AMENDMENT TO THE PRINCIPAL BALANCED FUND, INC. SUB-ADVISORY AGREEMENT

                                AMENDMENT TO THE
                          PRINCIPAL BALANCED FUND, INC.
                             SUB-ADVISORY AGREEMENT

Agreement executed as of the 12th day of December 2000, to amend the
Sub-Advisory Agreement executed as of October 20, 2000 (and including any
subsequent amendments thereafter) by and between Principal Management
Corporation (hereinafter called the "Manager") and Principal Capital Income
Investors, LLC (hereinafter called "PCII").

WHEREAS, in the Sub-Advisory Agreement, Manager retained PCII to furnish it with
portfolio selection and related research and statistical services in connection
with the investment advisory services which the Manager has agreed to provide to
the Principal Balanced Fund, Inc. (hereinafter called the "Fund"); and

WHEREAS, the Manager and PCII now wish to amend the Sub-Advisory Agreement;

NOW, THEREFORE, in consideration of the terms and conditions set forth
hereinafter, the parties agree that effective January 1, 2001 Schedule A will
read as follows:

                                   SCHEDULE A

For the services provided and the expenses assumed by PCII pursuant to the
Sub-Advisory Agreement, the Manager, not the Fund, shall pay PCII a sub-advisory
fee, computed daily and paid monthly, at an annual rate of 0.086% of the Fund's
average daily net assets allocated to PCII's management.


             Principal Management Corporation

                 /s/Xxxxx X. Xxxxxx
             by:____________________________

             Principal Capital Income Investors, LLC

                 /s/Xxxxxx X. Xxxxxxx
             by:____________________________