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

PRINCIPAL FUNDS, INC.

DISTRIBUTION PLAN AND AGREEMENT 

CLASS C 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 C 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 C 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 shareholders with tax information.
4.	In consideration for the services provided and the expenses incurred by the Distributor pursuant
	to the Distribution Agreement and Paragraphs 2 and 3 hereof, all with respect to Class C
	shares of a Series of the Fund, Class C 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

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	time, determine) of the average daily net assets of Class C 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 C shares. The Distributor may use all
	or any portion of the fee received pursuant to this Plan to compensate securities dealers or
	other persons who have engaged in the sale of Class C shares or to pay any of the expenses
	associated with other activities authorized under Paragraphs 2 and 3 hereof.
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 C 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 C 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 C 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 Underwriter 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 C 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 C 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).

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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 C 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 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
Series
Bond & Mortgage Securities Fund	LargeCap Value Fund
California Municipal Fund	MidCap Blend Fund
Disciplined LargeCap Blend Fund	Money Market Fund
Diversified International Fund	Preferred Securities Fund
Diversified Real Asset Fund	Principal Capital Appreciation Fund
Equity Income Fund	Real Estate Securities Fund
Global Diversified Income Fund	XXX – Balanced Portfolio
Global Real Estate Securities Fund	XXX – Conservative Balanced Portfolio
Government & High Quality Bond Fund	XXX – Conservative Growth Portfolio
High Yield Fund	XXX – Flexible Income Portfolio
Income Fund	XXX – Strategic Growth Portfolio
Inflation Protection Fund	Short-Term Income Fund
International Emerging Markets Fund	SmallCap Blend Fund
International Growth Fund	SmallCap Growth Fund
LargeCap Growth Fund	SmallCap Value Fund
LargeCap S&P 500 Index Fund	Tax-Exempt Bond Fund

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