
2020	10.90	0.14	(1.95)	(1.81)	(0.14)	(0.31)	(0.45)
2019	9.26	0.14	1.94	2.08	(0.38)	(0.06)	(0.44)
2018	9.50	0.19	–	0.19	(0.28)	(0.15)	(0.43)
R-6 shares
2022	11.77	0.19	(3.29)	(3.10)	(0.25)	(0.04)	(0.29)
2021	8.64	0.17	3.04	3.21	(0.08)	–	(0.08)
2020	10.90	0.18	(1.98)	(1.80)	(0.15)	(0.31)	(0.46)
2019	9.25	0.17	1.94	2.11	(0.40)	(0.06)	(0.46)
2018	9.49	0.21	–	0.21	(0.30)	(0.15)	(0.45)

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Reflects Manager's contractual expense limit.

C-28

Financial Highlights
Principal Funds, Inc.

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$7.69	(27.34)%(b)	$82,943	1.31%	1.45%	16.8%
10.83	36.76(b)	112,900	1.29	1.22	25.9
7.98	(17.41)(b)	83,680	1.33	1.48	41.7
10.11	22.96(b)	124,180	1.35	1.28	42.4
8.62	1.75(b)	101,404	1.31	1.81	24.3

8.37	(27.10)	1,422,719	0.94(c)	1.79	16.8
11.76	37.21	2,394,983	0.94(c)	1.53	25.9
8.64	(17.09)	1,587,908	0.94(c)	1.87	41.7
10.90	23.55	2,203,413	0.94(c)	1.73	42.4
9.25	2.10	2,176,030	0.94(c)	2.15	24.3

8.31	(27.40)	578	1.45	1.27	16.8
11.68	36.57	544	1.44	1.11	25.9
8.61	(17.51)	379	1.44	1.36	41.7
10.88	22.86	385	1.44	1.16	42.4
9.24	1.62	360	1.44	1.60	24.3

8.33	(27.25)	554	1.26	1.48	16.8
11.70	36.87	852	1.25	1.25	25.9
8.61	(17.37)	581	1.25	1.45	41.7
10.88	23.08	44	1.25	1.41	42.4
9.24	1.80	63	1.25	1.85	24.3

8.35	(27.13)	5,935	1.14	1.79	16.8
11.74	36.91	353	1.13	1.27	25.9
8.64	(17.22)	199	1.13	1.57	41.7
10.90	23.24	161	1.13	1.36	42.4
9.26	1.92	12	1.13	1.98	24.3

8.38	(27.02)	707,703	0.88(c)	1.84	16.8
11.77	37.35	1,585,562	0.87(c)	1.59	25.9
8.64	(17.06)	1,039,109	0.88(c)	1.92	41.7
10.90	23.63	1,133,581	0.87(c)	1.72	42.4
9.25	2.16	735,742	0.88(c)	2.22	24.3

C-29

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Total Dividends and Distributions	Net Asset Value, End of Period
GOVERNMENT & HIGH QUALITY BOND FUND
Class A shares
2022	$10.32	$0.09	$(1.66)	$(1.57)	$(0.13)	$(0.13)	$8.62
2021	10.59	0.03	(0.18)	(0.15)	(0.12)	(0.12)	10.32
2020	10.52	0.15	0.14	0.29	(0.22)	(0.22)	10.59
2019	9.94	0.21	0.63	0.84	(0.26)	(0.26)	10.52
2018	10.42	0.21	(0.42)	(0.21)	(0.27)	(0.27)	9.94
Class J shares
2022	10.35	0.09	(1.68)	(1.59)	(0.12)	(0.12)	8.64
2021	10.62	0.03	(0.19)	(0.16)	(0.11)	(0.11)	10.35
2020	10.55	0.15	0.14	0.29	(0.22)	(0.22)	10.62
2019	9.97	0.20	0.63	0.83	(0.25)	(0.25)	10.55
2018	10.44	0.21	(0.41)	(0.20)	(0.27)	(0.27)	9.97
Institutional shares
2022	10.34	0.11	(1.67)	(1.56)	(0.15)	(0.15)	8.63
2021	10.61	0.06	(0.19)	(0.13)	(0.14)	(0.14)	10.34
2020	10.54	0.18	0.14	0.32	(0.25)	(0.25)	10.61
2019	9.96	0.24	0.63	0.87	(0.29)	(0.29)	10.54
2018	10.43	0.24	(0.41)	(0.17)	(0.30)	(0.30)	9.96
R-1 shares
2022	10.34	0.04	(1.66)	(1.62)	(0.08)	(0.08)	8.64
2021	10.62	(0.02)	(0.20)	(0.22)	(0.06)	(0.06)	10.34
2020	10.55	0.10	0.14	0.24	(0.17)	(0.17)	10.62
2019	9.96	0.16	0.64	0.80	(0.21)	(0.21)	10.55
2018	10.44	0.16	(0.42)	(0.26)	(0.22)	(0.22)	9.96
R-3 shares
2022	10.34	0.07	(1.66)	(1.59)	(0.11)	(0.11)	8.64
2021	10.62	0.01	(0.19)	(0.18)	(0.10)	(0.10)	10.34
2020	10.55	0.14	0.13	0.27	(0.20)	(0.20)	10.62
2019	9.96	0.19	0.64	0.83	(0.24)	(0.24)	10.55
2018	10.44	0.19	(0.42)	(0.23)	(0.25)	(0.25)	9.96
R-4 shares
2022	10.35	0.09	(1.68)	(1.59)	(0.12)	(0.12)	8.64
2021	10.62	0.03	(0.18)	(0.15)	(0.12)	(0.12)	10.35
2020	10.55	0.16	0.13	0.29	(0.22)	(0.22)	10.62
2019	9.97	0.21	0.63	0.84	(0.26)	(0.26)	10.55
2018	10.44	0.21	(0.41)	(0.20)	(0.27)	(0.27)	9.97
R-5 shares
2022	10.35	0.10	(1.67)	(1.57)	(0.14)	(0.14)	8.64
2021	10.62	0.05	(0.19)	(0.14)	(0.13)	(0.13)	10.35
2020	10.55	0.17	0.14	0.31	(0.24)	(0.24)	10.62
2019	9.97	0.22	0.64	0.86	(0.28)	(0.28)	10.55
2018	10.45	0.22	(0.42)	(0.20)	(0.28)	(0.28)	9.97

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Excludes expense reimbursement from Manager and/or Distributor.

(d)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(e)

Reflects Manager's contractual expense limit.

C-30

Financial Highlights
Principal Funds, Inc.

Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


(15.37)%(b)	$172,969	0.78%	–%	0.94%	352.1%
(1.44)(b)	229,225	0.77	–	0.32	343.7
2.82(b)	263,721	0.80	–	1.44	84.3
8.53(b)	234,134	0.83	0.87(c)	2.01	23.2
(2.04)(b)	227,870	0.81	0.91(c)	2.06	19.9

(15.46)(b)	77,181	0.82(d)	0.84(c)	0.90	352.1
(1.47)(b)	99,128	0.80(d)	0.83(c)	0.29	343.7
2.79(b)	117,748	0.82(d)	0.85(c)	1.42	84.3
8.45(b)	108,140	0.88(d)	0.91(c)	1.96	23.2
(1.98)(b)	100,537	0.85(d)	0.88(c)	2.03	19.9

(15.22)	500,833	0.52(e)	–	1.18	352.1
(1.19)	770,058	0.52(e)	–	0.58	343.7
3.09	1,083,668	0.53(e)	–	1.72	84.3
8.84	1,236,943	0.53(e)	–	2.31	23.2
(1.67)	1,058,699	0.53(e)	–	2.35	19.9

(15.77)	2,393	1.29(e)	–	0.44	352.1
(2.04)	2,797	1.29(e)	–	(0.19)	343.7
2.30	5,048	1.29(e)	–	0.92	84.3
8.12	3,324	1.29(e)	–	1.55	23.2
(2.51)	2,412	1.29(e)	–	1.59	19.9

(15.51)	3,656	0.98(e)	–	0.73	352.1
(1.74)	5,493	0.98(e)	–	0.11	343.7
2.62	8,704	0.98(e)	–	1.29	84.3
8.45	11,288	0.98(e)	–	1.86	23.2
(2.21)	10,622	0.98(e)	–	1.90	19.9

(15.43)	5,283	0.79(e)	–	0.93	352.1
(1.46)	7,522	0.79(e)	–	0.31	343.7
2.82	6,419	0.79(e)	–	1.50	84.3
8.55	9,826	0.79(e)	–	2.05	23.2
(1.92)	10,117	0.79(e)	–	2.09	19.9

(15.33)	8,761	0.67(e)	–	1.02	352.1
(1.34)	16,336	0.67(e)	–	0.43	343.7
2.94	24,044	0.67(e)	–	1.57	84.3
8.67	22,401	0.67(e)	–	2.17	23.2
(1.90)	20,523	0.67(e)	–	2.20	19.9

C-31

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Total From Investment Operations	Dividends from Net Investment Income	Total Dividends and Distributions	Net Asset Value, End of Period	Total Return
GOVERNMENT MONEY MARKET FUND
Institutional shares
2022	$1.00	$0.01	$0.01	$(0.01)	$(0.01)	$1.00	0.81%
2021	1.00	–	–	–	–	1.00	0.00
2020	1.00	0.01	0.01	(0.01)	(0.01)	1.00	0.60
2019	1.00	0.02	0.02	(0.02)	(0.02)	1.00	2.17
2018(e)	1.00	0.01	0.01	(0.01)	(0.01)	1.00	1.38(f)

(a)

Calculated based on average shares outstanding during the period.

(b)

Reflects Manager's contractual and/or voluntary expense limit.

(c)

Excludes expense reimbursement from Manager.

(d)

Reflects Manager's contractual expense limit.

(e)

Period from December 20, 2017, date operations commenced, through October 31, 2018.

(f)

Total return amounts have not been annualized.

(g)

Computed on an annualized basis.

C-32

Financial Highlights
Principal Funds, Inc.

Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets


$2,979,627	0.14%(b)	0.15%(c)	0.73%
3,657,679	0.04(b)	0.16(c)	0.00
3,077,863	0.12(b)	0.16(c)	0.60
3,972,463	0.14(d)	–	2.13
3,285,396	0.14(d)(g)	–	1.58(g)

C-33

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Total Dividends and Distributions	Net Asset Value, End of Period
HIGH INCOME FUND
Institutional shares
2022	$9.36	$0.45	$(1.47)	$(1.02)	$(0.48)	$(0.48)	$7.86
2021	9.00	0.47	0.38	0.85	(0.49)	(0.49)	9.36
2020	9.30	0.54	(0.29)	0.25	(0.55)	(0.55)	9.00
2019	9.45	0.60	(0.13)	0.47	(0.62)	(0.62)	9.30
2018	9.98	0.56	(0.53)	0.03	(0.56)	(0.56)	9.45

(a)

Calculated based on average shares outstanding during the period.

(b)

(c)

Reflects Manager's contractual expense limit.

C-34

Financial Highlights
Principal Funds, Inc.

Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


(10.90)%(b)	$3,079,579	0.60%(c)	5.27%	48.1%
9.45(b)	3,720,936	0.60(c)	4.99	62.8
2.85(b)	3,020,358	0.61(c)	6.04	73.8
5.22(b)	3,112,267	0.61(c)	6.42	56.5
0.35	3,755,184	0.65	5.81	42.5

C-35

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Total Dividends and Distributions	Net Asset Value, End of Period
HIGH YIELD FUND
Class A shares
2022	$7.33	$0.32	$(1.02)	$(0.70)	$(0.34)	$(0.34)	$6.29
2021	7.01	0.32	0.35	0.67	(0.35)	(0.35)	7.33
2020	7.15	0.36	(0.13)	0.23	(0.37)	(0.37)	7.01
2019	7.11	0.38	0.06	0.44	(0.40)	(0.40)	7.15
2018	7.55	0.39	(0.42)	(0.03)	(0.41)	(0.41)	7.11
Class C shares
2022	7.43	0.27	(1.03)	(0.76)	(0.29)	(0.29)	6.38
2021	7.10	0.28	0.34	0.62	(0.29)	(0.29)	7.43
2020	7.23	0.32	(0.13)	0.19	(0.32)	(0.32)	7.10
2019	7.19	0.34	0.05	0.39	(0.35)	(0.35)	7.23
2018	7.63	0.34	(0.43)	(0.09)	(0.35)	(0.35)	7.19
Institutional shares
2022	7.27	0.34	(1.01)	(0.67)	(0.36)	(0.36)	6.24
2021	6.96	0.34	0.34	0.68	(0.37)	(0.37)	7.27
2020	7.10	0.38	(0.13)	0.25	(0.39)	(0.39)	6.96
2019	7.06	0.40	0.06	0.46	(0.42)	(0.42)	7.10
2018	7.50	0.41	(0.42)	(0.01)	(0.43)	(0.43)	7.06
R-6 shares
2022	7.27	0.35	(1.01)	(0.66)	(0.37)	(0.37)	6.24
2021	6.96	0.35	0.34	0.69	(0.38)	(0.38)	7.27
2020	7.10	0.38	(0.12)	0.26	(0.40)	(0.40)	6.96
2019	7.06	0.41	0.06	0.47	(0.43)	(0.43)	7.10
2018	7.50	0.42	(0.42)	–	(0.44)	(0.44)	7.06

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

(d)

Reflects Manager's contractual expense limit.

C-36

Financial Highlights
Principal Funds, Inc.

Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


(9.71)%(b)	$426,999	0.91%	4.74%	33.1%
9.64(b)	539,969	0.91	4.44	63.0
3.39(b)	513,993	0.91	5.22	77.7
6.36(b)	615,367	0.94	5.40	49.8
(0.45)(b)	609,934	0.92	5.35	42.0

(10.42)(b)	39,928	1.69	3.94	33.1
8.87(b)	62,973	1.64	3.74	63.0
2.74(b)	118,320	1.65	4.51	77.7
5.52(b)	170,730	1.67	4.72	49.8
(1.16)(b)	259,729	1.63	4.64	42.0

(9.50)(c)	1,140,046	0.61(d)	5.04	33.1
10.05(c)	1,535,963	0.61(d)	4.73	63.0
3.73	1,379,657	0.61(d)	5.51	77.7
6.76	1,496,764	0.61(d)	5.75	49.8
(0.15)	1,686,309	0.61(d)	5.67	42.0

(9.42)(c)	557,144	0.52	5.12	33.1
10.15(c)	757,781	0.52(d)	4.84	63.0
3.82	971,122	0.52(d)	5.57	77.7
6.86	688,121	0.52(d)	5.81	49.8
(0.06)	447,288	0.52(d)	5.76	42.0

C-37

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
INFLATION PROTECTION FUND
Class J shares
2022	$9.31	$0.53	$(1.56)	$(1.03)	$(0.36)	$(0.29)	$(0.65)
2021	8.83	0.28	0.24	0.52	(0.04)	–	(0.04)
2020	8.22	0.05	0.62	0.67	(0.06)	–	(0.06)
2019	7.96	0.08	0.49	0.57	(0.31)	–	(0.31)
2018	8.28	0.15	(0.31)	(0.16)	(0.16)	–	(0.16)
Institutional shares
2022	9.83	0.56	(1.62)	(1.06)	(0.39)	(0.29)	(0.68)
2021	9.29	0.29	0.30	0.59	(0.05)	–	(0.05)
2020	8.63	0.10	0.66	0.76	(0.10)	–	(0.10)
2019	8.33	0.15	0.51	0.66	(0.36)	–	(0.36)
2018	8.61	0.21	(0.32)	(0.11)	(0.17)	–	(0.17)
R-1 shares
2022	9.10	0.49	(1.55)	(1.06)	(0.31)	(0.29)	(0.60)
2021	8.65	0.21	0.26	0.47	(0.02)	–	(0.02)
2020	8.06	0.02	0.62	0.64	(0.05)	–	(0.05)
2019	7.81	0.08	0.47	0.55	(0.30)	–	(0.30)
2018	8.14	0.14	(0.32)	(0.18)	(0.15)	–	(0.15)
R-3 shares
2022	9.34	0.50	(1.55)	(1.05)	(0.33)	(0.29)	(0.62)
2021	8.86	0.25	0.26	0.51	(0.03)	–	(0.03)
2020	8.25	0.05	0.62	0.67	(0.06)	–	(0.06)
2019	7.98	0.10	0.49	0.59	(0.32)	–	(0.32)
2018	8.29	0.16	(0.31)	(0.15)	(0.16)	–	(0.16)
R-4 shares
2022	9.50	0.53	(1.59)	(1.06)	(0.37)	(0.29)	(0.66)
2021	8.99	0.20	0.35	0.55	(0.04)	–	(0.04)
2020	8.37	0.06	0.63	0.69	(0.07)	–	(0.07)
2019	8.09	0.12	0.49	0.61	(0.33)	–	(0.33)
2018	8.39	0.17	(0.30)	(0.13)	(0.17)	–	(0.17)
R-5 shares
2022	9.62	0.54	(1.60)	(1.06)	(0.37)	(0.29)	(0.66)
2021	9.10	0.29	0.27	0.56	(0.04)	–	(0.04)
2020	8.46	0.07	0.65	0.72	(0.08)	–	(0.08)
2019	8.18	0.12	0.50	0.62	(0.34)	–	(0.34)
2018	8.47	0.19	(0.31)	(0.12)	(0.17)	–	(0.17)

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(d)

Excludes expense reimbursement from Manager and/or Distributor.

(e)

C-38

Financial Highlights
Principal Funds, Inc.

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$7.63	(11.90)%(b)	$18,034	0.73%(c)	0.75%(d)	6.29%	108.3%
9.31	5.85(b)	16,550	0.85(c)	0.87(d)	3.04	67.7
8.83	8.15(b)	9,826	1.03(c)	1.06(d)	0.55	80.9
8.22	7.37(b)	6,177	1.18(c)	1.27(d)	1.00	68.4
7.96	(2.02)(b)	6,213	1.07(c)	1.10(d)	1.85	84.0

8.09	(11.61)	1,616,313	0.39	–	6.34	108.3
9.83	6.33	1,471,415	0.39	–	3.03	67.7
9.29	8.83	1,745,470	0.39	–	1.11	80.9
8.63	8.15	1,720,548	0.39	–	1.82	68.4
8.33	(1.27)	1,542,325	0.39	–	2.51	84.0

7.44	(12.36)(e)	663	1.27	–	5.92	108.3
9.10	5.37(e)	1,258	1.27	–	2.33	67.7
8.65	7.93	1,427	1.26	–	0.22	80.9
8.06	7.29	1,009	1.27	–	0.96	68.4
7.81	(2.22)	988	1.27	–	1.69	84.0

7.67	(12.09)	6,749	0.96	–	5.90	108.3
9.34	5.80	7,120	0.96	–	2.76	67.7
8.86	8.17	8,491	0.95	–	0.58	80.9
8.25	7.64	6,836	0.96	–	1.22	68.4
7.98	(1.85)	6,781	0.96	–	1.97	84.0

7.78	(11.95)	4,051	0.77	–	6.17	108.3
9.50	6.09	5,912	0.77	–	2.17	67.7
8.99	8.32	1,780	0.76	–	0.70	80.9
8.37	7.82	1,327	0.77	–	1.49	68.4
8.09	(1.65)	1,588	0.77	–	2.00	84.0

7.90	(11.83)	4,251	0.65	–	6.26	108.3
9.62	6.16	4,114	0.65	–	3.06	67.7
9.10	8.56	4,592	0.64	–	0.82	80.9
8.46	7.82	2,679	0.65	–	1.43	68.4
8.18	(1.48)	3,427	0.65	–	2.24	84.0

C-39

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
INTERNATIONAL FUND I
Institutional shares
2022	$18.41	$0.41	$(5.23)	$(4.82)	$(0.41)	$(1.94)	$(2.35)
2021	15.19	0.44	3.88	4.32	(0.21)	(0.89)	(1.10)
2020	14.94	0.22	0.41	0.63	(0.38)	–	(0.38)
2019	14.17	0.33	1.42	1.75	(0.32)	(0.66)	(0.98)
2018	16.73	0.33	(2.71)	(2.38)	(0.18)	–	(0.18)
R-1 shares
2022	18.31	0.30	(5.22)	(4.92)	(0.27)	(1.94)	(2.21)
2021	15.11	0.29	3.89	4.18	(0.09)	(0.89)	(0.98)
2020	14.85	0.10	0.40	0.50	(0.24)	–	(0.24)
2019	14.06	0.22	1.42	1.64	(0.19)	(0.66)	(0.85)
2018	16.62	0.15	(2.65)	(2.50)	(0.06)	–	(0.06)
R-3 shares
2022	18.35	0.34	(5.22)	(4.88)	(0.32)	(1.94)	(2.26)
2021	15.15	0.38	3.85	4.23	(0.14)	(0.89)	(1.03)
2020	14.89	0.14	0.42	0.56	(0.30)	–	(0.30)
2019	14.11	0.24	1.44	1.68	(0.24)	(0.66)	(0.90)
2018	16.66	0.20	(2.65)	(2.45)	(0.10)	–	(0.10)
R-4 shares
2022	18.40	0.37	(5.24)	(4.87)	(0.35)	(1.94)	(2.29)
2021	15.17	0.38	3.90	4.28	(0.16)	(0.89)	(1.05)
2020	14.90	0.18	0.40	0.58	(0.31)	–	(0.31)
2019	14.14	0.30	1.41	1.71	(0.29)	(0.66)	(0.95)
2018	16.70	0.25	(2.68)	(2.43)	(0.13)	–	(0.13)
R-5 shares
2022	18.39	0.38	(5.23)	(4.85)	(0.34)	(1.94)	(2.28)
2021	15.17	0.40	3.90	4.30	(0.19)	(0.89)	(1.08)
2020	14.91	0.19	0.40	0.59	(0.33)	–	(0.33)
2019	14.12	0.31	1.42	1.73	(0.28)	(0.66)	(0.94)
2018	16.68	0.25	(2.66)	(2.41)	(0.15)	–	(0.15)
R-6 shares
2022	18.41	0.42	(5.22)	(4.80)	(0.42)	(1.94)	(2.36)
2021	15.19	0.45	3.89	4.34	(0.23)	(0.89)	(1.12)
2020	14.94	0.23	0.41	0.64	(0.39)	–	(0.39)
2019	14.17	0.36	1.40	1.76	(0.33)	(0.66)	(0.99)
2018	16.72	0.30	(2.66)	(2.36)	(0.19)	–	(0.19)

(a)

Calculated based on average shares outstanding during the period.

(b)

Reflects Manager's contractual expense limit.

(c)

C-40

Financial Highlights
Principal Funds, Inc.

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$11.24	(29.86)%	$88,476	0.87%(b)	2.93%	60.5%
18.41	29.33	133,135	0.90(b)	2.43	55.0
15.19	4.14	100,695	0.90(b)	1.48	68.4
14.94	14.09	114,993	0.92(b)	2.38	71.0
14.17	(14.42)	141,451	1.00(b)	1.96	70.2

11.18	(30.39)	944	1.65	2.14	60.5
18.31	28.31(c)	1,369	1.67	1.61	55.0
15.11	3.41(c)	1,168	1.67(b)	0.64	68.4
14.85	13.14	1,701	1.72(b)	1.63	71.0
14.06	(15.12)	2,020	1.82	0.92	70.2

11.21	(30.14)	1,649	1.34	2.40	60.5
18.35	28.72	3,029	1.36	2.11	55.0
15.15	3.71	2,167	1.36(b)	0.94	68.4
14.89	13.44	2,906	1.41(b)	1.77	71.0
14.11	(14.80)	4,019	1.51	1.19	70.2

11.24	(30.04)	1,867	1.15	2.65	60.5
18.40	29.05	2,623	1.17	2.11	55.0
15.17	3.85	3,110	1.17(b)	1.24	68.4
14.90	13.71	3,285	1.22(b)	2.20	71.0
14.14	(14.69)	5,013	1.32	1.48	70.2

11.26	(29.95)	487	1.03	2.73	60.5
18.39	29.12(c)	755	1.05	2.21	55.0
15.17	3.99(c)	1,493	1.05(b)	1.32	68.4
14.91	13.90	1,932	1.10(b)	2.27	71.0
14.12	(14.61)	3,064	1.20	1.49	70.2

11.25	(29.73)	181,468	0.76(b)	3.06	60.5
18.41	29.47	204,338	0.79(b)	2.51	55.0
15.19	4.22	173,218	0.79(b)	1.58	68.4
14.94	14.19	215,444	0.82(b)	2.57	71.0
14.17	(14.32)	216,786	0.92(b)	1.76	70.2

C-41

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
LARGECAP GROWTH FUND I
Class A shares
2022	$23.75	$(0.08)	$(6.95)	$(7.03)	$–	$(2.52)	$(2.52)
2021	18.39	(0.11)	6.91	6.80	–	(1.44)	(1.44)
2020	15.59	(0.07)	4.15	4.08	–	(1.28)	(1.28)
2019	15.08	(0.05)	2.26	2.21	–	(1.70)	(1.70)
2018	14.62	(0.05)	1.90	1.85	–	(1.39)	(1.39)
Class J shares
2022	19.22	(0.04)	(5.49)	(5.53)	–	(2.52)	(2.52)
2021	15.10	(0.06)	5.62	5.56	–	(1.44)	(1.44)
2020	13.00	(0.03)	3.41	3.38	–	(1.28)	(1.28)
2019	12.86	–	1.85	1.85	(0.01)	(1.70)	(1.71)
2018	12.62	(0.02)	1.65	1.63	–	(1.39)	(1.39)
Institutional shares
2022	24.95	(0.03)	(7.35)	(7.38)	–	(2.52)	(2.52)
2021	19.20	(0.05)	7.24	7.19	–	(1.44)	(1.44)
2020	16.18	(0.02)	4.32	4.30	–	(1.28)	(1.28)
2019	15.55	0.02	2.33	2.35	(0.02)	(1.70)	(1.72)
2018	15.00	–	1.96	1.96	(0.02)	(1.39)	(1.41)
R-1 shares
2022	19.83	(0.14)	(5.66)	(5.80)	–	(2.52)	(2.52)
2021	15.64	(0.18)	5.81	5.63	–	(1.44)	(1.44)
2020	13.50	(0.13)	3.55	3.42	–	(1.28)	(1.28)
2019	13.35	(0.08)	1.93	1.85	–	(1.70)	(1.70)
2018	13.14	(0.11)	1.71	1.60	–	(1.39)	(1.39)

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Reflects Manager's contractual expense limit.

(d)

(e)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(f)

Excludes expense reimbursement from Manager and/or Distributor.

C-42

Financial Highlights
Principal Funds, Inc.

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$14.20	(32.72)%(b)	$389,907	0.96%(c)	–%	(0.46)%	28.4%
23.75	38.72(b)	632,010	0.95(c)	–	(0.51)	23.1
18.39	27.86(b)	487,128	0.99(c)	–	(0.43)	33.6
15.59	17.51(b)(d)	414,599	1.00(c)	–	(0.37)	28.1
15.08	13.21(b)(d)	39,217	1.04(c)	–	(0.36)	34.8

11.17	(32.65)(b)(d)	269,806	0.79(e)	0.83(f)	(0.29)	28.4
19.22	39.03(b)(d)	445,587	0.78(e)	0.82(f)	(0.34)	23.1
15.10	28.03(b)	331,514	0.80(e)	0.85(f)	(0.23)	33.6
13.00	17.85(b)	274,328	0.82(e)	0.87(f)	(0.01)	28.1
12.86	13.50(b)	180,871	0.81(e)	0.86(f)	(0.12)	34.8

15.05	(32.53)	2,371,763	0.68(c)	–	(0.18)	28.4
24.95	39.14	3,460,761	0.67(c)	–	(0.23)	23.1
19.20	28.23	2,630,670	0.68(c)	–	(0.11)	33.6
16.18	18.02	2,366,040	0.68(c)	–	0.15	28.1
15.55	13.60	2,181,951	0.67(c)	–	0.03	34.8

11.51	(33.05)(d)	8,728	1.47(c)	–	(0.97)	28.4
19.83	38.07(d)	14,313	1.46(c)	–	(1.02)	23.1
15.64	27.22	11,345	1.47(c)	–	(0.90)	33.6
13.50	17.12	10,940	1.47(c)	–	(0.64)	28.1
13.35	12.68	8,097	1.47(c)	–	(0.78)	34.8

C-43

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
LARGECAP GROWTH FUND I
R-3 shares
2022	$21.70	$(0.10)	$(6.28)	$(6.38)	$–	$(2.52)	$(2.52)
2021	16.94	(0.14)	6.34	6.20	–	(1.44)	(1.44)
2020	14.48	(0.09)	3.83	3.74	–	(1.28)	(1.28)
2019	14.15	(0.04)	2.07	2.03	–	(1.70)	(1.70)
2018	13.81	(0.07)	1.80	1.73	–	(1.39)	(1.39)
R-4 shares
2022	22.41	(0.08)	(6.51)	(6.59)	–	(2.52)	(2.52)
2021	17.42	(0.10)	6.53	6.43	–	(1.44)	(1.44)
2020	14.83	(0.06)	3.93	3.87	–	(1.28)	(1.28)
2019	14.42	(0.02)	2.13	2.11	–	(1.70)	(1.70)
2018	14.02	(0.04)	1.83	1.79	–	(1.39)	(1.39)
R-5 shares
2022	23.65	(0.06)	(6.92)	(6.98)	–	(2.52)	(2.52)
2021	18.29	(0.08)	6.88	6.80	–	(1.44)	(1.44)
2020	15.50	(0.04)	4.11	4.07	–	(1.28)	(1.28)
2019	14.98	–	2.22	2.22	–	(1.70)	(1.70)
2018	14.49	(0.02)	1.90	1.88	–	(1.39)	(1.39)
R-6 shares
2022	24.96	(0.02)	(7.35)	(7.37)	–	(2.52)	(2.52)
2021	19.19	(0.03)	7.25	7.22	–	(1.45)	(1.45)
2020	16.17	–	4.32	4.32	(0.03)	(1.27)	(1.30)
2019	15.55	0.04	2.31	2.35	(0.03)	(1.70)	(1.73)
2018	14.99	0.02	1.96	1.98	(0.03)	(1.39)	(1.42)

(a)

Calculated based on average shares outstanding during the period.

(b)

(c)

Reflects Manager's contractual expense limit.

C-44

Financial Highlights
Principal Funds, Inc.

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$12.80	(32.85)%(b)	$58,977	1.16%(c)	(0.66)%	28.4%
21.70	38.54(b)	102,793	1.15(c)	(0.71)	23.1
16.94	27.61	89,315	1.16(c)	(0.58)	33.6
14.48	17.46	85,393	1.16(c)	(0.31)	28.1
14.15	13.03	98,560	1.16(c)	(0.46)	34.8

13.30	(32.71)	47,601	0.97(c)	(0.47)	28.4
22.41	38.75	84,797	0.96(c)	(0.51)	23.1
17.42	27.86	82,907	0.97(c)	(0.39)	33.6
14.83	17.71	80,284	0.97(c)	(0.14)	28.1
14.42	13.28	77,509	0.97(c)	(0.27)	34.8

14.15	(32.64)	158,035	0.85(c)	(0.35)	28.4
23.65	38.94	364,553	0.84(c)	(0.40)	23.1
18.29	28.04(b)	296,527	0.85(c)	(0.27)	33.6
15.50	17.72(b)	293,297	0.85(c)	(0.01)	28.1
14.98	13.48	282,290	0.85(c)	(0.15)	34.8

15.07	(32.47)	6,257,991	0.59(c)	(0.09)	28.4
24.96	39.24(b)	9,740,176	0.59(c)	(0.15)	23.1
19.19	28.42(b)	7,254,770	0.59(c)	(0.02)	33.6
16.17	18.06	6,356,209	0.59(c)	0.24	28.1
15.55	13.72	5,378,075	0.59(c)	0.10	34.8

C-45

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
LARGECAP S&P 500 INDEX FUND
Class A shares
2022	$26.67	$0.24	$(3.75)	$(3.51)	$(0.20)	$(3.05)	$(3.25)
2021	20.14	0.24	7.88	8.12	(0.33)	(1.26)	(1.59)
2020	19.10	0.28	1.46	1.74	(0.32)	(0.38)	(0.70)
2019	17.99	0.31	1.92	2.23	(0.28)	(0.84)	(1.12)
2018	17.96	0.29	0.92	1.21	(0.25)	(0.93)	(1.18)
Class C shares
2022	25.81	0.04	(3.63)	(3.59)	–	(3.05)	(3.05)
2021	19.54	0.03	7.65	7.68	(0.15)	(1.26)	(1.41)
2020	18.57	0.11	1.41	1.52	(0.17)	(0.38)	(0.55)
2019	17.51	0.16	1.89	2.05	(0.15)	(0.84)	(0.99)
2018	17.54	0.13	0.90	1.03	(0.13)	(0.93)	(1.06)
Class J shares
2022	26.36	0.25	(3.70)	(3.45)	(0.21)	(3.05)	(3.26)
2021	19.93	0.25	7.78	8.03	(0.34)	(1.26)	(1.60)
2020	18.91	0.29	1.44	1.73	(0.33)	(0.38)	(0.71)
2019	17.82	0.32	1.91	2.23	(0.30)	(0.84)	(1.14)
2018	17.80	0.30	0.92	1.22	(0.27)	(0.93)	(1.20)
Institutional shares
2022	26.70	0.29	(3.75)	(3.46)	(0.25)	(3.05)	(3.30)
2021	20.16	0.30	7.88	8.18	(0.38)	(1.26)	(1.64)
2020	19.12	0.33	1.46	1.79	(0.37)	(0.38)	(0.75)
2019	18.01	0.36	1.92	2.28	(0.33)	(0.84)	(1.17)
2018	17.98	0.34	0.92	1.26	(0.30)	(0.93)	(1.23)

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Reflects Manager's contractual expense limit.

(d)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(e)

Excludes expense reimbursement from Manager and/or Distributor.

C-46

Financial Highlights
Principal Funds, Inc.

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$19.91	(14.93)%(b)	$544,686	0.40%	–%	1.10%	3.7%
26.67	42.29(b)	651,354	0.40	–	1.00	3.8
20.14	9.23(b)	465,384	0.42	–	1.45	6.0
19.10	13.84(b)	435,070	0.46	–	1.73	3.2
17.99	6.89(b)	380,299	0.44	–	1.60	5.8

19.17	(15.68)(b)	45,234	1.29(c)	–	0.20	3.7
25.81	41.04(b)	65,380	1.29(c)	–	0.14	3.8
19.54	8.27(b)	61,996	1.30(c)	–	0.59	6.0
18.57	12.91(b)	66,411	1.30(c)	–	0.91	3.2
17.51	5.92(b)	65,204	1.30(c)	–	0.75	5.8

19.65	(14.87)(b)	810,657	0.34(d)	0.36(e)	1.15	3.7
26.36	42.31(b)	970,126	0.35(d)	0.37(e)	1.06	3.8
19.93	9.29(b)	691,249	0.36(d)	0.39(e)	1.52	6.0
18.91	13.95(b)	691,045	0.38(d)	0.41(e)	1.82	3.2
17.82	6.98(b)	653,442	0.37(d)	0.40(e)	1.68	5.8

19.94	(14.73)	3,639,186	0.16	–	1.34	3.7
26.70	42.61	4,069,356	0.17	–	1.27	3.8
20.16	9.51	3,986,295	0.17	–	1.71	6.0
19.12	14.18	4,175,228	0.17	–	2.02	3.2
18.01	7.17	3,693,260	0.16	–	1.88	5.8

C-47

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
LARGECAP S&P 500 INDEX FUND
R-1 shares
2022	$26.53	$0.10	$(3.75)	$(3.65)	$(0.05)	$(3.05)	$(3.10)
2021	20.05	0.09	7.85	7.94	(0.20)	(1.26)	(1.46)
2020	19.00	0.16	1.45	1.61	(0.18)	(0.38)	(0.56)
2019	17.87	0.21	1.93	2.14	(0.17)	(0.84)	(1.01)
2018	17.85	0.18	0.91	1.09	(0.14)	(0.93)	(1.07)
R-3 shares
2022	26.67	0.17	(3.76)	(3.59)	(0.12)	(3.05)	(3.17)
2021	20.15	0.17	7.87	8.04	(0.26)	(1.26)	(1.52)
2020	19.11	0.22	1.46	1.68	(0.26)	(0.38)	(0.64)
2019	17.98	0.26	1.93	2.19	(0.22)	(0.84)	(1.06)
2018	17.95	0.24	0.93	1.17	(0.21)	(0.93)	(1.14)
R-4 shares
2022	26.78	0.21	(3.77)	(3.56)	(0.15)	(3.05)	(3.20)
2021	20.23	0.21	7.91	8.12	(0.31)	(1.26)	(1.57)
2020	19.19	0.26	1.46	1.72	(0.30)	(0.38)	(0.68)
2019	18.05	0.30	1.94	2.24	(0.26)	(0.84)	(1.10)
2018	18.02	0.28	0.92	1.20	(0.24)	(0.93)	(1.17)
R-5 shares
2022	27.09	0.24	(3.82)	(3.58)	(0.19)	(3.05)	(3.24)
2021	20.44	0.24	7.99	8.23	(0.32)	(1.26)	(1.58)
2020	19.38	0.29	1.47	1.76	(0.32)	(0.38)	(0.70)
2019	18.22	0.32	1.96	2.28	(0.28)	(0.84)	(1.12)
2018	18.18	0.30	0.93	1.23	(0.26)	(0.93)	(1.19)

(a)

Calculated based on average shares outstanding during the period.

(b)

C-48

Financial Highlights
Principal Funds, Inc.

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$19.78	(15.49)%	$11,720	1.03%	0.45%	3.7%
26.53	41.38	17,742	1.03	0.36	3.8
20.05	8.58	11,726	1.03	0.85	6.0
19.00	13.21	14,258	1.03	1.17	3.2
17.87	6.20	15,612	1.03	1.01	5.8

19.91	(15.21)	133,978	0.72	0.77	3.7
26.67	41.78	192,913	0.72	0.70	3.8
20.15	8.92	167,324	0.72	1.16	6.0
19.11	13.54	181,254	0.72	1.48	3.2
17.98	6.60	192,273	0.72	1.32	5.8

20.02	(15.06)(b)	105,613	0.53	0.96	3.7
26.78	42.09(b)	135,073	0.53	0.90	3.8
20.23	9.09	132,402	0.53	1.35	6.0
19.19	13.80	142,497	0.53	1.67	3.2
18.05	6.76	152,704	0.53	1.51	5.8

20.27	(14.94)	256,634	0.41	1.08	3.7
27.09	42.22	327,673	0.41	0.99	3.8
20.44	9.21	244,545	0.41	1.48	6.0
19.38	13.95	297,495	0.41	1.80	3.2
18.22	6.87	352,267	0.41	1.63	5.8

C-49

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
LARGECAP VALUE FUND III
Class J shares
2022	$20.70	$0.21	$(1.16)	$(0.95)	$(0.14)	$(1.60)	$(1.74)
2021	14.67	0.15	6.10	6.25	(0.22)	–	(0.22)
2020	16.98	0.21	(1.47)	(1.26)	(0.31)	(0.74)	(1.05)
2019	16.79	0.31	1.42	1.73	(0.23)	(1.31)	(1.54)
2018	16.93	0.23	0.74	0.97	(0.16)	(0.95)	(1.11)
Institutional shares
2022	21.07	0.26	(1.18)	(0.92)	(0.19)	(1.60)	(1.79)
2021	14.94	0.21	6.19	6.40	(0.27)	–	(0.27)
2020	17.27	0.26	(1.48)	(1.22)	(0.37)	(0.74)	(1.11)
2019	17.05	0.37	1.44	1.81	(0.28)	(1.31)	(1.59)
2018	17.17	0.29	0.75	1.04	(0.21)	(0.95)	(1.16)
R-1 shares
2022	20.93	0.10	(1.18)	(1.08)	(0.04)	(1.60)	(1.64)
2021	14.83	0.04	6.17	6.21	(0.11)	–	(0.11)
2020	17.13	0.13	(1.48)	(1.35)	(0.21)	(0.74)	(0.95)
2019	16.91	0.23	1.44	1.67	(0.14)	(1.31)	(1.45)
2018	17.05	0.13	0.75	0.88	(0.07)	(0.95)	(1.02)
R-3 shares
2022	22.13	0.16	(1.24)	(1.08)	(0.09)	(1.60)	(1.69)
2021	15.67	0.10	6.53	6.63	(0.17)	–	(0.17)
2020	18.07	0.19	(1.58)	(1.39)	(0.27)	(0.74)	(1.01)
2019	17.72	0.30	1.52	1.82	(0.16)	(1.31)	(1.47)
2018	17.80	0.20	0.77	0.97	(0.10)	(0.95)	(1.05)
R-4 shares
2022	21.04	0.19	(1.19)	(1.00)	(0.12)	(1.60)	(1.72)
2021	14.90	0.14	6.20	6.34	(0.20)	–	(0.20)
2020	17.23	0.21	(1.50)	(1.29)	(0.30)	(0.74)	(1.04)
2019	17.01	0.32	1.43	1.75	(0.22)	(1.31)	(1.53)
2018	17.13	0.22	0.76	0.98	(0.15)	(0.95)	(1.10)
R-5 shares
2022	21.22	0.22	(1.20)	(0.98)	(0.12)	(1.60)	(1.72)
2021	15.04	0.16	6.25	6.41	(0.23)	–	(0.23)
2020	17.38	0.23	(1.50)	(1.27)	(0.33)	(0.74)	(1.07)
2019	17.15	0.34	1.44	1.78	(0.24)	(1.31)	(1.55)
2018	17.26	0.25	0.76	1.01	(0.17)	(0.95)	(1.12)

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(d)

Excludes expense reimbursement from Manager and/or Distributor.

(e)

Reflects Manager's contractual expense limit.

C-50

Financial Highlights
Principal Funds, Inc.

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$18.01	(4.80)%(b)	$82,605	0.97%(c)	1.06%(d)	1.13%	42.6%
20.70	42.96(b)	84,871	0.98(c)	1.07(d)	0.82	46.3
14.67	(8.14)(b)	62,003	1.04(c)	1.14(d)	1.39	54.6
16.98	12.14(b)	74,483	1.06(c)	1.15(d)	1.97	51.5
16.79	5.76(b)	72,851	1.03(c)	1.12(d)	1.35	44.4

18.36	(4.56)	2,634,970	0.70(e)	–	1.39	42.6
21.07	43.27	3,457,999	0.70(e)	–	1.07	46.3
14.94	(7.82)	1,754,898	0.72(e)	–	1.72	54.6
17.27	12.53	2,065,317	0.72(e)	–	2.30	51.5
17.05	6.11	1,983,831	0.71(e)	–	1.66	44.4

18.21	(5.41)	4,060	1.57(e)	–	0.53	42.6
20.93	42.06	4,000	1.58(e)	–	0.22	46.3
14.83	(8.58)	2,889	1.59(e)	–	0.85	54.6
17.13	11.53	4,436	1.59(e)	–	1.44	51.5
16.91	5.15	4,455	1.59(e)	–	0.78	44.4

19.36	(5.11)	6,078	1.26(e)	–	0.83	42.6
22.13	42.56	7,133	1.27(e)	–	0.52	46.3
15.67	(8.36)	4,056	1.28(e)	–	1.16	54.6
18.07	11.90	5,695	1.28(e)	–	1.77	51.5
17.72	5.46	6,196	1.28(e)	–	1.09	44.4

18.32	(4.97)	1,934	1.07(e)	–	1.01	42.6
21.04	42.86	2,599	1.08(e)	–	0.72	46.3
14.90	(8.19)	1,866	1.09(e)	–	1.34	54.6
17.23	12.09	4,028	1.09(e)	–	1.98	51.5
17.01	5.71	4,910	1.09(e)	–	1.28	44.4

18.52	(4.81)	5,432	0.95(e)	–	1.15	42.6
21.22	42.94	8,722	0.96(e)	–	0.84	46.3
15.04	(8.05)	6,935	0.97(e)	–	1.47	54.6
17.38	12.22	10,455	0.97(e)	–	2.11	51.5
17.15	5.87	10,726	0.97(e)	–	1.41	44.4

C-51

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
MIDCAP FUND
Class A shares
2022	$42.87	$(0.09)	$(8.74)	$(8.83)	$–	$(3.33)	$(3.33)
2021	30.19	(0.19)	13.26	13.07	–	(0.39)	(0.39)
2020	30.15	(0.01)	1.44	1.43	(0.07)	(1.32)	(1.39)
2019	26.24	0.01	6.64	6.65	–	(2.74)	(2.74)
2018	26.90	(0.04)	0.29	0.25	–	(0.91)	(0.91)
Class C shares
2022	37.32	(0.31)	(7.49)	(7.80)	–	(3.33)	(3.33)
2021	26.51	(0.39)	11.59	11.20	–	(0.39)	(0.39)
2020	26.77	(0.19)	1.25	1.06	–	(1.32)	(1.32)
2019	23.77	(0.16)	5.90	5.74	–	(2.74)	(2.74)
2018	24.63	(0.22)	0.27	0.05	–	(0.91)	(0.91)
Class J shares
2022	41.18	(0.04)	(8.37)	(8.41)	–	(3.33)	(3.33)
2021	28.96	(0.12)	12.73	12.61	–	(0.39)	(0.39)
2020	28.99	0.03	1.38	1.41	(0.12)	(1.32)	(1.44)
2019	25.30	0.05	6.38	6.43	–	(2.74)	(2.74)
2018	25.94	–	0.27	0.27	–	(0.91)	(0.91)
Institutional shares
2022	44.26	–	(9.05)	(9.05)	–	(3.33)	(3.33)
2021	31.08	(0.09)	13.66	13.57	–	(0.39)	(0.39)
2020	31.00	0.06	1.49	1.55	(0.15)	(1.32)	(1.47)
2019	26.84	0.09	6.83	6.92	(0.02)	(2.74)	(2.76)
2018	27.44	0.04	0.28	0.32	(0.01)	(0.91)	(0.92)
R-1 shares
2022	38.77	(0.24)	(7.83)	(8.07)	–	(3.33)	(3.33)
2021	27.47	(0.35)	12.04	11.69	–	(0.39)	(0.39)
2020	27.63	(0.14)	1.30	1.16	–	(1.32)	(1.32)
2019	24.39	(0.11)	6.09	5.98	–	(2.74)	(2.74)
2018	25.20	(0.16)	0.26	0.10	–	(0.91)	(0.91)

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(d)

Excludes expense reimbursement from Manager and/or Distributor.

(e)

(f)

Reflects Manager's contractual expense limit.

C-52

Financial Highlights
Principal Funds, Inc.

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$30.71	(22.25)%(b)	$1,591,916	0.94%	–%	(0.27)%	14.1%
42.87	43.63(b)	2,198,683	0.93	–	(0.50)	12.4
30.19	4.83(b)	1,607,917	0.95	–	(0.04)	13.9
30.15	29.21(b)	1,645,317	0.98	–	0.05	13.6
26.24	0.86(b)	1,439,026	0.96	–	(0.14)	25.8

26.19	(22.84)(b)	40,097	1.72	–	(1.06)	14.1
37.32	42.62(b)	72,682	1.67	–	(1.21)	12.4
26.51	4.02(b)	158,906	1.69	–	(0.74)	13.9
26.77	28.32(b)	228,866	1.70	–	(0.67)	13.6
23.77	0.11(b)	248,197	1.69	–	(0.86)	25.8

29.44	(22.13)(b)	292,151	0.79(c)	0.81(d)	(0.12)	14.1
41.18	43.85(b)(e)	407,907	0.78(c)	0.80(d)	(0.34)	12.4
28.96	4.98(b)(e)	310,404	0.79(c)	0.82(d)	0.12	13.9
28.99	29.45(b)	325,426	0.83(c)	0.86(d)	0.21	13.6
25.30	0.98(b)	275,443	0.82(c)	0.85(d)	0.00	25.8

31.88	(22.05)(e)	10,110,818	0.67(f)	–	0.00	14.1
44.26	44.03(e)	15,790,247	0.67(f)	–	(0.24)	12.4
31.08	5.08	12,106,903	0.69(f)	–	0.21	13.9
31.00	29.61	12,070,133	0.70(f)	–	0.34	13.6
26.84	1.12	10,720,328	0.69(f)	–	0.13	25.8

27.37	(22.67)	83,862	1.46	–	(0.79)	14.1
38.77	42.92	116,642	1.46	–	(1.02)	12.4
27.47	4.27	89,600	1.46	–	(0.54)	13.9
27.63	28.61	98,489	1.47	–	(0.43)	13.6
24.39	0.31	81,543	1.47	–	(0.65)	25.8

C-53

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
MIDCAP FUND
R-3 shares
2022	$41.63	$(0.16)	$(8.46)	$(8.62)	$–	$(3.33)	$(3.33)
2021	29.38	(0.26)	12.90	12.64	–	(0.39)	(0.39)
2020	29.38	(0.06)	1.38	1.32	–	(1.32)	(1.32)
2019	25.68	(0.04)	6.48	6.44	–	(2.74)	(2.74)
2018	26.40	(0.09)	0.28	0.19	–	(0.91)	(0.91)
R-4 shares
2022	43.71	(0.11)	(8.91)	(9.02)	–	(3.33)	(3.33)
2021	30.78	(0.20)	13.52	13.32	–	(0.39)	(0.39)
2020	30.70	(0.01)	1.46	1.45	(0.05)	(1.32)	(1.37)
2019	26.66	0.01	6.77	6.78	–	(2.74)	(2.74)
2018	27.33	(0.04)	0.28	0.24	–	(0.91)	(0.91)
R-5 shares
2022	43.47	(0.06)	(8.87)	(8.93)	–	(3.33)	(3.33)
2021	30.57	(0.15)	13.44	13.29	–	(0.39)	(0.39)
2020	30.53	0.03	1.44	1.47	(0.11)	(1.32)	(1.43)
2019	26.50	0.05	6.72	6.77	–	(2.74)	(2.74)
2018	27.13	(0.01)	0.29	0.28	–	(0.91)	(0.91)
R-6 shares
2022	44.26	0.03	(9.06)	(9.03)	–	(3.33)	(3.33)
2021	31.05	(0.06)	13.66	13.60	–	(0.39)	(0.39)
2020	30.97	0.09	1.49	1.58	(0.18)	(1.32)	(1.50)
2019	26.83	0.13	6.80	6.93	(0.05)	(2.74)	(2.79)
2018	27.42	0.06	0.30	0.36	(0.04)	(0.91)	(0.95)

(a)

Calculated based on average shares outstanding during the period.

(b)

(c)

Reflects Manager's contractual expense limit.

C-54

Financial Highlights
Principal Funds, Inc.

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$29.68	(22.42)%	$44,432	1.15%	(0.49)%	14.1%
41.63	43.32(b)	73,376	1.15	(0.71)	12.4
29.38	4.61(b)	66,616	1.15	(0.22)	13.9
29.38	29.01	83,961	1.16	(0.14)	13.6
25.68	0.65	99,735	1.16	(0.33)	25.8

31.36	(22.25)	48,916	0.96	(0.30)	14.1
43.71	43.61	81,569	0.96	(0.52)	12.4
30.78	4.82	71,485	0.96	(0.04)	13.9
30.70	29.23	76,985	0.97	0.02	13.6
26.66	0.81	87,620	0.97	(0.14)	25.8

31.21	(22.16)	296,351	0.84	(0.17)	14.1
43.47	43.76(b)	427,065	0.84	(0.40)	12.4
30.57	4.93(b)	325,105	0.84	0.09	13.9
30.53	29.39	387,741	0.85	0.19	13.6
26.50	0.97	337,245	0.85	(0.02)	25.8

31.90	(21.98)	5,989,509	0.59(c)	0.09	14.1
44.26	44.13	5,220,374	0.59(c)	(0.15)	12.4
31.05	5.20	4,054,486	0.60(c)	0.29	13.9
30.97	29.71	2,431,236	0.60(c)	0.45	13.6
26.83	1.24	1,442,924	0.59(c)	0.21	25.8

C-55

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Distributions from Realized Gains	Total Dividends and Distributions	Net Asset Value, End of Period
MIDCAP GROWTH FUND
Class J shares
2022	$10.74	$(0.03)	$(2.79)	$(2.82)	$(2.15)	$(2.15)	$5.77
2021	8.39	(0.03)	3.63	3.60	(1.25)	(1.25)	10.74
2020	6.40	(0.04)	2.39	2.35	(0.36)	(0.36)	8.39
2019	7.05	(0.03)	0.49	0.46	(1.11)	(1.11)	6.40
2018	7.13	(0.03)	0.26	0.23	(0.31)	(0.31)	7.05
Institutional shares
2022	14.99	(0.03)	(4.12)	(4.15)	(2.15)	(2.15)	8.69
2021	11.30	(0.03)	4.97	4.94	(1.25)	(1.25)	14.99
2020	8.48	(0.04)	3.22	3.18	(0.36)	(0.36)	11.30
2019	8.92	(0.02)	0.69	0.67	(1.11)	(1.11)	8.48
2018	8.92	(0.02)	0.33	0.31	(0.31)	(0.31)	8.92
R-1 shares
2022	11.05	(0.08)	(2.88)	(2.96)	(2.15)	(2.15)	5.94
2021	8.66	(0.10)	3.74	3.64	(1.25)	(1.25)	11.05
2020	6.63	(0.09)	2.48	2.39	(0.36)	(0.36)	8.66
2019	7.29	(0.07)	0.52	0.45	(1.11)	(1.11)	6.63
2018	7.41	(0.08)	0.27	0.19	(0.31)	(0.31)	7.29
R-3 shares
2022	13.55	(0.07)	(3.67)	(3.74)	(2.15)	(2.15)	7.66
2021	10.35	(0.09)	4.54	4.45	(1.25)	(1.25)	13.55
2020	7.84	(0.07)	2.94	2.87	(0.36)	(0.36)	10.35
2019	8.37	(0.06)	0.64	0.58	(1.11)	(1.11)	7.84
2018	8.44	(0.07)	0.31	0.24	(0.31)	(0.31)	8.37
R-4 shares
2022	14.68	(0.06)	(4.02)	(4.08)	(2.15)	(2.15)	8.45
2021	11.12	(0.07)	4.88	4.81	(1.25)	(1.25)	14.68
2020	8.38	(0.06)	3.16	3.10	(0.36)	(0.36)	11.12
2019	8.85	(0.05)	0.69	0.64	(1.11)	(1.11)	8.38
2018	8.88	(0.05)	0.33	0.28	(0.31)	(0.31)	8.85
R-5 shares
2022	15.50	(0.05)	(4.28)	(4.33)	(2.15)	(2.15)	9.02
2021	11.67	(0.05)	5.13	5.08	(1.25)	(1.25)	15.50
2020	8.77	(0.05)	3.31	3.26	(0.36)	(0.36)	11.67
2019	9.19	(0.04)	0.73	0.69	(1.11)	(1.11)	8.77
2018	9.20	(0.04)	0.34	0.30	(0.31)	(0.31)	9.19

(a)

Calculated based on average shares outstanding during the period.

(b)

(c)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(d)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(e)

Excludes expense reimbursement from Manager and/or Distributor.

(f)

Reflects Manager's contractual expense limit.

C-56

Financial Highlights
Principal Funds, Inc.

Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


(31.59)%(b)(c)	$81,825	0.90%(d)	0.92%(e)	(0.42)%	165.5%
45.43(b)(c)	131,086	0.88(d)	0.90(e)	(0.35)	114.5
38.55(b)(c)	93,209	0.93(d)	0.96(e)	(0.56)	120.6
10.27(c)	71,129	0.97(d)	1.00(e)	(0.46)	104.6
3.26(c)	67,918	0.93(d)	0.96(e)	(0.44)	114.2

(31.50)(b)	125,149	0.75(f)	–	(0.26)	165.5
45.74(b)	149,191	0.75(f)	–	(0.24)	114.5
38.77	58,852	0.75(f)	–	(0.38)	120.6
10.51	52,324	0.75(f)	–	(0.25)	104.6
3.51	67,785	0.75(f)	–	(0.26)	114.2

(32.06)(b)	881	1.54	–	(1.05)	165.5
44.57(b)	1,740	1.54	–	(1.02)	114.5
37.62	1,789	1.55	–	(1.19)	120.6
9.71	1,286	1.55	–	(1.05)	104.6
2.58	1,391	1.55	–	(1.05)	114.2

(31.86)(b)	17,879	1.23	–	(0.75)	165.5
45.01(b)	22,672	1.23	–	(0.72)	114.5
38.08(b)	13,555	1.24	–	(0.87)	120.6
10.06	11,187	1.24	–	(0.74)	104.6
2.86	12,807	1.24	–	(0.75)	114.2

(31.72)(b)	4,709	1.04	–	(0.56)	165.5
45.27(b)	6,759	1.04	–	(0.52)	114.5
38.26	4,709	1.05	–	(0.68)	120.6
10.20	4,103	1.05	–	(0.55)	104.6
3.18	4,997	1.05	–	(0.54)	114.2

(31.64)(b)	5,778	0.92	–	(0.43)	165.5
45.47(b)	25,223	0.92	–	(0.39)	114.5
38.38	23,760	0.93	–	(0.55)	120.6
10.40	22,099	0.93	–	(0.43)	104.6
3.29	22,080	0.93	–	(0.44)	114.2

C-57

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Distributions from Realized Gains	Total Dividends and Distributions	Net Asset Value, End of Period
MIDCAP GROWTH FUND III
Class J shares
2022	$13.69	$(0.05)	$(2.92)	$(2.97)	$(3.43)	$(3.43)	$7.29
2021	10.46	(0.09)	4.12	4.03	(0.80)	(0.80)	13.69
2020	9.53	(0.06)	1.98	1.92	(0.99)	(0.99)	10.46
2019	9.35	(0.05)	1.37	1.32	(1.14)	(1.14)	9.53
2018	10.21	(0.06)	0.69	0.63	(1.49)	(1.49)	9.35
Institutional shares
2022	18.18	(0.04)	(4.12)	(4.16)	(3.43)	(3.43)	10.59
2021	13.63	(0.08)	5.43	5.35	(0.80)	(0.80)	18.18
2020	12.10	(0.04)	2.56	2.52	(0.99)	(0.99)	13.63
2019	11.50	(0.02)	1.76	1.74	(1.14)	(1.14)	12.10
2018	12.19	(0.03)	0.83	0.80	(1.49)	(1.49)	11.50
R-1 shares
2022	13.51	(0.10)	(2.86)	(2.96)	(3.43)	(3.43)	7.12
2021	10.39	(0.17)	4.09	3.92	(0.80)	(0.80)	13.51
2020	9.52	(0.11)	1.97	1.86	(0.99)	(0.99)	10.39
2019	9.39	(0.10)	1.37	1.27	(1.14)	(1.14)	9.52
2018	10.30	(0.11)	0.69	0.58	(1.49)	(1.49)	9.39
R-3 shares
2022	16.30	(0.10)	(3.60)	(3.70)	(3.43)	(3.43)	9.17
2021	12.36	(0.16)	4.90	4.74	(0.80)	(0.80)	16.30
2020	11.12	(0.10)	2.33	2.23	(0.99)	(0.99)	12.36
2019	10.72	(0.08)	1.62	1.54	(1.14)	(1.14)	11.12
2018	11.52	(0.09)	0.78	0.69	(1.49)	(1.49)	10.72
R-4 shares
2022	17.08	(0.09)	(3.81)	(3.90)	(3.43)	(3.43)	9.75
2021	12.90	(0.14)	5.12	4.98	(0.80)	(0.80)	17.08
2020	11.53	(0.08)	2.44	2.36	(0.99)	(0.99)	12.90
2019	11.06	(0.06)	1.67	1.61	(1.14)	(1.14)	11.53
2018	11.82	(0.07)	0.80	0.73	(1.49)	(1.49)	11.06
R-5 shares
2022	18.15	(0.08)	(4.10)	(4.18)	(3.43)	(3.43)	10.54
2021	13.65	(0.12)	5.42	5.30	(0.80)	(0.80)	18.15
2020	12.14	(0.07)	2.57	2.50	(0.99)	(0.99)	13.65
2019	11.56	(0.05)	1.77	1.72	(1.14)	(1.14)	12.14
2018	12.28	(0.06)	0.83	0.77	(1.49)	(1.49)	11.56

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(d)

Excludes expense reimbursement from Manager and/or Distributor.

(e)

Reflects Manager's contractual expense limit.

C-58

Financial Highlights
Principal Funds, Inc.

Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


(27.12)%(b)	$38,816	1.14%(c)	1.18%(d)	(0.65)%	44.0%
39.96(b)	59,567	1.12(c)	1.17(d)	(0.77)	34.3
21.76(b)	45,753	1.19(c)	1.25(d)	(0.65)	50.7
17.48(b)	41,366	1.27(c)	1.38(d)	(0.55)	43.2
6.61(b)	36,912	1.24(c)	1.35(d)	(0.56)	44.3

(26.94)	1,120,495	0.85(e)	–	(0.35)	44.0
40.37	1,165,856	0.86(e)	–	(0.50)	34.3
22.12	1,127,871	0.87(e)	–	(0.33)	50.7
17.93	1,032,306	0.91(e)	–	(0.19)	43.2
6.97	961,018	0.91(e)	–	(0.22)	44.3

(27.51)	1,248	1.73(e)	–	(1.24)	44.0
39.12	1,781	1.74(e)	–	(1.38)	34.3
21.09	1,430	1.75(e)	–	(1.21)	50.7
16.80	1,438	1.78(e)	–	(1.06)	43.2
6.00	1,665	1.78(e)	–	(1.10)	44.3

(27.30)	3,568	1.42(e)	–	(0.93)	44.0
39.54	5,149	1.43(e)	–	(1.09)	34.3
21.41	2,643	1.44(e)	–	(0.89)	50.7
17.28	2,913	1.47(e)	–	(0.75)	43.2
6.35	3,424	1.47(e)	–	(0.78)	44.3

(27.21)	1,379	1.23(e)	–	(0.75)	44.0
39.76	2,640	1.24(e)	–	(0.89)	34.3
21.80	2,223	1.25(e)	–	(0.69)	50.7
17.39	3,004	1.28(e)	–	(0.57)	43.2
6.55	3,658	1.28(e)	–	(0.60)	44.3

(27.13)	2,520	1.11(e)	–	(0.61)	44.0
39.92	5,903	1.12(e)	–	(0.76)	34.3
21.87	6,505	1.13(e)	–	(0.59)	50.7
17.62	5,527	1.16(e)	–	(0.44)	43.2
6.64	6,408	1.16(e)	–	(0.49)	44.3

C-59

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
MIDCAP S&P 400 INDEX FUND
Class J shares
2022	$25.15	$0.24	$(3.04)	$(2.80)	$(0.25)	$(1.79)	$(2.04)
2021	18.23	0.26	8.18	8.44	(0.21)	(1.31)	(1.52)
2020	19.65	0.20	(0.41)	(0.21)	(0.26)	(0.95)	(1.21)
2019	20.17	0.23	1.15	1.38	(0.22)	(1.68)	(1.90)
2018	21.53	0.25	(0.08)	0.17	(0.21)	(1.32)	(1.53)
Institutional shares
2022	26.06	0.28	(3.16)	(2.88)	(0.28)	(1.79)	(2.07)
2021	18.84	0.31	8.46	8.77	(0.24)	(1.31)	(1.55)
2020	20.28	0.25	(0.44)	(0.19)	(0.30)	(0.95)	(1.25)
2019	20.76	0.28	1.18	1.46	(0.26)	(1.68)	(1.94)
2018	22.11	0.30	(0.08)	0.22	(0.25)	(1.32)	(1.57)
R-1 shares
2022	25.71	0.10	(3.12)	(3.02)	(0.09)	(1.79)	(1.88)
2021	18.62	0.11	8.37	8.48	(0.08)	(1.31)	(1.39)
2020	19.99	0.10	(0.44)	(0.34)	(0.08)	(0.95)	(1.03)
2019	20.45	0.12	1.18	1.30	(0.08)	(1.68)	(1.76)
2018	21.81	0.11	(0.07)	0.04	(0.08)	(1.32)	(1.40)
R-3 shares
2022	26.57	0.18	(3.24)	(3.06)	(0.15)	(1.79)	(1.94)
2021	19.19	0.19	8.64	8.83	(0.14)	(1.31)	(1.45)
2020	20.63	0.16	(0.46)	(0.30)	(0.19)	(0.95)	(1.14)
2019	21.05	0.19	1.21	1.40	(0.14)	(1.68)	(1.82)
2018	22.40	0.19	(0.08)	0.11	(0.14)	(1.32)	(1.46)
R-4 shares
2022	26.72	0.22	(3.25)	(3.03)	(0.20)	(1.79)	(1.99)
2021	19.29	0.23	8.68	8.91	(0.17)	(1.31)	(1.48)
2020	20.73	0.19	(0.45)	(0.26)	(0.23)	(0.95)	(1.18)
2019	21.14	0.23	1.22	1.45	(0.18)	(1.68)	(1.86)
2018	22.49	0.23	(0.08)	0.15	(0.18)	(1.32)	(1.50)
R-5 shares
2022	27.00	0.25	(3.28)	(3.03)	(0.23)	(1.79)	(2.02)
2021	19.48	0.27	8.76	9.03	(0.20)	(1.31)	(1.51)
2020	20.91	0.22	(0.45)	(0.23)	(0.25)	(0.95)	(1.20)
2019	21.32	0.25	1.23	1.48	(0.21)	(1.68)	(1.89)
2018	22.67	0.26	(0.08)	0.18	(0.21)	(1.32)	(1.53)
R-6 shares
2022	26.05	0.30	(3.15)	(2.85)	(0.30)	(1.79)	(2.09)
2021	18.83	0.32	8.46	8.78	(0.25)	(1.31)	(1.56)
2020	20.27	0.25	(0.43)	(0.18)	(0.31)	(0.95)	(1.26)
2019	20.74	0.29	1.19	1.48	(0.27)	(1.68)	(1.95)
2018	22.09	0.31	(0.08)	0.23	(0.26)	(1.32)	(1.58)

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(d)

Excludes expense reimbursement from Manager and/or Distributor.

(e)

Reflects Manager's contractual expense limit.

(f)

C-60

Financial Highlights
Principal Funds, Inc.

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$20.31	(11.85)%(b)	$127,212	0.39%(c)	0.41%(d)	1.12%	20.9%
25.15	48.22(b)	151,143	0.39(c)	0.41(d)	1.11	19.2
18.23	(1.47)(b)	104,139	0.41(c)	0.44(d)	1.15	23.6
19.65	8.64(b)	121,032	0.43(c)	0.46(d)	1.23	16.7
20.17	0.59(b)	120,967	0.39(c)	0.42(d)	1.15	14.3

21.11	(11.73)	188,790	0.23	–	1.27	20.9
26.06	48.45	251,222	0.22	–	1.27	19.2
18.84	(1.35)	187,318	0.23(e)	–	1.34	23.6
20.28	8.84	347,631	0.23(e)	–	1.43	16.7
20.76	0.81	422,159	0.20(e)	–	1.35	14.3

20.81	(12.45)(f)	5,539	1.04	–	0.47	20.9
25.71	47.28(f)	6,584	1.04	–	0.45	19.2
18.62	(2.07)	5,032	1.04	–	0.52	23.6
19.99	7.94	7,771	1.04	–	0.62	16.7
20.45	(0.03)	10,070	1.04	–	0.51	14.3

21.57	(12.15)	67,797	0.73	–	0.77	20.9
26.57	47.71	88,428	0.73	–	0.76	19.2
19.19	(1.83)	64,732	0.73	–	0.83	23.6
20.63	8.31	84,108	0.73	–	0.93	16.7
21.05	0.29	93,374	0.73	–	0.83	14.3

21.70	(12.00)	42,003	0.54	–	0.97	20.9
26.72	47.98	53,233	0.54	–	0.95	19.2
19.29	(1.62)	43,726	0.54	–	1.02	23.6
20.73	8.52	58,888	0.54	–	1.12	16.7
21.14	0.47	66,297	0.54	–	1.01	14.3

21.95	(11.87)	95,818	0.42	–	1.08	20.9
27.00	48.14	122,169	0.42	–	1.08	19.2
19.48	(1.46)	102,868	0.42	–	1.14	23.6
20.91	8.63	137,633	0.42	–	1.25	16.7
21.32	0.58	183,944	0.42	–	1.13	14.3

21.11	(11.64)	712,153	0.16(e)	–	1.36	20.9
26.05	48.58	740,456	0.16(e)	–	1.34	19.2
18.83	(1.28)	479,248	0.16(e)	–	1.38	23.6
20.27	8.94	531,623	0.17(e)	–	1.48	16.7
20.74	0.85	405,426	0.16(e)	–	1.38	14.3

C-61

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
MIDCAP VALUE FUND I
Class A shares
2022	$18.93	$0.18	$(0.92)	$(0.74)	$(0.16)	$(1.80)	$(1.96)
2021	12.76	0.16	6.14	6.30	(0.13)	–	(0.13)
2020	14.27	0.12	(0.95)	(0.83)	(0.11)	(0.57)	(0.68)
2019(d)	13.56	0.04	0.67	0.71	–	–	–
Class J shares
2022	18.74	0.21	(0.90)	(0.69)	(0.19)	(1.80)	(1.99)
2021	12.65	0.19	6.08	6.27	(0.18)	–	(0.18)
2020	14.13	0.16	(0.94)	(0.78)	(0.13)	(0.57)	(0.70)
2019	14.44	0.13	1.09	1.22	(0.09)	(1.44)	(1.53)
2018	15.31	0.10	0.03	0.13	(0.07)	(0.93)	(1.00)
Institutional shares
2022	18.98	0.25	(0.93)	(0.68)	(0.21)	(1.80)	(2.01)
2021	12.81	0.22	6.16	6.38	(0.21)	–	(0.21)
2020	14.30	0.19	(0.95)	(0.76)	(0.16)	(0.57)	(0.73)
2019	14.62	0.18	1.07	1.25	(0.13)	(1.44)	(1.57)
2018	15.48	0.15	0.03	0.18	(0.11)	(0.93)	(1.04)
R-1 shares
2022	18.04	0.10	(0.87)	(0.77)	(0.08)	(1.80)	(1.88)
2021	12.20	0.08	5.86	5.94	(0.10)	–	(0.10)
2020	13.63	0.09	(0.92)	(0.83)	(0.03)	(0.57)	(0.60)
2019	13.96	0.06	1.05	1.11	–	(1.44)	(1.44)
2018	14.84	0.01	0.04	0.05	–	(0.93)	(0.93)

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Reflects Manager's contractual expense limit.

(d)

Period from April 2, 2019, date operations commenced, through October 31, 2019.

(e)

Total return amounts have not been annualized.

(f)

Computed on an annualized basis.

(g)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(h)

Excludes expense reimbursement from Manager and/or Distributor.

(i)

C-62

Financial Highlights
Principal Funds, Inc.

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$16.23	(4.18)%(b)	$46,917	1.09%(c)	–%	1.06%	51.1%
18.93	49.69(b)	42,833	1.10(c)	–	0.90	53.5
12.76	(6.32)(b)	23,187	1.27(c)	–	0.94	65.9
14.27	5.24(b)(e)	26,083	1.38(c)(f)	–	0.51(f)	60.0

16.06	(3.97)(b)	180,636	0.88(g)	0.92(h)	1.27	51.1
18.74	49.98(b)	190,633	0.89(g)	0.93(h)	1.11	53.5
12.65	(6.00)(b)	129,288	0.94(g)	0.99(h)	1.28	65.9
14.13	10.55(b)	153,602	1.06(g)	1.13(h)	0.95	60.0
14.44	0.67(b)	65,310	1.20(g)	1.35(h)	0.65	61.1

16.29	(3.82)	1,106,800	0.69(c)	–	1.49	51.1
18.98	50.23	349,246	0.72(c)	–	1.29	53.5
12.81	(5.82)	233,785	0.72(c)	–	1.49	65.9
14.30	10.73	279,888	0.85(c)	–	1.30	60.0
14.62	0.99	824,306	0.90(c)	–	0.95	61.1

15.39	(4.62)(i)	2,503	1.50(c)	–	0.65	51.1
18.04	49.03(i)	2,687	1.51(c)	–	0.51	53.5
12.20	(6.53)	2,079	1.51(c)	–	0.70	65.9
13.63	9.97	2,775	1.61(c)	–	0.43	60.0
13.96	0.14	3,190	1.76(c)	–	0.08	61.1

C-63

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
MIDCAP VALUE FUND I
R-3 shares
2022	$18.65	$0.16	$(0.90)	$(0.74)	$(0.13)	$(1.80)	$(1.93)
2021	12.60	0.14	6.05	6.19	(0.14)	–	(0.14)
2020	14.08	0.13	(0.94)	(0.81)	(0.10)	(0.57)	(0.67)
2019	14.37	0.10	1.09	1.19	(0.04)	(1.44)	(1.48)
2018	15.22	0.06	0.04	0.10	(0.02)	(0.93)	(0.95)
R-4 shares
2022	18.72	0.19	(0.91)	(0.72)	(0.16)	(1.80)	(1.96)
2021	12.64	0.17	6.08	6.25	(0.17)	–	(0.17)
2020	14.12	0.15	(0.93)	(0.78)	(0.13)	(0.57)	(0.70)
2019	14.42	0.13	1.08	1.21	(0.07)	(1.44)	(1.51)
2018	15.27	0.09	0.03	0.12	(0.04)	(0.93)	(0.97)
R-5 shares
2022	18.85	0.21	(0.91)	(0.70)	(0.19)	(1.80)	(1.99)
2021	12.72	0.19	6.12	6.31	(0.18)	–	(0.18)
2020	14.20	0.17	(0.94)	(0.77)	(0.14)	(0.57)	(0.71)
2019	14.50	0.14	1.09	1.23	(0.09)	(1.44)	(1.53)
2018	15.36	0.11	0.03	0.14	(0.07)	(0.93)	(1.00)
R-6 shares
2022	19.02	0.26	(0.92)	(0.66)	(0.23)	(1.80)	(2.03)
2021	12.84	0.24	6.16	6.40	(0.22)	–	(0.22)
2020	14.33	0.20	(0.95)	(0.75)	(0.17)	(0.57)	(0.74)
2019(d)	13.56	0.11	0.66	0.77	–	–	–

(a)

Calculated based on average shares outstanding during the period.

(b)

Reflects Manager's contractual expense limit.

(c)

(d)

Period from April 2, 2019, date operations commenced, through October 31, 2019.

(e)

Total return amounts have not been annualized.

(f)

Computed on an annualized basis.

C-64

Financial Highlights
Principal Funds, Inc.

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$15.98	(4.26)%	$11,582	1.19%(b)	0.95%	51.1%
18.65	49.47	13,975	1.20(b)	0.81	53.5
12.60	(6.24)	10,736	1.20(b)	1.01	65.9
14.08	10.33	13,305	1.30(b)	0.74	60.0
14.37	0.45	9,098	1.45(b)	0.41	61.1

16.04	(4.11)	9,611	1.00(b)	1.15	51.1
18.72	49.77	12,292	1.01(b)	1.00	53.5
12.64	(6.04)	9,285	1.01(b)	1.21	65.9
14.12	10.49	13,340	1.11(b)	0.93	60.0
14.42	0.64	8,590	1.26(b)	0.60	61.1

16.16	(4.00)	28,272	0.88(b)	1.27	51.1
18.85	50.02	29,746	0.89(b)	1.12	53.5
12.72	(5.96)	21,576	0.89(b)	1.33	65.9
14.20	10.63	29,270	0.99(b)	1.06	60.0
14.50	0.73	27,630	1.14(b)	0.70	61.1

16.33	(3.78)(c)	2,249,267	0.62(b)	1.53	51.1
19.02	50.41(c)	2,312,305	0.63(b)	1.38	53.5
12.84	(5.73)	1,696,270	0.64(b)	1.58	65.9
14.33	5.68(e)	1,980,217	0.64(b)(f)	1.33(f)	60.0

C-65

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Total From Investment Operations	Dividends from Net Investment Income	Total Dividends and Distributions	Net Asset Value, End of Period	Total Return
MONEY MARKET FUND
Class A shares
2022	$1.00	$0.01	$0.01	$(0.01)	$(0.01)	$1.00	0.63%(b)
2021	1.00	–	–	–	–	1.00	0.00(b)
2020	1.00	0.01	0.01	(0.01)	(0.01)	1.00	0.61(b)
2019	1.00	0.02	0.02	(0.02)	(0.02)	1.00	1.98(b)
2018	1.00	0.01	0.01	(0.01)	(0.01)	1.00	1.36(b)
Class J shares
2022	1.00	0.01	0.01	(0.01)	(0.01)	1.00	0.64(b)
2021	1.00	–	–	–	–	1.00	0.00(b)
2020	1.00	0.01	0.01	(0.01)	(0.01)	1.00	0.58(b)
2019	1.00	0.02	0.02	(0.02)	(0.02)	1.00	1.88(b)
2018	1.00	0.01	0.01	(0.01)	(0.01)	1.00	1.29(b)

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Reflects Manager's contractual and/or voluntary expense limit.

(d)

Excludes expense reimbursement from Manager.

(e)

Reflects Manager's contractual and voluntary expense limit and/or Distributor's contractual distribution fee limit.

(f)

Excludes expense reimbursement from Manager and/or Distributor.

C-66

Financial Highlights
Principal Funds, Inc.

Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets


$352,832	0.50%(c)	0.54%(d)	0.67%
293,949	0.12(c)	0.55(d)	0.00
342,008	0.39(c)	0.53(d)	0.54
242,127	0.50(c)	0.60(d)	1.94
231,844	0.52(c)	0.63(d)	1.34

625,829	0.49(e)	0.64(f)	0.76
411,033	0.12(e)	0.66(f)	0.00
455,689	0.41(e)	0.68(f)	0.49
278,464	0.60(e)	0.75(f)	1.84
257,738	0.59(e)	0.74(f)	1.28

C-67

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
OVERSEAS FUND
Institutional shares
2022	$11.44	$0.26	$(1.98)	$(1.72)	$(0.28)	$(0.54)	$(0.82)
2021	8.12	0.20	3.31	3.51	(0.19)	–	(0.19)
2020	9.69	0.18	(1.44)	(1.26)	(0.31)	–	(0.31)
2019	10.12	0.28	0.14	0.42	(0.24)	(0.61)	(0.85)
2018	11.53	0.25	(1.30)	(1.05)	(0.21)	(0.15)	(0.36)
R-1 shares
2022	11.29	0.20	(1.99)	(1.79)	(0.19)	(0.54)	(0.73)
2021	8.02	0.10	3.28	3.38	(0.11)	–	(0.11)
2020	9.58	0.10	(1.44)	(1.34)	(0.22)	–	(0.22)
2019	10.01	0.20	0.14	0.34	(0.16)	(0.61)	(0.77)
2018	11.38	0.15	(1.29)	(1.14)	(0.08)	(0.15)	(0.23)
R-3 shares
2022	11.30	0.20	(1.96)	(1.76)	(0.22)	(0.54)	(0.76)
2021	8.02	0.14	3.27	3.41	(0.13)	–	(0.13)
2020	9.58	0.13	(1.43)	(1.30)	(0.26)	–	(0.26)
2019	10.00	0.23	0.14	0.37	(0.18)	(0.61)	(0.79)
2018	11.41	0.19	(1.29)	(1.10)	(0.16)	(0.15)	(0.31)
R-4 shares
2022	11.36	0.23	(1.98)	(1.75)	(0.23)	(0.54)	(0.77)
2021	8.07	0.16	3.29	3.45	(0.16)	–	(0.16)
2020	9.64	0.15	(1.45)	(1.30)	(0.27)	–	(0.27)
2019	10.06	0.24	0.16	0.40	(0.21)	(0.61)	(0.82)
2018	11.46	0.21	(1.30)	(1.09)	(0.16)	(0.15)	(0.31)

(a)

Calculated based on average shares outstanding during the period.

(b)

Reflects Manager's contractual expense limit.

C-68

Financial Highlights
Principal Funds, Inc.

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$8.90	(16.05)%	$1,703,672	0.97%(b)	2.56%	62.2%
11.44	43.48	2,927,281	0.94(b)	1.79	54.8
8.12	(13.63)	2,314,374	0.96(b)	2.07	79.6
9.69	5.38	2,580,956	1.04(b)	2.95	47.8
10.12	(9.44)	2,919,837	1.02(b)	2.21	45.9

8.77	(16.76)	32	1.83(b)	2.00	62.2
11.29	42.33	20	1.80(b)	0.94	54.8
8.02	(14.40)	13	1.82(b)	1.17	79.6
9.58	4.40	15	1.91(b)	2.11	47.8
10.01	(10.22)	16	1.89(b)	1.38	45.9

8.78	(16.52)	464	1.52(b)	2.01	62.2
11.30	42.73	604	1.49(b)	1.29	54.8
8.02	(14.13)	407	1.51(b)	1.52	79.6
9.58	4.82	499	1.60(b)	2.48	47.8
10.00	(9.95)	521	1.58(b)	1.67	45.9

8.84	(16.30)	545	1.33(b)	2.27	62.2
11.36	42.95	608	1.30(b)	1.44	54.8
8.07	(13.99)	481	1.32(b)	1.70	79.6
9.64	5.05	530	1.41(b)	2.57	47.8
10.06	(9.79)	477	1.39(b)	1.88	45.9

C-69

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
PRINCIPAL CAPITAL APPRECIATION FUND
Class A shares
2022	$68.28	$0.38	$(8.95)	$(8.57)	$(0.27)	$(5.85)	$(6.12)
2021	51.30	0.36	19.57	19.93	(0.43)	(2.52)	(2.95)
2020	50.56	0.42	4.45	4.87	(0.46)	(3.67)	(4.13)
2019	63.24	0.53	5.65	6.18	(0.66)	(18.20)	(18.86)
2018	63.68	0.84	3.47	4.31	(0.62)	(4.13)	(4.75)
Class C shares
2022	42.16	(0.07)	(5.23)	(5.30)	(0.01)	(5.85)	(5.86)
2021	32.74	(0.08)	12.24	12.16	(0.22)	(2.52)	(2.74)
2020	33.73	0.01	2.90	2.91	(0.23)	(3.67)	(3.90)
2019	48.95	0.09	3.34	3.43	(0.45)	(18.20)	(18.65)
2018	50.38	0.24	2.75	2.99	(0.29)	(4.13)	(4.42)
Institutional shares
2022	70.67	0.57	(9.26)	(8.69)	(0.46)	(5.85)	(6.31)
2021	53.00	0.57	20.22	20.79	(0.60)	(2.52)	(3.12)
2020	52.09	0.61	4.60	5.21	(0.63)	(3.67)	(4.30)
2019	64.54	0.74	5.84	6.58	(0.83)	(18.20)	(19.03)
2018	64.86	1.00	3.63	4.63	(0.82)	(4.13)	(4.95)
R-1 shares
2022	68.09	0.06	(8.95)	(8.89)	–	(5.85)	(5.85)
2021	51.14	0.04	19.53	19.57	(0.10)	(2.52)	(2.62)
2020	50.41	0.16	4.43	4.59	(0.19)	(3.67)	(3.86)
2019	63.08	0.29	5.65	5.94	(0.41)	(18.20)	(18.61)
2018	63.50	0.49	3.49	3.98	(0.27)	(4.13)	(4.40)
R-3 shares
2022	68.37	0.24	(8.98)	(8.74)	(0.17)	(5.85)	(6.02)
2021	51.37	0.21	19.62	19.83	(0.31)	(2.52)	(2.83)
2020	50.62	0.31	4.45	4.76	(0.34)	(3.67)	(4.01)
2019	63.23	0.44	5.66	6.10	(0.51)	(18.20)	(18.71)
2018	63.61	0.67	3.51	4.18	(0.43)	(4.13)	(4.56)
R-4 shares
2022	69.31	0.36	(9.11)	(8.75)	(0.22)	(5.85)	(6.07)
2021	52.03	0.36	19.84	20.20	(0.40)	(2.52)	(2.92)
2020	51.23	0.41	4.51	4.92	(0.45)	(3.67)	(4.12)
2019	63.79	0.54	5.74	6.28	(0.64)	(18.20)	(18.84)
2018	64.18	0.83	3.51	4.34	(0.60)	(4.13)	(4.73)
R-5 shares
2022	69.77	0.43	(9.17)	(8.74)	(0.30)	(5.85)	(6.15)
2021	52.35	0.42	19.98	20.40	(0.46)	(2.52)	(2.98)
2020	51.51	0.47	4.54	5.01	(0.50)	(3.67)	(4.17)
2019	64.05	0.60	5.76	6.36	(0.70)	(18.20)	(18.90)
2018	64.40	0.90	3.53	4.43	(0.65)	(4.13)	(4.78)

(a)

Calculated based on average shares outstanding during the period.

(b)

(c)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(d)

Reflects Manager's contractual expense limit.

C-70

Financial Highlights
Principal Funds, Inc.

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$53.59	(13.77)%(b)(c)	$1,037,510	0.77%	0.66%	49.5%
68.28	40.26(b)(c)	1,288,915	0.80	0.59	29.9
51.30	10.04(b)(c)	987,963	0.83	0.86	35.4
50.56	17.38(c)	993,244	0.86	1.10	35.4
63.24	6.95(c)	950,601	0.83	1.30	36.3

31.00	(14.52)(c)	22,051	1.63	(0.20)	49.5
42.16	39.11(c)	33,930	1.64	(0.22)	29.9
32.74	9.10(c)	35,053	1.67	0.03	35.4
33.73	16.38(c)	39,154	1.70	0.28	35.4
48.95	6.09(c)	51,955	1.65	0.48	36.3

55.67	(13.51)(b)	2,022,614	0.46	0.97	49.5
70.67	40.71(b)	961,957	0.49(d)	0.90	29.9
53.00	10.42	717,175	0.47(d)	1.21	35.4
52.09	17.85	683,345	0.47(d)	1.49	35.4
64.54	7.35	683,933	0.47(d)	1.53	36.3

53.35	(14.25)(b)	1,343	1.32	0.11	49.5
68.09	39.51(b)	1,653	1.35	0.06	29.9
51.14	9.44	1,653	1.37	0.33	35.4
50.41	16.78	1,828	1.37	0.61	35.4
63.08	6.40	2,381	1.35	0.76	36.3

53.61	(13.98)	19,275	1.01	0.42	49.5
68.37	39.94	20,459	1.04	0.35	29.9
51.37	9.76	14,150	1.06	0.64	35.4
50.62	17.15	16,017	1.06	0.91	35.4
63.23	6.74	17,054	1.04	1.04	36.3

54.49	(13.83)(b)	8,365	0.82	0.61	49.5
69.31	40.22(b)	10,333	0.85	0.59	29.9
52.03	9.98	13,402	0.87	0.84	35.4
51.23	17.38	16,878	0.87	1.10	35.4
63.79	6.94	17,986	0.85	1.29	36.3

54.88	(13.72)	27,542	0.70	0.73	49.5
69.77	40.37	33,672	0.73	0.68	29.9
52.35	10.11	32,567	0.75	0.95	35.4
51.51	17.51	34,786	0.75	1.22	35.4
64.05	7.07	35,915	0.73	1.39	36.3

C-71

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
PRINCIPAL LIFETIME STRATEGIC INCOME FUND
Class A shares
2022	$13.24	$0.31	$(2.18)	$(1.87)	$(0.31)	$(0.60)	$(0.91)
2021	12.51	0.22	0.95	1.17	(0.22)	(0.22)	(0.44)
2020	12.43	0.25	0.43	0.68	(0.27)	(0.33)	(0.60)
2019	12.19	0.32	0.72	1.04	(0.30)	(0.50)	(0.80)
2018	12.87	0.30	(0.45)	(0.15)	(0.30)	(0.23)	(0.53)
Class J shares
2022	13.04	0.32	(2.15)	(1.83)	(0.32)	(0.60)	(0.92)
2021	12.33	0.23	0.94	1.17	(0.24)	(0.22)	(0.46)
2020	12.26	0.26	0.43	0.69	(0.29)	(0.33)	(0.62)
2019	12.03	0.33	0.72	1.05	(0.32)	(0.50)	(0.82)
2018	12.73	0.32	(0.46)	(0.14)	(0.33)	(0.23)	(0.56)
Institutional shares
2022	13.13	0.36	(2.17)	(1.81)	(0.35)	(0.60)	(0.95)
2021	12.41	0.26	0.94	1.20	(0.26)	(0.22)	(0.48)
2020	12.34	0.28	0.44	0.72	(0.32)	(0.33)	(0.65)
2019	12.11	0.36	0.72	1.08	(0.35)	(0.50)	(0.85)
2018	12.80	0.35	(0.46)	(0.11)	(0.35)	(0.23)	(0.58)
R-1 shares
2022	13.11	0.25	(2.17)	(1.92)	(0.22)	(0.60)	(0.82)
2021	12.40	0.16	0.92	1.08	(0.15)	(0.22)	(0.37)
2020	12.32	0.19	0.43	0.62	(0.21)	(0.33)	(0.54)
2019	12.08	0.25	0.73	0.98	(0.24)	(0.50)	(0.74)
2018	12.77	0.23	(0.45)	(0.22)	(0.24)	(0.23)	(0.47)
R-3 shares
2022	12.99	0.29	(2.16)	(1.87)	(0.27)	(0.60)	(0.87)
2021	12.27	0.19	0.94	1.13	(0.19)	(0.22)	(0.41)
2020	12.20	0.22	0.42	0.64	(0.24)	(0.33)	(0.57)
2019	11.97	0.30	0.71	1.01	(0.28)	(0.50)	(0.78)
2018	12.66	0.28	(0.46)	(0.18)	(0.28)	(0.23)	(0.51)
R-4 shares
2022	13.03	0.32	(2.16)	(1.84)	(0.30)	(0.60)	(0.90)
2021	12.32	0.21	0.94	1.15	(0.22)	(0.22)	(0.44)
2020	12.24	0.24	0.43	0.67	(0.26)	(0.33)	(0.59)
2019	12.00	0.31	0.73	1.04	(0.30)	(0.50)	(0.80)
2018	12.69	0.31	(0.47)	(0.16)	(0.30)	(0.23)	(0.53)
R-5 shares
2022	13.12	0.33	(2.18)	(1.85)	(0.31)	(0.60)	(0.91)
2021	12.39	0.24	0.94	1.18	(0.23)	(0.22)	(0.45)
2020	12.32	0.26	0.43	0.69	(0.29)	(0.33)	(0.62)
2019	12.09	0.33	0.72	1.05	(0.32)	(0.50)	(0.82)
2018	12.77	0.32	(0.45)	(0.13)	(0.32)	(0.23)	(0.55)

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Reflects Manager's contractual expense limit.

(d)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(e)

Excludes expense reimbursement from Manager and/or Distributor.

C-72

Financial Highlights
Principal Funds, Inc.

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$10.46	(15.14)%(b)	$16,425	0.38%(c)	–%	2.72%	33.6%
13.24	9.45(b)	19,902	0.38(c)	–	1.66	35.0
12.51	5.70(b)	16,214	0.38(c)	–	2.01	31.0
12.43	9.31(b)	16,283	0.38(c)	–	2.63	44.8
12.19	(1.23)(b)	16,585	0.38(c)	–	2.36	22.7

10.29	(15.02)(b)	58,048	0.23(d)	0.25(e)	2.87	33.6
13.04	9.61(b)	71,811	0.22(d)	0.24(e)	1.84	35.0
12.33	5.87(b)	65,404	0.22(d)	0.25(e)	2.18	31.0
12.26	9.52(b)	67,084	0.24(d)	0.27(e)	2.75	44.8
12.03	(1.17)(b)	67,011	0.22(d)	0.25(e)	2.56	22.7

10.37	(14.82)	237,065	0.02	–	3.12	33.6
13.13	9.83	337,718	0.02	–	2.04	35.0
12.41	6.06	313,363	0.02	–	2.35	31.0
12.34	9.71	288,470	0.03	–	3.00	44.8
12.11	(0.88)	300,145	0.02	–	2.85	22.7

10.37	(15.58)	1,686	0.89	–	2.21	33.6
13.11	8.82	2,173	0.89	–	1.22	35.0
12.40	5.22	2,298	0.89	–	1.55	31.0
12.32	8.74	2,935	0.89	–	2.12	44.8
12.08	(1.77)	3,303	0.89	–	1.86	22.7

10.25	(15.36)	7,731	0.58	–	2.56	33.6
12.99	9.31	10,552	0.58	–	1.51	35.0
12.27	5.45	11,439	0.58	–	1.86	31.0
12.20	9.13	13,611	0.58	–	2.59	44.8
11.97	(1.49)	18,843	0.58	–	2.24	22.7

10.29	(15.12)	3,546	0.39	–	2.81	33.6
13.03	9.41	5,143	0.39	–	1.67	35.0
12.32	5.69	5,101	0.39	–	2.03	31.0
12.24	9.40	5,513	0.39	–	2.60	44.8
12.00	(1.31)	7,847	0.39	–	2.49	22.7

10.36	(15.07)	10,147	0.27	–	2.90	33.6
13.12	9.64	13,279	0.27	–	1.84	35.0
12.39	5.79	16,430	0.27	–	2.14	31.0
12.32	9.42	19,181	0.27	–	2.75	44.8
12.09	(1.10)	19,665	0.27	–	2.57	22.7

C-73

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
PRINCIPAL LIFETIME 2010 FUND
Class A shares
2022	$14.05	$0.34	$(2.33)	$(1.99)	$(0.30)	$(0.64)	$(0.94)
2021	13.36	0.22	1.34	1.56	(0.23)	(0.64)	(0.87)
2020	13.48	0.26	0.48	0.74	(0.29)	(0.57)	(0.86)
2019	13.33	0.33	0.81	1.14	(0.31)	(0.68)	(0.99)
2018	14.07	0.33	(0.45)	(0.12)	(0.32)	(0.30)	(0.62)
Class J shares
2022	13.88	0.36	(2.29)	(1.93)	(0.33)	(0.64)	(0.97)
2021	13.21	0.25	1.32	1.57	(0.26)	(0.64)	(0.90)
2020	13.34	0.28	0.47	0.75	(0.31)	(0.57)	(0.88)
2019	13.20	0.35	0.81	1.16	(0.34)	(0.68)	(1.02)
2018	13.95	0.36	(0.45)	(0.09)	(0.36)	(0.30)	(0.66)
Institutional shares
2022	13.95	0.38	(2.30)	(1.92)	(0.35)	(0.64)	(0.99)
2021	13.27	0.27	1.33	1.60	(0.28)	(0.64)	(0.92)
2020	13.40	0.30	0.47	0.77	(0.33)	(0.57)	(0.90)
2019	13.26	0.38	0.80	1.18	(0.36)	(0.68)	(1.04)
2018	14.01	0.40	(0.47)	(0.07)	(0.38)	(0.30)	(0.68)
R-1 shares
2022	13.88	0.27	(2.30)	(2.03)	(0.23)	(0.64)	(0.87)
2021	13.21	0.15	1.32	1.47	(0.16)	(0.64)	(0.80)
2020	13.34	0.19	0.47	0.66	(0.22)	(0.57)	(0.79)
2019	13.18	0.28	0.79	1.07	(0.23)	(0.68)	(0.91)
2018	13.92	0.26	(0.45)	(0.19)	(0.25)	(0.30)	(0.55)
R-3 shares
2022	13.81	0.31	(2.29)	(1.98)	(0.26)	(0.64)	(0.90)
2021	13.15	0.20	1.31	1.51	(0.21)	(0.64)	(0.85)
2020	13.28	0.23	0.46	0.69	(0.25)	(0.57)	(0.82)
2019	13.12	0.30	0.82	1.12	(0.28)	(0.68)	(0.96)
2018	13.87	0.32	(0.47)	(0.15)	(0.30)	(0.30)	(0.60)
R-4 shares
2022	13.86	0.35	(2.31)	(1.96)	(0.29)	(0.64)	(0.93)
2021	13.19	0.23	1.31	1.54	(0.23)	(0.64)	(0.87)
2020	13.32	0.26	0.46	0.72	(0.28)	(0.57)	(0.85)
2019	13.17	0.35	0.79	1.14	(0.31)	(0.68)	(0.99)
2018	13.91	0.34	(0.46)	(0.12)	(0.32)	(0.30)	(0.62)
R-5 shares
2022	13.89	0.36	(2.31)	(1.95)	(0.31)	(0.64)	(0.95)
2021	13.21	0.24	1.32	1.56	(0.24)	(0.64)	(0.88)
2020	13.33	0.27	0.47	0.74	(0.29)	(0.57)	(0.86)
2019	13.19	0.35	0.80	1.15	(0.33)	(0.68)	(1.01)
2018	13.94	0.35	(0.46)	(0.11)	(0.34)	(0.30)	(0.64)

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Reflects Manager's contractual expense limit.

(d)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(e)

Excludes expense reimbursement from Manager and/or Distributor.

C-74

Financial Highlights
Principal Funds, Inc.

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$11.12	(15.14)%(b)	$22,189	0.38%(c)	–%	2.75%	26.7%
14.05	12.06(b)	28,819	0.38(c)	–	1.63	25.1
13.36	5.72(b)	27,239	0.38(c)	–	1.98	31.1
13.48	9.43(b)	27,312	0.38(c)	–	2.52	37.4
13.33	(0.89)(b)	26,867	0.38(c)	–	2.40	21.7

10.98	(14.94)(b)	162,058	0.19(d)	0.21(e)	2.95	26.7
13.88	12.25(b)	210,497	0.19(d)	0.21(e)	1.82	25.1
13.21	5.91(b)	206,711	0.18(d)	0.21(e)	2.18	31.1
13.34	9.71(b)	212,675	0.19(d)	0.22(e)	2.72	37.4
13.20	(0.72)(b)	215,753	0.18(d)	0.21(e)	2.62	21.7

11.04	(14.79)	302,641	0.01	–	3.14	26.7
13.95	12.44	426,691	0.02	–	1.99	25.1
13.27	6.06	409,464	0.02	–	2.33	31.1
13.40	9.86	414,444	0.02	–	2.94	37.4
13.26	(0.55)	464,671	0.01	–	2.91	21.7

10.98	(15.58)	2,703	0.89	–	2.25	26.7
13.88	11.48	3,858	0.89	–	1.12	25.1
13.21	5.14	4,183	0.89	–	1.43	31.1
13.34	8.92	3,967	0.89	–	2.18	37.4
13.18	(1.41)	4,818	0.89	–	1.93	21.7

10.93	(15.26)	14,052	0.58	–	2.57	26.7
13.81	11.81	20,070	0.58	–	1.51	25.1
13.15	5.48	25,428	0.58	–	1.79	31.1
13.28	9.35	26,022	0.58	–	2.36	37.4
13.12	(1.16)	29,905	0.58	–	2.34	21.7

10.97	(15.12)	4,538	0.39	–	2.85	26.7
13.86	12.01	7,270	0.39	–	1.69	25.1
13.19	5.65	9,381	0.39	–	2.04	31.1
13.32	9.52	11,749	0.39	–	2.71	37.4
13.17	(0.90)	16,391	0.39	–	2.51	21.7

10.99	(15.02)	13,563	0.27	–	2.94	26.7
13.89	12.21	20,052	0.27	–	1.77	25.1
13.21	5.82	24,198	0.27	–	2.12	31.1
13.33	9.59	27,348	0.27	–	2.76	37.4
13.19	(0.83)	44,323	0.27	–	2.58	21.7

C-75

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
PRINCIPAL LIFETIME 2015 FUND
Institutional shares
2022	$10.57	$0.29	$(1.78)	$(1.49)	$(0.26)	$(0.54)	$(0.80)
2021	9.66	0.20	1.26	1.46	(0.20)	(0.35)	(0.55)
2020	10.26	0.22	0.37	0.59	(0.23)	(0.96)	(1.19)
2019	10.18	0.29	0.66	0.95	(0.28)	(0.59)	(0.87)
2018	11.02	0.31	(0.36)	(0.05)	(0.29)	(0.50)	(0.79)
R-1 shares
2022	10.22	0.20	(1.72)	(1.52)	(0.16)	(0.54)	(0.70)
2021	9.35	0.10	1.23	1.33	(0.11)	(0.35)	(0.46)
2020	9.97	0.14	0.35	0.49	(0.15)	(0.96)	(1.11)
2019	9.90	0.19	0.65	0.84	(0.18)	(0.59)	(0.77)
2018	10.72	0.22	(0.35)	(0.13)	(0.19)	(0.50)	(0.69)
R-3 shares
2022	10.25	0.23	(1.72)	(1.49)	(0.20)	(0.54)	(0.74)
2021	9.38	0.14	1.22	1.36	(0.14)	(0.35)	(0.49)
2020	10.00	0.16	0.36	0.52	(0.18)	(0.96)	(1.14)
2019	9.93	0.22	0.66	0.88	(0.22)	(0.59)	(0.81)
2018	10.76	0.25	(0.35)	(0.10)	(0.23)	(0.50)	(0.73)
R-4 shares
2022	10.37	0.25	(1.75)	(1.50)	(0.22)	(0.54)	(0.76)
2021	9.48	0.16	1.24	1.40	(0.16)	(0.35)	(0.51)
2020	10.10	0.19	0.35	0.54	(0.20)	(0.96)	(1.16)
2019	10.02	0.25	0.66	0.91	(0.24)	(0.59)	(0.83)
2018	10.84	0.25	(0.33)	(0.08)	(0.24)	(0.50)	(0.74)
R-5 shares
2022	10.39	0.27	(1.76)	(1.49)	(0.23)	(0.54)	(0.77)
2021	9.50	0.17	1.24	1.41	(0.17)	(0.35)	(0.52)
2020	10.11	0.19	0.36	0.55	(0.20)	(0.96)	(1.16)
2019	10.04	0.26	0.66	0.92	(0.26)	(0.59)	(0.85)
2018	10.87	0.26	(0.33)	(0.07)	(0.26)	(0.50)	(0.76)

(a)

Calculated based on average shares outstanding during the period.

(b)

C-76

Financial Highlights
Principal Funds, Inc.

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$8.28	(15.15)%	$223,930	0.02%	3.16%	29.2%
10.57	15.48	304,277	0.02	1.91	28.3
9.66	6.20	273,028	0.02	2.30	31.2
10.26	10.48	291,875	0.02	2.95	37.5
10.18	(0.56)	362,525	0.02	2.94	23.6

8.00	(15.90)(b)	2,042	0.89	2.29	29.2
10.22	14.62(b)	2,611	0.89	1.06	28.3
9.35	5.21	3,288	0.89	1.49	31.2
9.97	9.44	3,645	0.89	1.99	37.5
9.90	(1.35)	4,325	0.89	2.17	23.6

8.02	(15.57)	19,212	0.58	2.64	29.2
10.25	14.85	28,808	0.58	1.38	28.3
9.38	5.52	31,339	0.58	1.76	31.2
10.00	9.89	36,399	0.58	2.31	37.5
9.93	(1.06)	48,512	0.58	2.41	23.6

8.11	(15.51)	7,376	0.39	2.82	29.2
10.37	15.11	12,547	0.39	1.58	28.3
9.48	5.69	14,286	0.39	2.03	31.2
10.10	10.11	18,317	0.39	2.54	37.5
10.02	(0.85)	23,837	0.39	2.43	23.6

8.13	(15.35)	18,499	0.27	2.97	29.2
10.39	15.25	26,565	0.27	1.67	28.3
9.50	5.86	28,376	0.27	2.08	31.2
10.11	10.21	30,810	0.27	2.72	37.5
10.04	(0.76)	48,571	0.27	2.54	23.6

C-77

Financial Highlights
Principal Funds, Inc. (Continued)

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
PRINCIPAL LIFETIME 2020 FUND
Class A shares
2022	$15.80	$0.38	$(2.74)	$(2.36)	$(0.33)	$(0.97)	$(1.30)
2021	14.07	0.23	2.30	2.53	(0.23)	(0.57)	(0.80)
2020	14.43	0.26	0.52	0.78	(0.27)	(0.87)	(1.14)
2019	13.92	0.31	1.07	1.38	(0.30)	(0.57)	(0.87)
2018	14.81	0.35	(0.48)	(0.13)	(0.34)	(0.42)	(0.76)
Class J shares
2022	15.59	0.41	(2.72)	(2.31)	(0.35)	(0.97)	(1.32)
2021	13.89	0.25	2.28	2.53	(0.26)	(0.57)	(0.83)
2020	14.26	0.29	0.50	0.79	(0.29)	(0.87)	(1.16)
2019	13.78	0.34	1.04	1.38	(0.33)	(0.57)	(0.90)
2018	14.66	0.37	(0.46)	(0.09)	(0.37)	(0.42)	(0.79)
Institutional shares
2022	15.70	0.44	(2.73)	(2.29)	(0.38)	(0.97)	(1.35)
2021	13.99	0.28	2.28	2.56	(0.28)	(0.57)	(0.85)
2020	14.35	0.31	0.52	0.83	(0.32)	(0.87)	(1.19)
2019	13.86	0.37	1.04	1.41	(0.35)	(0.57)	(0.92)
2018	14.74	0.42	(0.49)	(0.07)	(0.39)	(0.42)	(0.81)
R-1 shares
2022	15.56	0.31	(2.71)	(2.40)	(0.24)	(0.97)	(1.21)
2021	13.86	0.15	2.27	2.42	(0.15)	(0.57)	(0.72)
2020	14.22	0.19	0.50	0.69	(0.18)	(0.87)	(1.05)
2019	13.71	0.27	1.02	1.29	(0.21)	(0.57)	(0.78)
2018	14.59	0.28	(0.48)	(0.20)	(0.26)	(0.42)	(0.68)
R-3 shares
2022	15.49	0.36	(2.70)	(2.34)	(0.29)	(0.97)	(1.26)
2021	13.82	0.19	2.25	2.44	(0.20)	(0.57)	(0.77)
2020	14.18	0.23	0.51	0.74	(0.23)	(0.87)	(1.10)
2019	13.69	0.29	1.03	1.32	(0.26)	(0.57)	(0.83)
2018	14.57	0.34	(0.49)	(0.15)	(0.31)	(0.42)	(0.73)
R-4 shares
2022	15.55	0.39	(2.71)	(2.32)	(0.32)	(0.97)	(1.29)
2021	13.86	0.23	2.26	2.49	(0.23)	(0.57)	(0.80)
2020	14.22	0.28	0.49	0.77	(0.26)	(0.87)	(1.13)
2019	13.73	0.35	1.00	1.35	(0.29)	(0.57)	(0.86)
2018	14.60	0.34	(0.46)	(0.12)	(0.33)	(0.42)	(0.75)
R-5 shares
2022	15.60	0.40	(2.72)	(2.32)	(0.34)	(0.97)	(1.31)
2021	13.90	0.24	2.28	2.52	(0.25)	(0.57)	(0.82)
2020	14.26	0.28	0.51	0.79	(0.28)	(0.87)	(1.15)
2019	13.77	0.33	1.04	1.37	(0.31)	(0.57)	(0.88)
2018	14.66	0.37	(0.49)	(0.12)	(0.35)	(0.42)	(0.77)

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Reflects Manager's contractual expense limit.

(d)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(e)

Excludes expense reimbursement from Manager and/or Distributor.

(f)

C-78

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$12.14	(16.17)%(b)	$88,607	0.36%(c)	–%	2.84%	25.2%
15.80	18.52(b)	112,642	0.35(c)	–	1.50	19.6
14.07	5.58(b)	100,919	0.36(c)	–	1.89	21.7
14.43	10.78(b)	102,763	0.38(c)	–	2.27	34.2
13.92	(1.00)(b)	100,709	0.38(c)	–	2.42	20.4

11.96	(16.05)(b)	679,727	0.17(d)	0.19(e)	3.06	25.2
15.59	18.69(b)(f)	910,454	0.18(d)	0.20(e)	1.68	19.6
13.89	5.86(b)(f)	832,258	0.16(d)	0.19(e)	2.12	21.7
14.26	10.94(b)	880,475	0.17(d)	0.20(e)	2.47	34.2
13.78	(0.72)(b)	878,626	0.17(d)	0.20(e)	2.59	20.4

12.06	(15.85)	1,640,911	0.01	–	3.25	25.2
15.70	18.87	2,424,308	0.01	–	1.86	19.6
13.99	5.99	2,298,787	0.01	–	2.28	21.7
14.35	11.15	2,553,165	0.01	–	2.74	34.2
13.86	(0.56)	2,869,014	0.01	–	2.91	20.4

11.95	(16.60)	11,554	0.88	–	2.32	25.2
15.56	17.81(f)	15,645	0.88	–	0.98	19.6
13.86	5.09(f)	17,992	0.88	–	1.42	21.7
14.22	10.22	20,527	0.88	–	1.97	34.2
13.71	(1.50)	26,253	0.88	–	1.96	20.4

11.89	(16.37)(f)	77,582	0.57	–	2.69	25.2
15.49	18.24(f)	112,088	0.57	–	1.30	19.6
13.82	5.42	110,479	0.57	–	1.74	21.7
14.18	10.51	127,255	0.57	–	2.16	34.2
13.69	(1.16)	151,279	0.57	–	2.38	20.4

11.94	(16.17)	31,027	0.38	–	2.90	25.2
15.55	18.44	48,132	0.38	–	1.50	19.6
13.86	5.57	47,227	0.38	–	2.09	21.7
14.22	10.74	73,232	0.38	–	2.57	34.2
13.73	(0.93)	113,348	0.38	–	2.41	20.4

11.97	(16.13)	103,555	0.26	–	3.02	25.2
15.60	18.62	154,635	0.26	–	1.63	19.6
13.90	5.73	158,936	0.26	–	2.05	21.7
14.26	10.90	194,723	0.26	–	2.44	34.2
13.77	(0.91)	237,085	0.26	–	2.61	20.4

C-79

Financial Highlights
Principal Funds, Inc. (Continued)

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
PRINCIPAL LIFETIME 2025 FUND
Institutional shares
2022	$13.55	$0.37	$(2.48)	$(2.11)	$(0.33)	$(0.64)	$(0.97)
2021	11.64	0.23	2.33	2.56	(0.23)	(0.42)	(0.65)
2020	11.75	0.24	0.43	0.67	(0.25)	(0.53)	(0.78)
2019	11.18	0.29	0.92	1.21	(0.27)	(0.37)	(0.64)
2018	11.77	0.32	(0.36)	(0.04)	(0.31)	(0.24)	(0.55)
R-1 shares
2022	13.16	0.27	(2.43)	(2.16)	(0.22)	(0.64)	(0.86)
2021	11.31	0.11	2.27	2.38	(0.11)	(0.42)	(0.53)
2020	11.44	0.16	0.39	0.55	(0.15)	(0.53)	(0.68)
2019	10.89	0.19	0.90	1.09	(0.17)	(0.37)	(0.54)
2018	11.47	0.24	(0.37)	(0.13)	(0.21)	(0.24)	(0.45)
R-3 shares
2022	13.20	0.31	(2.43)	(2.12)	(0.26)	(0.64)	(0.90)
2021	11.35	0.16	2.27	2.43	(0.16)	(0.42)	(0.58)
2020	11.48	0.19	0.40	0.59	(0.19)	(0.53)	(0.72)
2019	10.94	0.22	0.90	1.12	(0.21)	(0.37)	(0.58)
2018	11.52	0.26	(0.36)	(0.10)	(0.24)	(0.24)	(0.48)
R-4 shares
2022	13.37	0.33	(2.46)	(2.13)	(0.28)	(0.64)	(0.92)
2021	11.49	0.18	2.30	2.48	(0.18)	(0.42)	(0.60)
2020	11.61	0.22	0.40	0.62	(0.21)	(0.53)	(0.74)
2019	11.05	0.25	0.91	1.16	(0.23)	(0.37)	(0.60)
2018	11.63	0.27	(0.35)	(0.08)	(0.26)	(0.24)	(0.50)
R-5 shares
2022	13.42	0.36	(2.48)	(2.12)	(0.30)	(0.64)	(0.94)
2021	11.54	0.20	2.30	2.50	(0.20)	(0.42)	(0.62)
2020	11.66	0.22	0.41	0.63	(0.22)	(0.53)	(0.75)
2019	11.10	0.26	0.91	1.17	(0.24)	(0.37)	(0.61)
2018	11.68	0.29	(0.35)	(0.06)	(0.28)	(0.24)	(0.52)

(a)

Calculated based on average shares outstanding during the period.

C-80

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$10.47	(16.71)%	$1,283,002	0.01%	3.21%	22.6%
13.55	22.55	1,534,067	0.01	1.76	24.0
11.64	5.93	1,225,564	0.01	2.16	33.4
11.75	11.81	1,155,367	0.01	2.60	34.9
11.18	(0.49)	1,203,265	0.01	2.75	26.0

10.14	(17.49)	6,575	0.88	2.41	22.6
13.16	21.53	8,802	0.88	0.90	24.0
11.31	4.94	8,795	0.88	1.48	33.4
11.44	10.78	11,116	0.88	1.73	34.9
10.89	(1.24)	11,721	0.88	2.08	26.0

10.18	(17.18)	98,077	0.57	2.73	22.6
13.20	21.95	132,449	0.57	1.23	24.0
11.35	5.29	123,574	0.57	1.69	33.4
11.48	11.07	134,168	0.57	2.04	34.9
10.94	(0.96)	142,783	0.57	2.29	26.0

10.32	(17.07)	38,530	0.38	2.84	22.6
13.37	22.14	51,340	0.38	1.45	24.0
11.49	5.49	51,235	0.38	1.95	33.4
11.61	11.37	63,748	0.38	2.30	34.9
11.05	(0.83)	77,410	0.38	2.31	26.0

10.36	(16.95)	89,987	0.26	3.09	22.6
13.42	22.20	123,237	0.26	1.54	24.0
11.54	5.59	109,815	0.26	1.97	33.4
11.66	11.49	118,440	0.26	2.31	34.9
11.10	(0.66)	135,376	0.26	2.50	26.0

C-81

Financial Highlights
Principal Funds, Inc. (Continued)

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
PRINCIPAL LIFETIME 2030 FUND
Class A shares
2022	$17.49	$0.42	$(3.42)	$(3.00)	$(0.35)	$(1.02)	$(1.37)
2021	14.76	0.22	3.45	3.67	(0.22)	(0.72)	(0.94)
2020	14.85	0.26	0.54	0.80	(0.26)	(0.63)	(0.89)
2019	14.31	0.29	1.23	1.52	(0.27)	(0.71)	(0.98)
2018	15.24	0.35	(0.47)	(0.12)	(0.34)	(0.47)	(0.81)
Class J shares
2022	17.39	0.44	(3.39)	(2.95)	(0.38)	(1.02)	(1.40)
2021	14.67	0.26	3.43	3.69	(0.25)	(0.72)	(0.97)
2020	14.77	0.29	0.53	0.82	(0.29)	(0.63)	(0.92)
2019	14.24	0.31	1.23	1.54	(0.30)	(0.71)	(1.01)
2018	15.18	0.37	(0.47)	(0.10)	(0.37)	(0.47)	(0.84)
Institutional shares
2022	17.47	0.46	(3.40)	(2.94)	(0.41)	(1.02)	(1.43)
2021	14.73	0.28	3.45	3.73	(0.27)	(0.72)	(0.99)
2020	14.83	0.31	0.53	0.84	(0.31)	(0.63)	(0.94)
2019	14.29	0.35	1.22	1.57	(0.32)	(0.71)	(1.03)
2018	15.23	0.43	(0.50)	(0.07)	(0.40)	(0.47)	(0.87)
R-1 shares
2022	17.25	0.34	(3.37)	(3.03)	(0.26)	(1.02)	(1.28)
2021	14.58	0.14	3.40	3.54	(0.15)	(0.72)	(0.87)
2020	14.68	0.18	0.53	0.71	(0.18)	(0.63)	(0.81)
2019	14.12	0.23	1.22	1.45	(0.18)	(0.71)	(0.89)
2018	15.05	0.28	(0.48)	(0.20)	(0.26)	(0.47)	(0.73)
R-3 shares
2022	17.33	0.39	(3.39)	(3.00)	(0.32)	(1.02)	(1.34)
2021	14.63	0.19	3.42	3.61	(0.19)	(0.72)	(0.91)
2020	14.73	0.23	0.52	0.75	(0.22)	(0.63)	(0.85)
2019	14.19	0.27	1.21	1.48	(0.23)	(0.71)	(0.94)
2018	15.12	0.34	(0.49)	(0.15)	(0.31)	(0.47)	(0.78)
R-4 shares
2022	18.09	0.43	(3.55)	(3.12)	(0.34)	(1.02)	(1.36)
2021	15.23	0.24	3.55	3.79	(0.21)	(0.72)	(0.93)
2020	15.28	0.30	0.53	0.83	(0.25)	(0.63)	(0.88)
2019	14.69	0.34	1.22	1.56	(0.26)	(0.71)	(0.97)
2018	15.62	0.36	(0.49)	(0.13)	(0.33)	(0.47)	(0.80)
R-5 shares
2022	17.43	0.43	(3.40)	(2.97)	(0.37)	(1.02)	(1.39)
2021	14.70	0.25	3.44	3.69	(0.24)	(0.72)	(0.96)
2020	14.79	0.28	0.53	0.81	(0.27)	(0.63)	(0.90)
2019	14.26	0.31	1.22	1.53	(0.29)	(0.71)	(1.00)
2018	15.19	0.37	(0.47)	(0.10)	(0.36)	(0.47)	(0.83)

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Reflects Manager's contractual expense limit.

(d)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(e)

Excludes expense reimbursement from Manager and/or Distributor.

(f)

C-82

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$13.12	(18.48)%(b)	$129,354	0.37%(c)	–%	2.83%	31.1%
17.49	25.68(b)	168,435	0.36(c)	–	1.34	24.0
14.76	5.48(b)	128,178	0.38(c)	–	1.78	33.4
14.85	11.81(b)	125,814	0.38(c)	–	2.04	23.0
14.31	(0.94)(b)	115,998	0.38(c)	–	2.35	23.8

13.04	(18.33)(b)	1,041,206	0.18(d)	0.20(e)	3.02	31.1
17.39	26.00(b)	1,388,404	0.18(d)	0.20(e)	1.56	24.0
14.67	5.64(b)	1,169,328	0.17(d)	0.20(e)	2.02	33.4
14.77	12.06(b)	1,197,486	0.18(d)	0.21(e)	2.24	23.0
14.24	(0.80)(b)	1,146,825	0.17(d)	0.20(e)	2.48	23.8

13.10	(18.22)	3,437,305	0.01	–	3.15	31.1
17.47	26.21	4,530,236	0.01	–	1.71	24.0
14.73	5.79	3,592,487	0.01	–	2.16	33.4
14.83	12.31	3,620,578	0.01	–	2.47	23.0
14.29	(0.65)	3,625,771	0.01	–	2.86	23.8

12.94	(18.91)(f)	16,009	0.88	–	2.32	31.1
17.25	25.06(f)	21,472	0.88	–	0.88	24.0
14.58	4.92	21,726	0.88	–	1.27	33.4
14.68	11.34	22,286	0.88	–	1.65	23.0
14.12	(1.49)	24,982	0.88	–	1.90	23.8

12.99	(18.66)	125,371	0.57	–	2.65	31.1
17.33	25.46	176,532	0.57	–	1.14	24.0
14.63	5.22	141,979	0.57	–	1.60	33.4
14.73	11.62	153,293	0.57	–	1.92	23.0
14.19	(1.17)	163,571	0.57	–	2.27	23.8

13.61	(18.53)	52,612	0.38	–	2.82	31.1
18.09	25.68	73,168	0.38	–	1.38	24.0
15.23	5.50	65,940	0.38	–	2.01	33.4
15.28	11.78	89,004	0.38	–	2.37	23.0
14.69	(0.97)	129,933	0.38	–	2.34	23.8

13.07	(18.42)	184,436	0.26	–	2.94	31.1
17.43	25.88	242,659	0.26	–	1.49	24.0
14.70	5.60	212,626	0.26	–	1.96	33.4
14.79	11.94	245,044	0.26	–	2.21	23.0
14.26	(0.85)	268,734	0.26	–	2.49	23.8

C-83

Financial Highlights
Principal Funds, Inc. (Continued)

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
PRINCIPAL LIFETIME 2035 FUND
Institutional shares
2022	$15.10	$0.41	$(3.07)	$(2.66)	$(0.40)	$(0.61)	$(1.01)
2021	12.34	0.24	3.24	3.48	(0.23)	(0.49)	(0.72)
2020	12.49	0.24	0.50	0.74	(0.26)	(0.63)	(0.89)
2019	11.97	0.28	1.06	1.34	(0.27)	(0.55)	(0.82)
2018	12.62	0.31	(0.29)	0.02	(0.28)	(0.39)	(0.67)
R-1 shares
2022	14.71	0.30	(3.02)	(2.72)	(0.27)	(0.61)	(0.88)
2021	12.04	0.12	3.16	3.28	(0.12)	(0.49)	(0.61)
2020	12.20	0.16	0.46	0.62	(0.15)	(0.63)	(0.78)
2019	11.70	0.18	1.03	1.21	(0.16)	(0.55)	(0.71)
2018	12.35	0.20	(0.28)	(0.08)	(0.18)	(0.39)	(0.57)
R-3 shares
2022	14.78	0.34	(3.02)	(2.68)	(0.32)	(0.61)	(0.93)
2021	12.09	0.15	3.19	3.34	(0.16)	(0.49)	(0.65)
2020	12.26	0.18	0.47	0.65	(0.19)	(0.63)	(0.82)
2019	11.76	0.21	1.04	1.25	(0.20)	(0.55)	(0.75)
2018	12.40	0.24	(0.27)	(0.03)	(0.22)	(0.39)	(0.61)
R-4 shares
2022	14.93	0.37	(3.05)	(2.68)	(0.34)	(0.61)	(0.95)
2021	12.21	0.19	3.20	3.39	(0.18)	(0.49)	(0.67)
2020	12.37	0.22	0.46	0.68	(0.21)	(0.63)	(0.84)
2019	11.85	0.25	1.04	1.29	(0.22)	(0.55)	(0.77)
2018	12.49	0.25	(0.27)	(0.02)	(0.23)	(0.39)	(0.62)
R-5 shares
2022	14.99	0.40	(3.08)	(2.68)	(0.36)	(0.61)	(0.97)
2021	12.26	0.21	3.21	3.42	(0.20)	(0.49)	(0.69)
2020	12.41	0.23	0.47	0.70	(0.22)	(0.63)	(0.85)
2019	11.90	0.25	1.05	1.30	(0.24)	(0.55)	(0.79)
2018	12.54	0.26	(0.26)	–	(0.25)	(0.39)	(0.64)

(a)

Calculated based on average shares outstanding during the period.

C-84

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$11.43	(18.85)%	$1,301,768	0.01%	3.19%	19.6%
15.10	28.95	1,468,727	0.01	1.66	19.5
12.34	6.02	1,043,617	0.01	2.04	37.1
12.49	12.43	955,390	0.01	2.35	25.9
11.97	0.04	942,246	0.01	2.44	20.2

11.11	(19.58)	6,498	0.88	2.43	19.6
14.71	27.85	8,129	0.88	0.84	19.5
12.04	5.11	7,462	0.88	1.36	37.1
12.20	11.38	8,566	0.89	1.59	25.9
11.70	(0.80)	10,567	0.88	1.62	20.2

11.17	(19.30)	85,620	0.57	2.75	19.6
14.78	28.31	110,352	0.57	1.11	19.5
12.09	5.38	85,507	0.57	1.56	37.1
12.26	11.74	87,799	0.58	1.83	25.9
11.76	(0.42)	93,396	0.57	1.98	20.2

11.30	(19.11)	34,077	0.38	2.93	19.6
14.93	28.48	44,010	0.38	1.37	19.5
12.21	5.58	38,878	0.38	1.86	37.1
12.37	12.05	45,491	0.39	2.10	25.9
11.85	(0.30)	57,637	0.38	2.04	20.2

11.34	(19.06)	86,155	0.26	3.14	19.6
14.99	28.61	113,877	0.26	1.45	19.5
12.26	5.76	92,452	0.26	1.92	37.1
12.41	12.11	99,730	0.27	2.09	25.9
11.90	(0.12)	111,791	0.26	2.12	20.2

C-85

Financial Highlights
Principal Funds, Inc. (Continued)

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
PRINCIPAL LIFETIME 2040 FUND
Class A shares
2022	$18.81	$0.46	$(3.88)	$(3.42)	$(0.46)	$(1.07)	$(1.53)
2021	15.20	0.22	4.35	4.57	(0.23)	(0.73)	(0.96)
2020	15.43	0.24	0.60	0.84	(0.26)	(0.81)	(1.07)
2019	14.99	0.27	1.34	1.61	(0.26)	(0.91)	(1.17)
2018	15.89	0.31	(0.32)	(0.01)	(0.30)	(0.59)	(0.89)
Class J shares
2022	19.07	0.50	(3.94)	(3.44)	(0.49)	(1.07)	(1.56)
2021	15.39	0.26	4.41	4.67	(0.26)	(0.73)	(0.99)
2020	15.61	0.28	0.59	0.87	(0.28)	(0.81)	(1.09)
2019	15.15	0.30	1.36	1.66	(0.29)	(0.91)	(1.20)
2018	16.06	0.34	(0.33)	0.01	(0.33)	(0.59)	(0.92)
Institutional shares
2022	19.29	0.53	(3.99)	(3.46)	(0.52)	(1.07)	(1.59)
2021	15.55	0.29	4.46	4.75	(0.28)	(0.73)	(1.01)
2020	15.77	0.30	0.60	0.90	(0.31)	(0.81)	(1.12)
2019	15.29	0.34	1.37	1.71	(0.32)	(0.91)	(1.23)
2018	16.20	0.41	(0.37)	0.04	(0.36)	(0.59)	(0.95)
R-1 shares
2022	18.99	0.38	(3.94)	(3.56)	(0.34)	(1.07)	(1.41)
2021	15.34	0.14	4.39	4.53	(0.15)	(0.73)	(0.88)
2020	15.55	0.17	0.59	0.76	(0.16)	(0.81)	(0.97)
2019	15.08	0.21	1.35	1.56	(0.18)	(0.91)	(1.09)
2018	15.98	0.24	(0.33)	(0.09)	(0.22)	(0.59)	(0.81)
R-3 shares
2022	18.93	0.44	(3.93)	(3.49)	(0.42)	(1.07)	(1.49)
2021	15.29	0.18	4.39	4.57	(0.20)	(0.73)	(0.93)
2020	15.52	0.22	0.58	0.80	(0.22)	(0.81)	(1.03)
2019	15.06	0.25	1.35	1.60	(0.23)	(0.91)	(1.14)
2018	15.96	0.31	(0.35)	(0.04)	(0.27)	(0.59)	(0.86)
R-4 shares
2022	19.00	0.47	(3.93)	(3.46)	(0.45)	(1.07)	(1.52)
2021	15.34	0.23	4.38	4.61	(0.22)	(0.73)	(0.95)
2020	15.56	0.29	0.55	0.84	(0.25)	(0.81)	(1.06)
2019	15.10	0.31	1.32	1.63	(0.26)	(0.91)	(1.17)
2018	15.99	0.32	(0.33)	(0.01)	(0.29)	(0.59)	(0.88)
R-5 shares
2022	19.15	0.49	(3.97)	(3.48)	(0.47)	(1.07)	(1.54)
2021	15.45	0.25	4.42	4.67	(0.24)	(0.73)	(0.97)
2020	15.67	0.27	0.59	0.86	(0.27)	(0.81)	(1.08)
2019	15.20	0.29	1.37	1.66	(0.28)	(0.91)	(1.19)
2018	16.10	0.34	(0.33)	0.01	(0.32)	(0.59)	(0.91)

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Reflects Manager's contractual expense limit.

(d)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(e)

Excludes expense reimbursement from Manager and/or Distributor.

C-86

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$13.86	(19.68)%(b)	$101,428	0.38%(c)	–%	2.94%	23.8%
18.81	31.00(b)	126,454	0.38(c)	–	1.24	20.0
15.20	5.49(b)	97,825	0.38(c)	–	1.65	32.8
15.43	12.24(b)	94,659	0.38(c)	–	1.84	14.6
14.99	(0.16)(b)	87,497	0.38(c)	–	1.96	16.0

14.07	(19.53)(b)	724,982	0.18(d)	0.20(e)	3.17	23.8
19.07	31.30(b)	948,713	0.18(d)	0.21(e)	1.44	20.0
15.39	5.67(b)	753,868	0.18(d)	0.21(e)	1.86	32.8
15.61	12.47(b)	752,041	0.20(d)	0.23(e)	2.01	14.6
15.15	(0.03)(b)	700,995	0.19(d)	0.22(e)	2.14	16.0

14.24	(19.43)	2,684,679	0.01	–	3.30	23.8
19.29	31.56	3,429,237	0.01	–	1.61	20.0
15.55	5.79	2,615,276	0.01	–	2.02	32.8
15.77	12.72	2,569,620	0.01	–	2.25	14.6
15.29	0.13	2,529,716	0.01	–	2.53	16.0

14.02	(20.10)	12,069	0.88	–	2.41	23.8
18.99	30.38	16,062	0.88	–	0.81	20.0
15.34	4.90	15,714	0.88	–	1.11	32.8
15.55	11.68	17,042	0.88	–	1.45	14.6
15.08	(0.71)	19,314	0.88	–	1.50	16.0

13.95	(19.88)	96,348	0.57	–	2.81	23.8
18.93	30.81	129,032	0.57	–	1.02	20.0
15.29	5.22	97,748	0.57	–	1.46	32.8
15.52	12.01	99,952	0.57	–	1.72	14.6
15.06	(0.37)	106,971	0.57	–	1.95	16.0

14.02	(19.68)	40,589	0.38	–	2.96	23.8
19.00	31.00	53,623	0.38	–	1.31	20.0
15.34	5.45	48,722	0.38	–	1.94	32.8
15.56	12.24	68,656	0.38	–	2.13	14.6
15.10	(0.15)	90,529	0.38	–	2.01	16.0

14.13	(19.62)	147,107	0.26	–	3.08	23.8
19.15	31.19	187,926	0.26	–	1.39	20.0
15.45	5.56	159,934	0.26	–	1.80	32.8
15.67	12.40	173,689	0.26	–	1.98	14.6
15.20	(0.07)	183,317	0.26	–	2.16	16.0

C-87

Financial Highlights
Principal Funds, Inc. (Continued)

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
PRINCIPAL LIFETIME 2045 FUND
Institutional shares
2022	$16.56	$0.44	$(3.51)	$(3.07)	$(0.47)	$(0.59)	$(1.06)
2021	12.95	0.23	4.05	4.28	(0.24)	(0.43)	(0.67)
2020	13.12	0.24	0.48	0.72	(0.25)	(0.64)	(0.89)
2019	12.51	0.27	1.17	1.44	(0.26)	(0.57)	(0.83)
2018	13.06	0.30	(0.27)	0.03	(0.28)	(0.30)	(0.58)
R-1 shares
2022	15.93	0.34	(3.41)	(3.07)	(0.34)	(0.59)	(0.93)
2021	12.49	0.11	3.88	3.99	(0.12)	(0.43)	(0.55)
2020	12.67	0.15	0.44	0.59	(0.13)	(0.64)	(0.77)
2019	12.09	0.17	1.13	1.30	(0.15)	(0.57)	(0.72)
2018	12.65	0.18	(0.26)	(0.08)	(0.18)	(0.30)	(0.48)
R-3 shares
2022	16.03	0.38	(3.43)	(3.05)	(0.38)	(0.59)	(0.97)
2021	12.57	0.14	3.91	4.05	(0.16)	(0.43)	(0.59)
2020	12.76	0.18	0.45	0.63	(0.18)	(0.64)	(0.82)
2019	12.18	0.20	1.14	1.34	(0.19)	(0.57)	(0.76)
2018	12.73	0.24	(0.27)	(0.03)	(0.22)	(0.30)	(0.52)
R-4 shares
2022	16.23	0.40	(3.47)	(3.07)	(0.40)	(0.59)	(0.99)
2021	12.71	0.19	3.95	4.14	(0.19)	(0.43)	(0.62)
2020	12.89	0.21	0.45	0.66	(0.20)	(0.64)	(0.84)
2019	12.29	0.23	1.14	1.37	(0.20)	(0.57)	(0.77)
2018	12.84	0.25	(0.27)	(0.02)	(0.23)	(0.30)	(0.53)
R-5 shares
2022	16.26	0.43	(3.47)	(3.04)	(0.43)	(0.59)	(1.02)
2021	12.74	0.19	3.96	4.15	(0.20)	(0.43)	(0.63)
2020	12.92	0.22	0.46	0.68	(0.22)	(0.64)	(0.86)
2019	12.33	0.23	1.16	1.39	(0.23)	(0.57)	(0.80)
2018	12.88	0.25	(0.25)	–	(0.25)	(0.30)	(0.55)

(a)

Calculated based on average shares outstanding during the period.

C-88

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$12.43	(19.76)%	$1,010,879	0.01%	3.21%	23.8%
16.56	33.82	1,139,261	0.01	1.50	19.2
12.95	5.57	780,234	0.01	1.90	32.5
13.12	12.75	705,002	0.01	2.16	19.2
12.51	0.17	668,913	0.01	2.30	20.9

11.93	(20.41)	3,916	0.88	2.54	23.8
15.93	32.61	5,074	0.88	0.76	19.2
12.49	4.68	4,536	0.89	1.24	32.5
12.67	11.81	5,738	0.89	1.41	19.2
12.09	(0.74)	6,365	0.89	1.44	20.9

12.01	(20.17)	66,131	0.57	2.85	23.8
16.03	32.97	88,634	0.57	0.93	19.2
12.57	5.00	66,042	0.58	1.45	32.5
12.76	12.13	67,732	0.58	1.64	19.2
12.18	(0.33)	68,394	0.58	1.87	20.9

12.17	(20.06)	22,059	0.38	2.95	23.8
16.23	33.30	30,290	0.38	1.23	19.2
12.71	5.19	27,141	0.39	1.72	32.5
12.89	12.38	30,975	0.39	1.91	19.2
12.29	(0.22)	35,889	0.39	1.97	20.9

12.20	(19.89)	69,495	0.26	3.17	23.8
16.26	33.37	91,388	0.26	1.28	19.2
12.74	5.30	71,201	0.27	1.80	32.5
12.92	12.46	74,697	0.27	1.88	19.2
12.33	(0.06)	76,402	0.27	1.96	20.9

C-89

Financial Highlights
Principal Funds, Inc. (Continued)

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
PRINCIPAL LIFETIME 2050 FUND
Class A shares
2022	$20.06	$0.49	$(4.30)	$(3.81)	$(0.49)	$(0.94)	$(1.43)
2021	15.63	0.21	5.06	5.27	(0.22)	(0.62)	(0.84)
2020	15.89	0.24	0.56	0.80	(0.24)	(0.82)	(1.06)
2019	15.28	0.27	1.42	1.69	(0.24)	(0.84)	(1.08)
2018	16.03	0.31	(0.31)	–	(0.29)	(0.46)	(0.75)
Class J shares
2022	19.30	0.51	(4.13)	(3.62)	(0.52)	(0.94)	(1.46)
2021	15.06	0.23	4.88	5.11	(0.25)	(0.62)	(0.87)
2020	15.35	0.25	0.54	0.79	(0.26)	(0.82)	(1.08)
2019	14.81	0.27	1.38	1.65	(0.27)	(0.84)	(1.11)
2018	15.56	0.31	(0.28)	0.03	(0.32)	(0.46)	(0.78)
Institutional shares
2022	19.99	0.55	(4.26)	(3.71)	(0.56)	(0.94)	(1.50)
2021	15.57	0.28	5.04	5.32	(0.28)	(0.62)	(0.90)
2020	15.84	0.29	0.55	0.84	(0.29)	(0.82)	(1.11)
2019	15.24	0.31	1.43	1.74	(0.30)	(0.84)	(1.14)
2018	15.99	0.39	(0.33)	0.06	(0.35)	(0.46)	(0.81)
R-1 shares
2022	19.67	0.39	(4.20)	(3.81)	(0.39)	(0.94)	(1.33)
2021	15.35	0.12	4.97	5.09	(0.15)	(0.62)	(0.77)
2020	15.61	0.15	0.54	0.69	(0.13)	(0.82)	(0.95)
2019	15.01	0.22	1.38	1.60	(0.16)	(0.84)	(1.00)
2018	15.75	0.22	(0.30)	(0.08)	(0.20)	(0.46)	(0.66)
R-3 shares
2022	19.64	0.46	(4.20)	(3.74)	(0.46)	(0.94)	(1.40)
2021	15.33	0.16	4.97	5.13	(0.20)	(0.62)	(0.82)
2020	15.60	0.20	0.56	0.76	(0.21)	(0.82)	(1.03)
2019	15.02	0.23	1.41	1.64	(0.22)	(0.84)	(1.06)
2018	15.77	0.29	(0.32)	(0.03)	(0.26)	(0.46)	(0.72)
R-4 shares
2022	19.81	0.50	(4.26)	(3.76)	(0.48)	(0.94)	(1.42)
2021	15.44	0.21	5.00	5.21	(0.22)	(0.62)	(0.84)
2020	15.71	0.27	0.52	0.79	(0.24)	(0.82)	(1.06)
2019	15.12	0.27	1.40	1.67	(0.24)	(0.84)	(1.08)
2018	15.86	0.30	(0.30)	–	(0.28)	(0.46)	(0.74)
R-5 shares
2022	19.88	0.51	(4.25)	(3.74)	(0.51)	(0.94)	(1.45)
2021	15.49	0.23	5.02	5.25	(0.24)	(0.62)	(0.86)
2020	15.76	0.25	0.55	0.80	(0.25)	(0.82)	(1.07)
2019	15.17	0.28	1.41	1.69	(0.26)	(0.84)	(1.10)
2018	15.92	0.31	(0.29)	0.02	(0.31)	(0.46)	(0.77)

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Reflects Manager's contractual expense limit.

(d)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(e)

Excludes expense reimbursement from Manager and/or Distributor.

(f)

C-90

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$14.82	(20.32)%(b)	$87,266	0.38%(c)	–%	2.93%	26.9%
20.06	34.64(b)	105,294	0.38(c)	–	1.11	21.0
15.63	5.06(b)	77,925	0.38(c)	–	1.56	26.9
15.89	12.47(b)	76,784	0.38(c)	–	1.77	17.3
15.28	(0.15)(b)	73,509	0.38(c)	–	1.91	16.9

14.22	(20.17)(b)	235,469	0.22(d)	0.24(e)	3.17	26.9
19.30	34.90(b)	312,540	0.21(d)	0.24(e)	1.29	21.0
15.06	5.18(b)	237,515	0.22(d)	0.25(e)	1.74	26.9
15.35	12.60(b)	238,083	0.24(d)	0.27(e)	1.84	17.3
14.81	0.01(b)	220,530	0.23(d)	0.26(e)	2.00	16.9

14.78	(19.96)	1,951,777	0.01	–	3.29	26.9
19.99	35.15	2,422,742	0.01	–	1.49	21.0
15.57	5.37	1,754,692	0.01	–	1.91	26.9
15.84	12.92	1,693,422	0.01	–	2.10	17.3
15.24	0.20	1,623,713	0.01	–	2.42	16.9

14.53	(20.65)	10,416	0.88	–	2.41	26.9
19.67	33.91(f)	13,259	0.88	–	0.64	21.0
15.35	4.50(f)	10,957	0.88	–	1.01	26.9
15.61	11.93	12,804	0.88	–	1.52	17.3
15.01	(0.65)	13,369	0.88	–	1.41	16.9

14.50	(20.41)	71,732	0.57	–	2.80	26.9
19.64	34.33	94,767	0.57	–	0.87	21.0
15.33	4.87	68,182	0.57	–	1.35	26.9
15.60	12.24	67,825	0.57	–	1.57	17.3
15.02	(0.33)	69,167	0.57	–	1.83	16.9

14.63	(20.32)	33,403	0.38	–	3.01	26.9
19.81	34.66	44,900	0.38	–	1.15	21.0
15.44	5.03	36,458	0.38	–	1.78	26.9
15.71	12.44	45,136	0.38	–	1.84	17.3
15.12	(0.12)	48,573	0.38	–	1.88	16.9

14.69	(20.18)	99,622	0.26	–	3.12	26.9
19.88	34.84	128,805	0.26	–	1.27	21.0
15.49	5.12	104,577	0.26	–	1.66	26.9
15.76	12.60	103,868	0.26	–	1.88	17.3
15.17	(0.04)	114,158	0.26	–	1.91	16.9

C-91

Financial Highlights
Principal Funds, Inc. (Continued)

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
PRINCIPAL LIFETIME 2055 FUND
Institutional shares
2022	$18.20	$0.48	$(3.92)	$(3.44)	$(0.51)	$(0.50)	$(1.01)
2021	13.87	0.23	4.71	4.94	(0.25)	(0.36)	(0.61)
2020	14.00	0.24	0.47	0.71	(0.25)	(0.59)	(0.84)
2019	13.22	0.26	1.29	1.55	(0.26)	(0.51)	(0.77)
2018	13.66	0.30	(0.26)	0.04	(0.29)	(0.19)	(0.48)
R-1 shares
2022	17.43	0.36	(3.79)	(3.43)	(0.38)	(0.50)	(0.88)
2021	13.32	0.11	4.49	4.60	(0.13)	(0.36)	(0.49)
2020	13.47	0.13	0.43	0.56	(0.12)	(0.59)	(0.71)
2019	12.73	0.16	1.24	1.40	(0.15)	(0.51)	(0.66)
2018	13.17	0.18	(0.25)	(0.07)	(0.18)	(0.19)	(0.37)
R-3 shares
2022	17.60	0.41	(3.82)	(3.41)	(0.42)	(0.50)	(0.92)
2021	13.45	0.13	4.56	4.69	(0.18)	(0.36)	(0.54)
2020	13.60	0.17	0.45	0.62	(0.18)	(0.59)	(0.77)
2019	12.86	0.19	1.25	1.44	(0.19)	(0.51)	(0.70)
2018	13.31	0.23	(0.26)	(0.03)	(0.23)	(0.19)	(0.42)
R-4 shares
2022	17.83	0.43	(3.86)	(3.43)	(0.44)	(0.50)	(0.94)
2021	13.61	0.19	4.59	4.78	(0.20)	(0.36)	(0.56)
2020	13.75	0.21	0.44	0.65	(0.20)	(0.59)	(0.79)
2019	12.98	0.22	1.27	1.49	(0.21)	(0.51)	(0.72)
2018	13.42	0.25	(0.25)	–	(0.25)	(0.19)	(0.44)
R-5 shares
2022	17.91	0.47	(3.90)	(3.43)	(0.46)	(0.50)	(0.96)
2021	13.66	0.20	4.63	4.83	(0.22)	(0.36)	(0.58)
2020	13.80	0.21	0.46	0.67	(0.22)	(0.59)	(0.81)
2019	13.05	0.23	1.26	1.49	(0.23)	(0.51)	(0.74)
2018	13.49	0.24	(0.23)	0.01	(0.26)	(0.19)	(0.45)

(a)

Calculated based on average shares outstanding during the period.

C-92

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$13.75	(19.95)%	$613,004	0.01%	3.12%	22.6%
18.20	36.38	658,064	0.01	1.37	18.9
13.87	5.07	421,577	0.02	1.81	28.0
14.00	12.89	375,813	0.02	1.97	15.5
13.22	0.18	314,540	0.02	2.17	19.6

13.12	(20.65)	2,912	0.89	2.47	22.6
17.43	35.19	3,341	0.89	0.66	18.9
13.32	4.12	2,642	0.89	1.04	28.0
13.47	11.96	3,121	0.89	1.25	15.5
12.73	(0.65)	3,289	0.89	1.32	19.6

13.27	(20.37)	38,419	0.58	2.78	22.6
17.60	35.53	48,174	0.58	0.81	18.9
13.45	4.53	32,687	0.58	1.34	28.0
13.60	12.24	31,793	0.58	1.50	15.5
12.86	(0.36)	29,942	0.58	1.71	19.6

13.46	(20.23)	13,440	0.39	2.83	22.6
17.83	35.84	16,969	0.39	1.13	18.9
13.61	4.69	14,221	0.39	1.63	28.0
13.75	12.53	14,729	0.39	1.73	15.5
12.98	(0.16)	16,262	0.39	1.86	19.6

13.52	(20.14)	40,556	0.27	3.12	22.6
17.91	36.08	50,443	0.27	1.19	18.9
13.66	4.81	38,859	0.27	1.62	28.0
13.80	12.56	34,838	0.27	1.76	15.5
13.05	(0.02)	33,762	0.27	1.71	19.6

C-93

Financial Highlights
Principal Funds, Inc. (Continued)

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
PRINCIPAL LIFETIME 2060 FUND
Class J shares
2022	$19.13	$0.48	$(4.18)	$(3.70)	$(0.47)	$(0.44)	$(0.91)
2021	14.47	0.17	5.04	5.21	(0.21)	(0.34)	(0.55)
2020	14.61	0.21	0.47	0.68	(0.22)	(0.60)	(0.82)
2019	13.68	0.22	1.36	1.58	(0.22)	(0.43)	(0.65)
2018	14.05	0.25	(0.27)	(0.02)	(0.26)	(0.09)	(0.35)
Institutional shares
2022	19.32	0.51	(4.17)	(3.66)	(0.54)	(0.44)	(0.98)
2021	14.60	0.24	5.08	5.32	(0.26)	(0.34)	(0.60)
2020	14.72	0.25	0.49	0.74	(0.26)	(0.60)	(0.86)
2019	13.79	0.26	1.37	1.63	(0.27)	(0.43)	(0.70)
2018	14.14	0.31	(0.27)	0.04	(0.30)	(0.09)	(0.39)
R-1 shares
2022	18.72	0.35	(4.05)	(3.70)	(0.38)	(0.44)	(0.82)
2021	14.19	0.11	4.91	5.02	(0.15)	(0.34)	(0.49)
2020	14.32	0.14	0.45	0.59	(0.12)	(0.60)	(0.72)
2019	13.43	0.15	1.33	1.48	(0.16)	(0.43)	(0.59)
2018	13.79	0.18	(0.26)	(0.08)	(0.19)	(0.09)	(0.28)
R-3 shares
2022	19.00	0.43	(4.14)	(3.71)	(0.44)	(0.44)	(0.88)
2021	14.38	0.13	5.01	5.14	(0.18)	(0.34)	(0.52)
2020	14.52	0.17	0.48	0.65	(0.19)	(0.60)	(0.79)
2019	13.61	0.19	1.35	1.54	(0.20)	(0.43)	(0.63)
2018	13.98	0.24	(0.28)	(0.04)	(0.24)	(0.09)	(0.33)
R-4 shares
2022	19.08	0.48	(4.16)	(3.68)	(0.46)	(0.44)	(0.90)
2021	14.44	0.18	5.01	5.19	(0.21)	(0.34)	(0.55)
2020	14.57	0.24	0.44	0.68	(0.21)	(0.60)	(0.81)
2019	13.64	0.24	1.34	1.58	(0.22)	(0.43)	(0.65)
2018	14.01	0.25	(0.27)	(0.02)	(0.26)	(0.09)	(0.35)
R-5 shares
2022	19.14	0.48	(4.15)	(3.67)	(0.49)	(0.44)	(0.93)
2021	14.48	0.20	5.02	5.22	(0.22)	(0.34)	(0.56)
2020	14.61	0.20	0.50	0.70	(0.23)	(0.60)	(0.83)
2019	13.69	0.24	1.35	1.59	(0.24)	(0.43)	(0.67)
2018	14.05	0.24	(0.24)	–	(0.27)	(0.09)	(0.36)

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(d)

Excludes expense reimbursement from Manager and/or Distributor.

(e)

Reflects Manager's contractual expense limit.

C-94

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$14.52	(20.23)%(b)	$14,614	0.38%(c)	0.43%(d)	2.94%	21.7%
19.13	36.62(b)	18,803	0.38(c)	0.43(d)	0.94	18.3
14.47	4.61(b)	11,740	0.38(c)	0.58(d)	1.49	22.9
14.61	12.54(b)	10,924	0.38(c)	0.64(d)	1.58	12.6
13.68	(0.24)(b)	8,891	0.38(c)	0.57(d)	1.76	24.0

14.68	(19.92)	594,766	0.01	–	3.13	21.7
19.32	37.12	629,044	0.02	–	1.32	18.3
14.60	5.02	385,276	0.02	–	1.75	22.9
14.72	12.88	319,472	0.03(e)	–	1.87	12.6
13.79	0.19	244,280	0.03(e)	–	2.16	24.0

14.20	(20.60)	2,442	0.89	–	2.22	21.7
18.72	35.95	2,430	0.89	–	0.65	18.3
14.19	4.08	1,935	0.89	–	1.02	22.9
14.32	11.91	2,165	0.89	–	1.13	12.6
13.43	(0.67)	1,651	0.89(e)	–	1.27	24.0

14.41	(20.41)	19,914	0.58	–	2.67	21.7
19.00	36.38	22,111	0.58	–	0.75	18.3
14.38	4.45	14,091	0.58	–	1.23	22.9
14.52	12.27	12,016	0.58	–	1.40	12.6
13.61	(0.38)	10,034	0.58(e)	–	1.65	24.0

14.50	(20.21)	5,694	0.39	–	2.95	21.7
19.08	36.55	7,736	0.39	–	1.05	18.3
14.44	4.67	5,851	0.39	–	1.72	22.9
14.57	12.53	6,603	0.39	–	1.72	12.6
13.64	(0.25)	6,285	0.39(e)	–	1.77	24.0

14.54	(20.10)	28,139	0.27	–	2.94	21.7
19.14	36.74	30,796	0.27	–	1.13	18.3
14.48	4.76	20,854	0.27	–	1.46	22.9
14.61	12.62	16,867	0.27	–	1.73	12.6
13.69	(0.07)	14,963	0.27(e)	–	1.66	24.0

C-95

Financial Highlights
Principal Funds, Inc. (Continued)

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
PRINCIPAL LIFETIME 2065 FUND
Institutional shares
2022	$15.19	$0.38	$(3.30)	$(2.92)	$(0.42)	$(0.14)	$(0.56)
2021	11.33	0.15	4.03	4.18	(0.19)	(0.13)	(0.32)
2020	11.19	0.14	0.44	0.58	(0.19)	(0.25)	(0.44)
2019	10.25	0.17	1.08	1.25	(0.19)	(0.12)	(0.31)
2018	10.45	0.02	(0.02)	–	(0.20)	–	(0.20)
R-1 shares
2022	14.92	0.30	(3.28)	(2.98)	(0.34)	(0.14)	(0.48)
2021	11.17	(0.01)	4.01	4.00	(0.12)	(0.13)	(0.25)
2020	11.05	0.29	0.19	0.48	(0.11)	(0.25)	(0.36)
2019	10.16	0.10	1.06	1.16	(0.15)	(0.12)	(0.27)
2018	10.43	(0.04)	(0.03)	(0.07)	(0.20)	–	(0.20)
R-3 shares
2022	15.04	0.30	(3.26)	(2.96)	(0.37)	(0.14)	(0.51)
2021	11.21	0.07	4.00	4.07	(0.11)	(0.13)	(0.24)
2020	11.10	0.11	0.40	0.51	(0.15)	(0.25)	(0.40)
2019	10.20	0.13	1.05	1.18	(0.16)	(0.12)	(0.28)
2018	10.44	(0.02)	(0.02)	(0.04)	(0.20)	–	(0.20)
R-4 shares
2022	15.06	0.37	(3.31)	(2.94)	(0.38)	(0.14)	(0.52)
2021	11.25	0.13	3.97	4.10	(0.16)	(0.13)	(0.29)
2020	11.13	0.17	0.36	0.53	(0.16)	(0.25)	(0.41)
2019	10.22	0.15	1.06	1.21	(0.18)	(0.12)	(0.30)
2018	10.44	0.01	(0.03)	(0.02)	(0.20)	–	(0.20)
R-5 shares
2022	15.10	0.33	(3.26)	(2.93)	(0.40)	(0.14)	(0.54)
2021	11.27	0.14	3.99	4.13	(0.17)	(0.13)	(0.30)
2020	11.16	0.06	0.48	0.54	(0.18)	(0.25)	(0.43)
2019	10.24	0.14	1.09	1.23	(0.19)	(0.12)	(0.31)
2018	10.44	0.01	(0.01)	–	(0.20)	–	(0.20)

(a)

Calculated based on average shares outstanding during the period.

(b)

Reflects Manager's contractual expense limit.

C-96

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$11.71	(19.92)%	$83,762	0.05%(b)	2.96%	28.4%
15.19	37.37	73,568	0.08(b)	1.04	22.5
11.33	5.15	26,561	0.08(b)	1.28	55.1
11.19	12.82	11,938	0.10(b)	1.57	51.6
10.25	(0.08)	7,146	0.10(b)	0.23	195.7

11.46	(20.61)	268	0.90(b)	2.40	28.4
14.92	36.21	176	0.91(b)	(0.10)	22.5
11.17	4.34	58	0.93(b)	2.64	55.1
11.05	11.93	136	0.93(b)	0.93	51.6
10.16	(0.76)	109	0.93(b)	(0.36)	195.7

11.57	(20.37)	4,642	0.59(b)	2.34	28.4
15.04	36.70	4,115	0.60(b)	0.49	22.5
11.21	4.55	1,590	0.62(b)	1.00	55.1
11.10	12.19	2,256	0.62(b)	1.29	51.6
10.20	(0.46)	1,565	0.62(b)	(0.23)	195.7

11.60	(20.19)	1,102	0.40(b)	2.86	28.4
15.06	36.90	1,234	0.41(b)	0.91	22.5
11.25	4.73	505	0.43(b)	1.55	55.1
11.13	12.48	427	0.43(b)	1.39	51.6
10.22	(0.27)	339	0.43(b)	0.14	195.7

11.63	(20.11)	5,055	0.28(b)	2.57	28.4
15.10	37.09	3,917	0.29(b)	0.98	22.5
11.27	4.81	1,898	0.31(b)	0.52	55.1
11.16	12.60	711	0.31(b)	1.37	51.6
10.24	(0.08)	469	0.31(b)	0.07	195.7

C-97

Financial Highlights
Principal Funds, Inc. (Continued)

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
PRINCIPAL LIFETIME HYBRID INCOME FUND
Class J shares
2022	$11.69	$0.23	$(1.83)	$(1.60)	$(0.25)	$(0.35)	$(0.60)
2021	11.18	0.39	0.66	1.05	(0.50)	(0.04)	(0.54)
2020	10.84	0.19	0.45	0.64	(0.26)	(0.04)	(0.30)
2019	10.16	0.22	0.66	0.88	(0.16)	(0.04)	(0.20)
2018(e)	10.26	0.05	(0.15)	(0.10)	–	–	–
Institutional shares
2022	11.74	0.29	(1.86)	(1.57)	(0.28)	(0.35)	(0.63)
2021	11.23	0.43	0.63	1.06	(0.51)	(0.04)	(0.55)
2020	10.88	0.27	0.40	0.67	(0.28)	(0.04)	(0.32)
2019	10.17	0.28	0.64	0.92	(0.17)	(0.04)	(0.21)
2018	10.51	0.28	(0.37)	(0.09)	(0.24)	(0.01)	(0.25)
R-6 shares
2022	11.76	0.27	(1.84)	(1.57)	(0.28)	(0.35)	(0.63)
2021	11.24	0.52	0.56	1.08	(0.52)	(0.04)	(0.56)
2020	10.89	0.26	0.41	0.67	(0.28)	(0.04)	(0.32)
2019	10.18	0.17	0.75	0.92	(0.17)	(0.04)	(0.21)
2018	10.52	0.15	(0.24)	(0.09)	(0.24)	(0.01)	(0.25)

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(d)

Excludes expense reimbursement from Manager and/or Distributor.

(e)

Period from March 1, 2018, date operations commenced, through October 31, 2018.

(f)

Total return amounts have not been annualized.

(g)

Computed on an annualized basis.

(h)

Reflects Manager's contractual expense limit.

C-98

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$9.49	(14.39)%(b)	$42,296	0.26%(c)	0.28%(d)	2.23%	31.5%
11.69	9.56(b)	33,456	0.28(c)	0.30(d)	3.38	20.6
11.18	6.01(b)	18,439	0.30(c)	0.43(d)	1.72	34.6
10.84	8.82(b)	8,310	0.30(c)	0.72(d)	2.07	24.1
10.16	(0.97)(b)(f)	3,029	0.30(c)(g)	2.97(d)(g)	0.72(g)	58.8

9.54	(14.17)	11,474	0.05(h)	–	2.76	31.5
11.74	9.69	17,255	0.05(h)	–	3.74	20.6
11.23	6.27	12,454	0.05(h)	–	2.45	34.6
10.88	9.20	13,554	0.05(h)	–	2.67	24.1
10.17	(0.88)	14,431	0.05(h)	–	2.73	58.8

9.56	(14.13)	33,623	0.02(h)	–	2.61	31.5
11.76	9.78	34,760	0.02(h)	–	4.48	20.6
11.24	6.27	33,148	0.02(h)	–	2.42	34.6
10.89	9.19	34,983	0.02(h)	–	1.62	24.1
10.18	(0.88)	8,750	0.02(h)	–	1.40	58.8

C-99

Financial Highlights
Principal Funds, Inc. (Continued)

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
PRINCIPAL LIFETIME HYBRID 2015 FUND
Class J shares
2022	$12.91	$0.23	$(2.00)	$(1.77)	$(0.28)	$(0.42)	$(0.70)
2021	11.75	0.39	1.34	1.73	(0.48)	(0.09)	(0.57)
2020	11.39	0.21	0.48	0.69	(0.26)	(0.07)	(0.33)
2019	10.63	0.18	0.80	0.98	(0.14)	(0.08)	(0.22)
2018(e)	10.79	0.03	(0.19)	(0.16)	–	–	–
Institutional shares
2022	12.96	0.31	(2.07)	(1.76)	(0.29)	(0.42)	(0.71)
2021	11.80	0.48	1.27	1.75	(0.50)	(0.09)	(0.59)
2020	11.42	0.28	0.45	0.73	(0.28)	(0.07)	(0.35)
2019	10.65	0.26	0.74	1.00	(0.15)	(0.08)	(0.23)
2018	10.96	0.26	(0.31)	(0.05)	(0.22)	(0.04)	(0.26)
R-6 shares
2022	12.98	0.32	(2.07)	(1.75)	(0.30)	(0.42)	(0.72)
2021	11.82	0.50	1.26	1.76	(0.51)	(0.09)	(0.60)
2020	11.44	0.27	0.46	0.73	(0.28)	(0.07)	(0.35)
2019	10.66	0.14	0.87	1.01	(0.15)	(0.08)	(0.23)
2018	10.98	0.11	(0.17)	(0.06)	(0.22)	(0.04)	(0.26)

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(d)

Excludes expense reimbursement from Manager and/or Distributor.

(e)

Period from March 1, 2018, date operations commenced, through October 31, 2018.

(f)

Total return amounts have not been annualized.

(g)

Computed on an annualized basis.

(h)

Reflects Manager's contractual expense limit.

C-100

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$10.44	(14.50)%(b)	$96,345	0.23%(c)	0.25%(d)	2.07%	18.1%
12.91	15.07(b)	55,458	0.23(c)	0.25(d)	3.10	20.6
11.75	6.21(b)	29,710	0.28(c)	0.31(d)	1.84	32.4
11.39	9.44(b)	19,129	0.30(c)	0.44(d)	1.67	31.5
10.63	(1.48)(b)(f)	7,117	0.30(c)(g)	1.32(d)(g)	0.42(g)	40.9

10.49	(14.35)	18,704	0.05(h)	–	2.72	18.1
12.96	15.21	22,888	0.05(h)	–	3.85	20.6
11.80	6.54	19,501	0.05(h)	–	2.46	32.4
11.42	9.63	22,269	0.05(h)	–	2.41	31.5
10.65	(0.56)	29,429	0.05(h)	–	2.34	40.9

10.51	(14.30)	46,216	0.02(h)	–	2.78	18.1
12.98	15.21	58,859	0.02(h)	–	3.98	20.6
11.82	6.55	56,576	0.02(h)	–	2.34	32.4
11.44	9.73	61,079	0.02(h)	–	1.32	31.5
10.66	(0.65)	14,245	0.02(h)	–	1.04	40.9

C-101

Financial Highlights
Principal Funds, Inc. (Continued)

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
PRINCIPAL LIFETIME HYBRID 2020 FUND
Class J shares
2022	$13.47	$0.28	$(2.19)	$(1.91)	$(0.30)	$(0.46)	$(0.76)
2021	11.92	0.37	1.76	2.13	(0.47)	(0.11)	(0.58)
2020	11.54	0.20	0.53	0.73	(0.26)	(0.09)	(0.35)
2019	10.85	0.16	0.87	1.03	(0.18)	(0.16)	(0.34)
2018(e)	11.04	0.02	(0.21)	(0.19)	–	–	–
Institutional shares
2022	13.54	0.33	(2.24)	(1.91)	(0.31)	(0.46)	(0.77)
2021	11.97	0.45	1.71	2.16	(0.48)	(0.11)	(0.59)
2020	11.59	0.33	0.41	0.74	(0.27)	(0.09)	(0.36)
2019	10.88	0.26	0.79	1.05	(0.18)	(0.16)	(0.34)
2018	11.21	0.28	(0.33)	(0.05)	(0.23)	(0.05)	(0.28)
R-6 shares
2022	13.54	0.33	(2.24)	(1.91)	(0.31)	(0.46)	(0.77)
2021	11.97	0.49	1.68	2.17	(0.49)	(0.11)	(0.60)
2020	11.59	0.26	0.49	0.75	(0.28)	(0.09)	(0.37)
2019	10.88	0.12	0.94	1.06	(0.19)	(0.16)	(0.35)
2018	11.22	0.10	(0.15)	(0.05)	(0.24)	(0.05)	(0.29)

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(d)

Excludes expense reimbursement from Manager and/or Distributor.

(e)

Period from March 1, 2018, date operations commenced, through October 31, 2018.

(f)

Total return amounts have not been annualized.

(g)

Computed on an annualized basis.

(h)

Reflects Manager's contractual expense limit.

C-102

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$10.80	(15.02)%(b)	$205,008	0.18%(c)	0.20%(d)	2.38%	20.4%
13.47	18.31(b)	184,994	0.19(c)	0.21(d)	2.87	16.2
11.92	6.38(b)	87,239	0.20(c)	0.23(d)	1.71	26.7
11.54	9.89(b)	44,553	0.28(c)	0.31(d)	1.42	21.4
10.85	(1.72)(b)(f)	12,536	0.30(c)(g)	1.07(d)(g)	0.27(g)	33.7

10.86	(14.95)	42,581	0.05(h)	–	2.78	20.4
13.54	18.50	58,554	0.05(h)	–	3.44	16.2
11.97	6.50	49,188	0.05(h)	–	2.83	26.7
11.59	10.11	81,108	0.05(h)	–	2.34	21.4
10.88	(0.50)	94,427	0.05(h)	–	2.45	33.7

10.86	(14.91)	187,400	0.02(h)	–	2.77	20.4
13.54	18.54	233,947	0.02(h)	–	3.78	16.2
11.97	6.53	212,655	0.02(h)	–	2.28	26.7
11.59	10.16	205,364	0.02(h)	–	1.04	21.4
10.88	(0.57)	35,759	0.02(h)	–	0.94	33.7

C-103

Financial Highlights
Principal Funds, Inc. (Continued)

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
PRINCIPAL LIFETIME HYBRID 2025 FUND
Class J shares
2022	$14.27	$0.29	$(2.42)	$(2.13)	$(0.32)	$(0.39)	$(0.71)
2021	12.20	0.37	2.25	2.62	(0.46)	(0.09)	(0.55)
2020	11.84	0.20	0.55	0.75	(0.26)	(0.13)	(0.39)
2019	11.10	0.16	0.92	1.08	(0.19)	(0.15)	(0.34)
2018(e)	11.33	0.01	(0.24)	(0.23)	–	–	–
Institutional shares
2022	14.33	0.34	(2.47)	(2.13)	(0.33)	(0.39)	(0.72)
2021	12.24	0.45	2.20	2.65	(0.47)	(0.09)	(0.56)
2020	11.88	0.28	0.48	0.76	(0.27)	(0.13)	(0.40)
2019	11.12	0.25	0.86	1.11	(0.20)	(0.15)	(0.35)
2018	11.44	0.26	(0.31)	(0.05)	(0.24)	(0.03)	(0.27)
R-6 shares
2022	14.34	0.35	(2.48)	(2.13)	(0.33)	(0.39)	(0.72)
2021	12.25	0.47	2.19	2.66	(0.48)	(0.09)	(0.57)
2020	11.89	0.25	0.51	0.76	(0.27)	(0.13)	(0.40)
2019	11.13	0.13	0.98	1.11	(0.20)	(0.15)	(0.35)
2018	11.45	0.13	(0.18)	(0.05)	(0.24)	(0.03)	(0.27)

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(d)

Excludes expense reimbursement from Manager and/or Distributor.

(e)

Period from March 1, 2018, date operations commenced, through October 31, 2018.

(f)

Total return amounts have not been annualized.

(g)

Computed on an annualized basis.

(h)

Reflects Manager's contractual expense limit.

C-104

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$11.43	(15.71)%(b)	$272,529	0.18%(c)	0.20%(d)	2.30%	13.6%
14.27	21.94(b)	207,361	0.19(c)	0.21(d)	2.69	14.2
12.20	6.36(b)	95,483	0.20(c)	0.23(d)	1.70	18.6
11.84	10.24(b)	48,991	0.28(c)	0.31(d)	1.42	22.5
11.10	(2.03)(b)(f)	13,840	0.30(c)(g)	0.84(d)(g)	0.09(g)	23.3

11.48	(15.63)	64,787	0.05(h)	–	2.70	13.6
14.33	22.14	75,042	0.05(h)	–	3.27	14.2
12.24	6.46	58,524	0.05(h)	–	2.38	18.6
11.88	10.48	63,839	0.05(h)	–	2.17	22.5
11.12	(0.53)	75,318	0.05(h)	–	2.25	23.3

11.49	(15.60)	178,008	0.02(h)	–	2.73	13.6
14.34	22.16	206,615	0.02(h)	–	3.42	14.2
12.25	6.49	161,907	0.02(h)	–	2.11	18.6
11.89	10.52	129,870	0.02(h)	–	1.13	22.5
11.13	(0.53)	35,044	0.02(h)	–	1.13	23.3

C-105

Financial Highlights
Principal Funds, Inc. (Continued)

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
PRINCIPAL LIFETIME HYBRID 2030 FUND
Class J shares
2022	$14.78	$0.28	$(2.67)	$(2.39)	$(0.32)	$(0.44)	$(0.76)
2021	12.32	0.37	2.67	3.04	(0.45)	(0.13)	(0.58)
2020	11.99	0.19	0.57	0.76	(0.25)	(0.18)	(0.43)
2019	11.25	0.14	0.99	1.13	(0.21)	(0.18)	(0.39)
2018(e)	11.53	–	(0.28)	(0.28)	–	–	–
Institutional shares
2022	14.86	0.33	(2.70)	(2.37)	(0.34)	(0.44)	(0.78)
2021	12.38	0.41	2.66	3.07	(0.46)	(0.13)	(0.59)
2020	12.04	0.35	0.44	0.79	(0.27)	(0.18)	(0.45)
2019	11.27	0.24	0.92	1.16	(0.21)	(0.18)	(0.39)
2018	11.62	0.27	(0.33)	(0.06)	(0.24)	(0.05)	(0.29)
R-6 shares
2022	14.86	0.33	(2.70)	(2.37)	(0.34)	(0.44)	(0.78)
2021	12.37	0.45	2.63	3.08	(0.46)	(0.13)	(0.59)
2020	12.03	0.26	0.53	0.79	(0.27)	(0.18)	(0.45)
2019	11.27	0.13	1.03	1.16	(0.22)	(0.18)	(0.40)
2018	11.62	0.09	(0.15)	(0.06)	(0.24)	(0.05)	(0.29)

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(d)

Excludes expense reimbursement from Manager and/or Distributor.

(e)

Period from March 1, 2018, date operations commenced, through October 31, 2018.

(f)

Total return amounts have not been annualized.

(g)

Computed on an annualized basis.

(h)

Reflects Manager's contractual expense limit.

C-106

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$11.63	(17.04)%(b)	$203,444	0.19%(c)	0.21%(d)	2.17%	16.7%
14.78	25.23(b)	177,896	0.20(c)	0.22(d)	2.61	14.9
12.32	6.42(b)	78,987	0.22(c)	0.25(d)	1.60	26.7
11.99	10.56(b)	40,498	0.30(c)	0.37(d)	1.25	16.3
11.25	(2.43)(b)(f)	11,583	0.30(c)(g)	1.09(d)(g)	(0.04)(g)	25.9

11.71	(16.87)	77,067	0.05(h)	–	2.56	16.7
14.86	25.38	92,984	0.05(h)	–	2.93	14.9
12.38	6.64	60,462	0.05(h)	–	2.92	26.7
12.04	10.88	93,111	0.05(h)	–	2.14	16.3
11.27	(0.56)	93,545	0.05(h)	–	2.31	25.9

11.71	(16.84)	237,340	0.02(h)	–	2.54	16.7
14.86	25.52	261,855	0.02(h)	–	3.23	14.9
12.37	6.67	194,059	0.02(h)	–	2.15	26.7
12.03	10.83	161,196	0.02(h)	–	1.15	16.3
11.27	(0.55)	53,746	0.02(h)	–	0.79	25.9

C-107

Financial Highlights
Principal Funds, Inc. (Continued)

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
PRINCIPAL LIFETIME HYBRID 2035 FUND
Class J shares
2022	$15.50	$0.31	$(2.88)	$(2.57)	$(0.34)	$(0.39)	$(0.73)
2021	12.56	0.33	3.14	3.47	(0.42)	(0.11)	(0.53)
2020	12.28	0.18	0.55	0.73	(0.26)	(0.19)	(0.45)
2019	11.49	0.14	1.07	1.21	(0.21)	(0.21)	(0.42)
2018(e)	11.78	–	(0.29)	(0.29)	–	–	–
Institutional shares
2022	15.59	0.34	(2.90)	(2.56)	(0.36)	(0.39)	(0.75)
2021	12.62	0.40	3.12	3.52	(0.44)	(0.11)	(0.55)
2020	12.33	0.28	0.47	0.75	(0.27)	(0.19)	(0.46)
2019	11.51	0.22	1.02	1.24	(0.21)	(0.21)	(0.42)
2018	11.83	0.27	(0.32)	(0.05)	(0.23)	(0.04)	(0.27)
R-6 shares
2022	15.61	0.35	(2.91)	(2.56)	(0.36)	(0.39)	(0.75)
2021	12.64	0.42	3.10	3.52	(0.44)	(0.11)	(0.55)
2020	12.35	0.25	0.51	0.76	(0.28)	(0.19)	(0.47)
2019	11.53	0.14	1.10	1.24	(0.21)	(0.21)	(0.42)
2018	11.84	0.14	(0.18)	(0.04)	(0.23)	(0.04)	(0.27)

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(d)

Excludes expense reimbursement from Manager and/or Distributor.

(e)

Period from March 1, 2018, date operations commenced, through October 31, 2018.

(f)

Total return amounts have not been annualized.

(g)

Computed on an annualized basis.

(h)

Reflects Manager's contractual expense limit.

C-108

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$12.20	(17.38)%(b)	$158,186	0.20%(c)	0.22%(d)	2.27%	12.6%
15.50	28.22(b)	143,236	0.21(c)	0.24(d)	2.22	10.6
12.56	5.94(b)	60,829	0.24(c)	0.27(d)	1.51	14.3
12.28	11.12(b)	29,770	0.30(c)	0.40(d)	1.16	17.4
11.49	(2.46)(b)(f)	8,266	0.30(c)(g)	1.65(d)(g)	0.00(g)	13.7

12.28	(17.25)	71,210	0.05(h)	–	2.50	12.6
15.59	28.46	79,002	0.05(h)	–	2.75	10.6
12.62	6.15	54,018	0.05(h)	–	2.31	14.3
12.33	11.42	54,756	0.05(h)	–	1.90	17.4
11.51	(0.45)	54,606	0.05(h)	–	2.22	13.7

12.30	(17.21)	167,461	0.02(h)	–	2.55	12.6
15.61	28.45	180,539	0.02(h)	–	2.84	10.6
12.64	6.17	124,836	0.02(h)	–	2.05	14.3
12.35	11.45	94,420	0.02(h)	–	1.17	17.4
11.53	(0.36)	33,325	0.02(h)	–	1.12	13.7

C-109

Financial Highlights
Principal Funds, Inc. (Continued)

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
PRINCIPAL LIFETIME HYBRID 2040 FUND
Class J shares
2022	$15.84	$0.30	$(2.98)	$(2.68)	$(0.35)	$(0.40)	$(0.75)
2021	12.58	0.30	3.48	3.78	(0.38)	(0.14)	(0.52)
2020	12.34	0.19	0.51	0.70	(0.25)	(0.21)	(0.46)
2019	11.59	0.11	1.10	1.21	(0.21)	(0.25)	(0.46)
2018(e)	11.91	–	(0.32)	(0.32)	–	–	–
Institutional shares
2022	15.93	0.36	(3.02)	(2.66)	(0.37)	(0.40)	(0.77)
2021	12.64	0.36	3.47	3.83	(0.40)	(0.14)	(0.54)
2020	12.40	0.34	0.38	0.72	(0.27)	(0.21)	(0.48)
2019	11.62	0.23	1.02	1.25	(0.22)	(0.25)	(0.47)
2018	11.94	0.27	(0.31)	(0.04)	(0.23)	(0.05)	(0.28)
R-6 shares
2022	15.96	0.35	(3.02)	(2.67)	(0.37)	(0.40)	(0.77)
2021	12.66	0.38	3.46	3.84	(0.40)	(0.14)	(0.54)
2020	12.41	0.25	0.48	0.73	(0.27)	(0.21)	(0.48)
2019	11.63	0.12	1.13	1.25	(0.22)	(0.25)	(0.47)
2018	11.96	0.15	(0.20)	(0.05)	(0.23)	(0.05)	(0.28)

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(d)

Excludes expense reimbursement from Manager and/or Distributor.

(e)

Period from March 1, 2018, date operations commenced, through October 31, 2018.

(f)

Total return amounts have not been annualized.

(g)

Computed on an annualized basis.

(h)

Reflects Manager's contractual expense limit.

C-110

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$12.41	(17.72)%(b)	$138,511	0.21%(c)	0.23%(d)	2.18%	13.5%
15.84	30.64(b)	115,496	0.22(c)	0.24(d)	1.98	12.9
12.58	5.74(b)	49,746	0.26(c)	0.29(d)	1.60	22.5
12.34	11.18(b)	26,552	0.30(c)	0.42(d)	0.94	14.9
11.59	(2.69)(b)(f)	6,882	0.30(c)(g)	1.71(d)(g)	(0.03)(g)	15.1

12.50	(17.53)	58,528	0.05(h)	–	2.58	13.5
15.93	30.90	68,006	0.05(h)	–	2.42	12.9
12.64	5.86	44,657	0.05(h)	–	2.75	22.5
12.40	11.49	65,024	0.05(h)	–	1.96	14.9
11.62	(0.38)	65,042	0.05(h)	–	2.18	15.1

12.52	(17.54)	187,431	0.02(h)	–	2.50	13.5
15.96	30.97	194,948	0.02(h)	–	2.56	12.9
12.66	5.97	137,469	0.02(h)	–	2.08	22.5
12.41	11.52	112,973	0.02(h)	–	1.04	14.9
11.63	(0.46)	36,294	0.02(h)	–	1.19	15.1

C-111

Financial Highlights
Principal Funds, Inc. (Continued)

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
PRINCIPAL LIFETIME HYBRID 2045 FUND
Class J shares
2022	$16.35	$0.30	$(3.09)	$(2.79)	$(0.37)	$(0.37)	$(0.74)
2021	12.71	0.28	3.83	4.11	(0.35)	(0.12)	(0.47)
2020	12.46	0.18	0.52	0.70	(0.25)	(0.20)	(0.45)
2019	11.72	0.10	1.12	1.22	(0.21)	(0.27)	(0.48)
2018(e)	12.05	(0.01)	(0.32)	(0.33)	–	–	–
Institutional shares
2022	16.44	0.36	(3.14)	(2.78)	(0.39)	(0.37)	(0.76)
2021	12.77	0.34	3.82	4.16	(0.37)	(0.12)	(0.49)
2020	12.51	0.28	0.45	0.73	(0.27)	(0.20)	(0.47)
2019	11.74	0.21	1.05	1.26	(0.22)	(0.27)	(0.49)
2018	12.05	0.25	(0.29)	(0.04)	(0.23)	(0.04)	(0.27)
R-6 shares
2022	16.46	0.36	(3.14)	(2.78)	(0.39)	(0.37)	(0.76)
2021	12.79	0.35	3.81	4.16	(0.37)	(0.12)	(0.49)
2020	12.53	0.24	0.49	0.73	(0.27)	(0.20)	(0.47)
2019	11.75	0.11	1.16	1.27	(0.22)	(0.27)	(0.49)
2018	12.06	0.12	(0.16)	(0.04)	(0.23)	(0.04)	(0.27)

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(d)

Excludes expense reimbursement from Manager and/or Distributor.

(e)

Period from March 1, 2018, date operations commenced, through October 31, 2018.

(f)

Total return amounts have not been annualized.

(g)

Computed on an annualized basis.

(h)

Reflects Manager's contractual expense limit.

C-112

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$12.82	(17.90)%(b)	$86,099	0.24%(c)	0.26%(d)	2.10%	15.9%
16.35	32.92(b)	70,004	0.26(c)	0.28(d)	1.81	13.5
12.71	5.58(b)	30,151	0.30(c)	0.35(d)	1.46	14.5
12.46	11.20(b)	14,776	0.30(c)	0.60(d)	0.84	17.7
11.72	(2.74)(b)(f)	3,288	0.30(c)(g)	3.08(d)(g)	(0.10)(g)	12.0

12.90	(17.75)	49,445	0.05(h)	–	2.52	15.9
16.44	33.20	55,809	0.05(h)	–	2.22	13.5
12.77	5.80	36,546	0.05(h)	–	2.30	14.5
12.51	11.53	38,651	0.05(h)	–	1.80	17.7
11.74	(0.39)	37,700	0.05(h)	–	2.07	12.0

12.92	(17.71)	119,980	0.02(h)	–	2.49	15.9
16.46	33.18	122,476	0.02(h)	–	2.30	13.5
12.79	5.81	82,272	0.02(h)	–	1.95	14.5
12.53	11.62	59,532	0.02(h)	–	0.94	17.7
11.75	(0.39)	17,071	0.02(h)	–	0.99	12.0

C-113

Financial Highlights
Principal Funds, Inc. (Continued)

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
PRINCIPAL LIFETIME HYBRID 2050 FUND
Class J shares
2022	$16.55	$0.29	$(3.14)	$(2.85)	$(0.36)	$(0.36)	$(0.72)
2021	12.73	0.26	4.02	4.28	(0.32)	(0.14)	(0.46)
2020	12.56	0.17	0.51	0.68	(0.25)	(0.26)	(0.51)
2019	11.79	0.11	1.12	1.23	(0.22)	(0.24)	(0.46)
2018(e)	12.12	(0.01)	(0.32)	(0.33)	–	–	–
Institutional shares
2022	16.63	0.36	(3.19)	(2.83)	(0.39)	(0.36)	(0.75)
2021	12.77	0.32	4.02	4.34	(0.34)	(0.14)	(0.48)
2020	12.59	0.36	0.34	0.70	(0.26)	(0.26)	(0.52)
2019	11.79	0.22	1.05	1.27	(0.23)	(0.24)	(0.47)
2018	12.12	0.24	(0.28)	(0.04)	(0.23)	(0.06)	(0.29)
R-6 shares
2022	16.63	0.35	(3.17)	(2.82)	(0.40)	(0.36)	(0.76)
2021	12.78	0.32	4.01	4.33	(0.34)	(0.14)	(0.48)
2020	12.59	0.23	0.49	0.72	(0.27)	(0.26)	(0.53)
2019	11.80	0.11	1.15	1.26	(0.23)	(0.24)	(0.47)
2018	12.12	0.10	(0.13)	(0.03)	(0.23)	(0.06)	(0.29)

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(d)

Excludes expense reimbursement from Manager and/or Distributor.

(e)

Period from March 1, 2018, date operations commenced, through October 31, 2018.

(f)

Total return amounts have not been annualized.

(g)

Computed on an annualized basis.

(h)

Reflects Manager's contractual expense limit.

C-114

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$12.98	(18.01)%(b)	$70,033	0.26%(c)	0.28%(d)	2.05%	16.3%
16.55	34.17(b)	57,162	0.28(c)	0.30(d)	1.65	12.1
12.73	5.36(b)	25,905	0.30(c)	0.40(d)	1.39	26.5
12.56	11.25(b)	12,754	0.30(c)	0.69(d)	0.95	12.6
11.79	(2.72)(b)(f)	3,239	0.30(c)(g)	3.46(d)(g)	(0.12)(g)	12.1

13.05	(17.85)	39,987	0.05(h)	–	2.47	16.3
16.63	34.60	43,480	0.05(h)	–	2.04	12.1
12.77	5.58	28,345	0.05(h)	–	2.87	26.5
12.59	11.60	44,432	0.05(h)	–	1.88	12.6
11.79	(0.38)	38,809	0.05(h)	–	1.95	12.1

13.05	(17.83)	108,293	0.02(h)	–	2.45	16.3
16.63	34.53	105,040	0.02(h)	–	2.08	12.1
12.78	5.68	64,444	0.02(h)	–	1.91	26.5
12.59	11.52	45,364	0.02(h)	–	0.95	12.6
11.80	(0.30)	13,369	0.02(h)	–	0.81	12.1

C-115

Financial Highlights
Principal Funds, Inc. (Continued)

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
PRINCIPAL LIFETIME HYBRID 2055 FUND
Class J shares
2022	$16.92	$0.29	$(3.22)	$(2.93)	$(0.37)	$(0.31)	$(0.68)
2021	12.86	0.21	4.28	4.49	(0.30)	(0.13)	(0.43)
2020	12.67	0.17	0.45	0.62	(0.25)	(0.18)	(0.43)
2019	11.91	0.09	1.16	1.25	(0.23)	(0.26)	(0.49)
2018(e)	12.27	(0.01)	(0.35)	(0.36)	–	–	–
Institutional shares
2022	17.01	0.36	(3.26)	(2.90)	(0.40)	(0.31)	(0.71)
2021	12.92	0.28	4.27	4.55	(0.33)	(0.13)	(0.46)
2020	12.71	0.29	0.37	0.66	(0.27)	(0.18)	(0.45)
2019	11.93	0.20	1.08	1.28	(0.24)	(0.26)	(0.50)
2018	12.23	0.24	(0.27)	(0.03)	(0.23)	(0.04)	(0.27)
R-6 shares
2022	17.04	0.35	(3.25)	(2.90)	(0.40)	(0.31)	(0.71)
2021	12.94	0.30	4.26	4.56	(0.33)	(0.13)	(0.46)
2020	12.72	0.22	0.45	0.67	(0.27)	(0.18)	(0.45)
2019	11.94	0.09	1.19	1.28	(0.24)	(0.26)	(0.50)
2018	12.24	0.09	(0.12)	(0.03)	(0.23)	(0.04)	(0.27)

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(d)

Excludes expense reimbursement from Manager and/or Distributor.

(e)

Period from March 1, 2018, date operations commenced, through October 31, 2018.

(f)

Total return amounts have not been annualized.

(g)

Computed on an annualized basis.

(h)

Reflects Manager's contractual expense limit.

C-116

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$13.31	(18.06)%(b)	$32,146	0.30%(c)	0.39%(d)	1.96%	13.4%
16.92	35.47(b)	24,427	0.30(c)	0.44(d)	1.30	9.1
12.86	4.91(b)	9,235	0.30(c)	0.73(d)	1.34	14.2
12.67	11.29(b)	4,097	0.30(c)	1.63(d)	0.74	22.3
11.91	(2.93)(b)(f)	1,178	0.30(c)(g)	10.17(d)(g)	(0.12)(g)	13.8

13.40	(17.82)	24,173	0.05(h)	–	2.45	13.4
17.01	35.76	25,049	0.05(h)	–	1.74	9.1
12.92	5.19	13,916	0.05(h)	–	2.30	14.2
12.71	11.53	14,697	0.05(h)	–	1.68	22.3
11.93	(0.30)	13,086	0.05(h)	–	1.89	13.8

13.43	(17.77)	55,493	0.02(h)	–	2.39	13.4
17.04	35.79	50,453	0.02(h)	–	1.92	9.1
12.94	5.26	28,721	0.02(h)	–	1.78	14.2
12.72	11.52	17,525	0.02(h)	–	0.77	22.3
11.94	(0.30)	3,741	0.02(h)	–	0.68	13.8

C-117

Financial Highlights
Principal Funds, Inc. (Continued)

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
PRINCIPAL LIFETIME HYBRID 2060 FUND
Class J shares
2022	$17.18	$0.27	$(3.26)	$(2.99)	$(0.38)	$(0.25)	$(0.63)
2021	12.97	0.19	4.44	4.63	(0.30)	(0.12)	(0.42)
2020	12.81	0.14	0.49	0.63	(0.26)	(0.21)	(0.47)
2019	11.91	0.11	1.17	1.28	(0.24)	(0.14)	(0.38)
2018(e)	12.28	(0.01)	(0.36)	(0.37)	–	–	–
Institutional shares
2022	17.33	0.35	(3.31)	(2.96)	(0.41)	(0.25)	(0.66)
2021	13.07	0.24	4.45	4.69	(0.31)	(0.12)	(0.43)
2020	12.87	0.30	0.38	0.68	(0.27)	(0.21)	(0.48)
2019	11.94	0.19	1.12	1.31	(0.24)	(0.14)	(0.38)
2018	12.26	0.21	(0.24)	(0.03)	(0.23)	(0.06)	(0.29)
R-6 shares
2022	17.37	0.35	(3.32)	(2.97)	(0.41)	(0.25)	(0.66)
2021	13.09	0.28	4.43	4.71	(0.31)	(0.12)	(0.43)
2020	12.89	0.22	0.46	0.68	(0.27)	(0.21)	(0.48)
2019	11.95	0.11	1.21	1.32	(0.24)	(0.14)	(0.38)
2018	12.28	0.04	(0.08)	(0.04)	(0.23)	(0.06)	(0.29)

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(d)

Excludes expense reimbursement from Manager and/or Distributor.

(e)

Period from March 1, 2018, date operations commenced, through October 31, 2018.

(f)

Total return amounts have not been annualized.

(g)

Computed on an annualized basis.

(h)

Reflects Manager's contractual expense limit.

C-118

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$13.56	(18.08)%(b)	$15,523	0.30%(c)	0.58%(d)	1.79%	13.8%
17.18	36.20(b)	9,593	0.30(c)	0.82(d)	1.16	12.9
12.97	4.97(b)	3,203	0.30(c)	1.72(d)	1.15	31.4
12.81	11.30(b)	1,426	0.30(c)	3.92(d)	0.92	15.9
11.91	(3.01)(b)(f)	442	0.30(c)(g)	19.65(d)(g)	(0.13)(g)	22.7

13.71	(17.80)	10,035	0.05(h)	–	2.35	13.8
17.33	36.46	9,423	0.05(h)	–	1.48	12.9
13.07	5.30	4,268	0.05(h)	–	2.39	31.4
12.87	11.53	5,085	0.05(h)	–	1.53	15.9
11.94	(0.31)	3,282	0.05(h)	–	1.71	22.7

13.74	(17.81)	24,880	0.02(h)	–	2.30	13.8
17.37	36.56	19,773	0.02(h)	–	1.70	12.9
13.09	5.29	9,905	0.02(h)	–	1.71	31.4
12.89	11.61	5,924	0.02(h)	–	0.93	15.9
11.95	(0.39)	1,680	0.02(h)	–	0.30	22.7

C-119

Financial Highlights
Principal Funds, Inc. (Continued)

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Tax Return of Capital Distribution
PRINCIPAL LIFETIME HYBRID 2065 FUND
Class J shares
2022	$15.22	$0.30	$(2.98)	$(2.68)	$(0.34)	$–	$–
2021	11.36	0.17	3.95	4.12	(0.25)	–	(0.01)
2020	10.98	0.15	0.42	0.57	(0.19)	–	–
2019	10.20	0.15	0.96	1.11	(0.27)	(0.06)	–
2018(e)	10.52	(0.01)	(0.31)	(0.32)	–	–	–
Institutional shares
2022	15.38	0.29	(2.96)	(2.67)	(0.35)	–	–
2021	11.45	0.19	4.00	4.19	(0.25)	–	(0.01)
2020	11.03	0.18	0.43	0.61	(0.19)	–	–
2019	10.22	0.12	1.02	1.14	(0.27)	(0.06)	–
2018	10.44	0.06	(0.08)	(0.02)	(0.20)	–	–
R-6 shares
2022	15.39	0.28	(2.95)	(2.67)	(0.35)	–	–
2021	11.45	0.27	3.93	4.20	(0.25)	–	(0.01)
2020	11.03	0.17	0.44	0.61	(0.19)	–	–
2019	10.22	0.01	1.13	1.14	(0.27)	(0.06)	–
2018	10.44	0.02	(0.04)	(0.02)	(0.20)	–	–

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(d)

Excludes expense reimbursement from Manager and/or Distributor.

(e)

Period from March 1, 2018, date operations commenced, through October 31, 2018.

(f)

Total return amounts have not been annualized.

(g)

Computed on an annualized basis.

(h)

Reflects Manager's contractual expense limit.

(i)

During the fiscal year ending October 31, 2019, the Class experienced a one-time gain of net $0.02/share as a result of a loss related to a large redemption and a subsequent reimbursement by the Advisor. If such gain had not been recognized, the total return amounts expressed herein would have been lower.

C-120

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

Total Dividends and Distributions	Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$(0.34)	$12.20	(18.04)%(b)	$5,632	0.30%(c)	0.89%(d)	2.26%	28.4%
(0.26)	15.22	36.67(b)	5,381	0.30(c)	1.24(d)	1.19	31.3
(0.19)	11.36	5.18(b)	1,550	0.30(c)	3.26(d)	1.34	65.7
(0.33)	10.98	11.42(b)	625	0.30(c)	7.73(d)	1.44	143.3
–	10.20	(3.04)(b)(f)	397	0.30(c)(g)	16.07(d)(g)	(0.12)(g)	14.2

(0.35)	12.36	(17.81)	1,463	0.05(h)	–	2.12	28.4
(0.26)	15.38	37.00	1,312	0.05(h)	–	1.29	31.3
(0.19)	11.45	5.52	360	0.05(h)	–	1.59	65.7
(0.33)	11.03	11.70	264	0.05(h)	–	1.19	143.3
(0.20)	10.22	(0.28)	86	0.05(h)	–	0.56	14.2

(0.35)	12.37	(17.80)	5,956	0.02(h)	–	2.07	28.4
(0.26)	15.39	37.09	3,340	0.02(h)	–	1.91	31.3
(0.19)	11.45	5.52	1,013	0.02(h)	–	1.56	65.7
(0.33)	11.03	11.83(i)	434	0.02(h)	–	0.13	143.3
(0.20)	10.22	(0.28)	3,948	0.02(h)	–	0.17	14.2

C-121

Financial Highlights
Principal Funds, Inc. (Continued)

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
REAL ESTATE SECURITIES FUND
Class A shares
2022	$33.58	$0.32	$(6.82)	$(6.50)	$(0.35)	$(1.11)	$(1.46)
2021	23.53	0.26	10.41	10.67	(0.30)	(0.32)	(0.62)
2020	28.63	0.33	(4.75)	(4.42)	(0.52)	(0.16)	(0.68)
2019	23.20	0.31	6.02	6.33	(0.33)	(0.57)	(0.90)
2018	23.65	0.35	0.11	0.46	(0.45)	(0.46)	(0.91)
Class C shares
2022	32.93	0.08	(6.68)	(6.60)	(0.11)	(1.11)	(1.22)
2021	23.08	0.05	10.20	10.25	(0.08)	(0.32)	(0.40)
2020	28.08	0.14	(4.67)	(4.53)	(0.31)	(0.16)	(0.47)
2019	22.77	0.11	5.91	6.02	(0.14)	(0.57)	(0.71)
2018	23.23	0.17	0.10	0.27	(0.27)	(0.46)	(0.73)
Class J shares
2022	32.49	0.35	(6.59)	(6.24)	(0.39)	(1.11)	(1.50)
2021	22.79	0.28	10.08	10.36	(0.34)	(0.32)	(0.66)
2020	27.76	0.36	(4.62)	(4.26)	(0.55)	(0.16)	(0.71)
2019	22.52	0.33	5.84	6.17	(0.36)	(0.57)	(0.93)
2018	22.99	0.37	0.11	0.48	(0.49)	(0.46)	(0.95)
Institutional shares
2022	33.61	0.42	(6.82)	(6.40)	(0.45)	(1.11)	(1.56)
2021	23.55	0.32	10.46	10.78	(0.40)	(0.32)	(0.72)
2020	28.66	0.42	(4.77)	(4.35)	(0.60)	(0.16)	(0.76)
2019	23.22	0.39	6.04	6.43	(0.42)	(0.57)	(0.99)
2018	23.67	0.43	0.12	0.55	(0.54)	(0.46)	(1.00)
R-1 shares
2022	33.15	0.17	(6.72)	(6.55)	(0.20)	(1.11)	(1.31)
2021	23.24	0.11	10.29	10.40	(0.17)	(0.32)	(0.49)
2020	28.26	0.23	(4.70)	(4.47)	(0.39)	(0.16)	(0.55)
2019	22.91	0.20	5.95	6.15	(0.23)	(0.57)	(0.80)
2018	23.36	0.23	0.12	0.35	(0.34)	(0.46)	(0.80)

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

(d)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(e)

Excludes expense reimbursement from Manager and/or Distributor.

(f)

Reflects Manager's contractual expense limit.

C-122

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$25.62	(20.14)%(b)	$283,213	1.20%	–%	1.05%	18.7%
33.58	45.87(b)	348,715	1.21	–	0.88	31.0
23.53	(15.56)(b)	286,896	1.24	–	1.33	35.1
28.63	28.09(b)	370,891	1.26	–	1.20	20.1
23.20	1.99(b)	277,447	1.25	–	1.51	22.7

25.11	(20.76)(b)	27,677	1.99	–	0.25	18.7
32.93	44.73(b)(c)	40,295	1.99	–	0.16	31.0
23.08	(16.21)(b)(c)	34,198	2.02	–	0.55	35.1
28.08	27.10(b)	53,250	2.05	–	0.44	20.1
22.77	1.19(b)	47,303	2.03	–	0.73	22.7

24.75	(20.04)(b)(c)	139,555	1.07(d)	1.09(e)	1.18	18.7
32.49	46.09(b)(c)	185,393	1.08(d)	1.10(e)	1.00	31.0
22.79	(15.45)(b)	134,897	1.10(d)	1.13(e)	1.46	35.1
27.76	28.24(b)	181,025	1.14(d)	1.17(e)	1.33	20.1
22.52	2.12(b)	150,427	1.12(d)	1.15(e)	1.63	22.7

25.65	(19.85)	3,291,840	0.86(f)	–	1.39	18.7
33.61	46.34	3,930,727	0.89(f)	–	1.06	31.0
23.55	(15.27)	2,160,526	0.91(f)	–	1.66	35.1
28.66	28.54	2,411,326	0.91(f)	–	1.53	20.1
23.22	2.35	1,540,537	0.91(f)	–	1.83	22.7

25.29	(20.49)	2,230	1.68	–	0.57	18.7
33.15	45.20	2,955	1.68	–	0.37	31.0
23.24	(15.94)	2,141	1.68	–	0.90	35.1
28.26	27.54	4,368	1.69	–	0.79	20.1
22.91	1.53	3,823	1.69	–	1.01	22.7

C-123

Financial Highlights
Principal Funds, Inc. (Continued)

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
REAL ESTATE SECURITIES FUND
R-3 shares
2022	$32.66	$0.26	$(6.62)	$(6.36)	$(0.30)	$(1.11)	$(1.41)
2021	22.91	0.17	10.17	10.34	(0.27)	(0.32)	(0.59)
2020	27.89	0.29	(4.63)	(4.34)	(0.48)	(0.16)	(0.64)
2019	22.62	0.28	5.87	6.15	(0.31)	(0.57)	(0.88)
2018	23.08	0.31	0.11	0.42	(0.42)	(0.46)	(0.88)
R-4 shares
2022	32.26	0.32	(6.54)	(6.22)	(0.36)	(1.11)	(1.47)
2021	22.63	0.27	10.00	10.27	(0.32)	(0.32)	(0.64)
2020	27.57	0.34	(4.59)	(4.25)	(0.53)	(0.16)	(0.69)
2019	22.37	0.32	5.80	6.12	(0.35)	(0.57)	(0.92)
2018	22.84	0.34	0.12	0.46	(0.47)	(0.46)	(0.93)
R-5 shares
2022	32.34	0.35	(6.56)	(6.21)	(0.39)	(1.11)	(1.50)
2021	22.68	0.29	10.04	10.33	(0.35)	(0.32)	(0.67)
2020	27.63	0.37	(4.59)	(4.22)	(0.57)	(0.16)	(0.73)
2019	22.42	0.36	5.80	6.16	(0.38)	(0.57)	(0.95)
2018	22.89	0.38	0.11	0.49	(0.50)	(0.46)	(0.96)
R-6 shares
2022	33.60	0.45	(6.83)	(6.38)	(0.47)	(1.11)	(1.58)
2021	23.55	0.40	10.39	10.79	(0.42)	(0.32)	(0.74)
2020	28.66	0.44	(4.76)	(4.32)	(0.63)	(0.16)	(0.79)
2019	23.22	0.42	6.04	6.46	(0.45)	(0.57)	(1.02)
2018	23.67	0.47	0.09	0.56	(0.55)	(0.46)	(1.01)

(a)

Calculated based on average shares outstanding during the period.

(b)

Reflects Manager's contractual expense limit.

C-124

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$24.89	(20.26)%	$33,778	1.37%	0.88%	18.7%
32.66	45.63	46,314	1.37	0.59	31.0
22.91	(15.66)	28,733	1.37	1.19	35.1
27.89	27.96	43,588	1.38	1.11	20.1
22.62	1.86	36,751	1.38	1.36	22.7

24.57	(20.10)	22,634	1.18	1.08	18.7
32.26	45.92	31,739	1.18	0.95	31.0
22.63	(15.51)	24,909	1.18	1.39	35.1
27.57	28.20	37,265	1.19	1.32	20.1
22.37	2.04	39,574	1.19	1.53	22.7

24.63	(20.01)	87,270	1.06	1.19	18.7
32.34	46.10	114,006	1.06	1.04	31.0
22.68	(15.40)	105,340	1.06	1.51	35.1
27.63	28.34	149,005	1.07	1.48	20.1
22.42	2.17	154,730	1.07	1.69	22.7

25.64	(19.79)	1,854,169	0.80	1.46	18.7
33.60	46.43	2,045,827	0.80(b)	1.38	31.0
23.55	(15.18)	1,643,165	0.81(b)	1.75	35.1
28.66	28.67	1,914,954	0.81(b)	1.65	20.1
23.22	2.43	1,395,164	0.83(b)	2.01	22.7

C-125

Financial Highlights
Principal Funds, Inc. (Continued)

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
SAM BALANCED PORTFOLIO
Class A shares
2022	$18.95	$0.32	$(3.38)	$(3.06)	$(0.30)	$(1.43)	$(1.73)
2021	15.64	0.20	3.58	3.78	(0.19)	(0.28)	(0.47)
2020	15.73	0.25	0.25	0.50	(0.23)	(0.36)	(0.59)
2019	15.50	0.30	1.30	1.60	(0.32)	(1.05)	(1.37)
2018	16.63	0.36	(0.34)	0.02	(0.33)	(0.82)	(1.15)
Class C shares
2022	18.53	0.20	(3.30)	(3.10)	(0.19)	(1.43)	(1.62)
2021	15.36	0.06	3.51	3.57	(0.12)	(0.28)	(0.40)
2020	15.46	0.14	0.24	0.38	(0.12)	(0.36)	(0.48)
2019	15.25	0.24	1.22	1.46	(0.20)	(1.05)	(1.25)
2018	16.39	0.24	(0.34)	(0.10)	(0.22)	(0.82)	(1.04)
Class J shares
2022	18.20	0.32	(3.22)	(2.90)	(0.33)	(1.43)	(1.76)
2021	15.05	0.22	3.43	3.65	(0.22)	(0.28)	(0.50)
2020	15.15	0.27	0.25	0.52	(0.26)	(0.36)	(0.62)
2019	14.98	0.32	1.25	1.57	(0.35)	(1.05)	(1.40)
2018	16.12	0.37	(0.33)	0.04	(0.36)	(0.82)	(1.18)
Institutional shares
2022	18.60	0.37	(3.32)	(2.95)	(0.36)	(1.43)	(1.79)
2021	15.36	0.25	3.52	3.77	(0.25)	(0.28)	(0.53)
2020	15.45	0.29	0.26	0.55	(0.28)	(0.36)	(0.64)
2019	15.25	0.35	1.27	1.62	(0.37)	(1.05)	(1.42)
2018	16.39	0.41	(0.34)	0.07	(0.39)	(0.82)	(1.21)

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Reflects Manager's contractual expense limit.

(d)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(e)

Excludes expense reimbursement from Manager and/or Distributor.

C-126

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$14.16	(17.52)%(b)	$1,965,970	0.60%	–%	1.98%	50.4%
18.95	24.55(b)	2,523,065	0.59	–	1.11	31.3
15.64	3.26(b)	2,060,672	0.61	–	1.64	17.3
15.73	11.57(b)	2,194,735	0.62(c)	–	1.99	13.4
15.50	0.00(b)	1,957,610	0.61(c)	–	2.24	26.7

13.81	(18.16)(b)	174,776	1.38	–	1.26	50.4
18.53	23.57(b)	281,665	1.37	–	0.37	31.3
15.36	2.48(b)	322,006	1.38	–	0.90	17.3
15.46	10.77(b)	384,622	1.38(c)	–	1.62	13.4
15.25	(0.80)(b)	648,980	1.36(c)	–	1.50	26.7

13.54	(17.39)(b)	1,158,071	0.45(d)	0.47(e)	2.11	50.4
18.20	24.65(b)	1,336,353	0.44(d)	0.47(e)	1.25	31.3
15.05	3.51(b)	1,071,910	0.44(d)	0.47(e)	1.80	17.3
15.15	11.78(b)	1,092,386	0.44(d)	0.47(e)	2.21	13.4
14.98	0.12(b)	1,032,835	0.43(d)	0.46(e)	2.40	26.7

13.86	(17.32)	649,784	0.29	–	2.34	50.4
18.60	24.93	896,603	0.28	–	1.42	31.3
15.36	3.66	747,015	0.30	–	1.95	17.3
15.45	11.93	778,336	0.29(c)	–	2.36	13.4
15.25	0.26	725,915	0.29(c)	–	2.58	26.7

C-127

Financial Highlights
Principal Funds, Inc. (Continued)

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
SAM BALANCED PORTFOLIO
R-1 shares
2022	$18.53	$0.22	$(3.29)	$(3.07)	$(0.22)	$(1.43)	$(1.65)
2021	15.35	0.10	3.50	3.60	(0.14)	(0.28)	(0.42)
2020	15.41	0.17	0.28	0.45	(0.15)	(0.36)	(0.51)
2019	15.21	0.23	1.26	1.49	(0.24)	(1.05)	(1.29)
2018	16.34	0.27	(0.33)	(0.06)	(0.25)	(0.82)	(1.07)
R-3 shares
2022	18.51	0.29	(3.30)	(3.01)	(0.27)	(1.43)	(1.70)
2021	15.31	0.15	3.50	3.65	(0.17)	(0.28)	(0.45)
2020	15.40	0.21	0.26	0.47	(0.20)	(0.36)	(0.56)
2019	15.20	0.28	1.25	1.53	(0.28)	(1.05)	(1.33)
2018	16.34	0.32	(0.34)	(0.02)	(0.30)	(0.82)	(1.12)
R-4 shares
2022	18.57	0.27	(3.27)	(3.00)	(0.29)	(1.43)	(1.72)
2021	15.34	0.19	3.51	3.70	(0.19)	(0.28)	(0.47)
2020	15.44	0.23	0.26	0.49	(0.23)	(0.36)	(0.59)
2019	15.23	0.33	1.24	1.57	(0.31)	(1.05)	(1.36)
2018	16.36	0.35	(0.33)	0.02	(0.33)	(0.82)	(1.15)
R-5 shares
2022	18.56	0.32	(3.29)	(2.97)	(0.32)	(1.43)	(1.75)
2021	15.33	0.20	3.52	3.72	(0.21)	(0.28)	(0.49)
2020	15.43	0.25	0.25	0.50	(0.24)	(0.36)	(0.60)
2019	15.23	0.32	1.26	1.58	(0.33)	(1.05)	(1.38)
2018	16.36	0.39	(0.36)	0.03	(0.34)	(0.82)	(1.16)

(a)

Calculated based on average shares outstanding during the period.

(b)

Reflects Manager's contractual expense limit.

C-128

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$13.81	(17.99)%	$2,220	1.16%	1.41%	50.4%
18.53	23.78	2,607	1.15	0.58	31.3
15.35	2.93	2,364	1.16	1.16	17.3
15.41	10.99	2,901	1.16(b)	1.53	13.4
15.21	(0.54)	3,126	1.16(b)	1.69	26.7

13.80	(17.71)	18,236	0.85	1.83	50.4
18.51	24.17	27,419	0.84	0.84	31.3
15.31	3.08	22,790	0.85	1.42	17.3
15.40	11.35	24,192	0.85(b)	1.90	13.4
15.20	(0.30)	28,330	0.85(b)	2.05	26.7

13.85	(17.56)	9,913	0.66	1.72	50.4
18.57	24.45	11,619	0.65	1.09	31.3
15.34	3.20	12,631	0.66	1.56	17.3
15.44	11.58	13,455	0.66(b)	2.20	13.4
15.23	(0.05)	23,180	0.66(b)	2.24	26.7

13.84	(17.45)	29,709	0.54	2.05	50.4
18.56	24.60	37,892	0.53	1.15	31.3
15.33	3.33	30,863	0.54	1.69	17.3
15.43	11.68	34,650	0.54(b)	2.15	13.4
15.23	0.07	35,425	0.54(b)	2.49	26.7

C-129

Financial Highlights
Principal Funds, Inc. (Continued)

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
SAM CONSERVATIVE BALANCED PORTFOLIO
Class A shares
2022	$13.95	$0.26	$(2.41)	$(2.15)	$(0.25)	$(0.70)	$(0.95)
2021	12.17	0.19	1.92	2.11	(0.19)	(0.14)	(0.33)
2020	12.16	0.22	0.17	0.39	(0.22)	(0.16)	(0.38)
2019	11.86	0.27	0.86	1.13	(0.29)	(0.54)	(0.83)
2018	12.52	0.31	(0.36)	(0.05)	(0.29)	(0.32)	(0.61)
Class C shares
2022	13.78	0.16	(2.38)	(2.22)	(0.15)	(0.70)	(0.85)
2021	12.03	0.09	1.90	1.99	(0.10)	(0.14)	(0.24)
2020	12.02	0.14	0.16	0.30	(0.13)	(0.16)	(0.29)
2019	11.73	0.21	0.82	1.03	(0.20)	(0.54)	(0.74)
2018	12.39	0.21	(0.35)	(0.14)	(0.20)	(0.32)	(0.52)
Class J shares
2022	13.74	0.27	(2.37)	(2.10)	(0.27)	(0.70)	(0.97)
2021	11.99	0.21	1.89	2.10	(0.21)	(0.14)	(0.35)
2020	11.99	0.24	0.16	0.40	(0.24)	(0.16)	(0.40)
2019	11.71	0.30	0.83	1.13	(0.31)	(0.54)	(0.85)
2018	12.37	0.32	(0.35)	(0.03)	(0.31)	(0.32)	(0.63)
Institutional shares
2022	13.79	0.29	(2.38)	(2.09)	(0.29)	(0.70)	(0.99)
2021	12.03	0.23	1.90	2.13	(0.23)	(0.14)	(0.37)
2020	12.04	0.26	0.15	0.41	(0.26)	(0.16)	(0.42)
2019	11.74	0.32	0.85	1.17	(0.33)	(0.54)	(0.87)
2018	12.41	0.35	(0.37)	(0.02)	(0.33)	(0.32)	(0.65)

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Reflects Manager's contractual expense limit.

(d)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(e)

Excludes expense reimbursement from Manager and/or Distributor.

C-130

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$10.85	(16.39)%(b)	$521,254	0.61%	–%	2.11%	55.3%
13.95	17.49(b)	650,919	0.60	–	1.41	29.9
12.17	3.28(b)	545,903	0.61	–	1.87	19.4
12.16	10.22(b)	553,362	0.63(c)	–	2.34	15.0
11.86	(0.51)(b)	485,084	0.62(c)	–	2.49	21.9

10.71	(17.06)(b)	70,882	1.38	–	1.37	55.3
13.78	16.66(b)	114,412	1.37	–	0.66	29.9
12.03	2.50(b)	137,283	1.37	–	1.14	19.4
12.02	9.37(b)	160,672	1.38(c)	–	1.82	15.0
11.73	(1.26)(b)	228,910	1.37(c)	–	1.76	21.9

10.67	(16.28)(b)	776,202	0.45(d)	0.47(e)	2.25	55.3
13.74	17.69(b)	869,500	0.44(d)	0.47(e)	1.56	29.9
11.99	3.43(b)	691,410	0.44(d)	0.47(e)	2.03	19.4
11.99	10.39(b)	672,096	0.44(d)	0.47(e)	2.55	15.0
11.71	(0.33)(b)	614,770	0.43(d)	0.46(e)	2.67	21.9

10.71	(16.17)	206,697	0.30	–	2.43	55.3
13.79	17.89	268,505	0.29	–	1.71	29.9
12.03	3.48	239,975	0.30	–	2.20	19.4
12.04	10.70	267,892	0.30(c)	–	2.77	15.0
11.74	(0.26)	292,828	0.28(c)	–	2.86	21.9

C-131

Financial Highlights
Principal Funds, Inc. (Continued)

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
SAM CONSERVATIVE BALANCED PORTFOLIO
R-1 shares
2022	$13.74	$0.19	$(2.38)	$(2.19)	$(0.18)	$(0.70)	$(0.88)
2021	11.98	0.13	1.88	2.01	(0.11)	(0.14)	(0.25)
2020	11.98	0.15	0.16	0.31	(0.15)	(0.16)	(0.31)
2019	11.70	0.21	0.84	1.05	(0.23)	(0.54)	(0.77)
2018	12.36	0.24	(0.36)	(0.12)	(0.22)	(0.32)	(0.54)
R-3 shares
2022	13.76	0.23	(2.38)	(2.15)	(0.22)	(0.70)	(0.92)
2021	12.01	0.16	1.89	2.05	(0.16)	(0.14)	(0.30)
2020	12.01	0.20	0.15	0.35	(0.19)	(0.16)	(0.35)
2019	11.72	0.25	0.84	1.09	(0.26)	(0.54)	(0.80)
2018	12.38	0.28	(0.36)	(0.08)	(0.26)	(0.32)	(0.58)
R-4 shares
2022	13.79	0.23	(2.37)	(2.14)	(0.24)	(0.70)	(0.94)
2021	12.03	0.18	1.90	2.08	(0.18)	(0.14)	(0.32)
2020	12.03	0.22	0.15	0.37	(0.21)	(0.16)	(0.37)
2019	11.73	0.28	0.84	1.12	(0.28)	(0.54)	(0.82)
2018	12.40	0.29	(0.35)	(0.06)	(0.29)	(0.32)	(0.61)
R-5 shares
2022	13.78	0.25	(2.36)	(2.11)	(0.26)	(0.70)	(0.96)
2021	12.02	0.19	1.91	2.10	(0.20)	(0.14)	(0.34)
2020	12.03	0.23	0.15	0.38	(0.23)	(0.16)	(0.39)
2019	11.73	0.28	0.86	1.14	(0.30)	(0.54)	(0.84)
2018	12.40	0.33	(0.38)	(0.05)	(0.30)	(0.32)	(0.62)

(a)

Calculated based on average shares outstanding during the period.

(b)

Reflects Manager's contractual expense limit.

C-132

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$10.67	(16.88)%	$1,649	1.16%	1.55%	55.3%
13.74	16.92	1,956	1.15	0.96	29.9
11.98	2.66	2,577	1.16	1.30	19.4
11.98	9.64	2,572	1.16(b)	1.83	15.0
11.70	(1.07)	2,331	1.15(b)	1.97	21.9

10.69	(16.60)	8,497	0.85	1.89	55.3
13.76	17.18	11,129	0.84	1.18	29.9
12.01	2.97	12,167	0.85	1.69	19.4
12.01	10.03	14,217	0.85(b)	2.13	15.0
11.72	(0.74)	11,837	0.84(b)	2.30	21.9

10.71	(16.47)	10,647	0.66	1.94	55.3
13.79	17.47	11,214	0.65	1.35	29.9
12.03	3.18	11,717	0.66	1.82	19.4
12.03	10.25	11,989	0.66(b)	2.39	15.0
11.73	(0.63)	20,282	0.65(b)	2.41	21.9

10.71	(16.31)	19,091	0.54	2.11	55.3
13.78	17.61	20,710	0.53	1.46	29.9
12.02	3.22	17,108	0.54	1.94	19.4
12.03	10.44	18,302	0.54(b)	2.45	15.0
11.73	(0.51)	17,177	0.53(b)	2.72	21.9

C-133

Financial Highlights
Principal Funds, Inc. (Continued)

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
SAM CONSERVATIVE GROWTH PORTFOLIO
Class A shares
2022	$22.20	$0.33	$(4.18)	$(3.85)	$(0.26)	$(1.45)	$(1.71)
2021	17.41	0.17	5.27	5.44	(0.24)	(0.41)	(0.65)
2020	17.55	0.25	0.30	0.55	(0.25)	(0.44)	(0.69)
2019	17.76	0.25	1.62	1.87	(0.26)	(1.82)	(2.08)
2018	19.24	0.39	(0.33)	0.06	(0.31)	(1.23)	(1.54)
Class C shares
2022	20.21	0.18	(3.82)	(3.64)	(0.09)	(1.45)	(1.54)
2021	15.91	0.01	4.81	4.82	(0.11)	(0.41)	(0.52)
2020	16.09	0.11	0.26	0.37	(0.11)	(0.44)	(0.55)
2019	16.45	0.21	1.40	1.61	(0.15)	(1.82)	(1.97)
2018	17.93	0.24	(0.31)	(0.07)	(0.18)	(1.23)	(1.41)
Class J shares
2022	21.26	0.34	(3.99)	(3.65)	(0.29)	(1.45)	(1.74)
2021	16.70	0.19	5.05	5.24	(0.27)	(0.41)	(0.68)
2020	16.87	0.26	0.29	0.55	(0.28)	(0.44)	(0.72)
2019	17.16	0.28	1.54	1.82	(0.29)	(1.82)	(2.11)
2018	18.64	0.40	(0.31)	0.09	(0.34)	(1.23)	(1.57)
Institutional shares
2022	21.64	0.38	(4.07)	(3.69)	(0.32)	(1.45)	(1.77)
2021	16.98	0.23	5.14	5.37	(0.30)	(0.41)	(0.71)
2020	17.14	0.30	0.29	0.59	(0.31)	(0.44)	(0.75)
2019	17.40	0.31	1.57	1.88	(0.32)	(1.82)	(2.14)
2018	18.88	0.45	(0.34)	0.11	(0.36)	(1.23)	(1.59)

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Reflects Manager's contractual expense limit.

(d)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(e)

Excludes expense reimbursement from Manager and/or Distributor.

C-134

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$16.64	(18.70)%(b)	$1,508,702	0.60%	–%	1.76%	52.4%
22.20	31.84(b)	1,979,014	0.59	–	0.81	34.3
17.41	3.11(b)	1,570,186	0.61	–	1.46	16.2
17.55	12.74(b)	1,683,156	0.63(c)	–	1.50	10.9
17.76	0.12(b)	1,432,165	0.61(c)	–	2.10	33.8

15.03	(19.39)(b)	121,737	1.37	–	1.05	52.4
20.21	30.82(b)	190,605	1.38	–	0.07	34.3
15.91	2.28(b)	204,754	1.37	–	0.74	16.2
16.09	11.92(b)	242,084	1.39(c)	–	1.36	10.9
16.45	(0.59)(b)	480,699	1.36(c)	–	1.38	33.8

15.87	(18.59)(b)	636,126	0.45(d)	0.47(e)	1.90	52.4
21.26	32.04(b)	778,913	0.45(d)	0.47(e)	0.95	34.3
16.70	3.25(b)	575,978	0.45(d)	0.48(e)	1.61	16.2
16.87	12.96(b)	582,101	0.45(d)	0.48(e)	1.76	10.9
17.16	0.30(b)	543,902	0.44(d)	0.47(e)	2.26	33.8

16.18	(18.48)	395,979	0.29	–	2.08	52.4
21.64	32.27	539,619	0.29	–	1.12	34.3
16.98	3.40	430,895	0.30	–	1.79	16.2
17.14	13.14	474,902	0.30(c)	–	1.92	10.9
17.40	0.44	456,425	0.29(c)	–	2.45	33.8

C-135

Financial Highlights
Principal Funds, Inc. (Continued)

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
SAM CONSERVATIVE GROWTH PORTFOLIO
R-1 shares
2022	$21.22	$0.21	$(3.99)	$(3.78)	$(0.16)	$(1.45)	$(1.61)
2021	16.70	0.03	5.08	5.11	(0.18)	(0.41)	(0.59)
2020	16.89	0.15	0.27	0.42	(0.17)	(0.44)	(0.61)
2019	17.10	0.18	1.55	1.73	(0.12)	(1.82)	(1.94)
2018	18.54	0.31	(0.34)	(0.03)	(0.18)	(1.23)	(1.41)
R-3 shares
2022	21.20	0.28	(4.01)	(3.73)	(0.20)	(1.45)	(1.65)
2021	16.65	0.11	5.05	5.16	(0.20)	(0.41)	(0.61)
2020	16.82	0.22	0.26	0.48	(0.21)	(0.44)	(0.65)
2019	17.11	0.24	1.52	1.76	(0.23)	(1.82)	(2.05)
2018	18.59	0.32	(0.31)	0.01	(0.26)	(1.23)	(1.49)
R-4 shares
2022	21.54	0.26	(4.02)	(3.76)	(0.21)	(1.45)	(1.66)
2021	16.91	0.14	5.13	5.27	(0.23)	(0.41)	(0.64)
2020	17.05	0.23	0.29	0.52	(0.22)	(0.44)	(0.66)
2019	17.31	0.26	1.55	1.81	(0.25)	(1.82)	(2.07)
2018	18.77	0.41	(0.35)	0.06	(0.29)	(1.23)	(1.52)
R-5 shares
2022	21.46	0.34	(4.04)	(3.70)	(0.28)	(1.45)	(1.73)
2021	16.85	0.17	5.10	5.27	(0.25)	(0.41)	(0.66)
2020	17.01	0.25	0.30	0.55	(0.27)	(0.44)	(0.71)
2019	17.28	0.27	1.55	1.82	(0.27)	(1.82)	(2.09)
2018	18.74	0.45	(0.37)	0.08	(0.31)	(1.23)	(1.54)

(a)

Calculated based on average shares outstanding during the period.

(b)

Reflects Manager's contractual expense limit.

C-136

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$15.83	(19.18)%	$1,557	1.16%	1.16%	52.4%
21.22	31.17	1,839	1.15	0.16	34.3
16.70	2.47	1,098	1.16	0.90	16.2
16.89	12.16	1,131	1.16(b)	1.13	10.9
17.10	(0.38)	1,140	1.16(b)	1.74	33.8

15.82	(18.95)	10,909	0.85	1.58	52.4
21.20	31.58	15,823	0.84	0.56	34.3
16.65	2.81	13,833	0.85	1.35	16.2
16.82	12.52	17,303	0.85(b)	1.49	10.9
17.11	(0.11)	20,976	0.85(b)	1.79	33.8

16.12	(18.80)	5,754	0.66	1.44	52.4
21.54	31.78	8,882	0.65	0.69	34.3
16.91	3.02	6,076	0.66	1.40	16.2
17.05	12.70	6,943	0.66(b)	1.61	10.9
17.31	0.16	10,768	0.66(b)	2.24	33.8

16.03	(18.66)	23,881	0.54	1.86	52.4
21.46	31.91	30,075	0.53	0.86	34.3
16.85	3.18	22,124	0.54	1.54	16.2
17.01	12.81	26,719	0.54(b)	1.66	10.9
17.28	0.25	25,539	0.54(b)	2.49	33.8

C-137

Financial Highlights
Principal Funds, Inc. (Continued)

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
SAM FLEXIBLE INCOME PORTFOLIO
Class A shares
2022	$13.56	$0.28	$(2.25)	$(1.97)	$(0.28)	$(0.53)	$(0.81)
2021	12.38	0.23	1.29	1.52	(0.23)	(0.11)	(0.34)
2020	12.40	0.25	0.03	0.28	(0.25)	(0.05)	(0.30)
2019	12.08	0.34	0.79	1.13	(0.34)	(0.47)	(0.81)
2018	12.54	0.34	(0.38)	(0.04)	(0.34)	(0.08)	(0.42)
Class C shares
2022	13.41	0.19	(2.22)	(2.03)	(0.19)	(0.53)	(0.72)
2021	12.24	0.13	1.27	1.40	(0.12)	(0.11)	(0.23)
2020	12.26	0.16	0.03	0.19	(0.16)	(0.05)	(0.21)
2019	11.96	0.25	0.77	1.02	(0.25)	(0.47)	(0.72)
2018	12.42	0.25	(0.38)	(0.13)	(0.25)	(0.08)	(0.33)
Class J shares
2022	13.43	0.29	(2.22)	(1.93)	(0.30)	(0.53)	(0.83)
2021	12.26	0.25	1.28	1.53	(0.25)	(0.11)	(0.36)
2020	12.29	0.27	0.02	0.29	(0.27)	(0.05)	(0.32)
2019	11.98	0.36	0.78	1.14	(0.36)	(0.47)	(0.83)
2018	12.44	0.36	(0.38)	(0.02)	(0.36)	(0.08)	(0.44)
Institutional shares
2022	13.51	0.31	(2.23)	(1.92)	(0.32)	(0.53)	(0.85)
2021	12.34	0.26	1.28	1.54	(0.26)	(0.11)	(0.37)
2020	12.36	0.28	0.03	0.31	(0.28)	(0.05)	(0.33)
2019	12.04	0.37	0.79	1.16	(0.37)	(0.47)	(0.84)
2018	12.50	0.38	(0.38)	–	(0.38)	(0.08)	(0.46)

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Reflects Manager's contractual expense limit.

(d)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(e)

Excludes expense reimbursement from Manager and/or Distributor.

C-138

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$10.78	(15.28)%(b)	$1,032,096	0.60%	–%	2.32%	57.3%
13.56	12.40(b)	1,289,067	0.59	–	1.72	29.3
12.38	2.30(b)	1,085,818	0.60	–	2.04	35.9
12.40	9.93(b)	1,057,769	0.61(c)	–	2.82	11.1
12.08	(0.33)(b)	917,357	0.60(c)	–	2.77	22.6

10.66	(15.90)(b)	135,741	1.38	–	1.57	57.3
13.41	11.58(b)	205,567	1.36	–	0.96	29.3
12.24	1.54(b)	237,410	1.37	–	1.29	35.9
12.26	9.02(b)	265,220	1.37(c)	–	2.13	11.1
11.96	(1.09)(b)	325,369	1.37(c)	–	2.01	22.6

10.67	(15.14)(b)	1,086,460	0.44(d)	0.46(e)	2.48	57.3
13.43	12.61(b)	1,321,469	0.44(d)	0.46(e)	1.88	29.3
12.26	2.42(b)	1,132,937	0.43(d)	0.46(e)	2.22	35.9
12.29	10.13(b)	1,139,080	0.43(d)	0.46(e)	3.01	11.1
11.98	(0.15)(b)	1,085,370	0.43(d)	0.46(e)	2.95	22.6

10.74	(15.01)	173,873	0.31	–	2.62	57.3
13.51	12.68	236,379	0.31	–	2.00	29.3
12.34	2.60	200,957	0.32	–	2.33	35.9
12.36	10.29	220,903	0.32(c)	–	3.12	11.1
12.04	(0.03)	214,476	0.30(c)	–	3.06	22.6

C-139

Financial Highlights
Principal Funds, Inc. (Continued)

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
SAM FLEXIBLE INCOME PORTFOLIO
R-1 shares
2022	$13.44	$0.21	$(2.23)	$(2.02)	$(0.21)	$(0.53)	$(0.74)
2021	12.27	0.15	1.28	1.43	(0.15)	(0.11)	(0.26)
2020	12.29	0.19	0.02	0.21	(0.18)	(0.05)	(0.23)
2019	11.98	0.27	0.79	1.06	(0.28)	(0.47)	(0.75)
2018	12.45	0.27	(0.38)	(0.11)	(0.28)	(0.08)	(0.36)
R-3 shares
2022	13.48	0.25	(2.24)	(1.99)	(0.25)	(0.53)	(0.78)
2021	12.31	0.19	1.28	1.47	(0.19)	(0.11)	(0.30)
2020	12.33	0.22	0.03	0.25	(0.22)	(0.05)	(0.27)
2019	12.02	0.31	0.78	1.09	(0.31)	(0.47)	(0.78)
2018	12.48	0.31	(0.38)	(0.07)	(0.31)	(0.08)	(0.39)
R-4 shares
2022	13.50	0.27	(2.24)	(1.97)	(0.27)	(0.53)	(0.80)
2021	12.32	0.22	1.29	1.51	(0.22)	(0.11)	(0.33)
2020	12.34	0.24	0.03	0.27	(0.24)	(0.05)	(0.29)
2019	12.03	0.34	0.77	1.11	(0.33)	(0.47)	(0.80)
2018	12.48	0.33	(0.36)	(0.03)	(0.34)	(0.08)	(0.42)
R-5 shares
2022	13.48	0.28	(2.22)	(1.94)	(0.29)	(0.53)	(0.82)
2021	12.31	0.23	1.28	1.51	(0.23)	(0.11)	(0.34)
2020	12.33	0.26	0.03	0.29	(0.26)	(0.05)	(0.31)
2019	12.02	0.35	0.78	1.13	(0.35)	(0.47)	(0.82)
2018	12.48	0.35	(0.38)	(0.03)	(0.35)	(0.08)	(0.43)

(a)

Calculated based on average shares outstanding during the period.

(b)

Reflects Manager's contractual expense limit.

C-140

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$10.68	(15.73)%	$2,079	1.16%	1.74%	57.3%
13.44	11.81	2,432	1.15	1.16	29.3
12.27	1.74	2,307	1.16	1.53	35.9
12.29	9.37	3,225	1.16(b)	2.23	11.1
11.98	(0.95)	1,746	1.16(b)	2.20	22.6

10.71	(15.51)	3,569	0.85	2.07	57.3
13.48	12.11	5,117	0.84	1.48	29.3
12.31	2.07	4,729	0.85	1.81	35.9
12.33	9.64	5,088	0.85(b)	2.60	11.1
12.02	(0.57)	5,380	0.85(b)	2.52	22.6

10.73	(15.33)	2,843	0.66	2.26	57.3
13.50	12.39	5,108	0.65	1.65	29.3
12.32	2.26	4,664	0.66	1.94	35.9
12.34	9.82	3,019	0.66(b)	2.87	11.1
12.03	(0.30)	5,359	0.66(b)	2.71	22.6

10.72	(15.16)	8,059	0.54	2.38	57.3
13.48	12.46	10,225	0.53	1.78	29.3
12.31	2.38	7,970	0.54	2.10	35.9
12.33	9.97	8,353	0.54(b)	2.93	11.1
12.02	(0.26)	11,471	0.54(b)	2.88	22.6

C-141

Financial Highlights
Principal Funds, Inc. (Continued)

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
SAM STRATEGIC GROWTH PORTFOLIO
Class A shares
2022	$24.57	$0.34	$(4.93)	$(4.59)	$(0.34)	$(1.40)	$(1.74)
2021	18.57	0.17	6.67	6.84	(0.17)	(0.67)	(0.84)
2020	18.67	0.21	0.53	0.74	(0.25)	(0.59)	(0.84)
2019	19.81	0.22	1.86	2.08	(0.33)	(2.89)	(3.22)
2018	21.35	0.44	(0.58)	(0.14)	(0.34)	(1.06)	(1.40)
Class C shares
2022	21.60	0.17	(4.33)	(4.16)	(0.16)	(1.40)	(1.56)
2021	16.43	0.01	5.87	5.88	(0.04)	(0.67)	(0.71)
2020	16.60	0.07	0.46	0.53	(0.11)	(0.59)	(0.70)
2019	17.98	0.18	1.54	1.72	(0.21)	(2.89)	(3.10)
2018	19.52	0.26	(0.53)	(0.27)	(0.21)	(1.06)	(1.27)
Class J shares
2022	23.51	0.35	(4.70)	(4.35)	(0.37)	(1.40)	(1.77)
2021	17.80	0.19	6.39	6.58	(0.20)	(0.67)	(0.87)
2020	17.93	0.23	0.51	0.74	(0.28)	(0.59)	(0.87)
2019	19.17	0.26	1.76	2.02	(0.37)	(2.89)	(3.26)
2018	20.70	0.46	(0.55)	(0.09)	(0.38)	(1.06)	(1.44)
Institutional shares
2022	23.88	0.40	(4.78)	(4.38)	(0.41)	(1.40)	(1.81)
2021	18.06	0.23	6.49	6.72	(0.23)	(0.67)	(0.90)
2020	18.18	0.26	0.52	0.78	(0.31)	(0.59)	(0.90)
2019	19.39	0.29	1.78	2.07	(0.39)	(2.89)	(3.28)
2018	20.93	0.50	(0.57)	(0.07)	(0.41)	(1.06)	(1.47)

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Reflects Manager's contractual expense limit.

(d)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(e)

Excludes expense reimbursement from Manager and/or Distributor.

C-142

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$18.24	(19.99)%(b)	$1,066,233	0.61%	–%	1.67%	49.5%
24.57	37.68(b)	1,401,140	0.60	–	0.75	26.3
18.57	3.93(b)	1,069,149	0.62	–	1.15	19.9
18.67	13.89(b)	1,114,994	0.64(c)	–	1.26	19.9
19.81	(0.86)(b)	943,803	0.63(c)	–	2.10	49.4

15.88	(20.59)(b)	77,837	1.41	–	0.94	49.5
21.60	36.56(b)	115,136	1.39	–	0.04	26.3
16.43	3.14(b)	120,962	1.40	–	0.41	19.9
16.60	13.01(b)	139,759	1.42(c)	–	1.12	19.9
17.98	(1.63)(b)	284,797	1.38(c)	–	1.37	49.4

17.39	(19.87)(b)	334,032	0.47(d)	0.49(e)	1.78	49.5
23.51	37.88(b)	410,297	0.46(d)	0.48(e)	0.88	26.3
17.80	4.11(b)	295,433	0.46(d)	0.49(e)	1.31	19.9
17.93	14.07(b)	308,330	0.47(d)	0.50(e)	1.50	19.9
19.17	(0.67)(b)	286,265	0.45(d)	0.48(e)	2.27	49.4

17.69	(19.73)	271,120	0.29	–	1.99	49.5
23.88	38.14	362,447	0.29	–	1.05	26.3
18.06	4.27	260,585	0.30	–	1.47	19.9
18.18	14.26	278,919	0.30(c)	–	1.66	19.9
19.39	(0.55)	258,545	0.29(c)	–	2.44	49.4

C-143

Financial Highlights
Principal Funds, Inc. (Continued)

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
SAM STRATEGIC GROWTH PORTFOLIO
R-1 shares
2022	$23.67	$0.22	$(4.77)	$(4.55)	$(0.20)	$(1.40)	$(1.60)
2021	17.81	0.03	6.44	6.47	–	(0.61)	(0.61)
2020	17.99	0.04	0.52	0.56	(0.15)	(0.59)	(0.74)
2019	19.11	0.19	1.74	1.93	(0.16)	(2.89)	(3.05)
2018	20.54	0.32	(0.57)	(0.25)	(0.12)	(1.06)	(1.18)
R-3 shares
2022	23.43	0.32	(4.74)	(4.42)	(0.30)	(1.40)	(1.70)
2021	17.72	0.08	6.40	6.48	(0.10)	(0.67)	(0.77)
2020	17.86	0.18	0.48	0.66	(0.21)	(0.59)	(0.80)
2019	19.09	0.23	1.73	1.96	(0.30)	(2.89)	(3.19)
2018	20.62	0.39	(0.57)	(0.18)	(0.29)	(1.06)	(1.35)
R-4 shares
2022	23.66	0.29	(4.74)	(4.45)	(0.23)	(1.40)	(1.63)
2021	17.91	0.18	6.40	6.58	(0.16)	(0.67)	(0.83)
2020	18.02	0.19	0.52	0.71	(0.23)	(0.59)	(0.82)
2019	19.23	0.27	1.73	2.00	(0.32)	(2.89)	(3.21)
2018	20.78	0.43	(0.58)	(0.15)	(0.34)	(1.06)	(1.40)
R-5 shares
2022	23.56	0.33	(4.70)	(4.37)	(0.36)	(1.40)	(1.76)
2021	17.84	0.17	6.40	6.57	(0.18)	(0.67)	(0.85)
2020	17.97	0.22	0.51	0.73	(0.27)	(0.59)	(0.86)
2019	19.20	0.24	1.77	2.01	(0.35)	(2.89)	(3.24)
2018	20.73	0.47	(0.59)	(0.12)	(0.35)	(1.06)	(1.41)

(a)

Calculated based on average shares outstanding during the period.

(b)

Reflects Manager's contractual expense limit.

(c)

C-144

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$17.52	(20.45)%	$319	1.16%	1.11%	49.5%
23.67	36.96	420	1.15	0.15	26.3
17.81	3.07	344	1.16	0.22	19.9
17.99	13.32	413	1.16(b)	1.08	19.9
19.11	(1.43)	593	1.16(b)	1.60	49.4

17.31	(20.20)	6,564	0.85	1.60	49.5
23.43	37.38	9,782	0.84	0.36	26.3
17.72	3.66	6,440	0.85	1.05	19.9
17.86	13.69	7,794	0.85(b)	1.34	19.9
19.09	(1.10)	10,910	0.85(b)	1.94	49.4

17.58	(20.05)	3,013	0.66	1.49	49.5
23.66	37.63	4,069	0.65	0.84	26.3
17.91	3.91	8,355	0.66	1.10	19.9
18.02	13.88	9,416	0.66(b)	1.55	19.9
19.23	(0.92)	13,132	0.66(b)	2.12	49.4

17.43	(19.95)(c)	19,246	0.54	1.70	49.5
23.56	37.80(c)	24,908	0.53	0.77	26.3
17.84	4.04	15,052	0.54	1.28	19.9
17.97	13.99	16,847	0.54(b)	1.39	19.9
19.20	(0.79)	14,622	0.54(b)	2.31	49.4

C-145

Financial Highlights
Principal Funds, Inc. (Continued)

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
SHORT-TERM INCOME FUND
Class A shares
2022	$12.32	$0.16	$(0.86)	$(0.70)	$(0.16)	$(0.06)	$(0.22)
2021	12.54	0.11	(0.13)	(0.02)	(0.11)	(0.09)	(0.20)
2020	12.32	0.20	0.22	0.42	(0.20)	–	(0.20)
2019	12.01	0.27	0.31	0.58	(0.27)	–	(0.27)
2018	12.21	0.24	(0.20)	0.04	(0.24)	–	(0.24)
Class C shares
2022	12.32	0.05	(0.86)	(0.81)	(0.05)	(0.06)	(0.11)
2021	12.55	–	(0.13)	(0.13)	(0.01)	(0.09)	(0.10)
2020	12.33	0.09	0.22	0.31	(0.09)	–	(0.09)
2019	12.01	0.16	0.32	0.48	(0.16)	–	(0.16)
2018	12.21	0.13	(0.20)	(0.07)	(0.13)	–	(0.13)
Class J shares
2022	12.31	0.16	(0.86)	(0.70)	(0.16)	(0.06)	(0.22)
2021	12.53	0.12	(0.13)	(0.01)	(0.12)	(0.09)	(0.21)
2020	12.31	0.20	0.23	0.43	(0.21)	–	(0.21)
2019	12.00	0.27	0.31	0.58	(0.27)	–	(0.27)
2018	12.20	0.24	(0.20)	0.04	(0.24)	–	(0.24)
Institutional shares
2022	12.31	0.18	(0.85)	(0.67)	(0.19)	(0.06)	(0.25)
2021	12.53	0.14	(0.13)	0.01	(0.14)	(0.09)	(0.23)
2020	12.31	0.23	0.22	0.45	(0.23)	–	(0.23)
2019	12.00	0.30	0.31	0.61	(0.30)	–	(0.30)
2018	12.20	0.27	(0.20)	0.07	(0.27)	–	(0.27)

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(d)

Excludes expense reimbursement from Manager and/or Distributor.

(e)

Reflects Manager's contractual expense limit.

C-146

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$11.40	(5.73)%(b)	$353,052	0.65%	–%	1.32%	28.4%
12.32	(0.17)(b)	470,326	0.67	–	0.89	52.4
12.54	3.47(b)	445,243	0.67	–	1.59	76.0
12.32	4.88(b)	310,526	0.69	–	2.22	52.4
12.01	0.31(b)	292,426	0.67	–	1.98	57.3

11.40	(6.61)(b)	23,675	1.57	–	0.38	28.4
12.32	(1.09)(b)	34,992	1.56	–	0.02	52.4
12.55	2.55(b)	57,463	1.56	–	0.72	76.0
12.33	4.03(b)	51,869	1.59	–	1.33	52.4
12.01	(0.59)(b)	63,169	1.57	–	1.07	57.3

11.39	(5.72)(b)	127,563	0.62(c)	0.64(d)	1.36	28.4
12.31	(0.13)(b)	154,334	0.62(c)	0.65(d)	0.94	52.4
12.53	3.49(b)	168,395	0.65(c)	0.68(d)	1.62	76.0
12.31	4.91(b)	131,795	0.67(c)	0.70(d)	2.24	52.4
12.00	0.33(b)	123,856	0.66(c)	0.69(d)	1.99	57.3

11.39	(5.53)	2,654,929	0.43(e)	–	1.53	28.4
12.31	0.06	3,531,191	0.43(e)	–	1.14	52.4
12.53	3.72	5,210,042	0.43(e)	–	1.85	76.0
12.31	5.16	4,736,982	0.43(e)	–	2.48	52.4
12.00	0.56	4,271,619	0.43(e)	–	2.23	57.3

C-147

Financial Highlights
Principal Funds, Inc. (Continued)

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
SHORT-TERM INCOME FUND
R-1 shares
2022	$12.31	$0.09	$(0.86)	$(0.77)	$(0.09)	$(0.06)	$(0.15)
2021	12.54	0.04	(0.14)	(0.10)	(0.04)	(0.09)	(0.13)
2020	12.32	0.12	0.23	0.35	(0.13)	–	(0.13)
2019	12.01	0.20	0.31	0.51	(0.20)	–	(0.20)
2018	12.20	0.17	(0.20)	(0.03)	(0.16)	–	(0.16)
R-3 shares
2022	12.32	0.12	(0.86)	(0.74)	(0.12)	(0.06)	(0.18)
2021	12.54	0.07	(0.12)	(0.05)	(0.08)	(0.09)	(0.17)
2020	12.32	0.16	0.22	0.38	(0.16)	–	(0.16)
2019	12.01	0.23	0.32	0.55	(0.24)	–	(0.24)
2018	12.21	0.20	(0.20)	–	(0.20)	–	(0.20)
R-4 shares
2022	12.31	0.15	(0.87)	(0.72)	(0.14)	(0.06)	(0.20)
2021	12.53	0.09	(0.12)	(0.03)	(0.10)	(0.09)	(0.19)
2020	12.31	0.18	0.23	0.41	(0.19)	–	(0.19)
2019	12.00	0.26	0.31	0.57	(0.26)	–	(0.26)
2018	12.20	0.22	(0.20)	0.02	(0.22)	–	(0.22)
R-5 shares
2022	12.32	0.16	(0.86)	(0.70)	(0.16)	(0.06)	(0.22)
2021	12.54	0.11	(0.13)	(0.02)	(0.11)	(0.09)	(0.20)
2020	12.33	0.20	0.21	0.41	(0.20)	–	(0.20)
2019	12.01	0.27	0.32	0.59	(0.27)	–	(0.27)
2018	12.21	0.24	(0.20)	0.04	(0.24)	–	(0.24)

(a)

Calculated based on average shares outstanding during the period.

(b)

Reflects Manager's contractual expense limit.

C-148

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$11.39	(6.33)%	$591	1.27%	0.75%	28.4%
12.31	(0.86)	532	1.29	0.28	52.4
12.54	2.83	998	1.29(b)	0.94	76.0
12.32	4.26	429	1.29(b)	1.62	52.4
12.01	(0.23)	841	1.29(b)	1.38	57.3

11.40	(6.03)	9,841	0.96	1.02	28.4
12.32	(0.48)	10,268	0.98	0.58	52.4
12.54	3.15	14,361	0.98(b)	1.30	76.0
12.32	4.58	13,832	0.98(b)	1.93	52.4
12.01	0.00	14,259	0.98(b)	1.67	57.3

11.39	(5.86)	13,727	0.77(b)	1.23	28.4
12.31	(0.29)	14,111	0.79(b)	0.76	52.4
12.53	3.35	6,435	0.79(b)	1.45	76.0
12.31	4.78	3,816	0.79(b)	2.12	52.4
12.00	0.19	8,394	0.79(b)	1.86	57.3

11.40	(5.74)	9,125	0.65	1.31	28.4
12.32	(0.17)	11,377	0.67	0.90	52.4
12.54	3.38	12,410	0.67(b)	1.62	76.0
12.33	4.99	14,704	0.67(b)	2.23	52.4
12.01	0.31	9,938	0.67(b)	1.98	57.3

C-149

Financial Highlights
Principal Funds, Inc. (Continued)

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
SMALLCAP FUND
Class A shares
2022	$30.71	$(0.02)	$(5.59)	$(5.61)	$–	$(2.13)	$(2.13)
2021	20.37	(0.10)	11.00	10.90	–	(0.56)	(0.56)
2020	20.79	–	0.79	0.79	–	(1.21)	(1.21)
2019	22.60	0.01	1.09	1.10	(0.01)	(2.90)	(2.91)
2018	24.13	0.01	0.43	0.44	–	(1.97)	(1.97)
Class C shares
2022	26.12	(0.19)	(4.71)	(4.90)	–	(2.13)	(2.13)
2021	17.54	(0.28)	9.42	9.14	–	(0.56)	(0.56)
2020	18.20	(0.14)	0.69	0.55	–	(1.21)	(1.21)
2019	20.33	(0.14)	0.91	0.77	–	(2.90)	(2.90)
2018	22.06	(0.16)	0.40	0.24	–	(1.97)	(1.97)
Class J shares
2022	29.11	0.02	(5.28)	(5.26)	–	(2.13)	(2.13)
2021	19.30	(0.05)	10.42	10.37	–	(0.56)	(0.56)
2020	19.77	0.02	0.76	0.78	(0.04)	(1.21)	(1.25)
2019	21.67	0.04	1.01	1.05	(0.05)	(2.90)	(2.95)
2018	23.18	0.05	0.42	0.47	(0.01)	(1.97)	(1.98)
Institutional shares
2022	33.60	0.06	(6.14)	(6.08)	–	(2.13)	(2.13)
2021	22.21	(0.03)	12.01	11.98	–	(0.59)	(0.59)
2020	22.56	0.06	0.88	0.94	(0.08)	(1.21)	(1.29)
2019	24.26	0.09	1.20	1.29	(0.09)	(2.90)	(2.99)
2018	25.74	0.11	0.44	0.55	(0.06)	(1.97)	(2.03)
R-1 shares
2022	28.35	(0.12)	(5.13)	(5.25)	–	(2.13)	(2.13)
2021	18.94	(0.22)	10.19	9.97	–	(0.56)	(0.56)
2020	19.49	(0.09)	0.75	0.66	–	(1.21)	(1.21)
2019	21.46	(0.07)	1.00	0.93	–	(2.90)	(2.90)
2018	23.11	(0.09)	0.41	0.32	–	(1.97)	(1.97)

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Reflects Manager's contractual expense limit.

(d)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(e)

Excludes expense reimbursement from Manager and/or Distributor.

(f)

C-150

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$22.97	(19.05)%(b)	$253,893	1.14%	–%	(0.07)%	18.7%
30.71	54.21(b)	348,066	1.12	–	(0.35)	38.0
20.37	3.71(b)	202,896	1.18	–	(0.03)	41.6
20.79	7.38(b)	218,037	1.22	–	0.04	40.0
22.60	1.73(b)	218,500	1.18	–	0.06	51.6

19.09	(19.73)(b)	19,971	2.00	–	(0.94)	18.7
26.12	52.89(b)	29,570	1.96	–	(1.18)	38.0
17.54	2.85(b)	21,727	2.03	–	(0.87)	41.6
18.20	6.44(b)	26,671	2.04(c)	–	(0.77)	40.0
20.33	0.93(b)	34,505	1.98(c)	–	(0.75)	51.6

21.72	(18.88)(b)	193,888	0.99(d)	1.01(e)	0.08	18.7
29.11	54.39(b)(f)	259,335	0.98(d)	1.00(e)	(0.20)	38.0
19.30	3.88(b)(f)	175,489	1.03(d)	1.06(e)	0.12	41.6
19.77	7.50(b)	189,772	1.06(d)	1.09(e)	0.20	40.0
21.67	1.93(b)	191,225	1.02(d)	1.05(e)	0.22	51.6

25.39	(18.79)	411,643	0.85(c)	–	0.21	18.7
33.60	54.64	577,259	0.85(c)	–	(0.09)	38.0
22.21	4.07	147,591	0.85(c)	–	0.28	41.6
22.56	7.72(f)	107,829	0.85(c)	–	0.41	40.0
24.26	2.12(f)	91,484	0.81(c)	–	0.42	51.6

20.97	(19.42)(f)	1,948	1.62	–	(0.56)	18.7
28.35	53.43(f)	2,847	1.62	–	(0.84)	38.0
18.94	3.24	1,825	1.63	–	(0.48)	41.6
19.49	6.91	2,407	1.63	–	(0.37)	40.0
21.46	1.25	2,403	1.63	–	(0.38)	51.6

C-151

Financial Highlights
Principal Funds, Inc. (Continued)

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
SMALLCAP FUND
R-3 shares
2022	$30.51	$(0.06)	$(5.54)	$(5.60)	$–	$(2.13)	$(2.13)
2021	20.28	(0.15)	10.94	10.79	–	(0.56)	(0.56)
2020	20.72	(0.03)	0.80	0.77	–	(1.21)	(1.21)
2019	22.55	(0.01)	1.08	1.07	–	(2.90)	(2.90)
2018	24.12	(0.02)	0.42	0.40	–	(1.97)	(1.97)
R-4 shares
2022	32.15	(0.01)	(5.86)	(5.87)	–	(2.13)	(2.13)
2021	21.30	(0.10)	11.51	11.41	–	(0.56)	(0.56)
2020	21.69	–	0.84	0.84	(0.02)	(1.21)	(1.23)
2019	23.46	0.03	1.14	1.17	(0.04)	(2.90)	(2.94)
2018	24.96	0.03	0.44	0.47	–	(1.97)	(1.97)
R-5 shares
2022	33.14	0.02	(6.05)	(6.03)	–	(2.13)	(2.13)
2021	21.91	(0.07)	11.86	11.79	–	(0.56)	(0.56)
2020	22.28	0.03	0.86	0.89	(0.05)	(1.21)	(1.26)
2019	24.00	0.06	1.17	1.23	(0.05)	(2.90)	(2.95)
2018	25.47	0.06	0.45	0.51	(0.01)	(1.97)	(1.98)
R-6 shares
2022	33.61	0.08	(6.14)	(6.06)	–	(2.13)	(2.13)
2021	22.21	–	12.01	12.01	–	(0.61)	(0.61)
2020	22.56	0.08	0.88	0.96	(0.10)	(1.21)	(1.31)
2019	24.25	0.11	1.20	1.31	(0.10)	(2.90)	(3.00)
2018	25.72	0.11	0.46	0.57	(0.07)	(1.97)	(2.04)

(a)

Calculated based on average shares outstanding during the period.

(b)

Reflects Manager's contractual expense limit.

(c)

C-152

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$22.78	(19.15)%	$14,119	1.31%	(0.24)%	18.7%
30.51	53.90	15,267	1.31	(0.54)	38.0
20.28	3.60	7,119	1.32	(0.17)	41.6
20.72	7.23	9,247	1.32	(0.06)	40.0
22.55	1.55	11,352	1.32	(0.07)	51.6

24.15	(19.00)	40,043	1.12	(0.06)	18.7
32.15	54.23	50,467	1.12	(0.35)	38.0
21.30	3.78	28,740	1.13	0.01	41.6
21.69	7.42	25,604	1.13	0.12	40.0
23.46	1.80	18,401	1.13	0.10	51.6

24.98	(18.91)	50,244	1.00	0.09	18.7
33.14	54.46	44,522	1.00	(0.23)	38.0
21.91	3.88	26,842	1.01	0.13	41.6
22.28	7.55	23,288	1.01	0.26	40.0
24.00	1.92	22,556	1.01	0.22	51.6

25.42	(18.72)	221,952	0.75(b)	0.32	18.7
33.61	54.76	169,609	0.75(b)	0.01	38.0
22.21	4.14	75,621	0.77(b)	0.37	41.6
22.56	7.82(c)	62,428	0.77(b)	0.49	40.0
24.25	2.20(c)	48,252	0.77(b)	0.42	51.6

C-153

Financial Highlights
Principal Funds, Inc. (Continued)

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Distributions from Realized Gains	Total Dividends and Distributions	Net Asset Value, End of Period
SMALLCAP GROWTH FUND I
Class J shares
2022	$13.34	$(0.06)	$(3.36)	$(3.42)	$(2.45)	$(2.45)	$7.47
2021	10.37	(0.09)	3.94	3.85	(0.88)	(0.88)	13.34
2020	9.29	(0.07)	2.16	2.09	(1.01)	(1.01)	10.37
2019	10.56	(0.07)	0.69	0.62	(1.89)	(1.89)	9.29
2018	10.88	(0.09)	1.04	0.95	(1.27)	(1.27)	10.56
Institutional shares
2022	20.54	(0.07)	(5.48)	(5.55)	(2.45)	(2.45)	12.54
2021	15.56	(0.12)	5.98	5.86	(0.88)	(0.88)	20.54
2020	13.45	(0.08)	3.20	3.12	(1.01)	(1.01)	15.56
2019	14.29	(0.07)	1.12	1.05	(1.89)	(1.89)	13.45
2018	14.27	(0.08)	1.37	1.29	(1.27)	(1.27)	14.29
R-1 shares
2022	15.05	(0.12)	(3.87)	(3.99)	(2.45)	(2.45)	8.61
2021	11.67	(0.19)	4.45	4.26	(0.88)	(0.88)	15.05
2020	10.40	(0.14)	2.42	2.28	(1.01)	(1.01)	11.67
2019	11.62	(0.14)	0.81	0.67	(1.89)	(1.89)	10.40
2018	11.91	(0.17)	1.15	0.98	(1.27)	(1.27)	11.62
R-3 shares
2022	15.96	(0.10)	(4.13)	(4.23)	(2.45)	(2.45)	9.28
2021	12.30	(0.16)	4.70	4.54	(0.88)	(0.88)	15.96
2020	10.87	(0.11)	2.55	2.44	(1.01)	(1.01)	12.30
2019	12.02	(0.11)	0.85	0.74	(1.89)	(1.89)	10.87
2018	12.25	(0.14)	1.18	1.04	(1.27)	(1.27)	12.02
R-4 shares
2022	17.51	(0.09)	(4.59)	(4.68)	(2.45)	(2.45)	10.38
2021	13.40	(0.14)	5.13	4.99	(0.88)	(0.88)	17.51
2020	11.74	(0.10)	2.77	2.67	(1.01)	(1.01)	13.40
2019	12.79	(0.10)	0.94	0.84	(1.89)	(1.89)	11.74
2018	12.94	(0.12)	1.24	1.12	(1.27)	(1.27)	12.79
R-5 shares
2022	18.71	(0.08)	(4.94)	(5.02)	(2.45)	(2.45)	11.24
2021	14.25	(0.13)	5.47	5.34	(0.88)	(0.88)	18.71
2020	12.42	(0.09)	2.93	2.84	(1.01)	(1.01)	14.25
2019	13.39	(0.09)	1.01	0.92	(1.89)	(1.89)	12.42
2018	13.47	(0.11)	1.30	1.19	(1.27)	(1.27)	13.39
R-6 shares
2022	20.56	(0.05)	(5.49)	(5.54)	(2.45)	(2.45)	12.57
2021	15.55	(0.10)	5.99	5.89	(0.88)	(0.88)	20.56
2020	13.43	(0.06)	3.19	3.13	(1.01)	(1.01)	15.55
2019	14.27	(0.06)	1.11	1.05	(1.89)	(1.89)	13.43
2018	14.25	(0.08)	1.37	1.29	(1.27)	(1.27)	14.27

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(d)

Excludes expense reimbursement from Manager and/or Distributor.

(e)

(f)

Reflects Manager's contractual expense limit.

C-154

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


(29.78)%(b)	$63,827	1.11%(c)	1.15%(d)	(0.64)%	50.7%
38.18(b)	103,343	1.07(c)	1.11(d)	(0.74)	62.1
24.24(b)	78,084	1.16(c)	1.22(d)	(0.75)	67.6
10.17(b)	69,567	1.33(c)	1.45(d)	(0.81)	57.4
8.82(b)	66,138	1.29(c)	1.41(d)	(0.81)	68.8

(29.74)(e)	195,117	0.94(f)	–	(0.47)	50.7
38.44(e)	300,718	0.93(f)	–	(0.60)	62.1
24.51(e)	222,802	0.97(f)	–	(0.57)	67.6
10.50(e)	148,229	1.02(f)	–	(0.50)	57.4
9.12	152,106	1.02(f)	–	(0.54)	68.8

(30.30)(e)	1,688	1.71(f)	–	(1.25)	50.7
37.37(e)	2,523	1.71(f)	–	(1.38)	62.1
23.53(e)	1,980	1.75(f)	–	(1.34)	67.6
9.59	1,757	1.87(f)	–	(1.35)	57.4
8.27	2,255	1.87(f)	–	(1.39)	68.8

(30.07)(e)	13,703	1.40(f)	–	(0.94)	50.7
37.78	18,489	1.40(f)	–	(1.07)	62.1
23.92	13,013	1.44(f)	–	(1.03)	67.6
9.90	13,075	1.56(f)	–	(1.04)	57.4
8.54	14,357	1.56(f)	–	(1.08)	68.8

(29.95)(e)	9,817	1.21(f)	–	(0.75)	50.7
38.13(e)	21,478	1.21(f)	–	(0.88)	62.1
24.12	15,438	1.25(f)	–	(0.84)	67.6
10.11	12,710	1.37(f)	–	(0.85)	57.4
8.72	12,526	1.37(f)	–	(0.89)	68.8

(29.79)	32,559	1.09(f)	–	(0.63)	50.7
38.24	50,285	1.09(f)	–	(0.75)	62.1
24.17	42,541	1.13(f)	–	(0.72)	67.6
10.29	37,322	1.25(f)	–	(0.73)	57.4
8.91	43,250	1.25(f)	–	(0.77)	68.8

(29.67)(e)	1,935,411	0.84(f)	–	(0.37)	50.7
38.60	2,780,704	0.83(f)	–	(0.50)	62.1
24.63(e)	1,817,204	0.86(f)	–	(0.46)	67.6
10.52(e)	1,497,648	0.99(f)	–	(0.48)	57.4
9.13	1,457,244	0.99(f)	–	(0.52)	68.8

C-155

Financial Highlights
Principal Funds, Inc. (Continued)

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
SMALLCAP S&P 600 INDEX FUND
Class J shares
2022	$31.18	$0.27	$(3.84)	$(3.57)	$(0.25)	$(2.49)	$(2.74)
2021	20.17	0.24	11.32	11.56	(0.24)	(0.31)	(0.55)
2020	23.55	0.21	(1.85)	(1.64)	(0.26)	(1.48)	(1.74)
2019	26.23	0.23	0.04	0.27	(0.27)	(2.68)	(2.95)
2018	26.68	0.24	1.10	1.34	(0.25)	(1.54)	(1.79)
Institutional shares
2022	33.36	0.34	(4.12)	(3.78)	(0.30)	(2.49)	(2.79)
2021	21.54	0.31	12.09	12.40	(0.27)	(0.31)	(0.58)
2020	25.03	0.27	(1.98)	(1.71)	(0.30)	(1.48)	(1.78)
2019	27.68	0.30	0.05	0.35	(0.32)	(2.68)	(3.00)
2018	28.06	0.31	1.15	1.46	(0.30)	(1.54)	(1.84)
R-1 shares
2022	32.59	0.10	(4.03)	(3.93)	(0.02)	(2.49)	(2.51)
2021	21.08	0.06	11.85	11.91	(0.09)	(0.31)	(0.40)
2020	24.50	0.09	(1.95)	(1.86)	(0.08)	(1.48)	(1.56)
2019	27.11	0.10	0.07	0.17	(0.10)	(2.68)	(2.78)
2018	27.53	0.07	1.14	1.21	(0.09)	(1.54)	(1.63)
R-3 shares
2022	34.04	0.20	(4.22)	(4.02)	(0.14)	(2.49)	(2.63)
2021	21.99	0.16	12.35	12.51	(0.15)	(0.31)	(0.46)
2020	25.52	0.16	(2.02)	(1.86)	(0.19)	(1.48)	(1.67)
2019	28.12	0.18	0.08	0.26	(0.18)	(2.68)	(2.86)
2018	28.49	0.17	1.17	1.34	(0.17)	(1.54)	(1.71)
R-4 shares
2022	34.52	0.25	(4.27)	(4.02)	(0.18)	(2.49)	(2.67)
2021	22.28	0.22	12.53	12.75	(0.20)	(0.31)	(0.51)
2020	25.84	0.21	(2.07)	(1.86)	(0.22)	(1.48)	(1.70)
2019	28.43	0.23	0.08	0.31	(0.22)	(2.68)	(2.90)
2018	28.77	0.23	1.19	1.42	(0.22)	(1.54)	(1.76)
R-5 shares
2022	34.76	0.29	(4.30)	(4.01)	(0.23)	(2.49)	(2.72)
2021	22.44	0.26	12.60	12.86	(0.23)	(0.31)	(0.54)
2020	26.00	0.23	(2.06)	(1.83)	(0.25)	(1.48)	(1.73)
2019	28.59	0.27	0.08	0.35	(0.26)	(2.68)	(2.94)
2018	28.93	0.26	1.19	1.45	(0.25)	(1.54)	(1.79)
R-6 shares
2022	33.35	0.35	(4.11)	(3.76)	(0.32)	(2.49)	(2.81)
2021	21.54	0.33	12.08	12.41	(0.29)	(0.31)	(0.60)
2020	25.03	0.27	(1.96)	(1.69)	(0.32)	(1.48)	(1.80)
2019	27.67	0.31	0.06	0.37	(0.33)	(2.68)	(3.01)
2018	28.05	0.32	1.15	1.47	(0.31)	(1.54)	(1.85)

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(d)

Excludes expense reimbursement from Manager and/or Distributor.

(e)

Reflects Manager's contractual expense limit.

(f)

C-156

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$24.87	(12.25)%(b)	$175,397	0.40%(c)	0.42%(d)	1.01%	15.9%
31.18	57.97(b)	209,971	0.39(c)	0.41(d)	0.83	11.9
20.17	(7.93)(b)	136,338	0.42(c)	0.45(d)	1.02	21.4
23.55	2.86(b)	171,912	0.44(c)	0.47(d)	1.01	16.8
26.23	5.14(b)	182,777	0.41(c)	0.44(d)	0.89	17.4

26.79	(12.08)	229,566	0.21(e)	–	1.19	15.9
33.36	58.26	291,508	0.21(e)	–	1.01	11.9
21.54	(7.75)	218,125	0.24(e)	–	1.22	21.4
25.03	3.04	330,036	0.24(e)	–	1.21	16.8
27.68	5.32	359,661	0.22(e)	–	1.08	17.4

26.15	(12.81)(f)	6,738	1.04	–	0.37	15.9
32.59	56.98(f)	8,077	1.04	–	0.18	11.9
21.08	(8.48)	6,987	1.04	–	0.42	21.4
24.50	2.24	10,201	1.04	–	0.41	16.8
27.11	4.46	12,877	1.04	–	0.26	17.4

27.39	(12.54)	79,204	0.73	–	0.67	15.9
34.04	57.42	103,119	0.73	–	0.49	11.9
21.99	(8.19)	71,759	0.73	–	0.72	21.4
25.52	2.55	101,745	0.73	–	0.73	16.8
28.12	4.77	109,187	0.73	–	0.57	17.4

27.83	(12.35)	34,056	0.54	–	0.86	15.9
34.52	57.78	45,339	0.54	–	0.68	11.9
22.28	(8.07)	39,413	0.54	–	0.92	21.4
25.84	2.75	57,686	0.54	–	0.92	16.8
28.43	5.01	74,989	0.54	–	0.76	17.4

28.03	(12.25)	103,304	0.42	–	0.99	15.9
34.76	57.89	128,741	0.42	–	0.80	11.9
22.44	(7.91)	92,028	0.42	–	1.04	21.4
26.00	2.89	132,921	0.42	–	1.04	16.8
28.59	5.10	179,867	0.42	–	0.88	17.4

26.78	(12.04)	533,682	0.16(e)	–	1.24	15.9
33.35	58.33	646,055	0.16(e)	–	1.06	11.9
21.54	(7.67)	459,359	0.16(e)	–	1.28	21.4
25.03	3.14	464,412	0.17(e)	–	1.28	16.8
27.67	5.37	383,063	0.16(e)	–	1.12	17.4

C-157

Financial Highlights
Principal Funds, Inc. (Continued)

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Distributions from Realized Gains	Total Dividends and Distributions
SMALLCAP VALUE FUND II
Class J shares
2022	$14.02	$0.05	$(0.75)	$(0.70)	$(0.06)	$(1.85)	$(1.91)
2021	8.63	0.04	5.39	5.43	(0.04)	–	(0.04)
2020	10.19	0.04	(1.55)	(1.51)	(0.05)	–	(0.05)
2019	11.78	0.05	0.19	0.24	(0.05)	(1.78)	(1.83)
2018	13.42	0.02	(0.35)	(0.33)	(0.01)	(1.30)	(1.31)
Institutional shares
2022	14.50	0.09	(0.77)	(0.68)	(0.09)	(1.85)	(1.94)
2021	8.94	0.09	5.56	5.65	(0.09)	–	(0.09)
2020	10.55	0.08	(1.59)	(1.51)	(0.10)	–	(0.10)
2019	12.12	0.10	0.20	0.30	(0.09)	(1.78)	(1.87)
2018	13.77	0.07	(0.36)	(0.29)	(0.06)	(1.30)	(1.36)
R-1 shares
2022	12.79	(0.01)	(0.68)	(0.69)	–	(1.85)	(1.85)
2021	7.90	(0.02)	4.92	4.90	(0.01)	–	(0.01)
2020	9.32	0.01	(1.43)	(1.42)	–	–	–
2019	10.93	0.01	0.16	0.17	–	(1.78)	(1.78)
2018	12.59	(0.04)	(0.32)	(0.36)	–	(1.30)	(1.30)
R-3 shares
2022	13.76	0.02	(0.73)	(0.71)	(0.03)	(1.85)	(1.88)
2021	8.48	0.02	5.29	5.31	(0.03)	–	(0.03)
2020	10.01	0.03	(1.52)	(1.49)	(0.04)	–	(0.04)
2019	11.59	0.04	0.18	0.22	(0.02)	(1.78)	(1.80)
2018	13.23	–	(0.34)	(0.34)	–	(1.30)	(1.30)
R-4 shares
2022	14.02	0.05	(0.76)	(0.71)	(0.05)	(1.85)	(1.90)
2021	8.63	0.05	5.39	5.44	(0.05)	–	(0.05)
2020	10.19	0.05	(1.55)	(1.50)	(0.06)	–	(0.06)
2019	11.77	0.06	0.18	0.24	(0.04)	(1.78)	(1.82)
2018	13.41	0.02	(0.35)	(0.33)	(0.01)	(1.30)	(1.31)
R-5 shares
2022	14.20	0.06	(0.75)	(0.69)	(0.07)	(1.85)	(1.92)
2021	8.75	0.06	5.45	5.51	(0.06)	–	(0.06)
2020	10.33	0.06	(1.57)	(1.51)	(0.07)	–	(0.07)
2019	11.91	0.07	0.19	0.26	(0.06)	(1.78)	(1.84)
2018	13.55	0.04	(0.35)	(0.31)	(0.03)	(1.30)	(1.33)
R-6 shares
2022	14.50	0.09	(0.77)	(0.68)	(0.10)	(1.85)	(1.95)
2021	8.93	0.10	5.56	5.66	(0.09)	–	(0.09)
2020	10.54	0.09	(1.60)	(1.51)	(0.10)	–	(0.10)
2019	12.12	0.10	0.19	0.29	(0.09)	(1.78)	(1.87)
2018	13.76	0.07	(0.35)	(0.28)	(0.06)	(1.30)	(1.36)

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Reflects Manager's contractual expense limit and/or Distributor's voluntary distribution fee limit.

(d)

Excludes expense reimbursement from Manager and/or Distributor.

(e)

Reflects Manager's contractual expense limit.

C-158

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

Net Asset Value, End of Period	Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Gross Expenses to Average Net Assets	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


$11.41	(5.41)%(b)	$20,790	1.28%(c)	1.32%(d)	0.40%	55.4%
14.02	63.03(b)	23,564	1.29(c)	1.33(d)	0.35	87.5
8.63	(14.92)(b)	11,752	1.48(c)	1.54(d)	0.42	92.2
10.19	4.60(b)	16,348	1.45(c)	1.52(d)	0.46	76.1
11.78	(3.18)(b)	17,180	1.36(c)	1.43(d)	0.13	84.1

11.88	(5.02)	185,308	0.96(e)	–	0.73	55.4
14.50	63.45	204,526	0.96(e)	–	0.70	87.5
8.94	(14.51)	103,672	0.98(e)	–	0.90	92.2
10.55	5.09	116,450	0.99(e)	–	0.92	76.1
12.12	(2.80)	129,984	1.00(e)	–	0.49	84.1

10.25	(5.84)	772	1.80(e)	–	(0.13)	55.4
12.79	62.06	741	1.80(e)	–	(0.13)	87.5
7.90	(15.21)	583	1.84(e)	–	0.06	92.2
9.32	4.21	871	1.84(e)	–	0.07	76.1
10.93	(3.61)	983	1.84(e)	–	(0.35)	84.1

11.17	(5.59)	5,063	1.49(e)	–	0.19	55.4
13.76	62.67	6,089	1.49(e)	–	0.14	87.5
8.48	(14.99)	3,599	1.53(e)	–	0.39	92.2
10.01	4.51	6,798	1.53(e)	–	0.39	76.1
11.59	(3.27)	9,087	1.53(e)	–	(0.04)	84.1

11.41	(5.45)	2,703	1.30(e)	–	0.39	55.4
14.02	63.15	4,153	1.30(e)	–	0.37	87.5
8.63	(14.84)	2,278	1.34(e)	–	0.59	92.2
10.19	4.67	4,746	1.34(e)	–	0.57	76.1
11.77	(3.14)	4,824	1.34(e)	–	0.15	84.1

11.59	(5.28)	13,339	1.18(e)	–	0.51	55.4
14.20	63.22	16,754	1.18(e)	–	0.49	87.5
8.75	(14.74)	14,788	1.22(e)	–	0.69	92.2
10.33	4.80	19,469	1.22(e)	–	0.70	76.1
11.91	(2.99)	23,256	1.22(e)	–	0.28	84.1

11.87	(5.07)	895,326	0.93(e)	–	0.76	55.4
14.50	63.66	1,150,438	0.93(e)	–	0.72	87.5
8.93	(14.51)	663,938	0.96(e)	–	0.94	92.2
10.54	5.05	840,894	0.97(e)	–	0.94	76.1
12.12	(2.70)	885,580	0.96(e)	–	0.54	84.1

C-159

Financial Highlights
Principal Funds, Inc. (Continued)

	Net Asset Value, Beginning of Period	Net Investment Income (Loss)(a)	Net Realized and Unrealized Gain (Loss) on Investments	Total From Investment Operations	Dividends from Net Investment Income	Total Dividends and Distributions	Net Asset Value, End of Period
TAX-EXEMPT BOND FUND
Class A shares
2022	$7.61	$0.17	$(1.30)	$(1.13)	$(0.17)	$(0.17)	$6.31
2021	7.40	0.17	0.21	0.38	(0.17)	(0.17)	7.61
2020	7.43	0.18	(0.04)	0.14	(0.17)	(0.17)	7.40
2019	6.95	0.24	0.47	0.71	(0.23)	(0.23)	7.43
2018	7.24	0.28	(0.31)	(0.03)	(0.26)	(0.26)	6.95
Class C shares
2022	7.63	0.11	(1.30)	(1.19)	(0.11)	(0.11)	6.33
2021	7.43	0.11	0.20	0.31	(0.11)	(0.11)	7.63
2020	7.46	0.12	(0.04)	0.08	(0.11)	(0.11)	7.43
2019	6.97	0.19	0.47	0.66	(0.17)	(0.17)	7.46
2018	7.27	0.22	(0.32)	(0.10)	(0.20)	(0.20)	6.97
Institutional shares
2022	7.61	0.19	(1.30)	(1.11)	(0.19)	(0.19)	6.31
2021	7.41	0.19	0.20	0.39	(0.19)	(0.19)	7.61
2020	7.44	0.21	(0.05)	0.16	(0.19)	(0.19)	7.41
2019	6.95	0.26	0.48	0.74	(0.25)	(0.25)	7.44
2018	7.25	0.29	(0.31)	(0.02)	(0.28)	(0.28)	6.95

(a)

Calculated based on average shares outstanding during the period.

(b)

Total return is calculated without the front-end sales charge or contingent deferred sales charge, if applicable.

(c)

Excludes interest expense and fees paid through inverse floater agreements. See “Operating Policies” in notes to financial statements.

(d)

Reflects Manager's contractual expense limit.

(e)

C-160

Financial Highlights
Principal Funds, Inc.

Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted):

Total Return	Net Assets, End of Period (in thousands)	Ratio of Expenses to Average Net Assets	Ratio of Expenses to Average Net Assets (Excluding Interest Expense and Fees)	Ratio of Net Investment Income to Average Net Assets	Portfolio Turnover Rate


(14.99)%(b)	$299,054	0.77%	0.73%(c)	2.44%	59.3%
5.19(b)	417,381	0.79	0.76(c)	2.18	24.8
1.89(b)	356,581	0.81	0.77(c)	2.50	66.7
10.28(b)	358,580	0.86	0.79(c)	3.36	64.0
(0.42)(b)	269,439	0.85	0.78(c)	3.87	65.8

(15.67)(b)	22,134	1.61(d)	1.57(c)(d)	1.59	59.3
4.17(b)	35,338	1.61(d)	1.58(c)(d)	1.37	24.8
1.05(b)	38,229	1.63(d)	1.59(c)(d)	1.69	66.7
9.51(b)	39,162	1.67(d)	1.60(c)(d)	2.55	64.0
(1.38)(b)	26,337	1.67(d)	1.60(c)(d)	3.05	65.8

(14.88)(e)	278,642	0.50(d)	0.46(c)(d)	2.72	59.3
5.44(e)	345,082	0.54(d)	0.51(c)(d)	2.42	24.8
2.14	248,148	0.56(d)	0.52(c)(d)	2.85	66.7
10.73	163,406	0.59(d)	0.52(c)(d)	3.57	64.0
(0.31)	70,842	0.59(d)	0.52(c)(d)	4.11	65.8

C-161

ADDITIONAL INFORMATION

Additional information about the Funds is available in the SAI dated March 1, 2023, which is incorporated by reference into this Prospectus. Additional information about each Fund’s investments is available in the Registrant’s Annual and Semi-Annual Reports to Shareholders. In the Registrant’s Annual Report, you will find a discussion of the market conditions and investment strategies that significantly affected each Fund’s performance during the last fiscal year. The SAI and the Registrant’s Annual and Semi-Annual Reports can be obtained free of charge by writing Principal Funds, P.O. Box 219971, Kansas City, MO 64121-9971. In addition, the Registrant makes its SAI and Annual and Semi-Annual Reports available, free of charge, on www.PrincipalAM.com/Prospectuses. To request this and other information about the Funds and to make shareholder inquiries, telephone 1-800-222-5852.

Reports and other information about the Registrant are available on the EDGAR Database on the SEC’s internet site at www.sec.gov. Copies of this information may be obtained, upon payment of a duplicating fee, by electronic request at the following e-mail address: [email protected].

The Registrant has entered into a management agreement with PGI. The Registrant and/or PGI, on behalf of the Funds, enter into contractual arrangements with various parties, including, among others, the Funds' sub-advisors, distributor, transfer agent, and custodian, who provide services to the Funds. These arrangements are between the Registrant and/or PGI and the applicable service provider. Shareholders are not parties to, or intended to be third-party beneficiaries of, any of these arrangements. Such arrangements are not intended to create in any individual shareholder or group of shareholders any right, including the right to enforce such arrangements against the service providers or to seek any remedy thereunder against PGI or any other service provider, either directly or on behalf of the Registrant or any Fund.

This Prospectus provides information that you should consider in determining whether to purchase shares of a Fund. This Prospectus, the SAI, or the contracts that are exhibits to the Registrant’s registration statement are not intended to give rise to any agreement or contract between the Registrant and/or any Fund and any investor, or give rise to any contract or other rights in any individual shareholder, group of shareholders, or other person other than any rights conferred explicitly by federal or state securities laws that may not be waived.

The U.S. government does not insure or guarantee an investment in any of the Funds. There can be no assurance that the Government Money Market or Money Market Funds will be able to maintain a stable share price of $1.00 per share.

Shares of the Funds are not deposits or obligations of, or guaranteed or endorsed by, Principal Bank or any other financial institution, nor are shares of the Funds federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other agency.

Principal Funds, Inc. SEC File 811-07572