PRINCIPAL FUNDS, INC. DISTRIBUTION PLAN AND AGREEMENT CLASS A SHARES

PRINCIPAL FUNDS, INC.

DISTRIBUTION PLAN AND AGREEMENT 

CLASS A SHARES

DISTRIBUTION PLAN AND AGREEMENT made as of December 14, 2010, by and between
PRINCIPAL FUNDS, 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 A 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 A 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 A shareholders with tax information.
4.	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 A
	shares of a Series of the Fund, Class A shares of each Series shall pay to the Distributor a fee at
	the annual rate as shown on Appendix A (or such lesser amount as the Fund Directors may, from
	time to time, determine) of the average daily net assets of Class A shares of such Series. This fee
	shall be accrued daily and paid monthly or at such other intervals, as the Fund Directors shall

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	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 A shares.
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 A 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 A shares within the
	meaning of Rule 12b-1, then such payment shall be deemed to be authorized by this Plan.
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 A 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 A 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 A 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 standards
	as defined 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 A 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.

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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 FUNDS, INC. 

BY: 

XXXX XXXXXXX, PRESIDENT & CEO 

BY: 

XXXX X. XXXXXX, VICE PRESIDENT & SECRETARY 

PRINCIPAL FUNDS DISTRIBUTOR, INC. 

BY: 

XXXXXXX X. BEER, EXECUTIVE VICE PRESIDENT 

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PRINCIPAL FUNDS, INC.
APPENDIX A
	Distribution or
Series	Service Fee
Bond & Mortgage Securities Fund	0.25%
California Municipal Fund	0.25%
Disciplined LargeCap Blend Fund	0.25%
Diversified International Fund	0.25%
Diversified Real Asset Fund	0.25%
Equity Income Fund	0.25%
Global Diversified Income Fund	0.25%
Global Real Estate Securities Fund	0.25%
Government & High Quality Bond Fund	0.25%
High Yield Fund	0.25%
Income Fund	0.25%
Inflation Protection Fund	0.25%
International Emerging Markets Fund	0.25%
International Growth Fund	0.25%
LargeCap Growth Fund	0.25%
LargeCap S&P 500 Index Fund	0.15%
LargeCap Value Fund	0.25%
MidCap Blend Fund	0.25%
Money Market Fund	0.00%
Preferred Securities Fund	0.25%
Principal Capital Appreciation Fund	0.25%
Principal LifeTime 2010 Fund	0.25%
Principal LifeTime 2020 Fund	0.25%
Principal LifeTime 2030 Fund	0.25%
Principal LifeTime 2040 Fund	0.25%
Principal LifeTime 2050 Fund	0.25%
Principal LifeTime Strategic Income Fund	0.25%
Real Estate Securities Fund	0.25%
XXX – Balanced Portfolio	0.25%
XXX – Conservative Balanced Portfolio	0.25%
XXX – Conservative Growth Portfolio	0.25%
XXX – Flexible Income Portfolio	0.25%
XXX – Strategic Growth Portfolio	0.25%
Short-Term Income Fund	0.15%
SmallCap Blend Fund	0.25%
SmallCap Growth Fund	0.25%
SmallCap Value Fund	0.25%
Tax-Exempt Bond Fund	0.25%

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