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Global Diversified Inc Fund (Prospectus Summary): | Global Div Inc Fund

GLOBAL DIVERSIFIED INCOME FUND

Supplement dated March 16, 2012

to the Class A, Class B, Class C, and Class P Shares Prospectus

for Principal Funds, Inc.

dated February 29, 2012

This supplement updates information currently in the Prospectus. Retain this supplement with the Prospectus.

FUND SUMMARIES

GLOBAL DIVERSIFIED INCOME FUND

On or about March 30, 2012, make the following changes.

Under the Principal Investment Strategies heading, delete the seventh paragraph (it begins “A portion of the Fund’s assets may be invested in a diversified portion of bonds”) and substitute:

A portion of the Fund’s assets may be invested in a diversified portfolio of fixed income securities and derivative instruments issued primarily by governments, their agencies, local authorities and instrumentalities and corporate entities domiciled in or exercising the predominant part of their economic activities in emerging markets. Here, "emerging market country" means any country which is considered to be an emerging country by the international financial community (including the International Bank for Reconstruction and Development (also known as the World Bank) and MSCI Emerging Markets Index) and any country included in any J.P. Morgan emerging market bond index. These countries generally include every nation in the world except the United States, Canada, Japan, and Australasia, and most nations located in Western Europe. Investing in many emerging market countries is not feasible or may involve unacceptable political risk. Typically, non-dollar currency exposure will not be hedged.

In the Performance section, add this paragraph immediately above the Total Returns as of December 31 heading:

Effective March 31, 2012, the weightings for the Global Diversified Income Custom Index will change to the following: 38% Barclays Capital U.S. Corporate High Yield 2% Issuer Capped Index; 20% blend of 50% BofA Merrill Lynch Fixed Rate Preferred Securities Index and 50% Barclays Capital U.S. Tier I Capital Securities Index; 14% J.P. Morgan EMBI Global Diversified Index; 5% MSCI All Country World Value Index; 6% Tortoise Midstream MLP Index; 7% blend of 65% S&P 500 Utilities Index, 25% S&P 500 Telecom Services Index and 10% S&P 500 Energy Index; 5% FTSE EPRA/NAREIT Developed Index; and 5% Barclays Capital Investment Grade CMBS Index.

In the Average Annual Total Returns table, add:

Average Annual Total Returns For the periods ended December 31, 2011

Average Annual Total Returns	Average Annual Returns, Label	Average Annual Returns, 1 Year	Life of Fund
J.P. Morgan EMBI Global Diversified Index (reflects no deduction for fees, expenses, or taxes) Global Div Inc Fund	J.P. Morgan EMBI Global Diversified Index (reflects no deduction for fees, expenses, or taxes)	7.35%	17.85%

If the Fund has annual returns for at least one calendar year, provide a bar chart showing the Fund's annual total returns for each of the last 10 calendar years (or for the life of the Fund if less than 10 years), but only for periods subsequent to the effective date of the Fund's registration statement. Present the corresponding numerical return adjacent to each bar. If the Fund's fiscal year is other than a calendar year, include the year-to-date return information as of the end of the most recent quarter in a footnote to the bar chart. Following the bar chart, disclose the Fund's highest and lowest return for a quarter during the 10 years or other period of the bar chart. Provide annual total returns beginning with the earliest calendar year. Calculate annual returns using the Instructions to Item 8(a), except that the calculations should be based on calendar years. If a Fund's shares are sold subject to a sales load or account fees, state that sales loads or account fees are not reflected in the bar chart and that, if these amounts were reflected, returns would be less than those shown. When a Multiple Class Fund offers more than one Class in the prospectus, provide annual total returns in the bar chart for only one of those Classes. The Fund can select which Class to include (e.g., the oldest Class, the Class with the greatest net assets). When a Multiple Class Fund offering one or more Classes offers a new Class in a prospectus that does not offer the shares of any other Class, include the bar chart with annual total returns for any other existing Class for the first year that the Class is offered. Explain in a footnote that the returns are for a Class that is not offered in the prospectus that would have substantially similar annual returns because the shares are invested in the same portfolio of securities and the annual returns would differ only to the extent that the Classes do not have the same expenses. Include return information for the other Class reflected in the bar chart in the performance table.

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