PRINCIPAL  FUNDS, INC.
AMENDED AND RESTATED SUB-ADVISORY AGREEMENT
SMALLCAP VALUE FUND II AND
 MIDCAP VALUE FUND I

AGREEMENT executed as of May 1, 2009, by and between PRINCIPAL
MANAGEMENT CORPORATION (hereinafter called "the Manager"), and LOS
ANGELES CAPITAL MANAGEMENT AND EQUITY RESEARCH, INC. ("LA Capital")
(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 investment advisory services with respect to assets allocated by
the Manager for management by the Sub-Adviser for a portion of the
portfolios of the  SmallCap Value Fund II and  MidCap Value Fund I of
the Fund (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;

	(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 act as the Manager's agent and
attorney-in-fact with respect to the investment and reinvestment of
assets in the Series with full power and authority to direct any
custodian of the assets of the Series to purchase, sell or exchange any
stocks, bonds, or other securities or such other assets which are
acceptable to the Sub-Advisor (individually, "security" and
collectively, "securities") and to issue directly to a broker or dealer
such orders for the purchase, sale or exchange of securities or other
property, as the Sub-Advisor may deem appropriate and without prior
consultation with the Manager, 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 each 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
registration statement, Articles 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 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. Except for expenses specifically assumed or
agreed to be paid by the Sub-Advisor under this Agreement, the Sub-
Advisor shall not be liable for any expenses of the Manager, the Fund or
the Series including, without limitation, (i) interest and taxes, (ii)
brokerage commissions and other costs in connection with the purchase or
sale of securities or other investment instruments with respect to the
Series, and (iii) custodian fees and expenses.

(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 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 a 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 a 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 a 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 a 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)	Vote proxies received on behalf of the Series in a manner
consistent with Sub-Advisor's proxy voting policies and procedures and
provide a record of votes cast containing all of the voting information
required by Form N-PX in an electronic format to enable the Series to
file Form N-PX as required by SEC rule.

(o)	Respond to tender offers, rights offerings and other voluntary
corporate action requests affecting securities held by the Fund and
complete and file notices of claims in connection with class action
lawsuits concerning securities owned by the Fund.

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 sub-advisory services to the Fund or a fund that is under
common control with the Fund regarding transactions for the Fund in the
securities or other assets allocated to the Sub-Advisor pursuant to this
Agreement, except as provided by Rule 12d-3-1 under the 1940 Act.

	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 a 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 insurance
laws and rules 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 Sub-Advisor shall not have any responsibilities with
respect to any assets of the Fund other than the Series.  The Manager
shall not be responsible for any loss incurred by reason of any act or
omission of any dealer or broker, or the Manager, or any custodian.

The Sub-Advisor shall be responsible only for managing the Series in
good faith and in accordance with the investment objectives, fundamental
policies and restrictions, and shall have no responsibility whatsoever
for, and shall incur no liability on account of (i) selection or
establishment of such investment objectives, fundamental policies and
restrictions (ii) advice on, or management of, any other assets for
Manager or the Fund, (iii) filing of any tax or information returns or
forms, withholding or paying any taxes, or seeking any exemption or
refund for the Manager or the Fund, (iv) registration of the Fund or
Series with any government or agency, or (v) administration of the plans
and trusts investing through the Fund, (vi) overall Fund compliance with
the requirements of the 1940 Act, which requirements are outside of the
Sub-Advisor's control, and any requirements of Subchapter M of the
Internal Revenue Code of 1986, as amended, which are outside of the Sub-
Advisor's control and shall be indemnified and held harmless by Manager
for any loss in carrying out the terms and provisions of this Agreement,
including reasonable attorney's fees, indemnification to the Fund, or
any shareholder thereof and, brokers and commission merchants, fines,
taxes, penalties and interest.  Sub-Advisor, however, shall be liable
for any liability, damages, or expenses of Manager or the Fund arising
out of the negligence, malfeasance or violation of applicable law by any
of its employees in providing investment management services under this
Agreement; and, in such cases, the indemnification by Manager, referred
to above, shall be inapplicable, and the Sub-Advisor shall indemnify and
hold harmless the Fund and Manager for any loss arising therefrom.

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 as of the date of its execution
and, unless otherwise terminated, 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 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.	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 judgement 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.
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 the Principal Financial Group, Des
Moines, Iowa 50392-0200, and the address of the Sub-Advisor shall be
11150 Santa Monica Blvd, Ste 200, Los Angeles, CA  90025.

(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 a
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 a Series, cash requirements and cash
available for investment in a 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


By /s/ Mike Beer_________________________________
Mike Beer, Executive Vice President


LOS ANGELES CAPITAL MANAGEMENT AND
EQUITY RESEARCH, INC.


By /s/ Thomas D. Stevens_________________________
			Thomas D. Stevens, CFA  Chairman


APPENDIX A


The Sub-Advisor shall serve as investment sub-advisor for each Series of
the Fund identified below. 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 shown below (the "Sub-Advisor Fee"):


Series	Sub-Advisor Fee (as a Percentage of
	Daily Net Assets)

SmallCap Value Fund II 	First $100,000,000 of assets	0.50%
	Next $200,000,000 of assets	0.45%
	Assets over $300,000,000	0.35%

 MidCap Value Fund I	All Assets.......................................0.30%





	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.

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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