PRINCIPAL FUNDS, INC. SUB-ADVISORY AGREEMENT JENNISON ASSOCIATES LLC


PRINCIPAL FUNDS, INC.
SUB-ADVISORY AGREEMENT
XXXXXXXX ASSOCIATES LLC

AGREEMENT executed as of March 16, 2010, by and between PRINCIPAL MANAGEMENT CORPORATION, an
Iowa corporation (hereinafter called "the Manager"), and XXXXXXXX ASSOCIATES LLC, a Delaware limited liability
company (hereinafter called “the Sub-Advisor).

W I T N E S S E T H:

WHEREAS, the Manager is the manager and investment adviser to each Fund of the Principal Funds, Inc., (the
"Fund"), an open-end management investment company registered under the Investment Company Act of 1940, as
amended (the "1940 Act"); and

WHEREAS, the Manager desires to retain the Sub-Advisor to furnish it with portfolio selection and related research and
statistical services in connection with the investment advisory services for the portion of assets of each series identified
in Appendix A (hereinafter called the “Series”) as may be designated by the Manager from time to time (such assets
hereinafter called the “Xxxxxxxx Portfolio”), which the Manager has agreed to provide to the Fund, and the Sub-Advisor
desires to furnish such services; and

WHEREAS, The Manager has furnished the Sub-Advisor with copies properly certified or authenticated of each of the
following and will promptly provide the Sub-Advisor with copies properly certified or authenticated of any amendment or
supplement thereto:

(a)	Management Agreement (the "Management Agreement") with the Fund;

(b)	The Fund's registration statement and financial statements as filed with the Securities and Exchange
	Commission;

(c)	The Fund's Articles of Incorporation and By-laws;

(d)	Policies, procedures or instructions adopted or approved by the Board of Directors of the Fund relating to
	obligations and services provided by the Sub-Advisor.

NOW, THEREFORE, in consideration of the premises and the terms and conditions hereinafter set forth, the parties
agree as follows:

1.	Appointment of Sub-Advisor

	In accordance with and subject to the Management Agreement, the Manager hereby appoints the Sub-Advisor
	to perform the services described in Section 2 below for investment and reinvestment of the securities and other
	assets of the Xxxxxxxx Portfolio, subject to the control and direction of the Manager and the Fund's Board of
	Directors, for the period and on the terms hereinafter set forth. The Sub-Advisor accepts such appointment and
	agrees to furnish the services hereinafter set forth for the compensation herein provided. The Sub-Advisor shall
	for all purposes herein be deemed to be an independent contractor and shall, except as expressly provided or
	authorized, have no authority to act for or represent the Fund or the Manager in any way or otherwise be
	deemed an agent of the Fund or the Manager.

2.	Obligations of and Services to be Provided by the Sub-Advisor

	The Sub-Advisor will:

	(a)	Provide investment advisory services, including but not limited to research, advice and supervision for the
		Xxxxxxxx Portfolio.

	(b)	Furnish to the Board of Directors of the Fund for approval (or any appropriate committee of such Board),
		and revise from time to time as economic conditions require, a recommended investment program for the
		Fund consistent with the Series’ investment objective and policies.


(c)	Implement the approved investment program by placing orders for the purchase and sale of securities
	without prior consultation with the Manager and without regard to the length of time the securities have
	been held, the resulting rate of portfolio turnover or any tax considerations, subject always to the provisions
	of the Fund's Articles of Incorporation and Bylaws, the requirements of the 1940 Act, as each of the same
	may be amended from time to time.

(d)	Advise and assist the officers of the Fund, as requested by the officers, in taking such steps as are
	reasonably necessary or appropriate to carry out the decisions of its Board of Directors, and any
	appropriate committees of such Board, regarding the general conduct of the investment business of the
	Series.

(e)	Maintain, in connection with the Sub-Advisor’s investment advisory services provided to the Xxxxxxxx
	Portfolio, its compliance with the 1940 Act and the regulations adopted by the Securities and Exchange
	Commission thereunder and the Series’ investment strategies and restrictions as stated in the Fund’s
	prospectus and statement of additional information, subject to receipt of such additional information as
	may be required from the Manager and provided in accordance with Section 11(d) of this Agreement. The
	Sub-Advisor has no responsibility for the maintenance of Fund records except insofar as is directly related
	to the services it provides to the Series. Compliance with the investment program designed for the
	Xxxxxxxx Portfolio pursuant to Section 2(b) above, shall be deemed compliance with the investment
	strategies and restrictions of the Series as stated in the Fund’s prospectus and statement of additional
	information.

(f)	Report to the Board of Directors of the Fund at such times and in such detail as the Board of Directors may
	reasonably deem appropriate in order to enable it to determine that the investment policies, procedures
	and approved investment program of the Xxxxxxxx Portfolio are being observed.

(g)	Upon request, provide assistance in the determination of the fair value of certain securities when reliable
	market quotations are not readily available for purposes of calculating net asset value in accordance with
	procedures and methods established by the Fund's Board of Directors.

(h)	Furnish, at its own expense, (i) all necessary investment and management facilities, including salaries of
	clerical and other personnel required for it to execute its duties faithfully, and (ii) administrative facilities,
	including bookkeeping, clerical personnel and equipment necessary for the efficient conduct of its duties
	under this Agreement.

(i)	Open accounts with broker-dealers and futures commission merchants (“broker-dealers”), select broker-
	dealers to effect all transactions for the Xxxxxxxx Portfolio, place all necessary orders with broker-dealers
	or issuers (including affiliated broker-dealers), and negotiate commissions, if applicable. To the extent
	consistent with applicable law, purchase or sell orders for the Xxxxxxxx Portfolio may be aggregated with
	contemporaneous purchase or sell orders of other clients of the Sub-Advisor. In such event allocation of
	securities so sold or purchased, as well as the expenses incurred in the transaction, will be made by the
	Sub-Advisor in the manner the Sub-Advisor considers to be the most equitable and consistent with its
	fiduciary obligations to the Fund and to other clients. The Manager recognizes that, in some cases, this
	procedure may limit the size of the position that may be acquired or sold for the Xxxxxxxx Portfolio. The
	Sub-Advisor will report on such allocations at the request of the Manager, the Fund or the Fund’s Board of
	Directors providing such information as the number of aggregated trades to which the Xxxxxxxx Portfolio
	was a party, the broker-dealers to whom such trades were directed and the basis for the allocation for the
	aggregated trades. The Sub-Advisor shall use its best efforts to obtain execution of transactions for the
	Xxxxxxxx Portfolio at prices which are advantageous to the Xxxxxxxx Portfolio and at commission rates that
	are reasonable in relation to the benefits received. However, the Sub-Advisor may select brokers or
	dealers on the basis that they provide brokerage, research or other services or products to the Sub-
	Advisor. To the extent consistent with applicable law, the Sub-Advisor may pay a broker or dealer an
	amount of commission for effecting a securities transaction in excess of the amount of commission or
	dealer spread another broker or dealer would have charged for effecting that transaction if the Sub-Advisor
	determines in good faith that such amount of commission is reasonable in relation to the value of the
	brokerage and research products and/or services provided by such broker or dealer. This determination,
	with respect to brokerage and research products and/or services, may be viewed in terms of either that


	particular transaction or the overall responsibilities which the Sub-Advisor and its affiliates have with
	respect to the Xxxxxxxx Portfolio as well as to accounts over which they exercise investment discretion.
	Not all such services or products need be used by the Sub-Advisor in managing the Xxxxxxxx Portfolio. In
	addition, joint repurchase or other accounts may not be utilized by the Xxxxxxxx Portfolio except to the
	extent permitted under any exemptive order obtained by the Sub-Advisor provided that all conditions of
	such order are complied with. Pursuant to the rules promulgated under Section 326 of the USA PATRIOT
	ACT, broker-dealers are required to obtain, verify and record information that identifies each person who
	opens an account with them. In accordance therewith, Manager acknowledges that broker-dealers whom
	the Sub-Advisor selects to execute transactions in the Xxxxxxxx Portfolio on the Series’ behalf may seek
	identifying information about the Manager and/or the Series and the Manager will provide such information
	to such broker-dealers, if requested.

(j)	Maintain all accounts, books and records with respect to the Xxxxxxxx Portfolio as are required of an
	investment advisor of a registered investment company pursuant to the 1940 Act and Investment Advisor’s
	Act of 1940 (the “Investment Advisor’s Act”), and the rules thereunder, and furnish the Fund and the
	Manager with such periodic and special reports as the Fund or Manager may reasonably request. In
	compliance with the requirements of Rule 31a-3 under the 1940 Act, the Sub-Advisor hereby agrees that
	all records that it maintains for the Xxxxxxxx Portfolio are the property of the Fund, agrees to preserve for
	the periods described by Rule 31a-2 under the 1940 Act any records that it maintains for the Fund and that
	are required to be maintained by Rule 31a-1 under the 1940 Act, and further agrees to surrender promptly
	to the Fund any records that it maintains for the Xxxxxxxx Portfolio upon request by the Fund or the
	Manager.

(k)	Observe and comply with Rule 17j-1 under the 1940 Act and the Sub-Advisor’s Code of Ethics adopted
	pursuant to that Rule as the same may be amended from time to time. The Manager acknowledges
	receipt of a copy of Sub-Advisor’s current Code of Ethics. Sub-Advisor shall promptly forward to the
	Manager a copy of any material amendment to the Sub-Advisor’s Code of Ethics.

(l)	From time to time as the Manager or the Fund may request, furnish the requesting party reports on
	portfolio transactions and reports on investments held by the Xxxxxxxx Portfolio, all in such detail as the
	Manager or the Fund may reasonably request. The Sub-Advisor will make available its officers and
	employees to meet with the Fund’s Board of Directors at the Fund’s principal place of business on due
	notice to review the investments of the Xxxxxxxx Portfolio.

(m)	Provide such information as is customarily provided by a sub-advisor and may be required for the Fund or
	the Manager to comply with their respective obligations under applicable laws, including, without limitation,
	the Internal Revenue Code of 1986, as amended (the “Code”), the 1940 Act, the Investment Advisers Act,
	the Securities Act of 1933, as amended (the “Securities Act”), and any state securities laws, and any rule
	or regulation thereunder. Sub-Advisor will advise Manager of any changes in personnel responsible for
	managing the Xxxxxxxx Portfolio within a reasonable time after any such change. Manager acknowledges
	receipt of Sub-Advisor’s Form ADV more than 48 hours prior to the execution of this Agreement.

(n)	Perform quarterly and annual tax compliance tests to monitor the Xxxxxxxx Portfolio’ compliance with
	Subchapter M of the Code and Section 817(h) of the Code, subject to receipt of such additional
	information as may be required from the Manager and provided in accordance with Section 11(d) of this
	Agreement. The Sub-Advisor shall notify the Manager immediately upon having a reasonable basis for
	believing that the Xxxxxxxx Portfolio has ceased to be in compliance or that it might not be in compliance in
	the future. If it is determined that the Xxxxxxxx Portfolio is not in compliance with the requirements noted
	above, the Sub-Advisor, in consultation with the Manager, will take prompt action to bring the Xxxxxxxx
	Portfolio back into compliance (to the extent possible) within the time permitted under the Code.

(o)	Have the responsibility and authority to vote proxies solicited by, or with respect to, the issuers of securities
	held in the Xxxxxxxx Portfolio. The Manager shall cause to be forwarded to Sub-Advisor all proxy
	solicitation materials that it receives and shall assist Sub-Advisor in its efforts to conduct the proxy voting
	process. Notwithstanding the foregoing, the Sub-Advisor shall not be obligated to take any action or
	render advice involving legal action on Fund’s behalf with respect to assets in the Xxxxxxxx Portfolio that
	become subject to any legal notices or proceedings, including securities class actions and bankruptcies.
	The Manager retains the right to proceed directly as a security holder against the issuer of any security in


	the Xxxxxxxx Portfolio. The Sub-Advisor will also not be authorized to take custody or possession of any of
	the Series’ cash or securities in the Xxxxxxxx Portfolio.

3.	Prohibited Conduct

	In providing the services described in this agreement, the Sub-Advisor will not consult with any other investment
	advisory firm that provides investment advisory services to any investment company sponsored by Principal Life
	Insurance Company regarding transactions for the Fund in securities or other assets.

4.	Compensation

	As full compensation for all services rendered and obligations assumed by the Sub-Advisor hereunder with
	respect to the Fund, the Manager shall pay the compensation specified in Appendix A to this Agreement.

5.	Liability of Sub-Advisor

	Neither the Sub-Advisor nor any of its directors, officers or employees shall be liable to the Manager, the Fund
	or its shareholders for any loss suffered by the Manager or the Fund resulting from any error of judgment made
	in the good faith exercise of the Sub-Advisor's duties under this Agreement or as a result of the failure by the
	Manager or any of its affiliates to comply with the terms of this Agreement except for losses resulting from willful
	misfeasance, bad faith or gross negligence of, or from reckless disregard of, the duties of the Sub-Advisor or
	any of its directors, officers or employees.

6.	Indemnification

	The Manager agrees to indemnify and hold harmless the Sub-Advisor from and against any and all claims,
	losses, liabilities or damages (including reasonable attorneys’ fees and other related expenses), (“Losses”)
	howsoever arising, from or in connection with this Agreement or the performance by the Sub-Advisor of its
	duties hereunder, so long as the Sub-Advisor shall, after receipt of notice of any claim or commencement of any
	action, promptly notify the Manager in writing of the claim or commencement of such action. The Manager shall
	not be liable for any settlement of any claim or action effected without its written consent. Nothing contained
	herein shall require the Manager to indemnify the Sub-Advisor for Losses resulting from the Sub-Advisor’s willful
	misfeasance, bad faith or gross negligence in the performance of its duties or from its reckless disregard of its
	obligations and duties under this Agreement.

7.	Supplemental Arrangements

	The Sub-Advisor may enter into arrangements with other persons affiliated with the Sub-Advisor or with
	unaffiliated third parties to better enable the Sub-Advisor to fulfill its obligations under this Agreement for the
	provision of certain personnel and facilities to the Sub- Advisor, subject to written notification to and approval of
	the Manager and, where required by applicable law, the Board of Directors of the Fund.

8.	Regulation

	The Sub-Advisor shall submit to all regulatory and administrative bodies having jurisdiction over the services
	provided pursuant to this Agreement any information, reports or other material which any such body may
	request or require pursuant to applicable laws and regulations.

9.	Duration and Termination of This Agreement

	This Agreement shall become effective as of the date of its execution and, unless otherwise terminated, shall
	continue in effect for a period of two years and thereafter from year to year provided that the continuance is
	specifically approved at least annually either by the Board of Directors of the Fund or by a vote of a majority of
	the outstanding voting securities of the Series and in either event by a vote of a majority of the Board of
	Directors of the Fund who are not interested persons of the Manager, Principal Life Insurance Company, the
	Sub-Advisor or the Fund cast in person at a meeting called for the purpose of voting on such approval.


If the shareholders of a Series fail to approve the Agreement or any continuance of the Agreement in
accordance with the requirements of the 1940 Act, the Sub-Advisor will continue to act as Sub-Advisor with
respect to the Series pending the required approval of the Agreement or its continuance or of any contract with
the Sub-Advisor or a different manager or Sub-Advisor or other definitive action; provided, that the
compensation received by the Sub-Advisor in respect to the Series during such period is in compliance with
Rule 15a-4 under the 1940 Act.

This Agreement may be terminated at any time without the payment of any penalty by the Board of Directors of
the Fund or by the Sub-Advisor, the Manager or by vote of a majority of the outstanding voting securities of the
Series on sixty days written notice. This Agreement shall automatically terminate in the event of its assignment.
In interpreting the provisions of this Section 9, the definitions contained in Section 2(a) of the 1940 Act
(particularly the definitions of "interested person," "assignment" and "voting security") shall be applied.

10. Amendment of this Agreement

No material amendment of this Agreement shall be effective until approved, if required by the 1940 Act or the
rules, regulations, interpretations or orders issued thereunder, by vote of the holders of a majority of the
outstanding voting securities of the Series and by vote of a majority of the Board of Directors of the Fund who
are not interested persons of the Manager, the Sub-Advisor, Principal Life Insurance Company or the Fund cast
in person at a meeting called for the purpose of voting on such approval, and such amendment is signed by
both parties.

11. General Provisions

(a)	Each party agrees to perform such further acts and execute such further documents as are necessary to
	effectuate the purposes hereof. This Agreement shall be construed and enforced in accordance with and
	governed by the laws of the State of Iowa. The captions in this Agreement are included for convenience
	only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or
	effect.

(b)	Any notice or report to be given pursuant to the Agreement shall be deemed to have been duly given or
	made (a) as of the date delivered, and shall be effective upon receipt, if delivered personally, mailed by
	registered or certified mail (postage prepaid, return receipt requested) or overnight delivery or (b) as of the
	date sent if provided by facsimile transmission confirmed afterwards as soon as reasonably possible by
	telephone call, first class mail, or by any method specified in (a) above, to the following addresses
	specified below:


To the Sub-Advisor:

Xxxxxxxx Associates LLC
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention:	Xxxxx X. Xxxxxx, Vice Chairman and Managing Director
Facsimile:	(000) 000-0000

With a copy to (at the address set forth above):

Attention:	Legal Department
Facsimile:	(000) 000-0000
E-mail: xxxxxxxxxxxxxxx@xxxxxxxx.xxx

To the Manager:

Principal Financial Group
Xxx Xxxxxx, Xxxx 00000-0000,
Attention: Xxxxxxx Xxxxxxxx
Facsimile: 000-000-0000


(c)	The Sub-Advisor will promptly notify the Manager in writing of the occurrence of any of the following events:

	(1)	the Sub-Advisor fails to be registered as an investment adviser under the Investment Advisers Act or
		under the laws of any jurisdiction in which the Sub-Advisor is required to be registered as an investment
		advisor in order to perform its obligations under this Agreement.

	(2)	the Sub-Advisor is served or otherwise receives notice of any action, suit, proceeding, inquiry or
		investigation, at law or in equity, before or by any court, public board or body, involving the affairs of the
		Fund.

(d)	The Manager shall provide (or cause the Series custodian to provide) timely information to the Sub-Advisor
	regarding such matters as the composition of the assets of the Series, cash requirements and cash
	available for investment in the Series, and all other reasonable information as may be necessary for the
	Sub-Advisor to perform its duties and responsibilities hereunder.

(e)	The Sub-Advisor represents that it will not enter into any agreement, oral or written, or other
	understanding under which the Fund directs or is expected to direct portfolio securities transactions, or
	any remuneration, to a broker or dealer in consideration for the promotion or sale of Fund shares or
	shares issued by any other registered investment company. Sub-advisor further represents that it is
	contrary to the Sub-advisor’s policies to permit those who select brokers or dealers for execution of fund
	portfolio securities transactions to take into account the broker or dealer’s promotion or sale of Fund
	shares or shares issued by any other registered investment company.

(f)	The Sub-Advisor agrees that neither it nor any of its affiliates will in any way refer directly or indirectly to
	its relationship with the Fund, the Series, or the Manager or any of their respective affiliates in offering,
	marketing or other promotional materials without the express written consent of the Manager.

(g)	This Agreement contains the entire understanding and agreement of the parties.

(h)	This Agreement shall become effective on the date on which the Sub-Advisor commences
	providing services under this Agreement.

(i)	This Agreement may be executed in any number of counterparts, each of which when so executed shall be
	an original, but all the counterparts shall together constitute one and the same instrument

		.

IN WITNESS WHEREOF, the parties have duly executed this Agreement on the date first above written.

PRINCIPAL MANAGEMENT CORPORATION

By /s/ Xxxx Xxxxxxx

Xxxx Xxxxxxx

President & Chief Executive Officer

XXXXXXXX ASSOCIATES LLC

By /s/ Xxxxx Xxxxxx

Xxxxx Xxxxxx

Managing Director

APPENDIX A

Xxxxxxxx Associates LLC (“Xxxxxxxx”) shall serve as an investment sub-advisor for a portion of the assets of the

Series identified below as may be designated by the Manager to Xxxxxxxx from time to time the “Xxxxxxxx

Portfolio”). The Manager will pay Xxxxxxxx as full compensation for all services provided under this Agreement, a

fee, computed daily and paid monthly, at an annual rate as shown below of the Xxxxxxxx Portfolio’s net assets as

the first day of each month allocated to Xxxxxxxx’x management.

In calculating the fee for a series included in the table, assets of any unregistered separate account of Principal Life

Insurance Company and any investment company sponsored by Principal Life Insurance Company to which Xxxxxxxx

provides investment advisory services and which have the same investment mandate as the series for which the fee is

calculated, will be combined with the assets of the Xxxxxxxx Portfolio to arrive at net assets.

If this Agreement becomes effective or terminates before the end of any month, the fee (if any) for the period from the

effective date to the end of such month or from the beginning of such month to the date of termination, as the case may

be, shall be prorated according to the proportion which such period bears to the full month in which such effectiveness or

termination occurs.


Diversified Real Asset Fund
Sub-Advisor’s Fee as a Percentage of Average Daily Net Assets
First $100 million	...........................0.55%
Assets over $100 million*	...........................0.50%


* During any period when the Fund’s Average Daily Net Assets equal or exceed $100 million, Xxxxxxxx’x fee as a
percentage of average daily net assets shall be 0.50% on all assets.

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PRINCIPAL FUNDS, INC. SUB-ADVISORY AGREEMENT JENNISON ASSOCIATES LLC

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