PRINCIPAL FUNDS, INC. AMENDED AND RESTATED SUB-ADVISORY AGREEMENT AMERICAN CENTURY SUB-ADVISED FUNDS AGREEMENT executed as of the 8th day of March, 2010 by and between PRINCIPAL MANAGEMENT CORPORATION, an Iowa corporation (hereinafter called "the...

PRINCIPAL FUNDS, INC.

AMENDED AND RESTATED SUB-ADVISORY AGREEMENT

AMERICAN CENTURY SUB-ADVISED FUNDS

AGREEMENT executed as of the 8^thday of March, 2010 by and between PRINCIPAL

MANAGEMENT CORPORATION, an Iowa corporation (hereinafter called "the Manager"), and

AMERICAN CENTURY INVESTMENT MANAGEMENT, INC., a Delaware 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 each

of the Series of the Fund identified in Appendix A hereto (each 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;

(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

	(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) a description of its LargeCap Growth investment strategies,
		with the understanding that the strategies are similar or identical to those used for other
		funds managed by the Sub-Advisor. The Manager shall ensure that the strategy is
		consistent with the Series’ investment objective and policies prior to presenting the
		recommendation to the Board of Directors.

	(c)	Implement the approved investment strategy 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 Certificate of
		Incorporation and Bylaws and 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 reasonably 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)	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 and as agreed by the Sub-Advisor
		in order to enable the Board to determine that the investment policies, procedures and
		approved investment program of the Series are being observed. It is generally
		expected that such reports will be made on a quarterly basis, in a format used with the
		level of detail agreed upon by the parties.

	(f)	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.

	(g)	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.

	(h)	Open accounts with broker-dealers and future 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 or, if appropriate, crossed
		with contemporaneous purchase or sell orders of other clients of the Sub-Advisor. If
		any trades are crossed, Sub-Advisor may charge the Fund for reasonable expenses
		incurred in such cross-trade, excluding brokerage commissions, fees (other than
		customary transfer fees) or other remuneration paid in connection with the transaction.
		A transaction fee charged by a custodial bank will be considered a customary transfer
		fee for purposes of this agreement. 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 a manner consistent with the Sub-Advisor’s allocation policy and 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. Notwithstanding
	the foregoing, nothing in this Agreement shall be construed to require the Sub-Advisor
	to use any broker or dealer that provides brokerage, research or other services, nor to
	use any broker or dealer that the Manager may recommend. 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.

(i)	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 Adviser’s Act of 1940 (the “Investment Adviser’s Act”), and the rules
	thereunder, and furnish the Fund and the Manager with such quarterly 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 Account 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.

(j)	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.

(k)	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 and the Sub-Advisor shall agree. The Sub-
	Advisor will make available appropriate representatives 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 once a year.


	(l)	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.

	(m)	Perform quarterly and annual tax compliance tests to monitor the Series’ compliance
		with Subchapter M of the Code. 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.

	(n)	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 strategy and restrictions
		as stated in the Fund’s prospectus and statement of additional information.
	(o)	Notify the Manager of the filing of any amendments to the Sub-Advisor’s Form ADV
		contemporaneously with filing of such documents with the Securities and Exchange
		Commission or other regulator agency.

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 Series, 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 and/or any insurance, securities or other laws and rules applicable to the
	management and marketing of the Fund, 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.

	The Manager agrees that subject to the investment objective, investment policies and
	investment restrictions of the Series as set forth in the Fund’s registration statement as in
	effect from time to time, the Sub-Advisor’s adherence to a LargeCap Growth investment
	style generally used by the Sub-Advisor in managing its other LargeCap Growth Funds, shall


	not be considered a failure by Sub-Advisor to use its best judgment, efforts and advice under
	this Agreement.

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.	Manager’s Representations

	The Manager represents and warrants that (i) it is registered as an investment adviser under
	the Investment Advisers Act and will continue to be so registered for so long as this
	Agreement remains in effect; (ii) it is not prohibited by the 1940 Act or the Investment
	Advisers Act from performing the services contemplated by this Agreement; (iii) it has met,
	and will continue to meet for so long as this Agreement remains in effect, any applicable
	federal or state requirements, or the applicable requirements of any regulatory or industry
	self-regulatory agency, necessary to be met in order to perform the services contemplated
	by this Agreement; (iv) it has the authority to enter into and perform the services
	contemplated by this Agreement, and (v) it will immediately notify the Sub-Advisor of the
	occurrence of any event that would disqualify the Manager from serving as an investment
	advisor of an investment company pursuant to Section 9(a) of the 1940 Act or otherwise.

9.	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 Fund 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 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 or upon termination of the
Management Agreement, provided the Sub-Advisor has received prior written notice of such
termination. 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. Indemnification

(a)	The Sub-Advisor agrees to indemnify and hold harmless the Manager, any affiliated
	person within the meaning of Section 2(a)(3) of the 1940 Act (“affiliated person”) of the
	Manager and each person, if any who, within the meaning of Section 15 of the
	Securities Act controls (“controlling persons”) the Manager, against any and all losses,
	claims, damages, liabilities or litigation, including reasonable legal expenses
	(collectively “Losses”) to which the Manager or such affiliated person or controlling
	person of the Manager may become subject under the Securities Act, the 1940 Act, the
	Investment Advisers Act, under any other statute, law, rule or regulation at common law
	or otherwise, arising out of the Sub-Advisor’s responsibilities hereunder (1) to the extent
	of and as a result of the willful misconduct, bad faith, or gross negligence by the Sub-
	Advisor, any of the Sub-Advisor’s employees or representatives or any affiliate of or any
	person acting on behalf of the Sub-Advisor; or (2) as a result of any untrue statement of
	a material fact contained in the Registration Statement, including any amendment
	thereof or any supplement thereto, or the omission to state therein a material fact
	required to be stated therein or necessary to make the statement therein not
	misleading, if such a statement or omission was made in reliance upon and in
	conformity with written information furnished by the Sub-Advisor to the Manager
	specifically for use therein; provided, however, that in no case is the Sub-Advisor’s
	indemnity in favor of the Manager or any affiliated person or controlling person of the
	Manager deemed to protect such person against any liability to which any such person
	would otherwise be subject by reason of willful misconduct, bad faith or gross
	negligence in the performance of its duties or by reason of its reckless disregard of its
	obligations and duties under this Agreement.

(b)	The Manager agrees to indemnify and hold harmless the Sub-Advisor, any affiliated
	person and any controlling person of the Sub-Advisor, if any, against any and all Losses
	to which the Sub-Advisor or such affiliated person or controlling person of the Sub-
	Advisor may become subject under the Securities Act, the 1940 Act, the Investment
	Advisers Act, under any other statute, law, rule or regulation, at common law or
	otherwise, arising out of the Manager’s responsibilities as investment manager of the
	Fund (1) to the extent of and as a result of the willful misconduct, bad faith, or gross
	negligence by the Manager, any of the Manager’s employees or representatives or any
	affiliate of or any person acting on behalf of the Manager, or (2) as a result of any
	untrue statement of a material fact contained in the Registration Statement, including
	any amendment thereof or any supplement thereto, or the omission to state therein a
	material fact required to be stated therein or necessary to make the statement therein
	not misleading; provided, however, that in no case is the Manager’s indemnity in favor
	of the Sub-Advisor or any affiliated person or controlling person of the Sub-Advisor
	deemed to protect such person against any liability to which any such person would
	otherwise be subject by reason of willful misconduct, bad faith or gross negligence in
	the performance of its duties or by reason of its reckless disregard of its obligations and
	duties under this Agreement. It is agreed that the Manager’s indemnification obligations
	under this Section will extend to expenses and costs (including reasonable attorneys
	fees) incurred by the Sub-Advisor as a result of any litigation brought by the Manager
	alleging the Sub-Advisor’s failure to perform its obligations and duties in the manner
	required under this Agreement unless judgment is rendered for the Manager.

11. 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.

12. General Provisions

	(a) Each party agrees to perform such further acts and execute such further documents as
	are necessary to effectuate the purposes hereof. 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 be 0000 Xxxx Xxxxxx,
	Xxxxxx Xxxx, XX 00000, Attention: General Counsel.

	(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, any
	applicable investment restrictions imposed by state insurance laws and regulations, and
	all other reasonable information as may be necessary for the Sub-Advisor to perform its
	duties and responsibilities hereunder.

	(e) The Manager will provide Sub-Advisor promptly with any changes to the Fund’s Articles
	of Incorporation, By-laws, registration statement, policies, procedures, instructions, and
	any other document relevant to the Sub-Advisor’s management of the Series. The
	parties agree that the Sub-Advisor is not responsible for compliance with any such
	changes until notified and provided with a written copy of such change.

	(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.

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

written.

PRINCIPAL MANAGEMENT CORPORATION

By /s/ Xxxxxxx X. Beer

Xxxxxxx J Beer, Executive Vice President

AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.

By /s/ Xxxx X. Xxxxx

Xxxx X. Xxxxx

APPENDIX A

The Sub-Advisor shall serve as investment sub-advisor for the LargeCap Growth Fund II of the Fund. 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"):


LargeCap Growth Fund II

Sub-Advisor Fee as a
Percentage of Daily Net Assets

First $50,000,000	0.450%
Next $200,000,000	0.400%
Next $500,000,000	0.350%
Above $750,000,000	0.300%

In calculating the fee for a Series, assets of any existing unregistered separate account of Principal Life Insurance Company and any existing 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 Series, will be combined (together, the “Aggregated Assets”). The fee charged for the assets in the Series shall be determined by calculating a fee on the value of the Aggregated Assets using the above fee schedule and multiplying the aggregate fee by a fraction, the numerator of which is the amount of assets in the Series and the denominator of which is the amount of the Aggregated Assets.

The Sub-Advisor Percentage Fee shall be accrued for each calendar day and the sum of the daily fee accruals shall be wired monthly to the Sub-Advisor, and shall be accompanied or supplemented by such supportive documentation as the Sub-Advisor may reasonably request. 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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PRINCIPAL FUNDS, INC. AMENDED AND RESTATED SUB-ADVISORY AGREEMENT AMERICAN CENTURY SUB-ADVISED FUNDS AGREEMENT executed as of the 8th day of March, 2010 by and between PRINCIPAL MANAGEMENT CORPORATION, an Iowa corporation (hereinafter called "the...

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