Organizational Structure Principal Financial Group

Organizational Structure

Principal Financial Group is broken up into the U.S. Asset Management and Accumulation division, the International Asset Management and Accumulation division, and the Life and Health Insurance division. The U.S. Asset Management and Accumulation division is divided into the Principal Global Investors sub-division and the Asset Accumulation division. The International Asset Management and Accumulation division has just one subdivision, the Principal International subdivision. The Life and Health Insurance division is broken up into the Individual Life Insurance subdivision, the Health Insurance subdivision, and the Specialty Benefits Insurance subdivision. (Prospectus 7)

Sales

Group Insurance Offices -- These offices work with agents, brokers, consultants and you to find the best possible group insurance solutions. Life, dental, vision, short- and long-term disability insurance products and wellness solutions. Sales for Group Insurance Solutions are handled at the company's Group Regional Insurance Solutions Offices, with designated offices for Large Cases involving more than 1,000 lives. For example, there were three Regional Offices in the state of California, San Diego, Orange County, and San Francisco, with Large Cases being handled only at the Orange County office. (http://www.principal.com/global/ussales/hccalifornia.htm)

Retirement Offices -- These offices work with agents, brokers, consultants and you to find employee benefits solutions to fit your needs. Retirement Services Sales are handled through the company's Regional Retirement Services Offices. (http://www.principal.com/locator/RepLocator).

Individual Sales Offices -- Representatives can help you set and achieve your financial goals with life and disability insurance, key employee benefit programs, business protection plans, retirement planning and more. These individual sales offices are broken into Individual Sales and Brokerage & Wholesaling. (http://www.principal.com/global/ussales/us48a.htm) The company's national sales force includes regional offices, local Principal Financial Group agencies (termed "Business Centers"), and local brokerage general agencies. These local brokerage agencies are independent agencies which carry Principal Financial Group products. (http://www.principal.com/global/ussales/us05a.htm)

Investment Product Sales -- Investment products are offered by registered representatives who can assist you in selecting investments which suit your objectives and risk tolerance.

Does this kind of organization exhibit a functional, divisional, matrix, or other structure? (http://www.principal.com/global/index.htm). The companies investment products, termed "securities products" are offered by Registered Representatives of Princor Financial Services Corporation, Des Moines, Iowa, 50392-0200, 800.247.4123, member SIPC. (http://www.principal.com/global/ussales/prin05.htm) These Registered Representatives are usually located at the same Business Centers which handle individual sales.

Distribution

Distribution - The company takes a multi-channel approach to distribution of its wide array of financial products. (Prospectus 14).

Its Proprietary distribution channel is divided into the Direct and Affiliated channels. The Direct channel is divided into the Principal Connection subchannel and the Worksite subchannel. These subchannels both operate via employers. The Affiliated channel has only one subchannel, the Career Agency subchannel.

Its Non-Proprietary/Independent distribution channel is divided into the Investment-oriented, Insurance-oriented, and Banks channels. The Investment-oriented channel only has one subchannel: the Warehouses, Regional B/Ds & Planners subchannel. The Insurance-oriented channel only has one subchannel: the Insurance producers channel. The Banks channel only has one subchannel, the Banks, B/Ds, and Marketers channel. (Prospectus 14)

Operation of the Company

Sales are done through the company's Local Business Centers, Regional Retirement Services Offices, and Regional Group Insurance Solutions Offices. This is where the sales manager will listen to the needs of the prospective client and present the company's value proposition.

Once a relationship is established with the client, the client is assigned an Account Representative at the same Business Center. The Account Representative becomes familiar with the details of the Client's financial situation and performs actions and changes on the Client's account for the Client. The final product services are delivered by Account Representatives located at the local and regional Business Centers.