PRINCIPAL FUNDS, INC. AMENDED AND RESTATED DISTRIBUTION PLAN AND AGREEMENT CLASS B SHARES
PRINCIPAL FUNDS, INC. | |
AMENDED AND RESTATED | |
DISTRIBUTION PLAN AND AGREEMENT | |
CLASS B SHARES | |
DISTRIBUTION PLAN AND AGREEMENT made as of December 22, 2008, by and between PRINCIPAL | |
INVESTORS FUND, INC., a Maryland corporation (the "Fund"), and PRINCIPAL FUNDS DISTRIBUTOR, | |
INC., a Washington corporation (the " Distributor "). | |
1. | This Distribution and Service Plan (the “Plan”), when effective in accordance with its terms, shall be the |
written plan contemplated by Securities and Exchange Commission Rule 12b-1 under the Investment | |
Company Act of 1940, as amended (the “Act”) for the Class B shares of each Series identified in | |
Appendix A, attached hereto (the “Series”), a class of shares of Principal Funds, Inc. (the “Fund”). | |
2. | The Fund has entered into a Distribution Agreement on behalf of the Fund with the Distributor, under |
which the Distributor uses all reasonable efforts, consistent with its other business, to secure purchasers | |
of shares of each Series of the Fund (the “Shares”). Such efforts may include, but neither are required to | |
include nor are limited to, the following: (1) formulation and implementation of marketing and | |
promotional activities, such as mail promotions and television, radio, newspaper, magazine and other | |
mass media advertising; (2) preparation, printing and distribution of sales literature provided to the | |
Fund’s shareholders and prospective shareholders; (3) preparation, printing and distribution of | |
prospectuses and statements of additional information of the Fund and reports to recipients other than | |
existing shareholders of the Fund; (4) obtaining such information, analyses and reports with respect to | |
marketing and promotional activities as the Distributor may, from time to time, deem advisable; (5) | |
making payment of sales commission, ongoing commissions and other payments to brokers, dealers, | |
financial institutions or others who sell Shares pursuant to Selling Agreements; (6) paying compensation | |
to registered representatives or other employees of the Distributor who engage in or support distribution | |
of the Fund’s Shares; (7) paying compensation to, and expenses (including overhead and telephone | |
expenses) of, the Distributor; (8) providing training, marketing and support to dealers and others with | |
respect to the sale of Shares; (9) receiving and answering correspondence from prospective | |
shareholders including distributing prospectuses, statements of additional information, and shareholder | |
reports; (10) providing of facilities to answer questions from prospective investors about Shares; (11) | |
complying with federal and state securities laws pertaining to the sale of Shares; (12) assisting investors | |
in completing application forms and selecting dividend and other account options; (13) providing of other | |
reasonable assistance in connection with the distribution of the Fund’s shares; (14) organizing and | |
conducting of sales seminars and making payments in the form of transactional compensation or | |
promotional incentives; and (15) such other distribution and services activities as the Fund determines | |
may be paid for by the Fund pursuant to the terms of this Plan and in accordance with Rule 12b-1 of the | |
Act. | |
3. | The Distribution Agreement also authorizes the Distributor to enter into Service Agreements with other |
selling dealers and with banks or other financial institutions to provide shareholder services to existing | |
Class B shareholders, including without limitation, services such as furnishing information as to the | |
status of shareholder accounts, responding to telephone and written inquiries of shareholders, and | |
assisting Class B shareholders with tax information. | |
4. | (a) In consideration for the services described above, and the expenses incurred by the Distributor |
pursuant to the Distribution Agreement and Paragraphs 2 and 3 hereof, all with respect to Class B | |
shares of a Series of the Fund, Class B shares of each Series shall pay to the Distributor a fee at the | |
annual rate of 1.00% (or such lesser amount as the Fund Directors may, from time to time, | |
determine) of the average daily net assets of Class B shares of such Series, of which 0.75% shall be | |
a distribution fee and 0.25% shall be a service fee. This fee shall be accrued daily and paid monthly | |
or at such other intervals, as the Fund Directors shall determine. The determination of daily net | |
assets shall be made at the close of business each day throughout the month and computed in the | |
manner specified in the Fund’s then current Prospectus for the determination of the net asset value | |
of the Fund’s Class B shares. |
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(b) In consideration of the Distributor’s role in the distribution of the Class B shares of each Series of the | |
Fund (including the Class B shares of such Series issued in connection with its acquisition of the | |
assets of a fund of WM Trust I, WM Trust II or WM Strategic Asset Management Portfolios, LLC ( | |
the “Washington Mutual Funds”), the Fund shall pay the Distributor its “Allocable Portion,” as | |
defined below, of the maximum distribution fee contemplated by the Fund’s Distribution Plan and | |
Agreement – Class B Shares for each Series as in effect on the date hereof (the “Plan”) that | |
would be attributable to the Distributor under the principles described below for determining the | |
Distributor’s Allocable Portion of the distribution fee. | |
Notwithstanding anything to the contrary elsewhere in this Agreement or the Plan: | |
(i) | The distribution fee accrues daily at the rate of 75 basis points per annum on the average daily |
net asset value of all of the outstanding Class B shares of each Series, including Class B | |
shares issued in connection with the Fund’s acquisition of assets of the Washington Mutual | |
Funds, subject to the applicable rules of the NASD, and shall be paid monthly as promptly as | |
possible after the last day of each month but in any event prior to the tenth day of the | |
following calendar month; | |
(ii) | The Distributor’s Allocable Portion in respect of each Series shall be 100% until such time as it |
shall be replaced as Distributor of the Class B shares of the Series; thereafter, its Allocable | |
Portion shall be the portion of the total distribution fee accruing in respect of outstanding | |
Class B shares of the Series as is fairly attributable to the portion of such outstanding Class | |
B shares that are outstanding when the Distributor ceases to serve in that capacity or are | |
later issued as dividends or other distributions in respect of such Class B shares or in free | |
exchanges for Class B shares of other Series or other funds for which the Distributor acts as | |
principal distributor that are fairly attributable to the Distributor on the same basis; and the | |
Allocable Portion of each subsequent distributor (a “Subsequent Distributor”) shall be the | |
portion of such outstanding Class B shares that were sold by the Fund during the period | |
such Subsequent Distributor served as distributor or were later issued as dividends or other | |
distributions in respect of such Class B shares or in free exchanges for Class B shares of | |
other Series or funds for which such Subsequent Distributor acts as principal distributor that | |
are fairly attributable to such Subsequent Distributor on the same basis; it being understood | |
that the Fund and the Distributor shall agree on procedures for making these allocations (the | |
“Allocation Procedures”); | |
(iii) | The Distributor shall be deemed to have fully earned its Allocable Portion of the distribution fee |
payable in respect of Class B shares of a Series as of any point in time upon the sale of the | |
outstanding commission shares (i.e., those that are initially subject to contingent deferred | |
sales charges under circumstances set forth in the Prospectus for such shares whether or | |
not such shares are later released from that obligation) of such Series as of such point in | |
time; | |
(iv) | The Distributor hereby directs the Fund, and the Fund hereby agrees, to pay all of the |
Distributor’s Allocable Portion of the distribution fee, as may be more specifically directed by | |
the Distributor in Irrevocable Payment Instructions, to persons which have provided funds to | |
the Distributor to cover or otherwise enable the incurring of expenses associated with | |
services in connection with the distribution of the Class B shares of the funds of the | |
Washington Mutual Funds in exchange for the assets of which Class B shares of the Fund | |
were issued; and | |
(v) | The Fund’s obligation to pay the Distributor (or an assignee of the Distributor) its Allocable |
Portion of the distribution fee as provided hereby shall be absolute and unconditional and not | |
subject to offset or counterclaim and shall not be terminated or modified (including without | |
limitation, by change in the rules applicable to the conversion of the Class B shares into | |
shares of another class) for any reason (including a termination of the Plan, a termination of |
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the Distributor as distributor of the Class B shares of the Fund or any Series thereof or a | ||
termination of this Agreement) except: | ||
a. | To the extent required by a change in the Investment Company Act of 1940 (the “1940 | |
Act”), the rules and regulations under the 1940 Act, the Conduct Rules of the National | ||
Association of Securities Dealers, Inc. (the “NASD”), or any judicial decisions or interpretive | ||
pronouncements by the Securities and Exchange Commission or its staff, which is either | ||
binding upon the Distributor or generally complied with by similarly situated distributors of | ||
mutual fund shares; | ||
b. | on a basis which does not alter the Distributor’s Allocable Portion of the distribution fee | |
computed with reference to shares of the Fund or any Series thereof or any other fund for | ||
which it acts as distributor that were outstanding immediately prior to such termination or | ||
modification or which are thereafter issued directly or indirectly as a result of dividends or | ||
other distributions or free exchanges of such shares; or | ||
c. | in connection with a “Complete Termination” of the Plan by the Fund, and for this purpose: | |
(1) a “Complete Termination” of the Plan for the Class B shares of a Series shall occur only | ||
if and only so long as the Plan is terminated for such Class B shares and following such | ||
termination, no distribution fees are imposed either on such Class B shares or on any | ||
“Similar Class” of shares of such Series; (2) a “Similar Class” is any class of shares of such | ||
Series that has a sales load structure substantially similar to that of the class for which this | ||
Plan was terminated, taking into account the total sales load borne directly or indirectly by | ||
holders of such class of shares including commission paid directly by such holders to | ||
brokers on issuance of shares of such class, asset based sales charges paid by the | ||
Fund/Series and allocated to shares of such class, contingent deferred sales charges | ||
payable by holders of shares of such class, installment or deferred sales charges payable | ||
by holders of shares of such class, and similar charges borne directly or indirectly by | ||
holders of shares of such class; and (3) a class of shares would not be considered | ||
substantially similar to the Class B shares if (I) a front end sales charge is paid by the | ||
purchaser, or (II)(A) the shares are purchased at net asset value, (B) any commission paid | ||
up front to any selling agent(s) does not exceed 1.0% of the purchase amount, (C) the | ||
period during which any contingent deferred sales charge applies does not exceed 12 | ||
months from the purchase date, and (D) there is no other sales load feature borne directly | ||
or indirectly by holders of such class of shares. | ||
(vi) | This Section 4(b) is not intended to, and shall not, prohibit the Fund from issuing and selling a | |
Similar Class (as defined in paragraph v(c)(2) above) of any Series; but is merely intended to | ||
prohibit the Fund from treating a termination of the Plan in respect of Class B shares of any | ||
Series as a "Complete Termination" for purposes of paragraph (v)(c)(1) of this Section 4(b) | ||
while it continues to issue a Similar Class. | ||
(vii) | The Fund’s obligations under this Section 4(b) shall terminate upon the Fund’s payment in full to | |
the Distributor and each Subsequent Distributor, if any, such distributor’s Allocable Portion in | ||
respect of each Series. | ||
5. | The Fund presently pays, and will continue to pay, a management fee to Principal Management | |
Corporation (the “Manager”) pursuant to a Management Agreement between the Fund and the Manager | ||
(the “Management Agreement”). It is recognized that the Manager may use its management fee | ||
revenue, as well as its past profits or its resources from any other source, to make payment to the | ||
Distributor with respect to any expenses incurred in connection with the distribution of Class B shares, | ||
including the activities referred to in Paragraph 2 hereof. To the extent that the payment of management | ||
fees by the Fund to the Manager should be deemed to be indirect financing of any activity primarily | ||
intended to result in the sale of Class B shares within the meaning of Rule 12b-1, then such payment | ||
shall be deemed to be authorized by this Plan. |
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6. | This Plan shall not take effect until it has been approved (a) by a vote of at least a majority (as defined in | |
the Act) of the outstanding Class B shares of the Series of the Fund and (b) by votes of the majority of | ||
both (i) the Board of Directors of the Fund, and (ii) those Directors of the Fund who are not "interested | ||
persons" (as defined in the Act) of the Fund and who have no direct or indirect financial interest in the | ||
operation of this Plan or any agreements related to this Plan (the "Disinterested Directors"), cast in | ||
person at a meeting called for the purpose of voting on this Plan or such agreements. | ||
7. | Unless sooner terminated pursuant to Paragraph 6, this Plan shall continue in effect for a period of twelve | |
months from the date it takes effect and thereafter shall continue in effect so long as such continuance is | ||
specifically approved at least annually in the manner provided for approval of this Plan in Paragraph 6(b). | ||
8. | A representative of the Distributor shall provide to the Board and the Board shall review at least quarterly | |
a written report of the amounts so expended and the purposes for which such expenditures were made. | ||
9. | This Plan may be terminated at any time by vote of a majority of the Disinterested Directors, or by vote of | |
a majority (as defined in the Act) of the outstanding Class B shares of the Series of the Fund. | ||
10. | Any agreement of the Fund related to this Plan shall be in writing and shall provide: | |
A. | That such agreement may be terminated at any time, without payment of any penalty, by vote of a | |
majority of the Disinterested Directors or by a vote of a majority (as defined in the Act) of the | ||
outstanding Class B shares of the Series of the Fund on not more than sixty (60) days' written notice | ||
to any other party to the agreement); and | ||
B. | That such agreement shall terminate automatically in the event of its assignment. | |
11. | While the Plan is in effect, the Fund’s board of directors shall satisfy the fund governance standard in | |
Securities and Exchange Commission Rule 0-1(a)(7). | ||
12. | This Plan does not require the Manager or Distributor to perform any specific type or level of distribution | |
activities or to incur any specific level of expenses for activities primarily intended to result in the sale of | ||
Class B shares. | ||
13. | The Fund shall preserve copies of this Plan and any related agreements and all reports made pursuant to | |
Paragraph 8, for a period of not less than six years from the date of the Plan, or the agreements or such | ||
report, as the case may be, the first two years in an easily accessible place. | ||
14. | This Plan may not be amended to increase materially the amount of Fees provided for in Paragraph 4 | |
hereof unless such amendment is approved in the manner provided for initial approval in Paragraph 6 | ||
hereof and no other material amendment to this Plan shall be made unless approved in the manner | ||
provided for initial approval in Paragraph 6(b) hereof. | ||
IN WITNESS WHEREOF, the parties hereto have executed and delivered this Plan as of the first date | ||
written above. |
PRINCIPAL FUND, INC. |
BY: /s/ Xxxx X. Xxxxxx |
XXXX X. XXXXXX, VICE PRESIDENT AND SECRETARY |
PRINCIPAL FUNDS DISTRIBUTOR, INC. |
BY: /s/ Xxxxxxx X. Beer |
XXXXXXX X. BEER, EXECUTIVE VICE PRESIDENT |
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PRINCIPAL FUNDS, INC. | ||
APPENDIX A | ||
Distribution | Service | |
Series | Fee | Fee |
Bond & Mortgage Securities Fund | 0.75% | 0.25% |
California Municipal Bond | 0.75% | 0.25% |
Disciplined LargeCap Blend | 0.75% | 0.25% |
Diversified International Fund | 0.75% | 0.25% |
Equity Income Fund | 0.75% | 0.25% |
Government Securities & High Quality Bond Fund | 0.75% | 0.25% |
High Yield Fund | 0.75% | 0.25% |
Income | 0.75% | 0.25% |
International Emerging Markets Fund | 0.75% | 0.25% |
LargeCap Growth Fund | 0.75% | 0.25% |
LargeCap Value Fund | 0.75% | 0.25% |
MidCap Blend Fund | 0.75% | 0.25% |
MidCap Stock | 0.75% | 0.25% |
Money Market | 0.75% | 0.25% |
Mortgage Securities | 0.75% | 0.25% |
LargeCap Blend Fund II | 0.75% | 0.25% |
LargeCap Blend Fund I | 0.75% | 0.25% |
LargeCap Growth Fund I | 0.75% | 0.25% |
LargeCap Value Fund III | 0.75% | 0.25% |
MidCap Growth Fund III | 0.75% | 0.25% |
MidCap Value Fund I | 0.75% | 0.25% |
MidCap Value Fund II | 0.75% | 0.25% |
SmallCap Growth Fund II | 0.75% | 0.25% |
Principal LifeTime 2020 Fund | 0.75% | 0.25% |
Principal LifeTime 2030 Fund | 0.75% | 0.25% |
Principal LifeTime 2040 Fund | 0.75% | 0.25% |
Principal LifeTime 2050 Fund | 0.75% | 0.25% |
Principal LifeTime Strategic Income Fund | 0.75% | 0.25% |
Real Estate Securities Fund | 0.75% | 0.25% |
XXX – Balanced Portfolio | 0.75% | 0.25% |
XXX – Conservative Balanced Portfolio | 0.75% | 0.25% |
XXX – Conservative Growth Portfolio | 0.75% | 0.25% |
XXX – Flexible Income | 0.75% | 0.25% |
XXX – Strategic Growth | 0.75% | 0.25% |
Small Cap Growth | 0.75% | 0.25% |
SmallCap Blend Fund | 0.75% | 0.25% |
SmallCap Value Fund | 0.75% | 0.25% |
Tax-Exempt Bond Fund | 0.75% | 0.25% |
West Coast Equity | 0.75% | 0.25% |
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