PRINCIPAL FUNDS, INC. AMENDED AND RESTATED SUB-ADVISORY AGREEMENT MIDCAP GROWTH FUND III SERIES

PRINCIPAL FUNDS, INC.
AMENDED AND RESTATED SUB-ADVISORY AGREEMENT
MIDCAP GROWTH FUND III SERIES
AGREEMENT executed as of the 1st day of January, 2010, by and between PRINCIPAL MANAGEMENT
CORPORATION, an Iowa corporation (hereinafter called "the Manager"), and XXXXXX INVESTMENT PARTNERS,
INC., a Pennsylvania corporation (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 Series of 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 MidCap Growth Fund III Series of
the Fund (hereinafter called the “Series”), 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 to be 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 Series, 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 Series.
	(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 conditions require, a recommended investment program for the
		Series consistent with the Series’ investment objective and policies.

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(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 registration statement, Articles of Incorporation and Bylaws, the requirements
	of the 1940 Act, as each of the same shall be from time to time in effect.
(d)	Advise and assist the officers of the Fund, as requested by the officers, in taking such steps as are
	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 obligations, 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.
(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 Series are being observed.
(g)	Upon request, provide assistance and recommendations for 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
	the investment advisory affairs of the Series.
(i)	Open accounts with broker-dealers and futures commission merchants (“broker-dealers”), select
	broker-dealers to effect all transactions for the Series, 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 Series 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 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 Series 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 Series at prices which are advantageous
	to the Series 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 Series 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 Series. In addition, joint repurchase or other accounts may not be utilized by the Series
	except to the extent permitted under any exemptive order obtained by the Sub-Advisor provided that all
	conditions of such order are complied with.

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	(j)	Maintain all accounts, books and records with respect to the Series as are required of an investment
		advisor of a registered investment company pursuant to the 1940 Act and Investment Advisers Act of
		1940 (the “Investment Advisers 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 Series 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 Series 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 Series upon request by the Fund or the Manager. The
		Sub-Advisor has no responsibility for the maintenance of Fund records except insofar as is directly
		related to the services the Sub-Advisor provides to the Series.
	(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 along with certification
		that the Sub-Advisor has implemented procedures for administering 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 Series, 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 Series.
	(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.
	(n)	Perform quarterly and annual tax compliance tests to monitor the Series’ compliance with Subchapter
		M of the Code, subject to receipt of such additional information as may be required from the Manager
		and provided in accordance with Section 9(d) of this Agreement. The Sub-Advisor shall notify the
		Manager immediately upon having a reasonable basis for believing that the Series has ceased to be in
		compliance or that it might not be in compliance in the future. If it is determined that the Series is not in
		compliance with the requirements noted above, the Sub-Advisor, in consultation with the Manager, will
		take prompt action to bring the Series back into compliance (to the extent possible) within the time
		permitted under the Code.
	(o)	Provide a copy of the Sub-Advisor’s Form ADV and any amendments thereto contemporaneously with
		filing of such documents with the Securities and Exchange Commission or other regulatory body.
3.	Compensation
	As full compensation for all services rendered and obligations assumed by the Sub-Advisor hereunder with
	respect to the Series, the Manager shall pay the compensation specified in Appendix A to this Agreement.
4.	Liability of Sub-Advisor
	Neither the Sub-Advisor nor any of its directors, officers, employees, agents or affiliates 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 investment discretion in connection
	with selecting investments for the Series 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, employees, agents, or affiliates.

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5.	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.
6.	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.
7.	Duration and Termination of This Agreement
	This Agreement shall become effective on the latest of (i) the date of its execution, (ii) the date of its
	approval by a majority of the Board of Directors of the Fund, including approval by the 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 or (iii) if required by the 1940 Act, the date of its approval by a majority of the outstanding
	voting securities of the Series. It shall continue in effect 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 the 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 Fund 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 7, the definitions contained in Section 2(a) of the
	1940 Act (particularly the definitions of "interested person," "assignment" and "voting security") shall be
	applied.
8.	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.
9.	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.

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(b)	Any notice under this Agreement shall be in writing, addressed and delivered or mailed postage pre-paid
	to the other party at such address as such other party may designate for the receipt of such notices.
	Until further notice to the other party, it is agreed that the address of the Manager for this purpose shall
	be Principal Financial Group, Xxx Xxxxxx, Xxxx 00000-0000, and the address of the Sub-Advisor shall
	be 0000 Xxxxxxxxx Xxxxx, Xxxxx 000, Xxxxxx, XX 00000. Attention: Compliance Department.
(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 Series.
(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.

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

                                                                                                                         PRINCIPAL MANAGEMENT CORPORATION 

                       /s/ Xxxxxxx X. Beer 

                                                                                                                         By 

                                                                                                                                 Xxxxxxx X. Beer, Executive Vice President and 

                                                                                                                                 Chief Operating Xxxxxxx 

                                                                                                                         XXXXXX INVESTMENT PARTNERS, INC. 

                             /s/ Xxxxx X. XxXxxxx 

                                                                                                                         By 

                                                                                                                                 Xxxxx X. XxXxxxx General Counsel & 

                                                                                                                                 Chief Compliance Officer 

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APPENDIX A
The Sub-Advisor shall serve as investment sub-advisor for the Series. The Manager will pay the Sub-Advisor, as
full compensation for all services provided under this Agreement, a fee computed at an annual rate as follows (the
"Sub-Advisor Percentage Fee"):
Series	Sub-Advisor Percentage Fee
MidCap Growth Fund III	First $600,000,000 of assets	0.500%
	Assets over $600,000,000	0.400%
In calculating the fee for the series included above, assets of any unregistered separate account of Principal Life
Insurance Company and any investment company sponsored by Principal Life Insurance Company to which Sub-Advisor
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 series to arrive at net assets.
The Sub-Advisor Percentage Fee shall be accrued for each calendar day and the sum of the daily fee accruals shall
be paid monthly to the Sub-Advisor. The daily fee accruals will be computed by multiplying the fraction of one over
the number of calendar days in the year by the applicable annual rate described above and multiplying this product
by the net assets of the Series as determined in accordance with the Series’ prospectus and statement of additional
information as of the close of business on the previous business day on which the Series was open for business.
Cash and cash equivalents shall be included in the Series net assets calculation up to a maximum of 1.00% of the
Series net assets. If the Manager requests the Sub-Advisor to raise cash in the Series portfolio in excess of 1.00% of
the Series net assets for the purpose of funding redemptions from the Series, such amount requested shall be
included in the Series net assets calculation.
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.

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