N-CSRS 1 statements.htm statements.htm - Generated by SEC Publisher for SEC Filing

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number

811-07572

Principal Funds, Inc.

(Exact name of registrant as specified in charter)

711 High Street, Des Moines, IA 50392-2080   
(Address of principal executive offices)  (Zip code) 

Principal Management Corporation, Principal Financial Group, Des Moines, IA 50392-2080 (Name and address of agent for service)

Registrant’s telephone number, including area code:  515-247-6783 
Date of fiscal year end:  August 31, 2010   
Date of reporting period:  February 28, 2010   


ITEM 1 – REPORT TO STOCKHOLDERS


Retirement and Institutional Share Classes

Semiannual Report

February 28, 2010




PRIVACY NOTICE

This Notice is provided on behalf of the following
companies of the Principal Financial Group:

Principal Life Insurance Company

Principal National Life Insurance Company

Princor Financial Services Corporation

Principal Funds, Inc. / Principal Funds Distributor, Inc.

Principal Variable Contracts Funds, Inc.

Principal Life Insurance Company Variable Life Separate Account

Principal Life Insurance Company Separate Account B

Principal Global Investors, LLC

Principal Global Investors Trust

Principal Real Estate Investors, LLC

Principal Commercial Acceptance, LLC

Principal Commercial Funding, LLC

Principal Green Fund I, LP / PGF GP, LLC

Principal Enhanced Property Fund, GP LLC

Principal Enhanced Property Fund, LP

Principal Trust Company

Spectrum Asset Management, Inc.

Employers Dental Services, Inc. / Principal Dental Services, Inc.

JF Molloy & Associates, Inc. / Principal Wellness Company

PROTECTING YOUR PRIVACY

This Notice is required by law. It tells how we handle personal information.

This Notice applies to:

  • people who own or apply for our products or services for personal use.
  • employee benefit plan participants and beneficiaries.

Please note that in this Notice, “you” refers to only these people. The Notice does not apply to an employer plan sponsor or group policyholder.

WE PROTECT INFORMATION WE COLLECT ABOUT YOU

We follow strict standards to safeguard personal information. These standards include limiting access to data and regularly testing our security technology.

HOW WE COLLECT INFORMATION

We collect data about you as we do business with you.

Some of the sources of this data are as follows:

  • Information we obtain when you apply or enroll for products or services. You may provide facts such as your name; address; Social Security number; financial status; and, when applicable, health history.
  • Information we obtain from others. This may include claim reports, medical records, when applicable, credit reports, property values and similar data.
  • Information we obtain through our transactions and experience with you. This includes your claims history, payment and investment records, and account values and balances.
  • Information we obtain through the Internet. This includes data from online forms you complete. It also includes data we collect when you visit our websites.

HOW WE SHARE INFORMATION

Within the Principal Financial Group

We may share personal information about you or about former customers, plan participants or beneficiaries within the Principal Financial Group for several reasons, including:

  • to assist us in providing service;
  • to help design and improve products; or
  • with your consent, at your request or as allowed by law.

With Others

In the course of doing business we may share data with others. This could include personal information about you or about former customers, plan participants or beneficiaries. Personal information may be shared with others for the following reasons:

  • in response to a subpoena,
  • to prevent fraud,
  • to comply with inquiries from government agencies or other regulators, or
  • for other legal purposes.

We also may share personal information:

  • with others that service your accounts, or that perform services on our behalf;
  • with others with whom we may have joint marketing agreements. These include financial services companies (such as other insurance companies, banks or mutual fund companies); and
  • with other companies with your consent, at your request or as allowed by law.

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01/2010

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MEDICAL INFORMATION

We do not share medical information among companies of the Principal Financial Group or with others except:

  • when needed to service your policies, accounts, claims or contracts;
  • when laws protecting your privacy permit it; or
  • when you consent.

ACCURACY OF INFORMATION

We strive for accurate records. Please tell us if you receive any incorrect materials from us. We will make the appropriate changes.

COMPANIES WITHIN THE PRINCIPAL FINANCIAL GROUP

Several companies within the Principal Financial Group are listed at the top of this Notice. The companies of the Principal Financial Group are leading providers of retirement savings, investment, and insurance products.

MORE INFORMATION

You may write to us if you have questions about our Privacy Notice. Contact our Privacy Officer at P.O. Box 14582, Des Moines, Iowa 50306-3582.

Receipt of this notice does not mean your application has been accepted.

We may change our privacy practices at times. We will give you a revised notice when required by law.

Our privacy practices comply with all applicable laws. If a state’s privacy laws are more restrictive than those stated in this Notice, we comply with those laws.

Your agent, broker, registered representative, consultant or advisor may have a different privacy policy.

1-800-986-3343


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CALIFORNIA PRIVACY NOTICE

This Notice is provided on behalf of the following

companies of the Principal Financial Group:

Principal Life Insurance Company

Principal National Life Insurance Company

Princor Financial Services Corporation

Principal Funds, Inc. / Principal Funds Distributor, Inc.

Principal Variable Contracts Funds, Inc.

Principal Life Insurance Company Variable Life Separate Account

Principal Life Insurance Company Separate Account B

Principal Global Investors, LLC

Principal Global Investors Trust

Principal Real Estate Investors, LLC

Principal Commercial Acceptance, LLC

Principal Commercial Funding, LLC

Principal Green Fund I, LP / PGF GP, LLC

Principal Enhanced Property Fund, GP LLC

Principal Enhanced Property Fund, LP

Principal Trust Company

Spectrum Asset Management, Inc.

Employers Dental Services, Inc. / Principal Dental Services, Inc.

JF Molloy & Associates, Inc. / Principal Wellness Company

PROTECTING YOUR PRIVACY

This Notice is required by law. It tells how we handle personal information.

This Notice applies to individual residents of California who:

  • own or apply for our products or services for personal use.
  • are employee benefit plan participants and beneficiaries.

Please note that in this Notice, “you” refers to only these people. The Notice does not apply to an employer plan sponsor or group policyholder.

WE PROTECT INFORMATION WE COLLECT ABOUT YOU

We follow strict standards to protect personal information. These standards include limiting access to data and regularly testing our security technology.

HOW WE COLLECT INFORMATION

We collect data about you as we do business with you. Some of the sources of this data are as follows:

  • Information we obtain when you apply or enroll for products or services. You may provide facts such as your name; address; Social Security number; financial status; and, when applicable, health history.
  • Information we obtain from others. This may include claim reports, medical records, credit reports and similar data.
  • Information we obtain through our transactions and experience with you. This includes your claims history, payment and investment records, and account values.
  • Information we obtain through the Internet. This includes data from online forms you complete. It also includes data we receive when you visit our website.

HOW WE SHARE INFORMATION

We may share personal information about you or about former customers, plan participants or beneficiaries among companies within the Principal Financial Group or with others for several reasons, including:

  • to assist us in servicing your account;
  • to protect against potential identity theft or unauthorized transactions;
  • to comply with inquiries from government agencies or other regulators, or for other legal purposes;
  • with your consent, at your request or as allowed by law.

MEDICAL INFORMATION

We do not share medical information among companies of the Principal Financial Group or with others except:

  • when needed to service your policies, accounts, claims or contracts;
  • when laws protecting your privacy permit it; or
  • when you consent.

ACCURACY OF INFORMATION

We strive for accurate records. Please tell us if you receive any incorrect materials from us. We will make the appropriate changes.

COMPANIES WITHIN THE PRINCIPAL FINANCIAL GROUP

Several companies within the Principal Financial Group are listed at the top of this Notice. The companies of the Principal Financial Group are leading providers of retirement savings, investment, and insurance products.

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MORE INFORMATION

You may write to us if you have questions about our Privacy Notice. Contact our Privacy Officer at P.O. Box 14582, Des Moines, Iowa 50306-3582.

Our privacy practices comply with all applicable laws.

Your agent, broker, registered representative, consultant or advisor may have a different privacy policy.

1-800-986-3343

Receipt of this notice does not mean your application has been accepted.

We may change our privacy practices at times. We will give you a revised notice when required by law.

BB 9338-7

01/2010

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Table of contents

Financial Statements  2 
Notes to Financial Statements  6 
Schedules of Investments  13 
Financial Highlights  32 
Shareholder Expense Example  36 
Supplemental Information  37 



STATEMENTS OF ASSETS AND LIABILITIES   
                                             PRINCIPAL FUNDS, INC.       
                              February 28, 2010 (unaudited)     
 
 
  Bond Market Index  International 
Amounts in thousands, except per share amounts    Fund  Equity Index Fund 
Investment in securities--at cost  $ 177,898  $ 63,375 
Foreign currency--at cost  $ –  $ 5 
Assets       
Investment in securities--at value  $ 178,285  $ 59,692 
Foreign currency--at value    –  5 
Cash    37,924  209 
Receivables:       
       Dividends and interest    1,065  94 
       Expense reimbursement from Manager    –  3 
       Fund shares sold    50,726  227 
       Investment securities sold    11,631  – 
       Variation margin on futures contracts    –  18 
                                                                                                                                           Total Assets    279,631  60,248 
Liabilities       
Accrued management and investment advisory fees    31  11 
Accrued directors' expenses    1  – 
Accrued other expenses    7  9 
Payables:       
       Fund shares redeemed    123  88 
       Investment securities purchased    48,176  27 
Total Liabilities    48,338  135 
Net Assets Applicable to Outstanding Shares  $ 231,293  $ 60,113 
Net Assets Consist of:       
Capital Shares and additional paid-in-capital  $ 230,248  $ 63,848 
Accumulated undistributed (overdistributed) net investment income (loss)    337  94 
Accumulated undistributed (overdistributed) net realized gain (loss)    321  (150 ) 
Net unrealized appreciation (depreciation) of investments and futures    387  (3,678 ) 
Net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign       
currency    –  (1 ) 
Total Net Assets  $ 231,293  $ 60,113 
Capital Stock (par value: $.01 a share):       
Shares authorized    385,000  380,000 
Net Asset Value Per Share:       
Institutional: Net Assets  $ 231,243  $ 59,281 
       Shares Issued and Outstanding    22,783  6,262 
       Net Asset Value per share  $ 10.15  $ 9.47 
R-1: Net Assets  $ 10  $ 9 
       Shares Issued and Outstanding    1  1 
       Net Asset Value per share  $ 10.13  $ 9.45 
R-2: Net Assets  $ 10  $ 9 
       Shares Issued and Outstanding    1  1 
       Net Asset Value per share  $ 10.13  $ 9.45 
R-3: Net Assets  $ 10  $ 9 
       Shares Issued and Outstanding    1  1 
       Net Asset Value per share  $ 10.14  $ 9.45 
R-4: Net Assets  $ 10  $ 796 
       Shares Issued and Outstanding    1  84 
       Net Asset Value per share  $ 10.14  $ 9.46 
R-5: Net Assets  $ 10  $ 9 
       Shares Issued and Outstanding    1  1 
       Net Asset Value per share  $ 10.14  $ 9.46 

See accompanying notes.

2


                         STATEMENTS OF OPERATIONS     
                          PRINCIPAL FUNDS, INC.     
Period Ended February 28, 2010 (unaudited)   
 
 
  Bond Market Index  International Equity 
Amounts in thousands    Fund(a)  Index Fund(a) 
Net Investment Income (Loss)       
Income:       
       Dividends  $ –  $ 135 
       Withholding tax    –  (13 ) 
       Interest    382  1 
                                                                                                                                 Total Income    382  123 
Expenses:       
       Management and investment advisory fees    40  20 
       Registration fees - Institutional    4  4 
       Transfer agent fees - Institutional    1  1 
       Custodian fees    3  6 
       Directors' expenses    1  – 
       Professional fees    3  3 
       Other expenses    1  1 
                                                                                                                   Total Gross Expenses    53  35 
       Less: Reimbursement from Manager - Institutional    4  6 
                                                                                                                       Total Net Expenses    49  29 
                                                                                                   Net Investment Income (Loss)    333  94 
 
Net Realized and Unrealized Gain (Loss) on Investments, Futures,       
and Foreign Currencies       
Net realized gain (loss) from:       
       Investment transactions    325  (80 ) 
       Foreign currency transactions    –  (1 ) 
       Futures contracts    –  (69 ) 
Change in unrealized appreciation/depreciation of:       
       Investments    387  (3,683 ) 
       Futures contracts    –  5 
       Translation of assets and liabilities in foreign currencies    –  (1 ) 
                                                   Net Realized and Unrealized Gain (Loss) on Investments,       
                                                                                                 Futures, and Foreign Currencies    712  (3,829) 
                                     Net Increase (Decrease) in Net Assets Resulting from Operations  $ 1,045  $ (3,735) 

(a)      Period from December 30, 2009, date operations commenced, through February 28, 2010.

See accompanying notes.

3


            STATEMENT OF CHANGES IN NET ASSETS   
              PRINCIPAL FUNDS, INC.     
              (unaudited)       
 
 
                      Bond Market 
Amounts in thousands                      Index Fund 
                      Period Ended 
                      February 28, 2010(a) 
Operations                       
Net investment income (loss)                      $ 333 
Net realized gain (loss) on investments, futures, and foreign currency transactions        325 
Change in unrealized appreciation/depreciation of investments, futures,           
and translation of assets and liabilities in foreign currencies            387 
        Net Increase (Decrease) in Net Assets Resulting from Operations  1,045 
 
 
Capital Share Transactions                       
Net increase (decrease) in capital share transactions                230,248 
              Total increase (decrease) in net assets  231,293 
 
Net Assets                       
Beginning of period                      – 
End of period (including undistributed net investment income as set forth below)        $ 231,293 
Undistributed (overdistributed) net investment income (loss)            $ 337 
 
  Institutional    R-1    R-2  R-3  R-4    R-5   
Capital Share Transactions:                       
Period Ended February 28, 2010                       
Dollars:                       
       Sold  $ 233,215  $ 10  $ 10  $ 10  $ 10  $ 10   
       Redeemed    (3,017 )    –    –  –  –    –   
Net Increase (Decrease)  $ 230,198  $ 10  $ 10  $ 10  $ 10  $ 10   
Shares:                       
       Sold    23,081    1    1  1  1    1   
       Redeemed    (298 )    –    –  –  –    –   
Net Increase (Decrease)    22,783    1    1  1  1    1   
 
Distributions:                       
Period Ended February 28, 2010                       
       From net investment income $  –  $ –  $ –  $ –  $ –  $ –   
       From net realized gain on                       
       investments    –    –    –  –  –    –   
Total Dividends and Distributions $  –  $ –  $ –  $ –  $ –  $ –   

(a)      Period from December 30, 2009, date operations commenced, through February 28, 2010.

See accompanying notes.

4


            STATEMENT OF CHANGES IN NET ASSETS   
              PRINCIPAL FUNDS, INC.     
              (unaudited)       
 
 
                      International 
                      Equity Index 
Amounts in thousands                      Fund 
                      Period Ended 
                      February 28, 2010(a) 
Operations                       
Net investment income (loss)                      $ 94 
Net realized gain (loss) on investments, futures, and foreign currency transactions        (150 ) 
Change in unrealized appreciation/depreciation of investments, futures,           
and translation of assets and liabilities in foreign currencies            (3,679 ) 
        Net Increase (Decrease) in Net Assets Resulting from Operations  (3,735) 
 
 
Capital Share Transactions                       
Net increase (decrease) in capital share transactions                63,848 
              Total increase (decrease) in net assets  60,113 
 
Net Assets                       
Beginning of period                      – 
End of period (including undistributed net investment income as set forth below)        $ 60,113 
Undistributed (overdistributed) net investment income (loss)            $ 94 
 
  Institutional    R-1    R-2  R-3  R-4    R-5   
Capital Share Transactions:                       
Period Ended February 28, 2010                       
Dollars:                       
       Sold  $ 64,979  $ 10  $ 10  $ 10  $ 784  $ 10   
       Redeemed    (1,955 )    –    –  –  –    –   
Net Increase (Decrease)  $ 63,024  $ 10  $ 10  $ 10  $ 784  $ 10   
Shares:                       
       Sold    6,467    1    1  1  84    1   
       Redeemed    (205 )    –    –  –  –    –   
Net Increase (Decrease)    6,262    1    1  1  84    1   
 
Distributions:                       
Period Ended February 28, 2010                       
       From net investment income $  –  $ –  $ –  $ –  $ –  $ –   
       From net realized gain on                       
       investments    –    –    –  –  –    –   
Total Dividends and Distributions $  –  $ –  $ –  $ –  $ –  $ –   

(a)      Period from December 30, 2009, date operations commenced, through February 28, 2010.

See accompanying notes.

5


NOTES TO FINANCIAL STATEMENTS
PRINCIPAL FUNDS, INC.
February 28, 2010 (unaudited)

1. Organization

Principal Funds, Inc. (the "Fund") is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company and operates as a series fund in the mutual fund industry. At February 28, 2010, the Fund consists of 66 separate funds. The financial statements for Bond Market Index Fund and International Equity Index Fund (known as the "Funds") are presented herein. The Funds offer six classes of shares: Institutional, R-1, R-2, R-3, R-4 and R-5.

Effective December 30, 2009, the initial purchases of $10,000 of Institutional, R-1, R-2, R-3, R-4 and R-5 classes of shares of Bond Market Index Fund and International Equity Index Fund were made by Principal Management Corporation (the “Manager”).

All classes of shares for each of the Funds represent interests in the same portfolio of investments, and will vote together as a single class except where otherwise required by law or as determined by the Fund’s Board of Directors. In addition, the Board of Directors declares separate dividends on each class of shares.

2. Significant Accounting Policies

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following summarizes the significant accounting policies of the Funds:

Security Valuation. The Funds value securities for which market quotations are readily available at market value, which is determined using the last reported sale price. If no sales are reported, as is regularly the case for some securities traded over-the-counter, securities are valued using the last reported bid price or an evaluated bid price provided by a pricing service. Pricing services use electronic modeling techniques that incorporate security characteristics, market conditions and dealer-supplied valuations to determine an evaluated bid price. When reliable market quotations are not considered to be readily available, which may be the case, for example, with respect to restricted securities, certain debt securities, preferred stocks, and foreign securities, the investments are valued at their fair value as determined in good faith by the Manager under procedures established and periodically reviewed by the Fund’s Board of Directors.

The value of foreign securities used in computing the net asset value per share is generally determined as of the close of the foreign exchange where the security is principally traded. Events that occur after the close of the applicable foreign market or exchange but prior to the calculation of the Funds’ net asset values are ordinarily not reflected in the Funds’ net asset values. If events that occur after the close of the applicable foreign market or exchange but prior to the calculation of the Funds’ net asset values are determined to materially affect the value of a foreign security, then the security is valued at its fair value as determined in good faith by the Manager under procedures established and periodically reviewed by the Fund’s Board of Directors. Many factors are reviewed in the course of making a good faith determination of a security’s fair value, including, but not limited to, price movements in ADRs, futures contracts, industry indices, general indices, and foreign currencies.

To the extent the Funds invest in foreign securities listed on foreign exchanges which trade on days on which the Funds do not determine net asset values, for example weekends and other customary national U.S. holidays, the Funds’ net asset values could be significantly affected on days when shareholders can not purchase or redeem shares.

Certain securities issued by companies in emerging market countries may have more than one quoted valuation at any given point in time, sometimes referred to as a “local” price and a “premium” price. The premium price is often a negotiated price, which may not consistently represent a price at which a specific transaction can be effected. It is the policy of the Funds to value such securities at prices at which it is expected those shares may be sold, and the Manager or any sub-advisor is authorized to make such determinations subject to such oversight by the Fund’s Board of Directors as may occasionally be necessary.

Short-term securities purchased with less than 60 days until maturity are valued at amortized cost, which approximates market.

Currency Translation. Foreign holdings are translated to U.S. dollars using the exchange rate at the daily close of the New York Stock Exchange. The identified cost of the Funds’ holdings is translated at approximate rates prevailing when acquired. Income and expense amounts are translated at approximate rates prevailing when received or paid, with daily accruals of such amounts reported at approximate rates prevailing at the date of valuation. Since the carrying amount of the foreign securities is determined based on the exchange rate and market values at the close of the period, it is not practicable to isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of securities during the period.

6


NOTES TO FINANCIAL STATEMENTS
PRINCIPAL FUNDS, INC.
February 28, 2010 (unaudited)

2. Significant Accounting Policies (Continued)

Net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between trade and settlement dates on security transactions, and the difference between the amount of dividends and foreign withholding taxes recorded on the books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized appreciation (depreciation) on translation of assets and liabilities in foreign currencies arise from changes in the exchange rate relating to assets and liabilities, other than investments in securities, purchased and held in non-U.S. denominated currencies.

The following fund held securities denominated in currencies that exceeded 5% of net assets of the fund:

International   
Equity Index Fund   
Euro  29.3% 
Japanese Yen  21.2 
British Pound  19.8 
Australian Dollar  8.0 
Swiss Franc  7.5 
United States Dollar  5.8 

Income and Investment Transactions. The Funds record investment transactions on a trade date basis. The identified cost basis has been used in determining the net realized gain or loss from investment transactions and unrealized appreciation or depreciation of investments. The Funds record dividend income on the ex-dividend date, except dividend income from foreign securities whereby the ex-dividend date has passed; such dividends are recorded as soon as the Funds are informed of the ex-dividend date. Interest income is recognized on an accrual basis. Discounts and premiums on securities are accreted/amortized over the lives of the respective securities. The Funds allocate daily all income and realized and unrealized gains or losses to each class of shares based upon the relative proportion of the value of shares outstanding of each class.

Expenses. Expenses directly attributed to a particular fund are charged to that fund. Other expenses not directly attributed a particular fund are apportioned among the registered investment companies managed by the Manager.

Management fees are allocated daily to each class of shares based upon the relative proportion of the value of shares outstanding of each class. Expenses specifically attributable to a particular class are charged directly to such class and are included separately in the statements of operations.

Distributions to Shareholders. Dividends and distributions to shareholders of the Funds are recorded on the ex-dividend date. Dividends and distributions to shareholders from net investment income and net realized gain from investments and foreign currency transactions are determined in accordance with federal tax regulations, which may differ from U.S. generally accepted accounting principles. These differences are primarily due to differing treatments for net operating losses, foreign currency transactions, futures contracts, certain defaulted securities, sales of Passive Foreign Investment Companies, losses deferred due to wash sales, tax straddles, mortgage-backed securities, certain preferred securities, swap agreements, and limitations imposed by Sections 381-384 of the Internal Revenue Code. Permanent book and tax basis differences are reclassified within the capital accounts based on federal tax-basis treatment; temporary differences do not require reclassification. To the extent dividends and distributions exceed current and accumulated earnings and profits for federal income tax purposes, they are reported as return of capital distributions.

Federal Income Taxes. No provision for federal income taxes is considered necessary because each of the Funds intends to qualify as a “regulated investment company” under the Internal Revenue Code and intends to distribute each year substantially all of its net investment income and realized capital gains to shareholders.

The Funds evaluate tax positions taken or expected to be taken in the course of preparing the Funds’ tax returns to determine whether it is “more likely than not” that each tax position would be sustained upon examination by a taxing authority based on the technical merits of the position. Tax positions not deemed to meet the more likely than not threshold would be recorded as a tax benefit or expense in the current year. During the period ended February 28, 2010, the Funds did not record any such tax benefit or expense in the accompanying financial statements.

Foreign Taxes. Certain of the Funds are subject to foreign income taxes imposed by certain countries in which they invest. Foreign income taxes are accrued by the Funds as a reduction of income. These amounts are shown as withholding tax on foreign dividends on the statements of operations.

7


NOTES TO FINANCIAL STATEMENTS
PRINCIPAL FUNDS, INC.
February 28, 2010 (unaudited)

2. Significant Accounting Policies (Continued)

Subsequent Events. Management has evaluated events or transactions that may have occurred since February 28, 2010, that would merit recognition or disclosure in the financial statements.

3. Operating Policies

Futures Contracts. The Funds are subject to equity price risk, interest rate risk, and foreign currency exchange rate risk in the normal course of pursuing their investment objectives. The Funds may enter into futures contracts to hedge against changes in or to gain exposure to, change in the value of equities, interest rates and foreign currencies. Initial margin deposits are made by cash deposits or segregation of specific securities as may be required by the exchange on which the transaction was conducted. Pursuant to the contracts, a fund agrees to receive from or pay to the broker, an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as “variation margin” and are recorded by the fund as a variation margin receivable or payable on futures contracts. During the period the futures contracts are open, daily changes in the value of the contracts are recognized as unrealized gains or losses. These unrealized gains or losses are included as a component of net unrealized appreciation (depreciation) of investments on the statements of assets and liabilities. When the contracts are closed, the Fund recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the fund’s cost basis in the contract. There is minimal counterparty credit risk to the Funds because futures are exchange traded and the exchange’s clearinghouse, as counterparty to all exchange traded futures, guarantees the futures against default.

Illiquid Securities. Illiquid securities generally cannot be sold or disposed of in the ordinary course of business (within seven calendar days) at approximately the value at which each of the Funds has valued the investments. This may have an adverse effect on each of the Funds’ ability to dispose of particular illiquid securities at fair market value and may limit each of the Funds’ ability to obtain accurate market quotations for purposes of valuing the securities. Information regarding illiquid securities is included with footnote designations in the schedules of investments.

Indemnification. Under the Fund’s by-laws, present and past officers, directors and employees are indemnified against certain liabilities arising out of the performance of their duties. In addition, in the normal course of business, the Fund may enter into a variety of contracts that may contain representations and warranties which provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund.

Joint Trading Account. Certain of the Funds may, pursuant to an exemptive order issued by the Securities and Exchange Commission, transfer uninvested funds into a joint trading account. The order permits the participating Funds’ cash balances to be deposited into a single joint account along with the cash of other registered investment companies managed by the Manager. These balances may be invested in one or more short-term instruments or repurchase agreements that are collateralized by U.S. government securities.

Rebates. Subject to best execution, the Funds may direct certain portfolio transactions to brokerage firms that, in turn, have agreed to rebate a portion of the related brokerage commission to the Funds in cash. Commission rebates are included as a component of realized gain from investment transactions in the statements of operations.

Repurchase Agreements. The Funds may invest in repurchase agreements that are fully collateralized, typically by U.S. government or U.S. government agency securities. It is the Funds’ policy that its custodian takes possession of the underlying collateral securities. The fair value of the collateral is at all times at least equal to the total amount of the repurchase obligation. In the event of default on the obligation to repurchase, the Funds have the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. In the event the seller of a repurchase agreement defaults, the Funds could experience delays in the realization of the collateral.

To Be Announced Securities. The Funds may trade portfolio securities on a “to-be-announced” (“TBA”) or when-issued basis. In a TBA or when-issued transaction, the Funds commit to purchase or sell securities for which all specific information is not known at the time of the trade. Securities purchased on a TBA or when-issued basis are not settled until they are delivered to the Funds, normally 15 to 30 days later. These transactions are subject to market fluctuations and their current value is determined in the same manner as for other portfolio securities. The securities purchased on a TBA or when-issued basis are identified as such in the Funds’ schedules of investments.

8


NOTES TO FINANCIAL STATEMENTS
PRINCIPAL FUNDS, INC.
February 28, 2010 (unaudited)

3. Operating Policies (Continued)

U.S. Government Agencies or Government-Sponsored Enterprises. Certain of the Funds may invest in U.S. Government agencies or government-sponsored enterprises. U.S. Government securities are obligations of, and in certain cases, guaranteed by, the U.S. Government or its agencies. The U.S. Government does not guarantee the net asset value of the Funds’ shares. Some U.S. Government securities such as treasury bills, notes and bonds, and securities guaranteed by the Government National Mortgage Association (“GNMA”) are supported by the full faith and credit of the U.S. Government. Other securities, such as those of the Federal Home Loan Bank are supported by the right of the issuer to borrow from the U.S. Department of the Treasury. Still other securities, such as those of the Federal National Mortgage Association (“FNMA”) are supported by the discretionary authority of the U.S. Government to purchase the agency’s obligations.

Government related guarantors (those not backed by the full faith and credit of the United States Government) include FNMA and the Federal Home Loan Mortgage Corporation (“FHLMC”). FNMA is a government sponsored corporation the common stock of which is owned entirely by private stockholders. FNMA purchases conventional residential mortgages from a list of approved seller/servicers which include state and federally chartered savings and loan associations, mutual savings banks, commercial banks, credit unions, and mortgage bankers. Pass-through securities issued by FNMA are guaranteed as to the timely payment of principal and interest by FNMA, but are not backed by the full faith and credit of the U.S. Government. FHLMC issues Participation Certificates which are pass-through securities, each representing an undivided interest in a pool of residential mortgages. FHLMC guarantees the timely payment of interest and ultimate collection of principal, but Participation Certificates are not backed by the full faith and credit of the U.S. Government.

During 2008, the Federal Housing Finance Agency (“FHFA”) placed FNMA and FHLMC into conservatorship. As the conservator, FHFA succeeded to all rights, titles, powers, and privileges of FNMA and FHLMC and of any stockholder of FNMA and FHLMC. The U.S. Department of the Treasury then announced three additional steps taken by it in connection with the conservatorship. First, the U.S. Department of the Treasury entered into a Senior Preferred Stock Purchase Agreement with each of FNMA and FHLMC pursuant to which the U.S. Department of the Treasury will purchase up to an aggregate of $100 billion of each of FNMA and FHLMC to maintain a positive net worth in each enterprise. This agreement contains various covenants that severely limit each enterprise’s operations. In exchange for entering into these agreements, the U.S. Department of the Treasury received $1 billion of each enterprise’s senior preferred stock and warrants to purchase 79.9% of each enterprise’s common stock. Second, the U.S. Department of the Treasury announced the creation of a new secured lending facility which is available to each of FNMA and FHLMC as a liquidity backstop. Third, the U.S. Department of the Treasury announced the creation of a temporary program to purchase mortgage-backed securities issued by each of FNMA and FHLMC. Both the liquidity backstop and the mortgage-backed securities purchase program expired in December 2009. FNMA and FHLMC are continuing to operate as going concerns while in conservatorship and each remain liable for all of its obligations, including its guaranty obligations associated with its mortgage-backed securities.

Derivatives. The following tables provide information about where in the statements of assets and liabilities and statements of operations information about derivatives can be found (amounts shown in thousands):

Derivatives not accounted for as hedging                           Asset Derivatives February 28, 2010    Liability Derivatives February 28, 2010 
instruments under Statement 133    Fair  Statement of Assets and  Fair 
         Statement of Assets and Liabilities Location  Value  Liabilities Location  Value 
International Equity Index Fund         
Equity contracts  Receivables, Net Assets Consist of Net unrealized       $5*     
  appreciation (depreciation) of investments       

*Includes cumulative unrealized appreciation/depreciation of futures contracts as shown in the schedules of investments. Only the portion of the unrealized appreciation/depreciation not yet cash settled is shown in the statements of assets and liabilities as variation margin.

Derivatives Not Accounted for    Realized Gain or (Loss) on  Change in Unrealized Appreciation or 
as Hedging Instruments Under  Location of Gain or (Loss) On Derivatives  Derivatives Recognized in  (depreciation) of Derivatives 
Statement 133  Recognized in Operations  Operations  Recognized in Operations 
International Equity Index Fund       
Equity contracts  Net realized gain (loss) from Futures  $(69)  $5 
  contracts/Change in unrealized     
  appreciation/depreciation of Futures contracts     

Long equity futures contracts are used to obtain market exposure for the cash balances that are maintained by the certain of the Funds and the notional values of the futures contracts will vary in accordance with changing cash balances. The level of other derivative activity disclosed in the schedules of investments is representative of the level of derivative activity used in the Funds throughout the period ended February 28, 2010.

9


NOTES TO FINANCIAL STATEMENTS
PRINCIPAL FUNDS, INC.
February 28, 2010 (unaudited)

4. Fair Valuation

Fair value is defined as the price that the Funds would receive upon selling a security in a timely transaction to an independent buyer in the principal or most advantageous market of the security at the measurement date. In determining fair value, the Funds use various valuation approaches, including market, income and/or cost approaches. A hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.

Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Funds. Unobservable inputs are inputs that reflect the Funds own estimates about the estimates market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

The three-tier hierarchy of inputs is summarized in the three broad levels listed below.

Level 1 – Quoted prices are available in active markets for identical securities as of the reporting date. The type of securities included in Level 1 includes listed equities and listed derivatives.

Level 2 – Other significant observable inputs (including quoted prices for similar investments, interest rates, prepayments speeds, credit risk, etc.) Investments which are generally included in this category include corporate bonds, senior floating rate interests, and municipal bonds.

Level 3 – Significant unobservable inputs (including the Funds’ assumptions in determining the fair value of investments.) Investments which are generally included in this category include certain corporate bonds and certain mortgage backed securities.

The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the market place, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Funds in determining fair value is greatest for instruments categorized in Level 3.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Fair value is a market based measure considered from the perspective of a market participant who holds the asset rather than an entity specific measure. Therefore, even when market assumptions are not readily available, the Fund’s own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. The Funds use prices and inputs that are current as of the measurement date.

Investments which are generally included in the Level 3 category are primarily valued using quoted prices from brokers and dealers participating in the market for these investments. These investments are classified as Level 3 investments due to the lack of market transparency and market corroboration to support these quoted prices. Valuation models may be used as the pricing source for other investments classified as Level 3. Valuation models rely on one or more significant unobservable inputs. Frequently, fair value of these investments is determined in good faith by the Manager under procedures established and periodically reviewed by the Fund’s Board of Directors.

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those instruments. For example, short-term securities held in Money Market Fund are valued using amortized cost, as permitted under 2a-7 of the Investment Company Act of 1940. Generally, amortized cost approximates the current fair value of these securities, but because the value is not obtained from a quoted price in an active market, such securities are reflected as Level 2.

10


NOTES TO FINANCIAL STATEMENTS
PRINCIPAL FUNDS, INC.
February 28, 2010 (unaudited)

4. Fair Valuation (Continued)

The following is a summary of the inputs used as of February 28, 2010, in valuing the Funds’ securities carried at value (amounts shown in thousands):

      Level 2 - Other     
    Level 1 - Quoted  Significant Observable  Level 3 - Significant   
Fund    Prices  Inputs         Unobservable Inputs      Totals (Level 1,2,3) 
 
Bond Market Index Fund           
       Bonds  $ —  $ 60,448  $ 456  $ 60,904 
       Municipal Bonds    —  483  —  483 
       U.S. Government & Government Agency Obligations  —  116,898  —  116,898 
  Total investments in securities $  —  $ 177,829  $ 456  $ 178,285 
 
International Equity Index Fund           
       Common Stocks           
                 Basic Materials  $ —  $ 5,442  $ —  $ 5,442 
                 Communications    —  4,647  —  4,647 
                 Consumer, Cyclical    —  5,844  —  5,844 
                 Consumer, Non-cyclical    —  10,511  —  10,511 
                 Diversified    —  503  —  503 
                 Energy    —  4,454  —  4,454 
                 Exchange Traded Funds    1,504  —  —  1,504 
                 Financial    —  13,918  —  13,918 
                 Industrial    —  6,314  —  6,314 
                 Technology    —  1,254  —  1,254 
                 Utilities    —  3,143  —  3,143 
       Preferred Stocks           
                 Consumer, Cyclical    —  85  —  85 
                 Consumer, Non-cyclical    —  86  —  86 
                 Utilities    —  18  —  18 
       Repurchase Agreements    —  1,969  —  1,969 
  Total investments in securities $  1,504  $ 58,188  $ —  $ 59,692 
       Assets:           
                 Equity Contracts(a)  $ 5  $ —  $ —  $ 5 
 
(a) Futures are valued at the unrealized appreciation/(depreciation) of the instrument.       

The changes in investments measured at fair value for which the Funds’ have used level 3 inputs to determine fair value are as follows (amounts shown in thousands):

  Value    Accrued    Change in  Net      Transfers  Value 
  August 31,  Discount/  Realized  Unrealized  Purchases/  Transfers   out of  February 
Fund  2009    Premiums  Gain/(Loss)  Gain/(Loss)  Sales  into Level 3   Level 3  28, 2010 
Bond Market Index Fund                     
           Bonds  $ —  $ —  $ —  $ 1  $ 455  $ —  $ —  $ 456 
                                         Total  $ —  $ —  $ —  $ 1  $ 455  $ —  $ —  $ 456 

11


NOTES TO FINANCIAL STATEMENTS
PRINCIPAL FUNDS, INC.
February 28, 2010 (unaudited)

5. Management Agreement and Transactions with Affiliates

Management Services. The Funds have agreed to pay investment advisory and management fees to the Manager (wholly owned by Principal Financial Services, Inc.) computed at an annual percentage rate of each of the Funds’ average daily net assets. A portion of the management fee is paid by the Manager to the sub-advisor of each of the Funds. The annual rates used in this calculation for the Funds are as follows:

  All Net Assets 
Bond Market Index Fund       .25% 
International Equity Index Fund         .25 

In addition to the management fee, R-1, R-2, R-3, R-4, and R-5 classes of shares of the Funds pay the Manager a service fee and an administrative service fee computed at an annual percentage rate of each class’s average daily net assets. The annual rates for the service fee are .25%, .25%, .17%, .15%, and .15% and the annual rates for the administrative service fee are .28%, .20%, .15%, .13%, and .11% for R-1, R-2, R-3, R-4, and R-5, respectively. Institutional shares of the Funds reimburse Principal Shareholder Services, Inc. (the “Transfer Agent”) (wholly owned by the Manager) for transfer agent services.

The Manager has contractually agreed to limit the expenses (excluding interest the Funds incur in connection with investments they make) for certain classes of shares of certain of the Funds. The reductions and reimbursements are in amounts that maintain total operating expenses at or below certain limits. The limits are expressed as a percentage of average daily net assets attributable to each class of shares on an annualized basis during the reporting period. The operating expense limits are as follows:

    Period from December 30, 2009 through February 28, 2010     
  Institutional           R-1  R-2  R-3  R-4  R-5  Expiration 
Bond Market Index Fund       0.30%           1.18%  1.05%  0.87%  0.68%  0.56%  December 31, 2010 
International Equity Index Fund       0.35           1.23  1.10  0.92  0.73  0.61  December 31, 2010 

Distribution Fees. R-1, R-2, R-3 and R-4 classes of shares of the Funds bear distribution fees. The fee is computed at an annual rate of the average daily net assets attributable to each class of each of the Funds. Distribution fees are paid to Principal Funds Distributor, Inc., the principal underwriter, a portion may be paid to other selling dealers for providing certain services. The annual rates are .35%, .30%, .25%, and .10% for R-1, R-2, R-3, and R-4 classes of shares, respectively.

At February 28, 2010, Principal Life Insurance Company (an affiliate of the Manager), Princor Financial Services Corporation, Collective Investment Trusts sponsored by Principal Trust Company, and benefit plans and separate accounts sponsored on behalf of Principal Life Insurance Company owned shares of the Funds as follows (amounts in thousands):

  Institutional  R-1  R-2  R-3  R-4  R-5 
Bond Market Index Fund  353  1  1  1  1  1 
International Equity Index Fund  131  1  1  1  1  1 
 
6. Investment Transactions             

For the period ended February 28, 2010, the cost of investment securities purchased and proceeds from investment securities sold (not including short-term investments and U.S. government securities) by the Funds were as follows (amounts shown in thousands):

  Purchases  Sales 
Bond Market Index Fund  $ 170,072  $ 54,405 
International Equity Index Fund  67,626  6,140 

For the period ended February 28, 2010, the cost of U.S. government securities purchased and proceeds from U.S. government securities sold (not including short-term investments) by the Funds were as follows (amounts shown in thousands):

  Purchases  Sales 
Bond Market Index Fund  $ 111,369  $ 49,384 

12


     Schedule of Investments Bond Market Index Fund February 28, 2010 (unaudited)

  Principal      Principal   
  Amount  Value    Amount  Value 
BONDS - 26.33%  (000's)  (000's)  BONDS (continued)  (000's)  (000's) 
Aerospace & Defense - 0.13%      Banks (continued)     
General Dynamics Corp      Export-Import Bank of Korea     
         4.25%, 5/15/2013  $ 100  $ 107         5.88%, 1/14/2015  $ 90  $ 97 
Lockheed Martin Corp             8.13%, 1/21/2014  50  58 
         5.50%, 11/15/2039  70  69  FleetBoston Financial Corp     
Northrop Grumman Systems Corp             6.88%, 1/15/2028  50  51 
         7.75%, 2/15/2031  50  62  Goldman Sachs Group Inc/The     
United Technologies Corp             5.15%, 1/15/2014  150  160 
         6.13%, 7/15/2038  70  75         6.13%, 2/15/2033  50  49 
    $ 313         6.15%, 4/1/2018  50  53 
Agriculture - 0.17%             6.60%, 1/15/2012  50  54 
Altria Group Inc             6.75%, 10/1/2037  120  116 
         9.25%, 8/6/2019  50  62  HSBC Holdings PLC     
         9.95%, 11/10/2038  40  53         6.50%, 5/2/2036  60  62 
         10.20%, 2/6/2039  40  54         6.50%, 9/15/2037  100  103 
Philip Morris International Inc      JP Morgan Chase & Co     
         5.65%, 5/16/2018  100  108         6.00%, 1/15/2018  90  98 
Reynolds American Inc             6.30%, 4/23/2019  100  111 
         7.63%, 6/1/2016  100  113         6.40%, 5/15/2038  100  108 
    $ 390  JP Morgan Chase Bank NA     
Automobile Asset Backed Securities - 0.11%             6.00%, 10/1/2017  110  118 
Nissan Auto Receivables Owner Trust      KeyBank NA     
         5.16%, 3/17/2014  250  262         5.80%, 7/1/2014  50  51 
      Korea Development Bank/Republic of Korea     
Automobile Manufacturers - 0.02%             5.50%, 11/13/2012  200  214 
Daimler Finance North America LLC      Kreditanstalt fuer Wiederaufbau     
         5.88%, 3/15/2011  50  52         1.88%, 1/14/2013  100  101 
             2.25%, 4/16/2012  150  154 
Banks - 4.01%             2.75%, 10/21/2014  150  152 
Bank of America Corp             3.25%, 3/15/2013  300  314 
         3.13%, 6/15/2012  250  261         3.75%, 6/27/2011  100  104 
         4.88%, 1/15/2013  200  210         4.00%, 1/27/2020  80  80 
         4.90%, 5/1/2013  100  105         4.38%, 3/15/2018  70  74 
         5.42%, 3/15/2017  150  147         4.50%, 7/16/2018  100  106 
         6.50%, 8/1/2016  100  108         4.88%, 6/17/2019  100  108 
         7.63%, 6/1/2019  100  113  Landesbank Baden-Wuerttemberg/New York     
Bank of Tokyo-Mitsubishi UFJ Ltd/New York NY             6.35%, 4/1/2012  140  153 
         7.40%, 6/15/2011  60  64  Landwirtschaftliche Rentenbank     
Barclays Bank PLC             1.88%, 9/24/2012  100  101 
         5.00%, 9/22/2016  160  163         3.13%, 7/15/2015  100  101 
         5.45%, 9/12/2012  100  109         4.13%, 7/15/2013  100  107 
BB&T Corp      Morgan Stanley     
         3.85%, 7/27/2012  170  178         4.10%, 1/26/2015  50  50 
         6.85%, 4/30/2019  70  80         4.20%, 11/20/2014  50  50 
Capital One Financial Corp             4.75%, 4/1/2014  260  264 
         5.70%, 9/15/2011  50  53         5.30%, 3/1/2013  50  53 
Citigroup Inc             5.63%, 9/23/2019  50  50 
         2.13%, 4/30/2012  250  255         6.00%, 5/13/2014  50  54 
         2.88%, 12/9/2011  250  259         6.00%, 4/28/2015  50  53 
         5.00%, 9/15/2014  100  99         6.63%, 4/1/2018  50  53 
         5.30%, 10/17/2012  200  210         6.75%, 4/15/2011  200  211 
         5.50%, 4/11/2013  100  105         7.25%, 4/1/2032  60  67 
         6.00%, 10/31/2033  60  51  Oesterreichische Kontrollbank AG     
         6.01%, 1/15/2015  100  105         3.13%, 10/14/2011  150  155 
         6.13%, 11/21/2017  200  202  PNC Funding Corp     
         6.13%, 5/15/2018  100  100         5.13%, 2/8/2020  100  101 
         6.38%, 8/12/2014  60  64         6.70%, 6/10/2019  100  113 
         6.50%, 8/19/2013  50  54  Regions Financial Corp     
         6.63%, 6/15/2032  50  46         7.75%, 11/10/2014  70  72 
         6.88%, 3/5/2038  100  99  Royal Bank of Scotland Group PLC     
Credit Suisse AG             6.40%, 10/21/2019  60  60 
         5.40%, 1/14/2020  100  100  Sovereign Bank     
Credit Suisse/New York NY             5.13%, 3/15/2013  60  62 
         3.45%, 7/2/2012  230  238  SunTrust Bank/Atlanta GA     
         5.00%, 5/15/2013  70  75         5.00%, 9/1/2015  90  91 
         5.50%, 5/1/2014  60  66  UBS AG/Stamford CT     
Deutsche Bank AG/London             3.88%, 1/15/2015  200  200 
         2.38%, 1/11/2013  80  80  Wachovia Bank NA     
         6.00%, 9/1/2017  60  66         6.60%, 1/15/2038  50  51 
 
See accompanying notes         13     


Schedule of Investments
Bond Market Index Fund
February 28, 2010 (unaudited)
 
 
 
  Principal      Principal   
  Amount  Value    Amount  Value 
BONDS (continued)  (000's)  (000's)  BONDS (continued)  (000's)  (000's) 
Banks (continued)      Consumer Products (continued)     
Wachovia Corp      Kimberly-Clark Corp     
         5.50%, 5/1/2013  $ 100  $ 108         7.50%, 11/1/2018  $ 70  $ 86 
Wells Fargo & Co          $ 148 
         3.75%, 10/1/2014  100  101  Cosmetics & Personal Care - 0.19%     
         4.38%, 1/31/2013  100  105  Procter & Gamble Co/The     
Westpac Banking Corp             1.38%, 8/1/2012  425  427 
         4.20%, 2/27/2015  120  124       
    $ 9,271  Credit Card Asset Backed Securities - 0.19%     
Beverages - 0.37%      Chase Issuance Trust     
Anheuser-Busch Cos Inc             5.12%, 10/15/2014(b)  100  109 
         5.50%, 1/15/2018  50  54  Citibank Credit Card Issuance Trust     
Anheuser-Busch InBev Worldwide Inc             5.30%, 3/15/2018  300  330 
         3.00%, 10/15/2012  50  51      $ 439 
         5.38%, 1/15/2020  100  105  Diversified Financial Services - 1.53%     
Bottling Group LLC      American Express Co     
         6.95%, 3/15/2014  100  117         7.00%, 3/19/2018  90  101 
Coca-Cola Co/The      American Express Credit Corp     
         5.35%, 11/15/2017  50  55         5.13%, 8/25/2014  250  266 
Coca-Cola Enterprises Inc      Bear Stearns Cos LLC/The     
         6.95%, 11/15/2026  60  69         6.95%, 8/10/2012  100  111 
Diageo Finance BV             7.25%, 2/1/2018  60  70 
         3.25%, 1/15/2015  160  162  BlackRock Inc     
Dr Pepper Snapple Group Inc             3.50%, 12/10/2014  150  152 
         6.82%, 5/1/2018  40  46  Boeing Capital Corp     
PepsiCo Inc/NC             4.70%, 10/27/2019  130  131 
         3.10%, 1/15/2015  90  91         6.50%, 2/15/2012  100  110 
         7.90%, 11/1/2018  80  100  BP Capital Markets PLC     
    $ 850         3.88%, 3/10/2015  60  63 
Biotechnology - 0.08%             5.25%, 11/7/2013  60  66 
Amgen Inc      Capital One Capital V     
         5.70%, 2/1/2019  50  54         10.25%, 8/15/2039  60  68 
         5.85%, 6/1/2017  110  122  Caterpillar Financial Services Corp     
    $ 176         7.15%, 2/15/2019  140  165 
Building Materials - 0.10%      Citigroup Funding Inc     
CRH America Inc             1.88%, 10/22/2012  250  252 
         6.95%, 3/15/2012  100  109  General Electric Capital Corp     
Lafarge SA             2.80%, 1/8/2013  200  202 
         6.50%, 7/15/2016  120  130         5.25%, 10/19/2012  100  107 
    $ 239         5.50%, 1/8/2020  100  101 
Chemicals - 0.22%             5.88%, 1/14/2038  100  93 
Dow Chemical Co/The             6.00%, 6/15/2012  170  184 
         4.85%, 8/15/2012  100  106         6.38%, 11/15/2067(b)  60  53 
         8.55%, 5/15/2019  80  97         6.75%, 3/15/2032  150  154 
EI du Pont de Nemours & Co             6.88%, 1/10/2039  80  83 
         4.63%, 1/15/2020  100  101  Goldman Sachs Capital I     
Mosaic Co/The             6.35%, 2/15/2034  110  98 
         7.38%, 12/1/2014(a)  100  107  HSBC Finance Corp     
Potash Corp of Saskatchewan Inc             5.00%, 6/30/2015  150  157 
         5.25%, 5/15/2014  100  109  Jefferies Group Inc     
    $ 520         8.50%, 7/15/2019  50  56 
Commercial Services - 0.03%      JP Morgan Chase Capital XXV     
Western Union Co/The             6.80%, 10/1/2037  60  59 
         6.50%, 2/26/2014  70  79  Merrill Lynch & Co Inc     
             6.05%, 5/16/2016  200  204 
Computers - 0.20%             6.88%, 4/25/2018  100  105 
Dell Inc      National Rural Utilities Cooperative Finance Corp     
         5.63%, 4/15/2014  100  111         7.25%, 3/1/2012  120  133 
Hewlett-Packard Co             10.38%, 11/1/2018  70  94 
         4.25%, 2/24/2012  100  105  SLM Corp     
         6.13%, 3/1/2014  60  68         5.00%, 10/1/2013  30  28 
International Business Machines Corp             8.45%, 6/15/2018  100  98 
         5.60%, 11/30/2039  60  62      $ 3,564 
         7.63%, 10/15/2018  100  124  Electric - 1.11%     
    $ 470  Allegheny Energy Supply Co LLC     
             8.25%, 4/15/2012(a),(b)  100  111 
Consumer Products - 0.06%           
Fortune Brands Inc      Appalachian Power Co     
         5.38%, 1/15/2016  60  62         7.00%, 4/1/2038  80  92 
      CenterPoint Energy Houston Electric LLC     
             7.00%, 3/1/2014  130  149 
See accompanying notes      14     


Schedule of Investments
Bond Market Index Fund
February 28, 2010 (unaudited)
 
 
 
  Principal      Principal   
  Amount  Value    Amount  Value 
BONDS (continued)  (000's)  (000's)  BONDS (continued)  (000's)  (000's) 
Electric (continued)      Finance - Mortgage Loan/Banker (continued)     
Commonwealth Edison Co      Fannie Mae (continued)     
         5.80%, 3/15/2018  $ 50  $ 54         2.00%, 2/19/2013  $ 250  $ 251 
Consolidated Edison Co of New York Inc             2.50%, 5/15/2014  200  203 
         6.75%, 4/1/2038  100  114         2.63%, 11/20/2014  200  202 
Constellation Energy Group Inc             2.88%, 12/11/2013  280  290 
         4.55%, 6/15/2015  60  62         3.00%, 7/28/2014  1,042  1,057 
Dominion Resources Inc/VA             4.38%, 9/15/2012  250  270 
         8.88%, 1/15/2019  100  128         4.38%, 3/15/2013  250  271 
Duke Energy Carolinas LLC             5.00%, 3/15/2016  250  278 
         5.30%, 10/1/2015  100  111         5.38%, 6/12/2017  250  282 
         5.30%, 2/15/2040  50  48         6.00%, 5/15/2011  250  267 
Exelon Generation Co LLC             6.13%, 3/15/2012  250  276 
         6.25%, 10/1/2039  60  61         6.63%, 11/15/2030  200  245 
FirstEnergy Solutions Corp      Federal Farm Credit Bank     
         6.05%, 8/15/2021  50  52         1.88%, 12/7/2012  509  516 
         6.80%, 8/15/2039  60  61         3.88%, 10/7/2013  617  660 
Florida Power & Light Co      Federal Home Loan Banks     
         5.63%, 4/1/2034  100  100         1.00%, 12/28/2011  500  501 
Florida Power Corp             1.63%, 7/27/2011  250  253 
         6.40%, 6/15/2038  60  66         1.63%, 11/21/2012  250  252 
KCP&L Greater Missouri Operations Co             1.75%, 8/22/2012  250  253 
         11.88%, 7/1/2012  40  47         3.63%, 10/18/2013  250  265 
Midamerican Energy Holdings Co             4.75%, 12/16/2016  250  273 
         6.13%, 4/1/2036  110  113         4.88%, 11/18/2011  250  267 
National Grid PLC             5.13%, 8/14/2013  250  278 
         6.30%, 8/1/2016  160  177         5.25%, 6/18/2014  250  281 
Nevada Power Co             5.38%, 8/19/2011  250  267 
         7.13%, 3/15/2019  50  57         5.38%, 5/18/2016  300  338 
Nisource Finance Corp             5.50%, 8/13/2014  250  283 
         5.40%, 7/15/2014  70  75  Freddie Mac     
         6.40%, 3/15/2018  60  64         1.13%, 12/15/2011  250  251 
Northern States Power Co/MN             1.63%, 4/26/2011  200  203 
         5.25%, 3/1/2018  160  170         1.75%, 6/15/2012  250  254 
Oncor Electric Delivery Co LLC             2.13%, 3/23/2012  300  307 
         6.80%, 9/1/2018  80  90         2.13%, 9/21/2012  250  255 
Pacific Gas & Electric Co             2.13%, 8/26/2013  200  201 
         6.05%, 3/1/2034  100  104         2.50%, 4/23/2014  200  203 
Pepco Holdings Inc             2.88%, 2/9/2015  200  203 
         6.45%, 8/15/2012  100  108         3.75%, 3/27/2019  250  250 
Progress Energy Inc             4.13%, 9/27/2013  250  270 
         7.75%, 3/1/2031  30  35         4.50%, 1/15/2014  250  273 
PSEG Power LLC             5.13%, 4/18/2011  200  210 
         7.75%, 4/15/2011  200  213         5.13%, 11/17/2017  200  223 
Southern California Edison Co             5.25%, 7/18/2011  200  213 
         5.95%, 2/1/2038  30  32         5.25%, 4/18/2016  200  224 
Virginia Electric and Power Co             5.75%, 1/15/2012  200  218 
         8.88%, 11/15/2038  40  56      $ 13,856 
    $ 2,550  Food - 0.40%     
Electrical Components & Equipment - 0.05%      ConAgra Foods Inc     
Emerson Electric Co             5.88%, 4/15/2014  120  133 
         4.88%, 10/15/2019  100  105  Kellogg Co     
             5.13%, 12/3/2012  20  22 
Electronics - 0.05%      Kraft Foods Inc     
Agilent Technologies Inc             4.13%, 2/9/2016  50  51 
         6.50%, 11/1/2017  60  66         5.38%, 2/10/2020  50  52 
Koninklijke Philips Electronics NV             6.25%, 6/1/2012  30  32 
         5.75%, 3/11/2018  40  43         6.50%, 2/9/2040  150  157 
    $ 109         6.75%, 2/19/2014  170  193 
Environmental Control - 0.03%             7.00%, 8/11/2037  40  44 
Waste Management Inc      Kroger Co/The     
         7.00%, 7/15/2028  60  66         6.15%, 1/15/2020  50  54 
             6.40%, 8/15/2017  70  78 
Finance - Mortgage Loan/Banker - 5.99%      Safeway Inc     
Fannie Mae             6.25%, 3/15/2014  90  101 
         1.00%, 11/23/2011  250  251      $ 917 
         1.38%, 4/28/2011  250  253  Forest Products & Paper - 0.05%     
         1.75%, 3/23/2011  500  507  International Paper Co     
         1.75%, 8/10/2012  250  253         7.50%, 8/15/2021  30  34 
         2.00%, 1/9/2012  250  255       
See accompanying notes         15     


Schedule of Investments
Bond Market Index Fund
February 28, 2010 (unaudited)
 
 
 
  Principal      Principal   
  Amount  Value    Amount  Value 
BONDS (continued)  (000's)  (000's)  BONDS (continued)  (000's)  (000's) 
Forest Products & Paper (continued)      Machinery - Diversified - 0.07%     
International Paper Co (continued)      Deere & Co     
       9.38%, 5/15/2019  $ 60  $ 75         4.38%, 10/16/2019  $ 120  $ 121 
    $ 109  Roper Industries Inc     
Gas - 0.02%             6.63%, 8/15/2013  50  56 
Sempra Energy          $ 177 
       6.00%, 10/15/2039  50  50  Media - 0.56%     
      CBS Corp     
Healthcare - Products - 0.12%             7.88%, 7/30/2030  60  64 
Baxter International Inc      Comcast Corp     
       5.90%, 9/1/2016  70  79         6.45%, 3/15/2037  70  72 
Covidien International Finance SA             6.95%, 8/15/2037  90  97 
       6.00%, 10/15/2017  90  99  DirecTV Holdings LLC / DirecTV Financing Co Inc     
Johnson & Johnson             5.88%, 10/1/2019(a)  100  105 
       5.15%, 8/15/2012  100  110  Historic TW Inc     
    $ 288         6.88%, 6/15/2018  100  114 
Healthcare - Services - 0.12%      News America Holdings Inc     
Aetna Inc             9.25%, 2/1/2013  100  118 
       6.63%, 6/15/2036  20  22  News America Inc     
Quest Diagnostics Inc             6.40%, 12/15/2035  100  104 
       5.45%, 11/1/2015  70  77  Reed Elsevier Capital Inc     
UnitedHealth Group Inc             7.75%, 1/15/2014  40  47 
       6.88%, 2/15/2038  50  55  Thomson Reuters Corp     
WellPoint Inc             5.70%, 10/1/2014  90  100 
       5.25%, 1/15/2016  130  139  Time Warner Cable Inc     
    $ 293         8.25%, 4/1/2019  100  122 
Insurance - 0.56%             8.75%, 2/14/2019  50  62 
ACE INA Holdings Inc      Time Warner Entertainment Co LP     
       5.88%, 6/15/2014  100  111         8.38%, 7/15/2033  70  85 
Aegon NV      Time Warner Inc     
       4.63%, 12/1/2015  90  91         6.50%, 11/15/2036  80  85 
Aflac Inc      Viacom Inc     
       8.50%, 5/15/2019  50  59         6.88%, 4/30/2036  60  64 
American International Group Inc      Walt Disney Co/The     
       8.25%, 8/15/2018  140  128         6.38%, 3/1/2012  50  55 
AON Corp          $ 1,294 
       8.21%, 1/1/2027  20  21  Mining - 0.32%     
Berkshire Hathaway Finance Corp      Alcoa Inc     
       5.75%, 1/15/2040  60  60         6.50%, 6/15/2018  50  49 
Chubb Corp      Barrick Australian Finance Pty Ltd     
       6.50%, 5/15/2038  40  44         5.95%, 10/15/2039  50  49 
Genworth Financial Inc      BHP Billiton Finance USA Ltd     
       5.75%, 6/15/2014  80  79         6.50%, 4/1/2019  90  103 
Hartford Financial Services Group Inc      Freeport-McMoRan Copper & Gold Inc     
       6.00%, 1/15/2019  70  71         8.38%, 4/1/2017  100  109 
Lincoln National Corp      Newmont Mining Corp     
       8.75%, 7/1/2019  50  60         6.25%, 10/1/2039  30  30 
Marsh & McLennan Cos Inc      Rio Tinto Finance USA Ltd     
       5.38%, 7/15/2014  90  94         7.13%, 7/15/2028  50  57 
MetLife Inc             8.95%, 5/1/2014  100  121 
       7.72%, 2/15/2019  100  116  Vale Overseas Ltd     
Prudential Financial Inc             5.63%, 9/15/2019  100  102 
       5.10%, 9/20/2014  110  117  Xstrata Canada Corp     
       6.63%, 12/1/2037  60  63         7.25%, 7/15/2012  100  111 
Transatlantic Holdings Inc          $ 731 
       5.75%, 12/14/2015  70  73  Miscellaneous Manufacturing - 0.19%     
Travelers Cos Inc/The      General Electric Co     
       6.25%, 6/15/2037  50  53         5.00%, 2/1/2013  110  118 
XL Capital Ltd      Honeywell International Inc     
       5.25%, 9/15/2014  50  52         5.70%, 3/15/2037  50  51 
    $ 1,292  Ingersoll-Rand Global Holding Co Ltd     
Iron & Steel - 0.09%             9.50%, 4/15/2014  40  49 
ArcelorMittal      Tyco Electronics Group SA     
       5.38%, 6/1/2013  50  53         6.55%, 10/1/2017  50  55 
       9.85%, 6/1/2019  70  88  Tyco International Finance SA     
Nucor Corp             6.38%, 10/15/2011  100  107 
       5.75%, 12/1/2017  50  55         8.50%, 1/15/2019  50  63 
    $ 196      $ 443 

See accompanying notes

16


     Schedule of Investments Bond Market Index Fund February 28, 2010 (unaudited)

  Principal        Principal   
  Amount  Value      Amount  Value 
BONDS (continued)  (000's)  (000's)  BONDS (continued)    (000's)  (000's) 
Mortgage Backed Securities - 2.49%      Oil & Gas (continued)       
Banc of America Commercial Mortgage Inc      Petroleos Mexicanos       
         4.76%, 11/10/2039  $ 150  $ 153         8.00%, 5/3/2019  $ 70  $ 81 
Bear Stearns Commercial Mortgage Securities      SeaRiver Maritime Inc       
         5.79%, 10/11/2014  1,000  1,045         0.00%, 9/1/2012(c)    140  132 
Citigroup/Deutsche Bank Commercial Mortgage      Shell International Finance BV       
Trust             6.38%, 12/15/2038    170  190 
         5.62%, 10/15/2048  320  326  Statoil ASA       
Credit Suisse First Boston Mortgage Securities Corp             5.25%, 4/15/2019    90  95 
         5.01%, 1/15/2012  1,000  1,020  Suncor Energy Inc       
Credit Suisse Mortgage Capital Certificates             6.50%, 6/15/2038    90  95 
         5.81%, 8/15/2016(b)  500  481  Transocean Inc       
First Union National Bank Commercial Mortgage             6.00%, 3/15/2018    100  108 
         7.00%, 1/12/2043  113  116  Valero Energy Corp       
GE Capital Commercial Mortgage Corp             7.50%, 4/15/2032    60  62 
         4.94%, 7/10/2045  150  156  XTO Energy Inc       
         5.34%, 11/10/2045(b)  100  103         6.50%, 12/15/2018    100  116 
         5.42%, 12/10/2049  170  175        $ 2,378 
Greenwich Capital Commercial Funding Corp      Oil & Gas Services - 0.09%       
         5.44%, 3/10/2039(b)  145  138  Baker Hughes Inc       
JP Morgan Chase Commercial Mortgage Securities             7.50%, 11/15/2018    50  60 
Corp      Halliburton Co       
         5.17%, 11/12/2012  150  155         7.45%, 9/15/2039    40  50 
         5.34%, 5/15/2047  1,000  928  Weatherford International Ltd       
LB Commercial Conduit Mortgage Trust             6.00%, 3/15/2018    50  53 
         5.95%, 7/15/2044(b)  245  224         9.63%, 3/1/2019    40  51 
Merrill Lynch Mortgage Trust            $ 214 
         5.83%, 6/12/2017  300  277  Pharmaceuticals - 0.45%       
Morgan Stanley Capital I      Abbott Laboratories       
         4.70%, 7/15/2056  325  329         5.13%, 4/1/2019    80  85 
         5.73%, 10/15/2042  100  105         5.88%, 5/15/2016    59  67 
Wachovia Bank Commercial Mortgage Trust      AstraZeneca PLC       
         5.63%, 10/15/2048  65  36         6.45%, 9/15/2037    60  68 
    $ 5,767  Bristol-Myers Squibb Co       
Office & Business Equipment - 0.06%             5.88%, 11/15/2036    50  52 
Xerox Corp      Eli Lilly & Co       
         8.25%, 5/15/2014  110  130         4.20%, 3/6/2014    100  106 
             5.20%, 3/15/2017    40  43 
Oil & Gas - 1.04%      GlaxoSmithKline Capital Inc       
Anadarko Petroleum Corp             6.38%, 5/15/2038    70  78 
         6.45%, 9/15/2036  100  105  Medco Health Solutions Inc       
Canadian Natural Resources Ltd             7.13%, 3/15/2018    60  69 
         5.70%, 5/15/2017  35  38  Merck & Co Inc       
         6.25%, 3/15/2038  50  52         5.00%, 6/30/2019    100  105 
Cenovus Energy Inc             6.55%, 9/15/2037    40  46 
         4.50%, 9/15/2014(a)  130  137  Novartis Capital Corp       
Chevron Corp             4.13%, 2/10/2014    50  53 
         3.95%, 3/3/2014  100  106  Novartis Securities Investment Ltd       
ConocoPhillips             5.13%, 2/10/2019    50  53 
         6.50%, 2/1/2039  60  67  Pfizer Inc       
ConocoPhillips Holding Co             6.20%, 3/15/2019    90  101 
         6.95%, 4/15/2029  100  116         7.20%, 3/15/2039    90  111 
Devon Energy Corp            $ 1,037 
         7.95%, 4/15/2032  60  75  Pipelines - 0.38%       
EnCana Corp      Enbridge Energy Partners LP       
         6.50%, 2/1/2038  60  65         9.88%, 3/1/2019    40  53 
EOG Resources Inc      Energy Transfer Partners LP       
         6.13%, 10/1/2013  100  113         9.00%, 4/15/2019    50  61 
Hess Corp      Enterprise Products Operating LLC       
         8.13%, 2/15/2019  100  122         6.50%, 1/31/2019    45  50 
Marathon Oil Corp             6.88%, 3/1/2033    60  65 
         7.50%, 2/15/2019  80  93  Kinder Morgan Energy Partners LP       
Nexen Inc             6.50%, 9/1/2039    50  52 
         7.50%, 7/30/2039  60  69         6.95%, 1/15/2038    50  55 
Occidental Petroleum Corp      ONEOK Partners LP       
         7.00%, 11/1/2013  100  117         8.63%, 3/1/2019    80  100 
Pemex Project Funding Master Trust      Plains All American Pipeline LP / PAA Finance Corp     
         5.75%, 3/1/2018  50  51         5.75%, 1/15/2020    60  62 
Petrobras International Finance Co      Southern Natural Gas Co       
         7.88%, 3/15/2019  150  173         5.90%, 4/1/2017(a),(b)    50  53 
See accompanying notes      17       


Schedule of Investments
Bond Market Index Fund
February 28, 2010 (unaudited)
 
 
 
  Principal      Principal   
  Amount  Value    Amount  Value 
BONDS (continued)  (000's)  (000's)  BONDS (continued)  (000's)  (000's) 
Pipelines (continued)      Sovereign (continued)     
Spectra Energy Capital LLC      Brazilian Government International Bond (continued)     
         6.25%, 2/15/2013  $ 70  $ 76         10.00%, 8/7/2011  $ 240  $ 268 
TransCanada PipeLines Ltd             12.25%, 3/6/2030  100  171 
         6.50%, 8/15/2018  90  103  Eksportfinans ASA     
         7.63%, 1/15/2039  50  62         3.00%, 11/17/2014  130  131 
Williams Cos Inc/The      Export Development Canada     
         7.50%, 1/15/2031  70  79         2.38%, 3/19/2012  100  103 
    $ 871         2.63%, 11/15/2011  100  103 
Regional Authority - 0.38%      Hungary Government International Bond     
Province of British Columbia Canada             4.75%, 2/3/2015  60  60 
         6.50%, 1/15/2026  70  82  Italian Republic     
Province of Nova Scotia Canada             3.13%, 1/26/2015  140  140 
         5.13%, 1/26/2017  160  176         5.25%, 9/20/2016  120  129 
Province of Ontario Canada             5.38%, 6/15/2033  50  50 
         1.88%, 11/19/2012  160  161         6.88%, 9/27/2023  50  58 
         4.10%, 6/16/2014  380  404  Japan Bank for International Cooperation/Japan     
Province of Quebec Canada             2.13%, 11/5/2012  300  305 
         7.50%, 9/15/2029  50  64  Malaysia Government International Bond     
    $ 887         7.50%, 7/15/2011  290  314 
REITS - 0.19%      Mexico Government International Bond     
Boston Properties LP             5.63%, 1/15/2017  150  159 
         6.25%, 1/15/2013  17  19         8.30%, 8/15/2031  150  187 
ERP Operating LP      Peruvian Government International Bond     
         5.20%, 4/1/2013  50  52         7.13%, 3/30/2019  50  58 
HCP Inc             8.75%, 11/21/2033  40  52 
         6.70%, 1/30/2018  60  60  Poland Government International Bond     
ProLogis             6.38%, 7/15/2019  60  64 
         7.38%, 10/30/2019  50  52  Republic of Korea     
Simon Property Group LP             7.13%, 4/16/2019  90  105 
         6.75%, 5/15/2014  170  188  South Africa Government International Bond     
         10.35%, 4/1/2019  50  64         6.88%, 5/27/2019  45  50 
    $ 435         7.38%, 4/25/2012  150  165 
Retail - 0.57%      Svensk Exportkredit AB     
Costco Wholesale Corp             5.13%, 3/1/2017  70  77 
         5.30%, 3/15/2012  100  108      $ 2,885 
CVS Caremark Corp      Supranational Bank - 0.84%     
         5.75%, 8/15/2011  280  298  African Development Bank     
         6.60%, 3/15/2019  50  56         1.63%, 2/11/2013  100  100 
Home Depot Inc      Asian Development Bank     
         5.40%, 3/1/2016  90  96         2.63%, 2/9/2015  100  101 
         5.88%, 12/16/2036  50  49         3.63%, 9/5/2013  100  106 
Lowe's Cos Inc             5.82%, 6/16/2028  60  65 
         6.65%, 9/15/2037  50  57  Corp Andina de Fomento     
McDonald's Corp             5.75%, 1/12/2017  80  83 
         6.30%, 10/15/2037  50  55  European Investment Bank     
Nordstrom Inc             1.63%, 3/15/2013  100  100 
         6.25%, 1/15/2018  50  55         3.13%, 6/4/2014  170  175 
Staples Inc             3.25%, 10/14/2011  400  416 
         9.75%, 1/15/2014  150  183         4.88%, 1/17/2017  100  110 
Target Corp             4.88%, 2/15/2036  100  99 
         6.00%, 1/15/2018  80  90         5.13%, 9/13/2016  100  111 
         7.00%, 1/15/2038  50  58  Inter-American Development Bank     
Wal-Mart Stores Inc             1.75%, 10/22/2012  160  161 
         6.20%, 4/15/2038  100  109         3.88%, 2/14/2020  100  99 
         6.50%, 8/15/2037  50  57  International Bank for Reconstruction &     
Yum! Brands Inc      Development     
         6.88%, 11/15/2037  50  55         2.00%, 4/2/2012  150  153 
    $ 1,326         7.63%, 1/19/2023  50  66 
Software - 0.18%          $ 1,945 
Fiserv Inc      Telecommunications - 0.97%     
         6.13%, 11/20/2012  180  198  America Movil SA de CV     
Microsoft Corp             5.50%, 3/1/2014  110  119 
         2.95%, 6/1/2014  100  102  AT&T Corp     
Oracle Corp             8.00%, 11/15/2031(b)  130  159 
         5.75%, 4/15/2018  100  110  AT&T Inc     
    $ 410         6.25%, 3/15/2011  100  106 
Sovereign - 1.25%             6.30%, 1/15/2038  60  61 
Brazilian Government International Bond             6.50%, 9/1/2037  60  62 
         7.13%, 1/20/2037  120  136       
See accompanying notes      18     


Schedule of Investments
Bond Market Index Fund
February 28, 2010 (unaudited)
 
 
 
  Principal      Principal   
  Amount  Value    Amount  Value 
BONDS (continued)  (000's)  (000's)  MUNICIPAL BONDS (continued)  (000's)  (000's) 
Telecommunications (continued)      Illinois - 0.05%     
British Telecommunications PLC      State of Illinois     
         5.95%, 1/15/2018  $ 110  $ 114         5.10%, 6/1/2033  $ 150  $ 126 
Cellco Partnership / Verizon Wireless Capital LLC           
         8.50%, 11/15/2018  80  101  New Jersey - 0.02%     
Cisco Systems Inc      New Jersey Transportation Trust Fund Authority     
         5.90%, 2/15/2039  100  103         6.56%, 12/15/2040  50  53 
Deutsche Telekom International Finance BV           
         8.75%, 6/15/2030(b)  90  114  TOTAL MUNICIPAL BONDS    $ 483 
Embarq Corp        Principal   
         7.08%, 6/1/2016  100  110  U.S. GOVERNMENT & GOVERNMENT  Amount  Value 
France Telecom SA      AGENCY OBLIGATIONS - 50.54%  (000's)  (000's) 
         8.50%, 3/1/2031(b)  50  66  Federal Home Loan Mortgage Corporation     
Motorola Inc      (FHLMC) - 8.65%     
         8.00%, 11/1/2011  50  55         4.00%, 12/1/2024(d)  $ 198  $ 202 
New Cingular Wireless Services Inc             4.00%, 3/1/2025(d),(e)  500  511 
         8.75%, 3/1/2031  100  129         4.00%, 12/1/2039(d)  597  588 
Qwest Corp             4.00%, 3/1/2040(d),(e)  225  221 
         8.38%, 5/1/2016  80  88         4.50%, 7/1/2024(d)  318  331 
Rogers Communications Inc             4.50%, 3/1/2025(d),(e)  700  729 
         7.50%, 3/15/2015  60  71         4.50%, 3/1/2039(d)  961  975 
Telecom Italia Capital SA             4.50%, 2/1/2040(d)  998  1,012 
         5.25%, 11/15/2013  100  106         4.50%, 2/1/2040(d)  1,000  1,014 
         6.38%, 11/15/2033  70  67         4.97%, 6/1/2038(b),(d)  288  302 
Telefonica Emisiones SAU             4.99%, 4/1/2038(b),(d)  241  253 
         5.98%, 6/20/2011  90  95         5.00%, 5/1/2018(d)  236  251 
         7.05%, 6/20/2036  70  78         5.00%, 3/1/2025(d),(e)  500  528 
Verizon Communications Inc             5.00%, 8/1/2035(d)  488  509 
         6.40%, 2/15/2038  50  52         5.00%, 9/1/2035(d)  865  902 
         6.90%, 4/15/2038  40  45         5.00%, 7/1/2039(d)  879  915 
Verizon Global Funding Corp             5.00%, 1/1/2040(d)  894  931 
         7.75%, 12/1/2030  110  131         5.00%, 3/1/2040(d),(e)  700  728 
Vodafone Group PLC             5.50%, 1/1/2018(d)  99  107 
         5.63%, 2/27/2017  190  204         5.50%, 3/1/2025(d),(e)  300  320 
    $ 2,236         5.50%, 1/1/2034(d)  2,268  2,407 
Transportation - 0.29%             5.50%, 1/1/2034(d)  577  612 
Burlington Northern Santa Fe Corp             5.50%, 11/1/2035(d)  484  513 
         4.70%, 10/1/2019  130  130         5.50%, 1/1/2040(d)  818  866 
Canadian National Railway Co             6.00%, 3/1/2025(d),(e)  200  215 
         5.55%, 3/1/2019  60  65         6.00%, 3/1/2040(d),(e)  2,800  2,996 
CSX Corp             6.50%, 3/1/2040(d),(e)  1,000  1,080 
         6.25%, 3/15/2018  110  120      $ 20,018 
         6.75%, 3/15/2011  100  105  Federal National Mortgage Association (FNMA) -     
Norfolk Southern Corp      14.92%     
         7.05%, 5/1/2037  60  70         3.20%, 12/1/2039(b),(d)  748  763 
Union Pacific Corp             3.45%, 1/1/2040(b),(d)  498  506 
         7.88%, 1/15/2019  80  97         3.72%, 2/1/2040(b),(d)  749  770 
United Parcel Service Inc             4.00%, 9/1/2024(d)  249  254 
         6.20%, 1/15/2038  90  99         4.00%, 3/1/2025(d),(e)  700  715 
    $ 686         4.00%, 3/1/2039(d)  698  688 
Water - 0.01%             4.00%, 3/1/2040(d),(e)  825  813 
American Water Capital Corp             4.50%, 12/1/2024(d)  421  439 
         6.59%, 10/15/2037  20  21         4.50%, 3/1/2025(d),(e)  1,000  1,041 
             4.50%, 7/1/2029(d)  125  128 
TOTAL BONDS    $ 60,904         4.50%, 2/1/2030(d)  498  513 
  Principal           4.50%, 4/1/2039(d)  996  1,010 
  Amount  Value         4.50%, 6/1/2039(d)  1,197  1,214 
MUNICIPAL BONDS - 0.21%  (000's)  (000's)         4.50%, 12/1/2039(d)  991  1,005 
California - 0.09%             4.50%, 1/1/2040(d)  1,145  1,161 
State of California             4.59%, 4/1/2038(b),(d)  250  260 
         5.65%, 4/1/2039(b)  $ 100  $ 104         5.00%, 11/1/2021(d)  320  341 
         7.30%, 10/1/2039  100  96         5.00%, 7/1/2024(d)  299  313 
    $ 200         5.00%, 3/1/2025(d),(e)  800  843 
Connecticut - 0.05%             5.00%, 7/1/2033(d)  1,891  1,971 
State of Connecticut             5.00%, 8/1/2033(d)  200  209 
         5.85%, 3/15/2032  100  104         5.00%, 2/1/2034(d)  194  202 
             5.00%, 7/1/2035(d)  999  1,039 
             5.00%, 10/1/2035(d)  485  504 
             5.00%, 1/1/2040(d)  994  1,033 
             5.00%, 3/1/2040(d),(e)  750  778 
See accompanying notes      19     


     Schedule of Investments Bond Market Index Fund February 28, 2010 (unaudited)

  Principal        Principal   
U.S. GOVERNMENT & GOVERNMENT  Amount  Value  U.S. GOVERNMENT & GOVERNMENT  Amount  Value 
AGENCY OBLIGATIONS (continued)  (000's)  (000's)  AGENCY OBLIGATIONS (continued)  (000's)  (000's) 
Federal National Mortgage Association (FNMA)      U.S. Treasury (continued)     
(continued)           3.75%, 11/15/2018  $ 1,000 $  1,023 
         5.50%, 1/1/2021(d)  $ 147  $ 158       3.88%, 5/15/2018  700  727 
         5.50%, 12/1/2023(d)  300  320       4.00%, 2/15/2014  1,000  1,086 
         5.50%, 12/1/2029(d)  498  527       4.00%, 8/15/2018  700  732 
         5.50%, 5/1/2034(d)  1,182  1,252       4.25%, 8/15/2014  400  439 
         5.50%, 11/1/2034(d)  1,001  1,058       4.25%, 11/15/2017  700  751 
         5.50%, 10/1/2035(d)  75  79       4.25%, 5/15/2039  100  96 
         5.50%, 9/1/2036(d)  1,851  1,961       4.38%, 11/15/2039  600  585 
         5.50%, 9/1/2036(d)  784  831       4.50%, 2/28/2011  150  156 
         5.50%, 11/1/2036(d)  476  502       4.50%, 2/15/2036  450  452 
         5.50%, 1/1/2037(d)  924  975       4.50%, 8/15/2039  565  562 
         5.50%, 3/1/2040(d)  1,300  1,369       4.75%, 8/15/2017  700  777 
         6.00%, 1/1/2016(d)  200  215       4.75%, 2/15/2037  450  470 
         6.00%, 6/1/2037(d)  699  742       4.88%, 7/31/2011  1,200  1,275 
         6.00%, 1/1/2038(d)  681  723       5.13%, 6/30/2011  1,113  1,182 
         6.00%, 3/1/2040(d),(e)  3,100  3,288       5.25%, 11/15/2028  250  278 
         6.50%, 3/1/2040(d),(e)  1,875  2,002       5.25%, 2/15/2029  200  222 
    $ 34,515       5.38%, 2/15/2031  170  192 
Government National Mortgage Association           6.00%, 2/15/2026  155  186 
(GNMA) - 4.12%           6.13%, 11/15/2027  150  183 
         4.00%, 6/15/2039  195  193       6.13%, 8/15/2029  185  227 
         4.50%, 5/15/2039  674  687       6.25%, 8/15/2023  385  470 
         4.50%, 3/1/2040(e)  1,700  1,729       6.25%, 5/15/2030  200  250 
         5.00%, 3/1/2040(e)  2,425  2,526       6.50%, 11/15/2026  500  632 
         5.50%, 3/1/2040(e)  2,075  2,195       6.88%, 8/15/2025  500  650 
         6.00%, 3/1/2040(e)  1,475  1,574       7.13%, 2/15/2023  500  655 
         6.50%, 3/1/2040(e)  575  617      $ 52,844 
    $ 9,521  TOTAL U.S. GOVERNMENT & GOVERNMENT     
U.S. Treasury - 22.85%      AGENCY OBLIGATIONS  $ 116,898 
         0.75%, 11/30/2011  1,500  1,502  Total Investments  $ 178,285 
         0.88%, 2/28/2011  1,650  1,659  Other Assets in Excess of Liabilities, Net - 22.92%  $ 53,008 
         0.88%, 3/31/2011  2,000  2,011  TOTAL NET ASSETS - 100.00%  $ 231,293 
         0.88%, 1/31/2012  1,250  1,253         
         1.00%, 7/31/2011  2,000  2,015         
         1.00%, 8/31/2011  664  669  (a)     Security exempt from registration under Rule 144A of the Securities Act of 
         1.00%, 9/30/2011  740  745       1933. These securities may be resold in transactions exempt from 
         1.00%, 10/31/2011  1,498  1,507       registration, normally to qualified institutional buyers. Unless otherwise 
         1.00%, 12/31/2011  1,905  1,915       indicated, these securities are not considered illiquid. At the end of the 
         1.13%, 6/30/2011  1,350  1,362       period, the value of these securities totaled $513 or 0.22% of net assets. 
         1.13%, 1/15/2012  500  504  (b)     Variable Rate. Rate shown is in effect at February 28, 2010   
         1.13%, 12/15/2012  653  651  (c)     Non-Income Producing Security     
         1.38%, 10/15/2012  301  303  (d)     This entity was put into conservatorship by the US Government in 2008. 
         1.38%, 11/15/2012  1,204  1,210       See Notes to Financial Statements for additional information.   
         1.38%, 1/15/2013  500  501  (e)     Security was purchased in a "to-be-announced" ("TBA") transaction. See 
         1.50%, 12/31/2013  550  545       Notes to Financial Statements.     
         1.75%, 1/31/2014  400  399         
         1.88%, 4/30/2014  1,000  999         
         2.00%, 11/30/2013  400  404  Unrealized Appreciation (Depreciation)     
         2.13%, 11/30/2014  1,000  998  The net federal income tax unrealized appreciation (depreciation) and federal tax 
         2.25%, 1/31/2015  1,200  1,200  cost of investments held by the fund as of the period end were as follows: 
         2.38%, 8/31/2014  1,000  1,014         
         2.38%, 9/30/2014  700  709  Unrealized Appreciation  $ 670 
         2.38%, 10/31/2014  3,085  3,118  Unrealized Depreciation    (283) 
         2.50%, 3/31/2013  1,000  1,035  Net Unrealized Appreciation (Depreciation)  $ 387 
         2.63%, 6/30/2014  180  185  Cost for federal income tax purposes  $ 177,898 
         2.63%, 7/31/2014  1,000  1,026  All dollar amounts are shown in thousands (000's)     
         2.63%, 12/31/2014  560  571         
         2.75%, 2/28/2013  1,000  1,042         
         2.75%, 11/30/2016  189  186         
         2.75%, 2/15/2019  1,000  943         
         3.00%, 9/30/2016  841  845         
         3.13%, 10/31/2016  800  809         
         3.13%, 1/31/2017  300  302         
         3.13%, 5/15/2019  700  678         
         3.25%, 12/31/2016  704  715         
         3.38%, 11/15/2019  760  747         
         3.50%, 2/15/2018  700  712         
         3.50%, 2/15/2039  710  592         
         3.63%, 8/15/2019  1,000  1,005         
See accompanying notes        20     


  Schedule of Investments 
  Bond Market Index Fund 
  February 28, 2010 (unaudited) 
 
 
                                       Portfolio Summary (unaudited)   
Sector  Percent 
Government  31.31% 
Mortgage Securities  30.18% 
Financial  6.29% 
Consumer, Non-cyclical  2.00% 
Communications  1.52% 
Energy  1.51% 
Utilities  1.14% 
Industrial  0.91% 
Basic Materials  0.68% 
Consumer, Cyclical  0.59% 
Technology  0.44% 
Asset Backed Securities  0.30% 
General Obligation  0.19% 
Revenue  0.02% 
Other Assets in Excess of Liabilities, Net  22.92% 
TOTAL NET ASSETS  100.00% 

See accompanying notes

21


Schedule of Investments
International Equity Index Fund
February 28, 2010 (unaudited)
 
 
 
    Value      Value 
COMMON STOCKS - 95.71%  Shares Held  (000's)  COMMON STOCKS (continued)  Shares Held  (000's) 
Advertising - 0.11%      Automobile Parts & Equipment (continued)     
Dentsu Inc             1,000 $  24  Koito Manufacturing Co Ltd             1,000 $  13 
Hakuhodo DY Holdings Inc  140  7  NGK Spark Plug Co Ltd  1,000  12 
JC Decaux SA (a)  386  9  NHK Spring Co Ltd  1,000  8 
Publicis Groupe SA  684  27  NOK Corp  700  10 
  $ 67  Nokian Renkaat OYJ  617  16 
Aerospace & Defense - 0.59%      Pirelli & C SpA  14,662  7 
BAE Systems PLC  20,579  117  Stanley Electric Co Ltd  800  15 
Cobham PLC  6,648  24  Sumitomo Electric Industries Ltd  4,400  53 
European Aeronautic Defence and Space Co NV  2,369  49  Sumitomo Rubber Industries Ltd  1,000  8 
Finmeccanica SpA  2,353  30  Toyoda Gosei Co Ltd  400  10 
Rolls-Royce Group PLC (a)  10,777  92  Toyota Boshoku Corp  400  7 
Safran SA  1,091  26  Toyota Industries Corp  1,000  26 
Thales SA  520  21    $ 422 
  $ 359  Banks - 14.70%     
Agriculture - 1.26%      77 Bank Ltd/The  2,000  11 
British American Tobacco PLC  11,609  395  Alpha Bank AE (a)  2,710  26 
Golden Agri-Resources Ltd (a)  39,000  15  Aozora Bank Ltd  4,000  5 
Imperial Tobacco Group PLC  5,911  185  Australia & New Zealand Banking Group Ltd  14,562  302 
Japan Tobacco Inc  26  94  Banca Carige SpA  3,759  10 
Swedish Match AB  1,460  33  Banca Monte dei Paschi di Siena SpA  12,777  19 
Wilmar International Ltd  7,000  32  Banca Popolare di Milano Scarl  2,293  14 
  $ 754  Banco Bilbao Vizcaya Argentaria SA  20,704  269 
Airlines - 0.21%      Banco Comercial Portugues SA  13,649  14 
Air France-KLM (a)  786  10  Banco de Sabadell SA  5,233  25 
All Nippon Airways Co Ltd  5,000  15  Banco de Valencia SA  1,239  8 
British Airways PLC (a)  3,354  11  Banco Espirito Santo SA  3,053  15 
Cathay Pacific Airways Ltd  7,000  13  Banco Popolare SC (a)  3,724  24 
Deutsche Lufthansa AG  1,331  20  Banco Popular Espanol SA  5,039  33 
Iberia Lineas Aereas de Espana SA (a)  2,670  8  Banco Santander SA  47,424  617 
Qantas Airways Ltd  6,454  15  Bank of Cyprus Public Co Ltd  3,280  19 
Singapore Airlines Ltd  3,000  32  Bank of East Asia Ltd  8,600  31 
  $ 124  Bank of Kyoto Ltd/The  2,000  17 
Apparel - 0.33%      Bank of Yokohama Ltd/The  7,000  35 
Adidas AG  1,125  56  Bankinter SA  1,652  13 
Asics Corp  1,000  9  Barclays PLC  66,345  316 
Billabong International Ltd  1,172  11  Bendigo and Adelaide Bank Ltd  2,023  17 
Burberry Group PLC  2,520  24  BNP Paribas  5,506  398 
Christian Dior SA  370  36  BOC Hong Kong Holdings Ltd  21,500  48 
Hermes International  307  41  Chiba Bank Ltd/The  4,000  24 
Puma AG Rudolf Dassler Sport  30  8  Chugoku Bank Ltd/The  1,000  13 
Yue Yuen Industrial Holdings Ltd  4,000  12  Chuo Mitsui Trust Holdings Inc  5,000  18 
      Commerzbank AG (a)  4,122  31 
  $ 197       
Automobile Manufacturers - 2.94%      Commonwealth Bank of Australia  8,832  427 
Bayerische Motoren Werke AG  1,925  78  Credit Agricole SA  5,395  80 
Daihatsu Motor Co Ltd  1,000  10  Credit Suisse Group AG  6,544  291 
      Danske Bank A/S (a)  2,641  60 
Daimler AG  5,244  219       
Fiat SpA  4,446  47  DBS Group Holdings Ltd  10,000  100 
Fuji Heavy Industries Ltd  3,000  14  Deutsche Bank AG  3,443  219 
      Deutsche Postbank AG (a)  509  16 
Hino Motors Ltd  2,000  8  Dexia SA (a)  3,075  17 
Honda Motor Co Ltd  9,600  333       
 
Isuzu Motors Ltd  7,000  18  EFG DnB NOR Eurobank ASA Ergasias SA (a)  1,879 5,200  57 15 
Mazda Motor Corp  9,000  24       
Mitsubishi Motors Corp (a)  21,000  30  Erste Group Bank AG  1,099  41 
Nissan Motor Co Ltd (a)  14,500  115  Fukuoka Financial Group Inc  4,000  15 
Peugeot SA (a)  885  23  Gunma Bank Ltd/The  2,000  11 
Renault SA (a)  1,077  44  Hachijuni Bank Ltd/The  2,000  11 
Scania AB  1,861  26  Hang Seng Bank Ltd  4,400  64 
Suzuki Motor Corp  2,100  45  Hiroshima Bank Ltd/The  3,000  12 
Toyota Motor Corp  17,000  637  Hokuhoku Financial Group Inc  7,000  15 
Volkswagen AG  257  22  HSBC Holdings PLC  100,817  1,106 
      Intesa Sanpaolo SpA (a)  44,787  158 
Volvo AB - A Shares  2,561  21       
Volvo AB - B Shares  6,327  54  Intesa Sanpaolo SpA-RSP  5,422  15 
  $ 1,768  Iyo Bank Ltd/The  1,000  9 
      Joyo Bank Ltd/The  4,000  16 
Automobile Parts & Equipment - 0.70%      Julius Baer Group Ltd  1,202  37 
Aisin Seiki Co Ltd  1,100  29  KBC Groep NV (a)  936  42 
Bridgestone Corp  3,500  61  Lloyds Banking Group PLC (a)  221,752  178 
Cie Generale des Etablissements Michelin  857  60  Mitsubishi UFJ Financial Group Inc  73,200  370 
Denso Corp  2,800  76  Mizuho Financial Group Inc  79,400  154 
JTEKT Corp  1,100  11  Mizuho Trust & Banking Co Ltd  9,000  9 
See accompanying notes         22     


Schedule of Investments
International Equity Index Fund
February 28, 2010 (unaudited)
 
 
 
    Value      Value 
COMMON STOCKS (continued)  Shares Held  (000's)  COMMON STOCKS (continued)  Shares Held  (000's) 
Banks (continued)      Building Materials (continued)     
National Australia Bank Ltd  12,186 $  278  Lafarge SA             1,161 $  75 
National Bank of Greece SA (a)  3,530  66  Nippon Sheet Glass Co Ltd  4,000  11 
Natixis (a)  5,073  25  Panasonic Electric Works Co Ltd  2,000  23 
Nishi-Nippon City Bank Ltd/The  4,000  11  Rinnai Corp  200  10 
Nordea Bank AB  18,782  183  Taiheiyo Cement Corp  5,000  7 
Oversea-Chinese Banking Corp Ltd  15,000  91  Titan Cement Co SA  324  8 
Piraeus Bank SA (a)  1,760  15  TOTO Ltd  2,000  13 
Pohjola Bank PLC  803  9    $ 741 
Raiffeisen International Bank Holding AS  315  14  Chemicals - 3.12%     
Resona Holdings Inc  2,800  34  Air Liquide SA  1,457  174 
Royal Bank of Scotland Group PLC (a)  98,329  57  Air Water Inc  1,000  12 
Sapporo Hokuyo Holdings Inc  1,700  7  Akzo Nobel NV  1,347  69 
Senshu Ikeda Holdings Inc (a)  2,700  7  Asahi Kasei Corp  7,000  36 
Seven Bank Ltd  3  6  BASF SE  5,341  299 
Shinsei Bank Ltd  5,000  6  Bayer AG  4,809  319 
Shizuoka Bank Ltd/The  4,000  35  Daicel Chemical Industries Ltd  2,000  13 
Skandinaviska Enskilda Banken AB  8,833  53  Denki Kagaku Kogyo KK  3,000  12 
Societe Generale  3,657  201  Givaudan SA  44  36 
Standard Chartered PLC  11,688  278  Hitachi Chemical Co Ltd  600  12 
Sumitomo Mitsui Financial Group Inc  7,500  241  Incitec Pivot Ltd  9,377  27 
Sumitomo Trust & Banking Co Ltd/The  8,000  45  Johnson Matthey PLC  1,248  30 
Suncorp-Metway Ltd  7,312  56  JSR Corp  1,000  20 
Suruga Bank Ltd  1,000  9  K+S AG  1,002  61 
Svenska Handelsbanken AB  2,846  78  Kaneka Corp  2,000  12 
Swedbank AB (a)  3,553  34  Kansai Paint Co Ltd  1,000  8 
UBS AG (a)  20,690  285  Koninklijke DSM NV  897  37 
UniCredit SpA (a)  95,240  241  Linde AG  882  99 
Unione di Banche Italiane SCPA  3,345  42  Lonza Group AG  264  21 
United Overseas Bank Ltd  7,000  93  Mitsubishi Chemical Holdings Corp  7,000  32 
Westpac Banking Corp  17,100  400  Mitsubishi Gas Chemical Co Inc  2,000  11 
Wing Hang Bank Ltd  1,000  8  Mitsui Chemicals Inc  5,000  14 
Yamaguchi Financial Group Inc  1,000  11  Nissan Chemical Industries Ltd  1,000  13 
  $ 8,836  Nitto Denko Corp  1,000  37 
Beverages - 1.80%      Nufarm Ltd/Australia  1,014  9 
Anheuser-Busch InBev NV  4,195  210  Shin-Etsu Chemical Co Ltd  2,400  129 
Asahi Breweries Ltd  2,200  43  Showa Denko KK  8,000  16 
Carlsberg A/S  622  48  Solvay SA  345  33 
Coca Cola Hellenic Bottling Co SA  1,062  26  Sumitomo Chemical Co Ltd  9,000  40 
Coca-Cola Amatil Ltd  3,238  33  Syngenta AG  550  143 
Coca-Cola West Co Ltd  300  5  Taiyo Nippon Sanso Corp  2,000  18 
Diageo PLC  14,535  236  Tokuyama Corp  2,000  11 
Foster's Group Ltd  11,210  54  Tosoh Corp  3,000  7 
Fraser and Neave Ltd  6,000  18  Ube Industries Ltd/Japan  6,000  16 
Heineken Holding NV  641  26  Wacker Chemie AG  91  11 
Heineken NV  1,425  70  Yara International ASA  1,100  45 
Ito En Ltd  400  6    $ 1,882 
Kirin Holdings Co Ltd  5,000  69  Commercial Services - 1.06%     
Pernod-Ricard SA  1,150  86  Abertis Infraestructuras SA  1,637  31 
SABMiller PLC  5,484  144  Adecco SA  715  36 
Sapporo Holdings Ltd  1,000  5  Atlantia SpA  1,498  35 
  $ 1,079  Benesse Holdings Inc  400  18 
Biotechnology - 0.22%      Brambles Ltd  8,152  50 
CSL Ltd  3,468  107  Brisa Auto-Estradas de Portugal SA  1,047  8 
Novozymes A/S  268  27  Bunzl PLC  1,907  20 
  $ 134  Bureau Veritas SA  284  14 
Building Materials - 1.24%      Capita Group PLC/The  3,621  39 
Asahi Glass Co Ltd  6,000  60  Dai Nippon Printing Co Ltd  3,000  40 
Boral Ltd  3,448  17  Experian PLC  5,966  55 
Cimpor Cimentos de Portugal SGPS SA  1,368  10  G4S PLC  7,371  30 
Compagnie de St-Gobain  2,237  105  Intoll Group  13,152  13 
CRH PLC  4,028  92  Kamigumi Co Ltd  2,000  16 
Daikin Industries Ltd  1,400  54  Macquarie Atlas Roads Group (a)  1  — 
Fletcher Building Ltd  3,515  20  Randstad Holding NV (a)  592  25 
Geberit AG  226  39  Secom Co Ltd  1,200  55 
HeidelbergCement AG  818  42  Securitas AB  1,821  20 
Holcim Ltd  1,426  94  Serco Group PLC  2,841  24 
Imerys SA  197  10  SGS SA  32  43 
Italcementi SpA  397  4  Societe Des Autoroutes Paris-Rhin-Rhone (a)  127  9 
James Hardie Industries SE (a)  2,515  17  Toppan Printing Co Ltd  3,000  26 
JS Group Corp  1,500  30       
See accompanying notes      23     


Schedule of Investments
International Equity Index Fund
February 28, 2010 (unaudited)
 
 
 
    Value      Value 
COMMON STOCKS (continued)  Shares Held  (000's)  COMMON STOCKS (continued)  Shares Held  (000's) 
Commercial Services (continued)      Electric (continued)     
Transurban Group             6,751 $  32  Chugoku Electric Power Co Inc/The             1,600 $  33 
  $ 639  CLP Holdings Ltd  12,000  83 
Computers - 0.44%      Contact Energy Ltd (a)  1,683  7 
Atos Origin SA (a)  264  12  E.ON AG  11,054  393 
Cap Gemini SA  852  39  EDF SA  1,377  69 
Computershare Ltd  2,585  27  EDP - Energias de Portugal SA  10,166  37 
Fujitsu Ltd  11,000  72  Electric Power Development Co Ltd  800  27 
Indra Sistemas SA  573  12  Enel SpA  38,276  208 
Itochu Techno-Solutions Corp  200  6  Fortum OYJ  2,583  66 
Logitech International SA (a)  1,058  16  GDF Suez  7,227  265 
NTT Data Corp  7  22  Hokkaido Electric Power Co Inc  1,100  22 
Obic Co Ltd  40  7  Hokuriku Electric Power Co  1,100  25 
Otsuka Corp  100  6  Hongkong Electric Holdings Ltd  8,000  45 
TDK Corp  700  43  Iberdrola SA  21,379  172 
  $ 262  International Power PLC  8,850  44 
Consumer Products - 0.40%      Kansai Electric Power Co Inc/The  4,400  104 
Henkel AG & Co KGaA  755  34  Kyushu Electric Power Co Inc  2,200  50 
Husqvarna AB  2,319  15  National Grid PLC  14,304  142 
Reckitt Benckiser Group PLC  3,530  185  Public Power Corp SA (a)  675  10 
Societe BIC SA  155  11  Red Electrica Corporacion SA  629  32 
  $ 245  RWE AG  2,435  207 
Cosmetics & Personal Care - 0.53%      Scottish & Southern Energy PLC  5,352  92 
Beiersdorf AG  513  31  Shikoku Electric Power Co  1,000  29 
Kao Corp  3,100  79  SP AusNet  7,461  6 
L'Oreal SA  1,392  144  Terna Rete Elettrica Nazionale SpA  7,563  31 
Shiseido Co Ltd  2,000  45  Tohoku Electric Power Co Inc  2,500  54 
Unicharm Corp  200  19  Tokyo Electric Power Co Inc/The  7,100  195 
  $ 318    $ 2,601 
Distribution & Wholesale - 1.18%      Electrical Components & Equipment - 0.85%     
Canon Marketing Japan Inc  400  6  Brother Industries Ltd  1,300  15 
Hitachi High-Technologies Corp  400  8  Casio Computer Co Ltd  1,400  10 
ITOCHU Corp  9,000  72  Furukawa Electric Co Ltd  4,000  19 
Jardine Cycle & Carriage Ltd  1,000  17  Gamesa Corp Tecnologica SA  1,061  13 
Li & Fung Ltd  14,000  65  GS Yuasa Corp  2,000  14 
Marubeni Corp  10,000  60  Hitachi Ltd  26,000  86 
Mitsubishi Corp  7,400  185  Legrand SA  612  19 
Mitsui & Co Ltd  10,100  157  Mitsubishi Electric Corp  11,000  90 
Sojitz Corp  7,200  13  Prysmian SpA  578  10 
      Sanyo Electric Co Ltd (a)  11,000  19 
Sumitomo Corp  6,500  71       
Toyota Tsusho Corp  1,200  17  Schneider Electric SA  1,371  146 
Wolseley PLC (a)  1,651  39  Ushio Inc  600  10 
      Vestas Wind Systems A/S (a)  1,185  59 
  $ 710       
Diversified Financial Services - 1.21%        $ 510 
Acom Co Ltd  220  3  Electronics - 1.38%     
Aeon Credit Service Co Ltd  500  5  Advantest Corp  900  21 
ASX Ltd  996  32  Hirose Electric Co Ltd  200  21 
Credit Saison Co Ltd  900  12  Hoya Corp  2,400  60 
Criteria Caixacorp SA  4,889  22  Ibiden Co Ltd  700  24 
Daiwa Securities Group Inc  10,000  49  Keyence Corp  200  44 
Deutsche Boerse AG  1,134  79  Koninklijke Philips Electronics NV  5,655  165 
GAM Holding Ltd  1,227  13  Kyocera Corp  900  80 
Hong Kong Exchanges and Clearing Ltd  5,900  99  Mabuchi Motor Co Ltd  200  11 
ICAP PLC  3,051  15  Minebea Co Ltd  2,000  11 
Investec PLC  2,454  17  Mitsumi Electric Co Ltd  500  10 
London Stock Exchange Group PLC  865  9  Murata Manufacturing Co Ltd  1,200  64 
Macquarie Group Ltd  1,935  79  NEC Corp  15,000  42 
Mediobanca SpA (a)  2,754  29  NGK Insulators Ltd  1,000  22 
Mitsubishi UFJ Lease & Finance Co Ltd  340  12  Nidec Corp  600  58 
Mizuho Securities Co Ltd  3,000  9  Nippon Electric Glass Co Ltd  2,000  26 
Nomura Holdings Inc  20,700  153  Nissha Printing Co Ltd  200  7 
ORIX Corp  610  47  Omron Corp  1,200  26 
Schroders PLC  715  13  Toshiba Corp  23,000  115 
Singapore Exchange Ltd  5,000  27  Yaskawa Electric Corp  1,000  8 
  $ 724  Yokogawa Electric Corp  1,300  11 
Electric - 4.32%        $ 826 
A2A SpA  6,376  11  Energy - Alternate Sources - 0.08%     
      EDP Renovaveis SA (a)  1,268  10 
AGL Energy Ltd  2,602  34       
BKW FMB Energie AG  74  5  Iberdrola Renovables SA  4,913  21 
Chubu Electric Power Co Inc  3,900  103       
 
See accompanying notes      24     


Schedule of Investments
International Equity Index Fund
February 28, 2010 (unaudited)
 
 
 
    Value      Value 
COMMON STOCKS (continued)  Shares Held  (000's)  COMMON STOCKS (continued)  Shares Held  (000's) 
Energy - Alternate Sources (continued)      Food (continued)     
Verbund - Oesterreichische Elektrizitaetswirtschafts                 448 $  18  Nissin Foods Holdings Co Ltd                 400 $  14 
AG      Olam International Ltd  7,000  12 
  $ 49  Orkla ASA  4,400  34 
Engineering & Contruction - 1.42%      Parmalat SpA  9,903  25 
ABB Ltd (a)  12,832  259  Suedzucker AG  385  9 
Acciona SA  148  16  Tesco PLC  46,135  295 
ACS Actividades de Construccion y Servicios SA  823  37  Toyo Suisan Kaisha Ltd  1,000  28 
Aeroports de Paris  173  14  Unilever NV  9,472  285 
Auckland International Airport Ltd  5,106  6  Unilever PLC  7,463  219 
Balfour Beatty PLC  3,982  17  WM Morrison Supermarkets PLC  12,323  56 
Bouygues SA  1,301  60  Woolworths Ltd  7,156  172 
Chiyoda Corp  1,000  9  Yakult Honsha Co Ltd  600  18 
Eiffage SA  236  11  Yamazaki Baking Co Ltd  1,000  13 
Ferrovial SA  2,559  23    $ 3,042 
Fomento de Construcciones y Contratas SA  214  7  Food Service - 0.19%     
Fraport AG Frankfurt Airport Services Worldwide  214  11  Compass Group PLC  10,760  80 
Hochtief AG  244  17  Sodexo  548  33 
Hong Kong Aircraft Engineering Co Ltd  400  5    $ 113 
JGC Corp  1,000  19  Forest Products & Paper - 0.24%     
Kajima Corp  5,000  12  Holmen AB  296  7 
Kinden Corp  1,000  9  Nippon Paper Group Inc  500  13 
Koninklijke Boskalis Westminster NV  373  12  OJI Paper Co Ltd  5,000  21 
Leighton Holdings Ltd  866  29  Stora Enso OYJ (a)  3,383  21 
MAp Group  4,085  11  Svenska Cellulosa AB  3,312  49 
Obayashi Corp  4,000  15  UPM-Kymmene OYJ  3,024  33 
Sacyr Vallehermoso SA (a)  513  4    $ 144 
SembCorp Industries Ltd  6,000  16  Gas - 0.62%     
Shimizu Corp  3,000  12  Centrica PLC  29,795  127 
Singapore Technologies Engineering Ltd  8,000  18  Enagas  1,041  22 
Skanska AB  2,320  38  Gas Natural SDG SA  1,302  24 
Taisei Corp  6,000  12  Hong Kong & China Gas Co Ltd  23,000  52 
Vinci SA  2,551  134  Osaka Gas Co Ltd  11,000  40 
WorleyParsons Ltd  954  21  Snam Rete Gas SpA  8,306  39 
  $ 854  Toho Gas Co Ltd  3,000  16 
Entertainment - 0.19%      Tokyo Gas Co Ltd  13,000  56 
Aristocrat Leisure Ltd  2,321  9    $ 376 
OPAP SA  1,298  27  Hand & Machine Tools - 0.30%     
Oriental Land Co Ltd  300  21  Fuji Electric Holdings Co Ltd  3,000  7 
Sankyo Co Ltd  300  14  Makita Corp  700  22 
TABCORP Holdings Ltd  3,511  21  Sandvik AB  5,863  63 
Tatts Group Ltd  7,016  15  Schindler Holding AG  283  23 
Toho Co Ltd/Tokyo  700  11  Schindler Holding AG  125  10 
  $ 118  SMC Corp/Japan  300  37 
Environmental Control - 0.03%      THK Co Ltd  700  14 
Kurita Water Industries Ltd  700  19    $ 176 
      Healthcare - Products - 0.72%     
Food - 5.06%      Cie Generale d'Optique Essilor International SA  1,169  70 
Ajinomoto Co Inc  4,000  41  Cochlear Ltd  327  18 
Aryzta AG  472  18  Coloplast A/S  132  15 
Associated British Foods PLC  2,072  30  Fresenius SE  164  11 
Carrefour SA  3,689  170  Getinge AB  1,164  27 
Casino Guichard Perrachon SA  321  26  Luxottica Group SpA  674  18 
Colruyt SA  87  22  Nobel Biocare Holding AG  720  18 
Danone  3,198  187  QIAGEN NV (a)  1,317  29 
Delhaize Group SA  585  46  Shimadzu Corp  1,000  7 
Goodman Fielder Ltd  7,486  10  Smith & Nephew PLC  5,141  53 
J Sainsbury PLC  6,978  35  Sonova Holding AG  270  34 
Jeronimo Martins SGPS SA  1,281  12  Straumann Holding AG  44  11 
Kerry Group PLC  814  26  Synthes Inc  345  41 
Kesko OYJ  387  14  Sysmex Corp  200  12 
Kikkoman Corp  1,000  12  Terumo Corp  1,000  54 
Koninklijke Ahold NV  6,931  85  William Demant Holding (a)  137  10 
Lindt & Spruengli AG  1  23    $ 428 
Lindt & Spruengli AG  5  10  Healthcare - Services - 0.15%     
MEIJI Holdings Co Ltd  400  16  BioMerieux  80  9 
Metcash Ltd  4,448  17  Fresenius Medical Care AG & Co KGaA  1,113  58 
Metro AG  660  34  Sonic Healthcare Ltd  2,138  26 
Nestle SA  20,163  1,003    $ 93 
Nippon Meat Packers Inc  1,000  12       
Nisshin Seifun Group Inc  1,000  13       
See accompanying notes      25     


Schedule of Investments
International Equity Index Fund
February 28, 2010 (unaudited)
 
 
 
    Value      Value 
COMMON STOCKS (continued)  Shares Held  (000's)  COMMON STOCKS (continued)  Shares Held  (000's) 
Holding Companies - Diversified - 0.82%      Internet (continued)     
Cie Nationale a Portefeuille                 192 $  10  Matsui Securities Co Ltd                 700 $  5 
Drax Group PLC  2,122  13  Rakuten Inc  42  32 
Exor SpA  404  6  SBI Holdings Inc/Japan  98  18 
GEA Group AG  909  17  Trend Micro Inc  600  21 
Groupe Bruxelles Lambert SA  469  41  United Internet AG (a)  732  11 
Hutchison Whampoa Ltd  12,000  86  Yahoo! Japan Corp  84  32 
Keppel Corp Ltd  7,000  42    $ 145 
LVMH Moet Hennessy Louis Vuitton SA  1,424  154  Investment Companies - 0.23%     
Noble Group Ltd  9,000  20  Cheung Kong Infrastructure Holdings Ltd  3,000  11 
NWS Holdings Ltd  5,000  9  Eurazeo  160  10 
Swire Pacific Ltd  4,500  50  Investor AB  2,649  47 
Wharf Holdings Ltd  8,000  41  Man Group PLC  9,951  34 
  $ 489  Marfin Investment Group SA (a)  3,757  9 
Home Builders - 0.13%      Marfin Investment Group SA - Rights (a),(b)  3,519  — 
Daiwa House Industry Co Ltd  3,000  32  Pargesa Holding SA  157  12 
Sekisui Chemical Co Ltd  3,000  20  Resolution Ltd (a)  14,028  16 
Sekisui House Ltd  3,000  29    $ 139 
  $ 81  Iron & Steel - 1.29%     
Home Furnishings - 0.76%      Acerinox SA  813  14 
Electrolux AB  1,393  30  ArcelorMittal  4,992  190 
Matsushita Electric Industrial Co Ltd  11,400  158  BlueScope Steel Ltd  10,602  23 
Sharp Corp/Japan  6,000  70  Daido Steel Co Ltd  2,000  8 
Sony Corp  5,800  199  Fortescue Metals Group Ltd (a)  7,192  30 
  $ 457  Hitachi Metals Ltd  1,000  10 
Insurance - 4.37%      JFE Holdings Inc  2,900  108 
Admiral Group PLC  1,083  20  Kobe Steel Ltd  14,000  26 
Aegon NV (a)  9,085  57  Nippon Steel Corp  30,000  112 
Aioi Insurance Co Ltd  3,000  15  Nisshin Steel Co Ltd  4,000  7 
Allianz SE  2,634  303  OneSteel Ltd  7,710  24 
AMP Ltd  11,709  62  Outokumpu OYJ  688  12 
Assicurazioni Generali SpA  6,790  154  Rautaruukki OYJ  489  9 
Aviva PLC  15,927  95  Salzgitter AG  227  20 
AXA Asia Pacific Holdings Ltd  5,917  34  SSAB AB - A Shares  1,050  18 
AXA SA  9,871  199  SSAB AB - B Shares  466  7 
Baloise-Holding AG  291  25  Sumitomo Metal Industries Ltd  20,000  55 
CNP Assurances  216  19  ThyssenKrupp AG  1,945  62 
Fondiaria-Sai SpA  349  5  Tokyo Steel Manufacturing Co Ltd  600  7 
Fortis  12,991  45  Voestalpine AG  683  24 
Hannover Rueckversicherung AG  351  16  Yamato Kogyo Co Ltd  300  9 
ING Groep NV (a)  21,166  189    $ 775 
Insurance Australia Group Ltd  12,045  43  Leisure Products & Services - 0.22%     
Legal & General Group PLC  34,085  40  Carnival PLC  947  36 
Mapfre SA  4,255  15  Sega Sammy Holdings Inc  1,200  15 
Mediolanum SpA  1,229  7  Shimano Inc  400  17 
Mitsui Sumitomo Insurance Group Holdings Inc  2,400  61  Thomas Cook Group PLC  4,991  18 
Muenchener Rueckversicherungs AG  1,148  177  TUI AG (a)  776  8 
Nipponkoa Insurance Co Ltd  4,000  24  Tui Travel PLC  3,251  14 
Nissay Dowa General Insurance Co Ltd  1,000  5  Yamaha Corp  900  10 
Old Mutual PLC  30,684  53  Yamaha Motor Co Ltd  1,200  16 
Prudential PLC  14,677  135    $ 134 
QBE Insurance Group Ltd  5,888  113  Lodging - 0.27%     
RSA Insurance Group PLC  19,592  39  Accor SA  851  43 
Sampo OYJ  2,443  59  City Developments Ltd  3,000  22 
SCOR SE  964  24  Crown Ltd  2,847  20 
Sompo Japan Insurance Inc  5,000  35  Genting Singapore PLC (a)  27,000  17 
Sony Financial Holdings Inc  5  15  Intercontinental Hotels Group PLC  1,499  21 
Standard Life PLC  12,869  38  Sands China Ltd (a)  11,600  17 
Swiss Life Holding AG (a)  168  21  Shangri-La Asia Ltd  8,000  13 
Swiss Reinsurance Co Ltd  2,008  90  Sky City Entertainment Group Ltd  3,223  7 
T&D Holdings Inc  1,650  36    $ 160 
Tokio Marine Holdings Inc  4,200  118  Machinery - Construction & Mining - 0.34%     
Topdanmark A/S (a)  83  10  Atlas Copco AB - A Shares  3,905  55 
TrygVesta AS  149  10  Atlas Copco AB - B Shares  2,269  29 
Unipol Gruppo Finanziario SpA (a)  4,146  5  Hitachi Construction Machinery Co Ltd  600  12 
Vienna Insurance Group  223  11  Komatsu Ltd  5,500  111 
Zurich Financial Services  857  207    $ 207 
  $ 2,629  Machinery - Diversified - 0.85%     
Internet - 0.24%      Alstom SA  1,173  75 
Dena Co Ltd  2  16  Amada Co Ltd  2,000  15 
Iliad SA  95  10       
See accompanying notes      26     


Schedule of Investments
International Equity Index Fund
February 28, 2010 (unaudited)
 
 
 
    Value      Value 
COMMON STOCKS (continued)  Shares Held  (000's)  COMMON STOCKS (continued)  Shares Held  (000's) 
Machinery - Diversified (continued)      Mining (continued)     
Fanuc Ltd             1,100 $  107  Xstrata PLC  11,086 $  174 
IHI Corp  8,000  14    $ 2,641 
Japan Steel Works Ltd/The  2,000  23  Miscellaneous Manufacturing - 1.25%     
Kawasaki Heavy Industries Ltd  8,000  21  Alfa Laval AB  1,963  28 
Kone OYJ  894  38  CSR Ltd  8,369  12 
Kubota Corp  6,000  53  FUJIFILM Holdings Corp  2,700  86 
MAN SE  615  44  Invensys PLC  4,687  23 
Metso OYJ  743  23  Konica Minolta Holdings Inc  3,000  31 
Mitsubishi Heavy Industries Ltd  18,000  67  Nikon Corp  1,900  42 
Sumitomo Heavy Industries Ltd  3,000  15  Olympus Corp  1,300  40 
Zardoya Otis SA  774  14  Siemens AG  4,784  411 
  $ 509  Smiths Group PLC  2,262  36 
Media - 1.13%      Tomkins PLC  5,128  15 
British Sky Broadcasting Group PLC  6,625  55  Wartsila OYJ  487  23 
Fairfax Media Ltd  12,309  18    $ 747 
Fuji Media Holdings Inc  3  4  Office & Business Equipment - 0.57%     
Gestevision Telecinco SA  553  8  Canon Inc  6,200  258 
Jupiter Telecommunications Co Ltd  14  16  Neopost SA  181  15 
Lagardere SCA  686  25  Ricoh Co Ltd  4,000  55 
M6-Metropole Television  375  9  Seiko Epson Corp  800  14 
Mediaset SpA  4,121  31    $ 342 
PagesJaunes Groupe SA  709  8  Oil & Gas - 7.00%     
Pearson PLC  4,712  66  Arrow Energy Ltd (a)  3,386  10 
Reed Elsevier NV  4,208  48  BG Group PLC  19,544  341 
Reed Elsevier PLC  7,049  53  BP PLC  108,997  962 
Sanoma OYJ  468  9  Cairn Energy PLC (a)  8,006  41 
Singapore Press Holdings Ltd  9,000  24  Caltex Australia Ltd  756  7 
Societe Television Francaise 1  683  11  Cosmo Oil Co Ltd  3,000  7 
Television Broadcasts Ltd  2,000  9  ENI SpA  15,139  342 
Vivendi SA  7,117  179  Galp Energia SGPS SA  897  15 
Wolters Kluwer NV  1,617  33  Hellenic Petroleum SA  514  6 
WPP PLC  7,287  67  Idemitsu Kosan Co Ltd  100  7 
  $ 673  Inpex Corp  5  37 
Metal Fabrication & Hardware - 0.41%      Japan Petroleum Exploration Co  200  9 
Assa Abloy AB  1,815  34  Lundin Petroleum AB (a)  1,294  10 
Maruichi Steel Tube Ltd  200  4  Neste Oil OYJ  745  11 
NSK Ltd  3,000  21  Nippon Mining Holdings Inc  5,000  25 
NTN Corp  3,000  13  Nippon Oil Corp  7,000  37 
Sims Metal Management Ltd  937  16  OMV AG  872  32 
SKF AB  2,263  36  Origin Energy Ltd  5,088  77 
Tenaris SA  2,746  57  Repsol YPF SA  4,260  97 
Vallourec SA  329  63  Royal Dutch Shell PLC - A Shares  20,618  563 
  $ 244  Royal Dutch Shell PLC - B Shares  15,676  410 
Mining - 4.38%      Santos Ltd  4,829  56 
Alumina Ltd  14,190  19  Seadrill Ltd  1,600  37 
Anglo American PLC (a)  7,655  279  Showa Shell Sekiyu KK  1,100  8 
Antofagasta PLC  2,293  31  Statoil ASA  6,550  147 
BHP Billiton Ltd  19,515  719  TonenGeneral Sekiyu KK  2,000  16 
BHP Billiton PLC  12,834  393  Total SA  12,283  685 
Dowa Holdings Co Ltd  2,000  11  Tullow Oil PLC  5,145  93 
Energy Resources of Australia Ltd  374  6  Woodside Petroleum Ltd  3,128  121 
Eramet  31  9    $ 4,209 
Eurasian Natural Resources Corp PLC  1,498  24  Oil & Gas Services - 0.32%     
Fresnillo PLC  1,043  12  Amec PLC  1,934  23 
Kazakhmys PLC (a)  1,244  25  Cie Generale de Geophysique-Veritas (a)  834  20 
Lonmin PLC (a)  898  25  Fugro NV  389  23 
Mitsubishi Materials Corp  6,000  16  Petrofac Ltd  1,205  19 
Mitsui Mining & Smelting Co Ltd (a)  3,000  8  Saipem SpA  1,540  51 
Mongolia Energy Co Ltd (a)  18,000  8  SBM Offshore NV  956  17 
Newcrest Mining Ltd  2,811  79  Technip SA  604  43 
Norsk Hydro ASA  4,000  27    $ 196 
Orica Ltd  2,093  47  Packaging & Containers - 0.12%     
OZ Minerals Ltd (a)  18,150  17  Amcor Ltd/Australia  7,077  38 
Paladin Energy Ltd (a)  3,753  12  Rexam PLC  5,098  21 
Randgold Resources Ltd  521  37  Toyo Seikan Kaisha Ltd  900  15 
Rio Tinto Ltd  2,534  160    $ 74 
Rio Tinto PLC  7,973  409  Pharmaceuticals - 6.31%     
Sumitomo Metal Mining Co Ltd  3,000  43  Actelion Ltd (a)  582  30 
Umicore  663  20  Alfresa Holdings Corp  200  8 
Vedanta Resources PLC  793  31       
See accompanying notes      27     


Schedule of Investments
International Equity Index Fund
February 28, 2010 (unaudited)
 
 
 
    Value      Value 
COMMON STOCKS (continued)  Shares Held  (000's)  COMMON STOCKS (continued)  Shares Held  (000's) 
Pharmaceuticals (continued)      REITS (continued)     
Astellas Pharma Inc             2,600 $  98  Dexus Property Group  27,335 $  20 
AstraZeneca PLC  8,426  370  Fonciere Des Regions  135  14 
Celesio AG  495  15  Gecina SA  109  11 
Chugai Pharmaceutical Co Ltd  1,300  25  Goodman Group  34,751  19 
Daiichi Sankyo Co Ltd  3,900  79  GPT Group  49,772  26 
Dainippon Sumitomo Pharma Co Ltd  900  9  Hammerson PLC  4,048  24 
Eisai Co Ltd  1,500  58  ICADE  114  11 
Elan Corp PLC (a)  2,885  20  Japan Prime Realty Investment Corp  4  9 
GlaxoSmithKline PLC  30,170  558  Japan Real Estate Investment Corp  3  26 
Grifols SA  743  11  Japan Retail Fund Investment Corp  8  10 
H Lundbeck A/S  330  6  Klepierre  529  20 
Hisamitsu Pharmaceutical Co Inc  400  15  Land Securities Group PLC  4,396  42 
Ipsen  147  7  Liberty International PLC  2,893  21 
Kyowa Hakko Kirin Co Ltd  2,000  21  Link REIT/The  12,500  32 
Medipal Holdings Corp  900  11  Mirvac Group  15,634  21 
Merck KGaA  376  30  Nippon Building Fund Inc  3  26 
Mitsubishi Tanabe Pharma Corp  1,000  15  Nomura Real Estate Office Fund Inc  2  12 
Novartis AG  12,270  682  Segro PLC  4,270  21 
Novo Nordisk A/S  2,533  179  Stockland  13,857  50 
Ono Pharmaceutical Co Ltd  500  23  Unibail-Rodamco SE  513  101 
Orion OYJ  519  12  Westfield Group  12,078  130 
Roche Holding AG  4,085  682    $ 744 
Sanofi-Aventis SA  6,120  448  Retail - 2.12%     
Santen Pharmaceutical Co Ltd  400  13  ABC-Mart Inc  100  3 
Shionogi & Co Ltd  1,700  35  Aeon Co Ltd  3,700  38 
Shire PLC  3,258  70  Autogrill SpA (a)  570  7 
Suzuken Co Ltd  400  13  Carphone Warehouse Group PLC  2,305  6 
Taisho Pharmaceutical Co  1,000  17  Cie Financiere Richemont SA  3,035  102 
Takeda Pharmaceutical Co Ltd  4,400  199  Citizen Holdings Co Ltd  1,700  11 
Tsumura & Co  300  9  Esprit Holdings Ltd  6,700  48 
UCB SA  586  26  FamilyMart Co Ltd  300  10 
  $ 3,794  Fast Retailing Co Ltd  300  50 
Publicly Traded Investment Fund - 2.50%      Harvey Norman Holdings Ltd  3,089  11 
iShares MSCI EAFE Index Fund  28,575  1,504  Hennes & Mauritz AB  2,973  180 
      Home Retail Group PLC  5,102  20 
Real Estate - 1.36%      Inditex SA  1,269  75 
Aeon Mall Co Ltd  500  9  Isetan Mitsukoshi Holdings Ltd  2,100  22 
CapitaLand Ltd  15,000  40  J Front Retailing Co Ltd  3,000  17 
CapitaMalls Asia Ltd (a)  8,000  13  Kingfisher PLC  13,728  45 
Cheung Kong Holdings Ltd  8,000  98  Lawson Inc  400  17 
Chinese Estates Holdings Ltd  4,000  6  Lifestyle International Holdings Ltd  3,500  6 
Daito Trust Construction Co Ltd  500  24  Marks & Spencer Group PLC  9,182  46 
Hang Lung Group Ltd  5,000  25  Marui Group Co Ltd  1,300  9 
Hang Lung Properties Ltd  12,000  46  McDonald's Holdings Co Japan Ltd  400  8 
Henderson Land Development Co Ltd  6,000  41  Next PLC  1,146  33 
Hopewell Holdings Ltd  3,500  10  Nitori Co Ltd  200  16 
Hysan Development Co Ltd  4,000  11  PPR  442  51 
Immoeast AG (a)  2,424  12  Seven & I Holdings Co Ltd  4,500  101 
Kerry Properties Ltd  4,000  19  Shimamura Co Ltd  100  9 
Lend Lease Group  2,528  22  Swatch Group AG/The  179  50 
Lend Lease Group - Rights (a),(c)  574  1  Swatch Group AG/The  252  13 
Mitsubishi Estate Co Ltd  7,000  110  Takashimaya Co Ltd  2,000  15 
Mitsui Fudosan Co Ltd  5,000  84  UNY Co Ltd  1,000  8 
New World Development Ltd  15,000  27  USS Co Ltd  130  8 
Nomura Real Estate Holdings Inc  600  9  Wesfarmers Ltd  5,845  163 
NTT Urban Development Corp  7  6  Wesfarmers Ltd  884  25 
Sino Land Co Ltd  10,000  19  Whitbread PLC  1,018  22 
Sumitomo Realty & Development Co Ltd  2,000  36  Yamada Denki Co Ltd  510  36 
Sun Hung Kai Properties Ltd  8,000  111    $ 1,281 
Tokyo Tatemono Co Ltd  2,000  7  Semiconductors - 0.52%     
Tokyu Land Corp  3,000  11  ASM Pacific Technology Ltd  1,100  10 
UOL Group Ltd  3,000  8  ASML Holding NV  2,508  77 
Wheelock & Co Ltd  5,000  14  Elpida Memory Inc (a)  1,000  18 
  $ 819  Infineon Technologies AG (a)  6,319  34 
REITS - 1.24%      Renewable Energy Corp ASA (a)  2,000  7 
Ascendas Real Estate Investment Trust  9,000  12  Rohm Co Ltd  600  41 
British Land Co PLC  4,993  34  Shinko Electric Industries Co Ltd  400  6 
CapitaMall Trust  13,000  16  Solarworld AG  470  7 
CFS Retail Property Trust  10,110  17  STMicroelectronics NV  3,970  34 
Corio NV  311  19  Sumco Corp (a)  700  13 
See accompanying notes      28     


Schedule of Investments
International Equity Index Fund
February 28, 2010 (unaudited)
 
 
 
    Value      Value 
COMMON STOCKS (continued)  Shares Held  (000's)  COMMON STOCKS (continued)  Shares Held  (000's) 
Semiconductors (continued)      Toys, Games & Hobbies (continued)     
Tokyo Electron Ltd             1,000 $  62  Nintendo Co Ltd                 600 $  163 
  $ 309    $ 174 
Shipbuilding - 0.06%      Transportation - 1.66%     
Cosco Corp Singapore Ltd  6,000  5  AP Moller - Maersk A/S - A shares  3  22 
Mitsui Engineering & Shipbuilding Co Ltd  4,000  10  AP Moller - Maersk A/S - B shares  8  61 
SembCorp Marine Ltd  5,000  13  Asciano Group (a)  16,164  26 
Yangzijiang Shipbuilding Holdings Ltd  10,000  8  Central Japan Railway Co  9  68 
  $ 36  ComfortDelgro Corp Ltd  11,000  12 
Software - 0.58%      Deutsche Post AG  4,920  80 
Autonomy Corp PLC (a)  1,253  29  DSV A/S  1,216  19 
Dassault Systemes SA  377  22  East Japan Railway Co  2,000  138 
Konami Corp  500  9  Firstgroup PLC  2,803  15 
Nomura Research Institute Ltd  600  13  Hankyu Hanshin Holdings Inc  7,000  34 
Oracle Corp Japan  200  9  Kawasaki Kisen Kaisha Ltd  4,000  15 
Sage Group PLC  7,629  28  Keihin Electric Express Railway Co Ltd  3,000  25 
SAP AG  4,990  223  Keio Corp  3,000  20 
Square Enix Holdings Co Ltd  400  8  Keisei Electric Railway Co Ltd  2,000  12 
  $ 341  Kintetsu Corp  9,000  28 
Storage & Warehousing - 0.02%      Koninklijke Vopak NV  182  13 
Mitsubishi Logistics Corp  1,000  12  Kuehne + Nagel International AG  314  29 
      Mitsui OSK Lines Ltd  7,000  45 
Telecommunications - 6.26%      MTR Corp  8,500  29 
Alcatel-Lucent/France (a)  13,479  41  Neptune Orient Lines Ltd/Singapore (a)  5,000  6 
Belgacom SA  885  33  Nippon Express Co Ltd  5,000  20 
BT Group PLC  45,069  79  Nippon Yusen KK  9,000  33 
Cable & Wireless PLC  14,920  31  Odakyu Electric Railway Co Ltd  4,000  34 
Deutsche Telekom AG  16,484  213  Orient Overseas International Ltd  1,500  11 
Elisa OYJ  774  16  TNT NV  2,157  56 
Eutelsat Communications  576  19  Tobu Railway Co Ltd  5,000  27 
Foxconn International Holdings Ltd (a)  12,000  12  Tokyu Corp  7,000  30 
France Telecom SA  10,781  253  Toll Holdings Ltd  3,842  23 
Hellenic Telecommunications Organization SA  1,425  16  West Japan Railway Co  10  35 
Inmarsat PLC  2,539  28  Yamato Holdings Co Ltd  2,300  31 
KDDI Corp  17  91    $ 997 
Koninklijke KPN NV  9,716  155  Venture Capital - 0.04%     
Millicom International Cellular SA  440  37  3i Group PLC  5,641  22 
Mobistar SA  174  10  Jafco Co Ltd  200  5 
Nippon Telegraph & Telephone Corp  3,000  131    $ 27 
Nokia OYJ  21,777  293  Water - 0.28%     
NTT DoCoMo Inc  89  138  Severn Trent PLC  1,375  24 
PCCW Ltd  21,000  6  Suez Environnement Co  1,566  35 
Portugal Telecom SGPS SA  3,389  36  United Utilities Group PLC  3,963  33 
SES SA  1,646  40  Veolia Environnement  2,296  74 
Singapore Telecommunications Ltd  46,000  100    $ 166 
Softbank Corp  4,400  115  TOTAL COMMON STOCKS  $ 57,534 
StarHub Ltd  3,000  4      Value 
Swisscom AG  136  47  PREFERRED STOCKS - 0.31%  Shares Held  (000's) 
Tele2 AB  1,754  26  Automobile Manufacturers - 0.14%     
Telecom Corp of New Zealand Ltd  10,828  18  Bayerische Motoren Werke AG  304  9 
Telecom Italia SpA  58,356  83  Porsche Automobil Holding SE  509  26 
Telecom Italia SpA - RNC  35,041  37  Volkswagen AG  612  50 
Telefonaktiebolaget LM Ericsson  17,355  174    $ 85 
Telefonica SA  24,623  578  Consumer Products - 0.09%     
Telekom Austria AG  1,803  24  Henkel AG & Co KGaA  1,036  53 
Telenor ASA  4,800  61       
TeliaSonera AB  13,056  90  Electric - 0.03%     
Telstra Corp Ltd  25,324  67  RWE AG  227  18 
Vodafone Group PLC  305,736  660       
  $ 3,762  Healthcare - Products - 0.05%     
Textiles - 0.18%      Fresenius SE  469  33 
Kuraray Co Ltd  2,000  25       
Mitsubishi Rayon Co Ltd  3,000  13  TOTAL PREFERRED STOCKS  $ 189 
Nisshinbo Holdings Inc  1,000  10       
Teijin Ltd  5,000  15       
Toray Industries Inc  8,000  44       
  $ 107       
Toys, Games & Hobbies - 0.29%           
Namco Bandai Holdings Inc  1,200  11       

See accompanying notes

29


     Schedule of Investments International Equity Index Fund February 28, 2010 (unaudited)

          Portfolio Summary (unaudited)   
 
      Principal    Country  Percent 
      Amount  Value  Japan  21.19% 
REPURCHASE AGREEMENTS - 3.28%    (000's)  (000's)  United Kingdom  17.59% 
          France  9.32% 
Banks - 3.28%        Australia  7.94% 
Investment in Joint Trading Account; Bank of  $ 492 $  492     
  America Repurchase Agreement; 0.10% dated      Switzerland  7.79% 
          Germany  7.01% 
  02/26/10 maturing 03/01/10 (collateralized by      United States  5.85% 
  Sovereign Agency Issues; $502,035; 0.00% -         
  4.63%; dated 06/25/10 - 10/15/15)        Netherlands  4.21% 
          Spain  3.69% 
Investment in Joint Trading Account; Credit Suisse  492  492  Italy  2.91% 
  Repurchase Agreement; 0.11% dated 02/26/10         
  maturing 03/01/10 (collateralized by Sovereign      Sweden  2.46% 
          Hong Kong  2.25% 
  Agency Issues; $502,035; 0.00% - 5.50%; dated      Singapore  1.33% 
  03/03/10 - 10/05/29)           
Investment in Joint Trading Account; Deutsche Bank  492  493  Finland  1.12% 
          Belgium  0.92% 
  Repurchase Agreement; 0.11% dated 02/26/10      Denmark  0.88% 
  maturing 03/01/10 (collateralized by Sovereign         
  Agency Issues; $502,035; 1.13% - 3.75%; dated      Norway  0.64% 
  09/09/11 - 03/09/12)        Luxembourg  0.54% 
          Ireland  0.43% 
Investment in Joint Trading Account; Morgan Stanley  492  492  Greece  0.36% 
  Repurchase Agreement; 0.10% dated 02/26/10         
  maturing 03/01/10 (collateralized by Sovereign      Austria  0.29% 
          Portugal  0.24% 
  Agency Issues; $502,035; 0.00% - 5.85%; dated      New Zealand  0.09% 
  03/03/10 - 02/19/25)        Jersey, Channel Islands  0.06% 
      $ 1,969  Bermuda  0.06% 
TOTAL REPURCHASE AGREEMENTS    $ 1,969  Macao  0.03% 
Total Investments    $ 59,692  China  0.03% 
Other Assets in Excess of Liabilities, Net - 0.70%  $ 421  Cyprus  0.03% 
TOTAL NET ASSETS - 100.00%    $ 60,113  Guernsey  0.02% 
          Mexico  0.02% 
 
(a)  Non-Income Producing Security        Other Assets in Excess of Liabilities, Net  0.70% 
(b)  Security is Illiquid        TOTAL NET ASSETS  100.00% 
(c)  Market value is determined in accordance with procedures established in     
  good faith by the Board of Directors. At the end of the period, the value of  Other Assets Summary (unaudited)   
  these securities totaled $0 or 0.00% of net assets.      Asset Type  Percent 
          Futures  2.99% 
 
 
Unrealized Appreciation (Depreciation)           
The net federal income tax unrealized appreciation (depreciation) and federal tax     
cost of investments held by the fund as of the period end were as follows:     
 
Unrealized Appreciation    $ 700     
Unrealized Depreciation      (4,382)     
Net Unrealized Appreciation (Depreciation)    $ (3,682)     
Cost for federal income tax purposes    $ 63,374     
All dollar amounts are shown in thousands (000's)         

See accompanying notes

30


Schedule of Investments
International Equity Index Fund
February 28, 2010 (unaudited)
 
 
Futures Contracts
          Unrealized 
Type  Long/Short         Contracts  Notional Value  Current Market Value  Appreciation/(Depreciation) 
eMini MSCI EAFE; March 2010  Long  24 $  1,794  $ 1,799  $ 5 
          $ 5 
All dollar amounts are shown in thousands (000's)           

See accompanying notes

31


FINANCIAL HIGHLIGHTS PRINCIPAL FUNDS, INC.

(unaudited)

Selected data for a share of Capital Stock outstanding throughout each year ended August 31 (except as noted):

  2010(a) 
BOND MARKET INDEX FUND   
Institutional shares   
Net Asset Value, Beginning of Period  $ 10.00 
Income from Investment Operations:   
       Net Investment Income (Loss)(b)  0.03 
       Net Realized and Unrealized Gain (Loss) on Investments  0.12 
                                               Total From Investment Operations  0 .15 
Net Asset Value, End of Period  $ 10.15 
Total Return  1 .50%(c) 
Ratio/Supplemental Data:   
       Net Assets, End of Period (in thousands)  $ 231,243 
       Ratio of Expenses to Average Net Assets  0 .30%(d) 
       Ratio of Gross Expenses to Average Net Assets(e)  0 .33%(d) 
       Ratio of Net Investment Income to Average Net Assets  2 .09%(d) 
       Portfolio Turnover Rate  796 .4%(d) 
 
  2010(a) 
BOND MARKET INDEX FUND   
R-1 shares   
Net Asset Value, Beginning of Period  $ 10.00 
Income from Investment Operations:   
       Net Investment Income (Loss)(b)  0 .01 
       Net Realized and Unrealized Gain (Loss) on Investments  0 .12 
                                                 Total From Investment Operations  0 .13 
Net Asset Value, End of Period  $ 10.13 
Total Return  1 .30%(c) 
Ratio/Supplemental Data:   
       Net Assets, End of Period (in thousands)  $ 10 
       Ratio of Expenses to Average Net Assets  1 .18%(d) 
       Ratio of Gross Expenses to Average Net Assets(e)  6 .93%(d) 
       Ratio of Net Investment Income to Average Net Assets  0 .88%(d) 
       Portfolio Turnover Rate  796 .4%(d) 
 
  2010(a) 
BOND MARKET INDEX FUND   
R-2 shares   
Net Asset Value, Beginning of Period  $ 10.00 
Income from Investment Operations:   
       Net Investment Income (Loss)(b)  0 .02 
       Net Realized and Unrealized Gain (Loss) on Investments  0 .11 
                                                 Total From Investment Operations  0 .13 
Net Asset Value, End of Period  $ 10.13 
Total Return  1 .30%(c) 
Ratio/Supplemental Data:   
       Net Assets, End of Period (in thousands)  $ 10 
       Ratio of Expenses to Average Net Assets  1 .05%(d) 
       Ratio of Gross Expenses to Average Net Assets(e)  6 .78%(d) 
       Ratio of Net Investment Income to Average Net Assets  1 .01%(d) 
       Portfolio Turnover Rate  796 .4%(d) 
 
  2010(a) 
BOND MARKET INDEX FUND   
R-3 shares   
Net Asset Value, Beginning of Period  $ 10.00 
Income from Investment Operations:   
       Net Investment Income (Loss)(b)  0 .02 
       Net Realized and Unrealized Gain (Loss) on Investments  0 .12 
                                                 Total From Investment Operations  0 .14 
Net Asset Value, End of Period  $ 10.14 
Total Return  1 .40%(c) 
Ratio/Supplemental Data:   
       Net Assets, End of Period (in thousands)  $ 10 
       Ratio of Expenses to Average Net Assets  0 .87%(d) 
       Ratio of Gross Expenses to Average Net Assets(e)  6 .60%(d) 
       Ratio of Net Investment Income to Average Net Assets  1 .20%(d) 
       Portfolio Turnover Rate  796 .4%(d) 

See accompanying notes.

32


  FINANCIAL HIGHLIGHTS (Continued) 
  PRINCIPAL FUNDS, INC. 
                       (unaudited) 
 
  2010(a) 
BOND MARKET INDEX FUND   
R-4 shares   
Net Asset Value, Beginning of Period  $ 10.00 
Income from Investment Operations:   
       Net Investment Income (Loss)(b)  0 .02 
       Net Realized and Unrealized Gain (Loss) on Investments  0 .12 
                                                 Total From Investment Operations  0 .14 
Net Asset Value, End of Period  $ 10.14 
Total Return  1 .40%(c) 
Ratio/Supplemental Data:   
       Net Assets, End of Period (in thousands)  $ 10 
       Ratio of Expenses to Average Net Assets  0 .68%(d) 
       Ratio of Gross Expenses to Average Net Assets(e)  6 .42%(d) 
       Ratio of Net Investment Income to Average Net Assets  1 .39%(d) 
       Portfolio Turnover Rate  796 .4%(d) 
 
  2010(a) 
BOND MARKET INDEX FUND   
R-5 shares   
Net Asset Value, Beginning of Period  $ 10.00 
Income from Investment Operations:   
       Net Investment Income (Loss)(b)  0 .02 
       Net Realized and Unrealized Gain (Loss) on Investments  0 .12 
                                                 Total From Investment Operations  0 .14 
Net Asset Value, End of Period  $ 10.14 
Total Return  1 .40%(c) 
Ratio/Supplemental Data:   
       Net Assets, End of Period (in thousands)  $ 10 
       Ratio of Expenses to Average Net Assets  0 .56%(d) 
       Ratio of Gross Expenses to Average Net Assets(e)  6 .28%(d) 
       Ratio of Net Investment Income to Average Net Assets  1 .51%(d) 
       Portfolio Turnover Rate  796 .4%(d) 

(a)      Period from December 30, 2009, date operations commenced, through February 28, 2010.
(b)      Calculated based on average shares outstanding during the period.
(c)      Total return amounts have not been annualized.
(d)      Computed on an annualized basis.
(e)      Excludes expense reimbursement from Manager.

See accompanying notes.

33


FINANCIAL HIGHLIGHTS PRINCIPAL FUNDS, INC.

(unaudited)

Selected data for a share of Capital Stock outstanding throughout each year ended August 31 (except as noted):

  2010(a) 
INTERNATIONAL EQUITY INDEX FUND   
Institutional shares   
Net Asset Value, Beginning of Period  $ 10.00 
Income from Investment Operations:   
       Net Investment Income (Loss)(b)  0 .02 
       Net Realized and Unrealized Gain (Loss) on Investments  (0 .55) 
                                               Total From Investment Operations  (0 .53) 
Net Asset Value, End of Period  $ 9.47 
Total Return  (5 .30)%(c) 
Ratio/Supplemental Data:   
       Net Assets, End of Period (in thousands)  $ 59,281 
       Ratio of Expenses to Average Net Assets  0 .35%(d) 
       Ratio of Gross Expenses to Average Net Assets(e)  0 .43%(d) 
       Ratio of Net Investment Income to Average Net Assets  1 .18%(d) 
       Portfolio Turnover Rate  105 .2%(d) 
 
  2010(a) 
INTERNATIONAL EQUITY INDEX FUND   
R-1 shares   
Net Asset Value, Beginning of Period  $ 10.00 
Income from Investment Operations:   
       Net Investment Income (Loss)(b)  – 
       Net Realized and Unrealized Gain (Loss) on Investments  (0 .55) 
                                               Total From Investment Operations  (0 .55) 
Net Asset Value, End of Period  $ 9.45 
Total Return  (5 .50)%(c) 
Ratio/Supplemental Data:   
       Net Assets, End of Period (in thousands)  $ 9 
       Ratio of Expenses to Average Net Assets  1 .23%(d) 
       Ratio of Gross Expenses to Average Net Assets(e)  9 .14%(d) 
       Ratio of Net Investment Income to Average Net Assets  0 .09%(d) 
       Portfolio Turnover Rate  105 .2%(d) 
 
  2010(a) 
INTERNATIONAL EQUITY INDEX FUND   
R-2 shares   
Net Asset Value, Beginning of Period  $ 10.00 
Income from Investment Operations:   
       Net Investment Income (Loss)(b)  – 
       Net Realized and Unrealized Gain (Loss) on Investments  (0 .55) 
                                               Total From Investment Operations  (0 .55) 
Net Asset Value, End of Period  $ 9.45 
Total Return  (5 .50)%(c) 
Ratio/Supplemental Data:   
       Net Assets, End of Period (in thousands)  $ 9 
       Ratio of Expenses to Average Net Assets  1 .10%(d) 
       Ratio of Gross Expenses to Average Net Assets(e)  9 .01%(d) 
       Ratio of Net Investment Income to Average Net Assets  0 .22%(d) 
       Portfolio Turnover Rate  105 .2%(d) 
 
  2010(a) 
INTERNATIONAL EQUITY INDEX FUND   
R-3 shares   
Net Asset Value, Beginning of Period  $ 10.00 
Income from Investment Operations:   
       Net Investment Income (Loss)(b)  0 .01 
       Net Realized and Unrealized Gain (Loss) on Investments  (0 .56) 
                                               Total From Investment Operations  (0 .55) 
Net Asset Value, End of Period  $ 9.45 
Total Return  (5 .50)%(c) 
Ratio/Supplemental Data:   
       Net Assets, End of Period (in thousands)  $ 9 
       Ratio of Expenses to Average Net Assets  0 .92%(d) 
       Ratio of Gross Expenses to Average Net Assets(e)  8 .83%(d) 
       Ratio of Net Investment Income to Average Net Assets  0 .40%(d) 
       Portfolio Turnover Rate  105 .2%(d) 

See accompanying notes.

34


  FINANCIAL HIGHLIGHTS (Continued) 
  PRINCIPAL FUNDS, INC. 
                       (unaudited) 
 
  2010(a) 
INTERNATIONAL EQUITY INDEX FUND   
R-4 shares   
Net Asset Value, Beginning of Period  $ 10.00 
Income from Investment Operations:   
       Net Investment Income (Loss)(b)  0 .03 
       Net Realized and Unrealized Gain (Loss) on Investments  (0 .57) 
                                               Total From Investment Operations  (0 .54) 
Net Asset Value, End of Period  $ 9.46 
Total Return  (5 .40)%(c) 
Ratio/Supplemental Data:   
       Net Assets, End of Period (in thousands)  $ 796 
       Ratio of Expenses to Average Net Assets  0 .73%(d) 
       Ratio of Gross Expenses to Average Net Assets(e)  1 .05%(d) 
       Ratio of Net Investment Income to Average Net Assets  1 .91%(d) 
       Portfolio Turnover Rate  105 .2%(d) 
 
  2010(a) 
INTERNATIONAL EQUITY INDEX FUND   
R-5 shares   
Net Asset Value, Beginning of Period  $ 10.00 
Income from Investment Operations:   
       Net Investment Income (Loss)(b)  0 .01 
       Net Realized and Unrealized Gain (Loss) on Investments  (0 .55) 
                                               Total From Investment Operations  (0 .54) 
Net Asset Value, End of Period  $ 9.46 
Total Return  (5 .40)%(c) 
Ratio/Supplemental Data:   
       Net Assets, End of Period (in thousands)  $ 9 
       Ratio of Expenses to Average Net Assets  0 .61%(d) 
       Ratio of Gross Expenses to Average Net Assets(e)  8 .52%(d) 
       Ratio of Net Investment Income to Average Net Assets  0 .71%(d) 
       Portfolio Turnover Rate  105 .2%(d) 

(a)      Period from December 30, 2009, date operations commenced, through February 28, 2010.
(b)      Calculated based on average shares outstanding during the period.
(c)      Total return amounts have not been annualized.
(d)      Computed on an annualized basis.
(e)      Excludes expense reimbursement from Manager.

See accompanying notes.

35


SHAREHOLDER EXPENSE EXAMPLE
PRINCIPAL FUNDS, INC.
February 28, 2010 (unaudited)

As a shareholder of Principal Funds, Inc., you incur ongoing costs, including management fees; distribution fees (for certain share classes); and other fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in Principal Funds, Inc. and to compare these costs with the ongoing costs of investing in other mutual funds.

The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (September 1, 2009 to February 28, 2010), unless otherwise noted.

Actual Expenses

The first section of the table below provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period. R-1, R-2, R-3, R-4, and R-5 classes of shares may be purchased only through retirement plans. Such plans may impose fees in addition to those charged by the Fund. These fees are not included in the table below. If they were, the estimate of expenses you paid during the period would be higher, and your ending account value lower, by this amount.

Hypothetical Example for Comparison Purposes

The second section of the table below provides information about hypothetical account values and hypothetical expenses based on each funds’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in Principal Funds, Inc. and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as contingent deferred sales charges, redemption fees or exchange fees. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.

    Actual               Hypothetical   
      Expenses Paid         
      During Period  Beginning     Ending     
  Beginning  Ending  December 30,  Account  Account  Expenses Paid   
  Account Value       Account Value  2009 to  Value  Value  During Period  Annualized 
  December 30,  February 28,  February 28,  September 1,  February 28,  September 1, 2009 to  Expense 
  2009  2010  2010(a)  2009  2010  February 28, 2010(b)     Ratio 
Bond Market Index Fund               
       Institutional  $1,000.00  $1,015.00  $0.50  $1,000.00  $1,023.31  $1.51  0.30% 
       R-1  1,000.00  1,013.00  1.95  1,000.00  1,018.94  5.91  1.18 
       R-2  1,000.00  1,013.00  1.74  1,000.00  1,019.59  5.26  1.05 
       R-3  1,000.00  1,014.00  1.44  1,000.00  1,020.48  4.36  0.87 
       R-4  1,000.00  1,014.00  1.13  1,000.00  1,021.42  3.41  0.68 
       R-5  1,000.00  1,014.00  0.93  1,000.00  1,022.02  2.81  0.56 
 
International Equity Index Fund               
       Institutional  1,000.00  947.00  0.56  1,000.00  1,023.06  1.76  0.35 
       R-1  1,000.00  945.00  1.97  1,000.00  1,018.70  6.16  1.23 
       R-2  1,000.00  945.00  1.76  1,000.00  1,019.34  5.51  1.10 
       R-3  1,000.00  945.00  1.47  1,000.00  1,020.23  4.61  0.92 
       R-4  1,000.00  946.00  1.17  1,000.00  1,021.17  3.66  0.73 
       R-5  1,000.00  946.00  0.98  1,000.00  1,021.77  3.06  0.61 

(a) Expenses are equal to a fund's annualized expense ratio multiplied by the average account value over the period (December 30, 2009 to February 28, 2010), multiplied by 60/365 (to reflect the period since inception).

(b) Expenses are equal to a fund's annualized expense ratio multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).

36


FUND DIRECTORS AND OFFICERS

Under Maryland law, a Board of Directors oversees the Fund. The Directors have financial or other relevant experience and meet several times during the year to review contracts, Fund activities and the quality of services provided to the Fund. Each director also has the same position with Principal Variable Contracts Funds, Inc. which is also sponsored by Principal Life Insurance Company. Each director holds office for an indefinite term. Directors considered to be “interested persons” as defined in the Investment Company Act of 1940, as amended, as shown below are considered to be interested because of an affiliation with the Manager and Principal Life Insurance Company.

The following directors are considered not to be “interested persons” as defined in the 1940 Act

    Number of   
    Portfolios in Fund   
    Complex  Other 
Name, Position Held with the Fund,  Principal Occupation(s)  Overseen by  Directorships 
Address*, and Year of Birth  During past 5 years  Director  Held by Director** 
Elizabeth Ballantine  Principal, EBA Associates  106  Durango Herald, Inc; 
Director since 2004      McClatchy 
Member, Nominating and Governance      Newspapers, Inc. 
Committee       
1948       
 
Kristianne Blake  President, Kristianne Gates Blake,  106  Avista Corporation; 
Director since 2007  P.S.    Russell Investment 
Member, Operations Committee      Company; Russell 
1954      Investment Funds 
 
Craig Damos  Chairman/CEO/President, and  106  None 
Director since 2008  Vertical Growth Officer, The Weitz     
Member, Operations Committee  Company     
1954       
 
Richard W. Gilbert  President, Gilbert Communications,  106  Calamos Asset 
Director since 1985  Inc.    Management, Inc. 
Member, Nominating and Governance       
Committee       
Member, Executive Committee       
1940       
 
Mark A. Grimmett  Executive Vice President and CFO,  106  None 
Director since 2004  Merle Norman Cosmetics, Inc.     
Member, Audit Committee       
1960       
 
Fritz S. Hirsch  Director, Focus Products Group;  106  None 
Director since 2005  formerly President, Sassy, Inc.     
Member, Audit Committee       
1951       
 
William C. Kimball  Partner, Kimball – Porter Investments  106  Casey’s General Stores, 
Director since 1999  L.L.C.    Inc. 
Member, Nominating and Governance       
Committee       
1947       
 
Barbara A. Lukavsky  President and CEO, Barbican  106  None 
Director since 1987  Enterprises, Inc.     
Member, Nominating and Governance       
Committee       
1940       
 
Daniel Pavelich  Retired.  106  Catalytic Inc.; Vaagen 
Director since 2007      Bros. Lumber, Inc. 
Member, Audit Committee       
1944       

37


The following directors are considered to be “interested persons” as defined in the 1940 Act, as amended, because of an affiliation with the Manager and Principal Life.

Ralph C. Eucher  Director, Principal Management Corporation (the  106  None 
Director, Chairman  “Manager”), since 2008; Chairman, Principal Funds     
Member, Executive Committee  Distributor, Inc. (“PFD”) and Princor, since 2008; Senior     
1952  Vice President, Principal Life, and Principal Financial     
  Group, since 2008; Director, Principal Shareholder Services     
  (“PSS”) and Currency Management Committee – London,     
  since 2008; Director CCI since 2009; Director, Spectrum,     
  since 2005.     
 
Nora M. Everett  President and Director, the Manager, since 2008; Senior  106  None 
Director, President and CEO  Vice President, Retirement & Investor Services, Principal     
Member, Executive Committee  Life, since 2008; Senior Vice President & Deputy General     
1959  Counsel, Principal Life, 2004-2008; Director, PFD, since     
  2008; CEO, Princor, since 2009; Director, Princor, PSS,     
  Edge, Principal Asset Management Co. (Asia) Limited,     
  since 2008; Chairman, PFA since 2010; Director, Principal     
  International and Principal International Holding Company,     
  LLC, since 2006.     
 
William G. Papesh  Retired December 2007. Prior thereto, President and  106  None 
Director  Director of Edge Asset Management, Inc.; President and     
Member, Operations Committee  CEO of WM Group of Funds 1987-2006.     
1943       

*Correspondence intended for each Director who is other than an Interested Director may be sent to 711 High Street, Des Moines, IA 50392.

**Directorships of any company registered pursuant to Section 12 of the Securities Exchange Act or subject to the requirements of Section 15(d) of the Securities Exchange Act or any other mutual fund.

The following table presents officers of the Funds.

Name, Position Held with the Fund,  Principal Occupation(s) 
Address, and Year of Birth  During past 5 years 
Craig L. Bassett  Vice President and Treasurer, Principal Life; Treasurer, the Manager, PFD, 
Treasurer  Princor and Spectrum since 2006; Vice President and Treasurer, Edge and 
711 High Street, Des Moines, IA 50392  Principal – REI since 2006; Treasurer, PSS since 2007; Vice President and 
1952  Treasurer, Columbus Circle, LLC and PGI since 2007. 
 
Michael J. Beer  Executive Vice President, Chief Operating Officer and Director, the Manager, 
Executive Vice President  since 2008; Executive Vice President, PFD since 2006. President and Director, 
711 High Street, Des Moines, IA 50392  Princor, since 2006; Vice President/Mutual Funds and Broker Dealer, Principal 
1961  Life, since 2001; President and Director, PSS since 2007. 
 
Randy L. Bergstrom  Counsel, Principal Life; Counsel, PGI, since 2006. 
Assistant Tax Counsel   
711 High Street, Des Moines, IA 50392   
1955   

38


Name, Position Held with the Fund,  Principal Occupation(s) 
Address, and Year of Birth  During past 5 years 
David J. Brown  Vice President, Product & Distribution Compliance, Principal Life; Senior Vice 
Chief Compliance Officer  President, PFD, the Manager, and Princor since 2006. Senior Vice President, 
711 High Street, Des Moines, IA 50392  PSS, since 2007. 
1960   
 
Jill R. Brown  President, PFD since 2010; Senior Vice President/Chief Financial Officer, 
Senior Vice President  Princor since 2006; Senior Vice President/Chief Financial Officer, PFD, and PSS, 
1100 Investment Blvd, ste 200  since 2007. Senior Vice President/Chief Financial Officer, the Manager, since 
El Dorado Hills, CA 95762  2008. 
1967   
 
Cary Fuchs  Vice President, PSS, since 2008; FVO, WMSS, 2005-2007; prior thereto, 
Senior Vice President of Distribution  Divisional Vice President, BFDS. 
1100 Investment Blvd, ste 200   
El Dorado Hills, CA 95762   
1957   
 
Steve Gallaher  Assistant General Counsel, Principal Life and PFD since 2006; Assistant General 
Assistant Counsel  Counsel, PMC, PSS, and Princor since 2007; Prior thereto, self-employed writer. 
711 High Street Des Moines, IA 50392   
1955   
 
Ernie H. Gillum  Chief Compliance Officer, the Manager, since 2004; Vice President, Product 
Vice President, Assistant Secretary  Development, the Manager, and Princor, since 2000; Vice President, PSS, since 
711 High Street Des Moines, IA 50392  2007. 
1955   
 
Patrick A. Kirchner  Counsel, Principal Life; Assistant General Counsel, the Manager, PGI, and 
Assistant Counsel  Princor since 2008. 
711 High Street, Des Moines, IA 50392   
1960   
 
 
Carolyn F. Kolks  Counsel, Principal Life, since 2003. 
Assistant Tax Counsel   
711 High Street, Des Moines, IA 50392   
1962   
 
Jennifer A. Mills  Attorney, Principal Life since 2008; Counsel, Princor, PSS, the Manager, and 
Assistant Counsel  PFD, since 2009; Registered Product Analyst, Principal Funds, 2007-2008, 
711 High Street, Des Moines, IA 50392  Registered Product Development Consultant, Princor 2006-2007; and prior 
1973  thereto, Judicial Law Clerk, Iowa Supreme Court. 
 
Layne A. Rasmussen  Vice President and Controller – Mutual Funds, the Manager. 
Vice President, Controller, and CFO   
711 High Street, Des Moines, IA 50392   
1958   
 
Michael D. Roughton  Vice President and Associate General Counsel, Principal Life and Principal 
Counsel  Financial Group, since 2001; Counsel, PGI, since 2001; Senior Vice President 
711 High Street, Des Moines, IA 50392  and Counsel, the Manager, and Princor, since 2001. Senior Vice President and 
1951  Counsel, PFD, since 2007. 

39


Name, Position Held with the Fund,  Principal Occupation(s) 
Address, and Year of Birth  During past 5 years 
Adam U. Shaikh  Counsel, Principal Life and PFD, since 2006. Prior thereto, practicing attorney; 
Assistant Counsel  Counsel, the Manager, since 2007. 
711 High Street, Des Moines, IA 50392   
1972   
 
Dan Westholm  Director Treasury, Principal Life, the Manger, and Princor. 
Assistant Treasurer   
711 High Street, Des Moines, IA 50392   
1966   
 
Beth Wilson  Vice President, Principal, since 2007. Prior thereto, Segment Business Manager 
Vice President and Secretary  for Pella Corporation. 
711 High Street, Des Moines, IA 50392   
1956   

The Audit Committee selects the independent auditors for the Fund and oversees the activities of the independent auditors as well as the internal auditors. The committee also receives reports about accounting and financial matters affecting the Fund.

The Executive Committee is selected by the Board. It may exercise all the powers of the Board, with certain exceptions, when the Board is not in session. The Committee must report its actions to the Board.

The Nominating and Governance Committee selects and nominates all candidates who are not “interested persons” of the fund for election to the Board. The committee also oversees the structure and efficiency of the Board of Directors and the committees the Board establishes, and the activities of the Funds’ Chief Compliance Officer.

The Operations Committee oversees the provision of administrative and distribution services to the Funds, communications with the Funds’ shareholders, and provides review and oversight of the Funds’ operations.

Additional information about the Fund is available in the Prospectuses dated December 21, 2009 and the Statement of Additional Information dated December 21, 2009. These documents may be obtained free of charge by writing or telephoning Principal Funds Distributor, Inc., P.O. Box 10423, Des Moines, IA 50306. Telephone 1-800-222-5852.

PROXY VOTING POLICIES

A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities and the results of the proxy votes for the most recent twelve months ended June 30 may be obtained free of charge by telephoning Principal Funds Distributor, Inc., at 1-800-222-5852, at the Principal Funds website at www.principal.com, or at www.sec.gov.

SCHEDULES OF INVESTMENTS

The Fund files complete schedules of investments with the Securities and Exchange Commission as of May 31 and November 30 of each year on Form N-Q. The Fund’s Form N-Q can be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. or on the Commission’s website at www.sec.gov. Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330.

40


BOARD CONSIDERATION OF INVESTMENT ADVISORY CONTRACTS

During the period covered by this report, the Board of Directors of Principal Funds, Inc. (“PFI”) approved (1) an amended subadvisory agreement related to the addition of Principal Global Investors, LLC (“PGI”) to the International Equity Index Fund; (2) an amended subadvisory agreement related to the addition of Mellon Capital Management Corporation (“Mellon”) to the Bond Market Index Fund; and (3) an amended Management Agreement with Principal Management Corporation ( the “Manager”) related to the addition of the International Equity Index Fund and the Bond Market Index Fund.

PGI and Mellon Subadvisory Agreements and Management Agreement with the Manager

At the September 14, 2009 meeting, the Board considered whether to approve the amended subadvisory agreements with PGI related to the International Equity Index Fund and Mellon related to the Bond Market Index Fund and an amended and restated Management Agreement with the Manager related to the International Equity Index Fund and the Bond Market Index Fund. The Management Agreement and the subadvisory agreements are collectively referred to as the “Advisory Agreements.” The Board considered the nature, quality and extent of services to be provided under the Management Agreement, including administrative services. The Board noted that in September 2009, in connection with the renewal of management agreements for the other PFI Funds, the Board had: (1) reviewed the services provided by the Manager to the other PFI Funds under the Management Agreement; (2) considered the experience and skills of senior management leading fund operations, the experience and skills of the personnel performing the functions under the Management Agreement and the resources made available to such personnel, the ability of the Manager to attract and retain high-quality personnel, and the organizational depth and stability of the Manager and concluded that appropriate resources were provided under the Management Agreement for the existing funds; (3) considered the program developed by the Manager for identifying, recommending, monitoring and replacing subadvisors for the PFI Funds and concluded that this due diligence process was working well; and (4) considered the compliance program established by the Manager and the level of compliance attained by the Manager. Based upon all relevant factors, the Board concluded that the nature, quality and extent of the services the Manager is expected to provide to the International Equity Index and Bond Market Index Funds under the Management Agreement are satisfactory.

The Board considered the nature, quality and extent of services expected to be provided under each subadvisory agreement. The Board considered the reputation, qualifications and background of each subadvisor, investment approach of each subadvisor, the experience and skills of each subadvisor’s investment personnel who would be responsible for the day-to-day management of the Funds, and the resources made available to such personnel. In addition, the Board considered the Manager’s program for identifying, recommending, monitoring and replacing subadvisors for the Funds and that the Manager recommended each subadvisor for the Funds based upon that program.

As the International Equity Index Fund and the Bond Market Index Fund were newly created series, the Board did not review performance of the Funds since no track records were available. The Board considered the representation by the Manager that PGI has achieved a solid performance record with other passive equity strategies, while maintaining satisfactory risk controls, and considered the ability of PGI to manage this type of index fund. The Board reviewed the historical performance of a Mellon composite portfolio with an investment strategy similar to the proposed portfolio strategy for the Bond Market Index Fund, as compared to a Morningstar peer group and the relevant benchmark index. The Board noted that as of June 30, 2009, Mellon had outperformed the relevant benchmark index over the last one, three, five and ten year periods. The Board concluded, based on this information, that investment performance was expected to be satisfactory.

The Board considered the Funds’ management and subadvisory fees. The Board received information from the Manager, based on data supplied by Lipper Analytical Services, comparing the proposed management fees to advisory fees of mutual funds with similar investment objectives. With respect to the subadvisory fees proposed to be paid to Mellon, the Board considered that the subadvisory fee rates were negotiated at arm’s length between the Manager and the subadvisor. The Board noted that each subadvisor represented that the proposed subadvisory fee for the Funds was not higher than fees charged to its other subadvisory clients with the same mandate. The Board considered whether there are economies of scale with respect to the management and subadvisory services to be provided to the Funds under the Advisory Agreements. Although the proposed management fee schedules do not include breakpoints, the Board concluded that the fee schedules are appropriate at currently anticipated asset levels. The Board noted the breakpoints included in the subadvisors’ fee schedules and concluded that the fee schedules reflect an appropriate recognition of economies of scale at currently anticipated asset levels. On the basis of the information provided, the Board concluded that the proposed management and subadvisory fees were reasonable.

As the Funds are newly created series, the Board did not review information about the profitability of the Advisory Agreements to the Manager or subadvisors. The Board noted that, at least for the first year of operations, the profitability of the Funds was expected to be negative due to start-up costs and fee waivers, based upon forecasted asset levels. The Board also noted that the Manager has proposed to compensate the subadvisors from its own management fees and that the proposed fees are represented to be competitive. The Board also considered the character and amount of other incidental benefits to be received by the Manager and subadvisors. The Board noted the Manager’s representation that the soft dollar practices of PGI were appropriate and that Mellon will not use soft dollars.

Based upon all of the information considered and the conclusions reached, the Board determined that the terms of each Advisory Agreement are fair and reasonable and that approval of each of the Advisory Agreements is in the best interests of each Fund.

41


Principal Funds Distributor, Inc.
711 High Street
Des Moines, IA 50392-6370

Do not use this address for business correspondence.

WE’ll GiVE YOu an EdGE®

principalfunds.com

GLOBAL INVESTMENT MANAGEMENT • ASSET ALLOCATION EXPERTISE • RETIREMENT LEADERSHIP

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

     This semiannual report is published as general information for the shareholders of Principal Funds. This material is not authorized for distribution unless preceded or accompanied by a current prospectus that includes more information regarding the risk factors, expenses, policies, and objectives of the funds. Investors should read the prospectus carefully before investing.

To obtain an additional prospectus, please contact your financial professional or call 800-222-5852.

Insurance products and plan administrative services are provided by Principal life Insurance Company. Principal Funds, Inc. is distributed by Principal Funds Distributor, Inc., 800-222-5852, Member SIPC.

Principal Life and Principal Funds Distributor are members of the Principal Financial Group®, Des Moines, IA 50392.

FV675 | 04/2010 | #t10040100Lh ©2010 Principal Financial Services, Inc.


ITEM 2 – CODE OF ETHICS

Not applicable to semi-annual reports.

ITEM 3 – AUDIT COMMITTEE FINANCIAL EXPERT

Not applicable to semi-annual reports.

ITEM 4 – PRINCIPAL ACCOUNTANT FEES AND SERVICES

Not applicable to semi-annual reports.

ITEM 5 – AUDIT COMMITTEE OF LISTED REGISTRANTS

Not applicable.

ITEM 6 – SCHEDULE OF INVESTMENTS

Schedule of Investments is included as part of the Report to Shareholders filed under Item 1 of this form.

ITEM 7 – DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES

Not applicable.

ITEM 8 – PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES

Not applicable.

ITEM 9 – PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS

Not applicable.

ITEM 10 – SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 11 – CONTROLS AND PROCEDURES

a) The registrant's principal executive officer and principal financial officer have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended) are effective (such disclosure controls and procedures having been evaluated within 90 days of the date of this filing).

(b) There have been no changes in the registrant’s internal controls over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d)) that occurred during the registrant’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.


ITEM 12 – EXHIBITS

(a)(1) Code of Ethics - Not applicable to semi-annual reports.

(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 attached hereto as Exhibit 99.CERT.

(b) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 attached hereto as Exhibit 99.906CERT.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

(Registrant)

Principal Funds, Inc.

By /s/ Nora M. Everett

Nora M. Everett, President and CEO

Date 4/22/2010

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By /s/ Nora M. Everett

  Nora M. Everett, President and CEO

Date 4/22/2010

By /s/ Layne A. Rasmussen

Layne A. Rasmussen, Vice President, Controller and Chief Financial Officer

Date 4/22/2010