SECOND AMENDMENT OF THE
                        PRINCIPAL REAL ESTATE FUND, INC.
                          INVESTMENT SERVICE AGREEMENT


Agreement executed as of the 10th day of December 2001 to amend the Investment
Service Agreement executed as of December 1, 1997 (and including any subsequent
amendments thereafter) by and between Principal Real Estate Fund, Inc.
(hereinafter called "the Fund"), Princor Management Corporation (now known as
Principal Management Corporation)(hereinafter called "the Manager") and
Principal Mutual Life Insurance Company (now known as Principal Life Insurance
Company) hereinafter called "the Company").

WHEREAS, in the Investment Service Agreement, the Company agreed to make
available to the Manager such employees of the Company as the Manager might
reasonably need in the performance of its investment advisory services; and

WHEREAS,  the Fund, the Manager and the Company now wish to amend the Investment
Service Agreement;

NOW, THEREFORE, in consideration of the terms and conditions set forth
hereinafter, the parties agree that effective January 1, 2002 Schedule A will
read as follows:


                                   SCHEDULE A

For the services provided and the expenses incurred by Principal Life or its
subsidiaries pursuant to the Investment Service Agreement, the Manager, not the
Fund, shall pay Principal Life or its subsidiaries a fee, computed daily and
paid monthly, at an annual rate of 0.55% of the Fund's average daily net assets.



                                 PRINCIPAL MANAGEMENT CORPORATION

                                 By:   /s/ Ralph C. Eucher
                                    -------------------------------------



                                 PRINCIPAL LIFE INSURANCE COMPANY

                                 By:   /s/ Michael J. Beer
                                    -------------------------------------



                                 PRINCIPAL REAL ESTATE FUND, INC.

                                 By:   /s/ A. S. Filean
                                    -------------------------------------