PRINCIPAL FUNDS, INC. AMENDED AND RESTATED SUB-ADVISORY AGREEMENT UBS SUB- ADVISED FUNDS


PRINCIPAL FUNDS, INC.
AMENDED AND RESTATED SUB-ADVISORY AGREEMENT
UBS SUB-ADVISED FUNDS


AGREEMENT executed as of the 1^stday of July, 2009, by and between PRINCIPAL MANAGEMENT
CORPORATION, an Iowa corporation (hereinafter called "the Manager"), and UBS Global Asset Management
(Americas) Inc. (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 SmallCap Growth Fund II and the
LargeCap Value Fund I of the Fund (referred collectively to hereinafter as “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 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 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 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
	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 obligations provided to the
	Series, 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 10(d) of this Agreement.

(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 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 (excluding brokerage expenses and pricing and bookkeeping
	services).

(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.


(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 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 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 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 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
	provided 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.

(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. Sub-Advisor will advise Manager of any changes in Sub-Advisor’s
	general partners 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 Series‘ 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 10(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)	Have the responsibility and authority to vote proxies solicited by, or with respect to, the issuers of
	securities held in the Series. 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.


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, 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 negligence
	of, or from reckless disregard of, the duties of the Sub-Advisor or any of its directors, officers, employees,
	agents (excluding any broker-dealer selected by the Sub-Advisor), or affiliates.

6.	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.

7.	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.

8.	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 8, the definitions contained in Section 2(a) of the
	1940 Act (particularly the definitions of "interested person," "assignment" and "voting security") shall be
	applied.

9.	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.

10. 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 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 be51

Xxxx 00^xxXxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxx Xxxxxxxxxx.

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

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 Officer

UBS GLOBAL ASSET MANAGEMENT (AMERICAS) INC.

/s/ Xxxxxxxx X. Xxxxx, Director

By:_____________________________

/s/ Xxxxx X. Xxxx, Managing Director

By:_____________________________


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"):

SmallCap Growth Fund II Fee

Net Assets	Sub-Advisor’s Fee as a Percentage of Average Daily Net Assets
First $50 million	0.60%
Next $250 million	0.55%
Over $300 million	0.45%

In calculating the fee for the SmallCap Growth Fund II of Principal Funds, Inc., assets of any unregistered
separate account of Principal Life Insurance Company and any investment company sponsored by Principal Life
Insurance Company to which the Sub-Advisor provides investment advisory services and which have the same
investment mandate as the SmallCap Growth Fund II, will be combined with the assets of the SmallCap Growth
Fund II series of the Fund to arrive at net assets.


LargeCap Value Fund I Fee

Net Assets	Sub-Advisor’s Fee as a Percentage of Average Daily Net Assets
First $200 million	0.25%
Next $300 million	0.20%
Over $500 million	0.18%

In calculating the fee for the LargeCap Value Fund I of Principal Funds, Inc., assets of any unregistered

separate account of Principal Life Insurance Company and any investment company sponsored by Principal Life

Insurance Company to which the Sub-Advisor provides investment advisory services and which have the same

investment mandate as the LargeCap Value Fund I, will be combined with the assets of the LargeCap Value

Fund I series of the Fund 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 Fund as determined in accordance with the Fund’s prospectus and statement of additional

information as of the close of business on the previous business day on which the Fund was open for business.

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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PRINCIPAL FUNDS, INC. AMENDED AND RESTATED SUB-ADVISORY AGREEMENT UBS SUB- ADVISED FUNDS

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