PRINCIPAL FUNDS, INC.
 SUB-ADVISORY AGREEMENT
 W.H. REAVES & CO., INC. SUB-ADVISED FUND

AGREEMENT executed as of the October 5, 2011, by and between PRINCIPAL
MANAGEMENT CORPORATION, an Iowa corporation (hereinafter called "the
Manager"), and W.H. REAVES & CO., 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 Fund of
the Principal  Funds, Inc., (the "Fund"), an open-end management
investment company registered under the Investment Company Act of 1940, as
amended (the "1940 Act"); and

WHEREAS, the Manager desires to retain the Sub-Advisor to furnish it with
portfolio selection and related research and statistical services in
connection with the investment advisory services for each series
identified in Appendix A (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
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 Manager
represents and warrants that it has been given full power and
authority by the Fund's Board of Directors to appoint the Sub-
Advisor hereunder. 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. The Manager shall provide prior written
notice to the Sub-Advisor of any amendment to the investment
objectives and policies of the Series that may impact the Sub-
Advisor's investment program and such amendment shall become
effective only upon the Sub-Advisor's written acknowledgment of
its receipt of such amendment, and the Sub-Advisor shall be
provided a reasonable time to make appropriate adjustments to
the investment program and to otherwise comply with such
amendment.

(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 provided to the Series, its compliance with
the 1940 Act and the regulations adopted by the Securities and
Exchange Commission thereunder and the Series' investment
strategies and restrictions as stated in the Fund's prospectus
and statement of additional information, subject to receipt of
such additional information as may be required from the Manager
and provided in accordance with Section 11(d) of this Agreement.
The Sub-Advisor has no responsibility for the maintenance of
Fund records except  to the extent described in (j) below.

(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 in the determination of the
fair value of certain securities when reliable market quotations
are not readily available for purposes of calculating net asset
value in accordance with procedures and methods established by
the Fund's Board of Directors; provided that the Sub-Advisor
shall incur not liability for any such assistance taken or not
taken in good faith.

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

(i)	Open accounts with broker-dealers and futures commission
merchants ("broker-dealers"), select broker-dealers to effect
all transactions for the 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 Manager recognizes that, in
some cases, this procedure may limit the size of the position
that may be acquired or sold for the Series.  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 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 Manager acknowledges and agrees that
the Sub-Advisor may retain copies of all records it maintains
for the Fund insofar as necessary to comply with applicable law
and regulation. The Manager agrees to cooperate in good faith
with the Sub-Advisor with respect to sharing, providing copies
or otherwise making available such records as the Sub-Advisor
may reasonably need for regulatory, compliance or litigation
defense purposes, which obligation shall survive the termination
of this Agreement.

(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 reasonably
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 reasonably 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 Senior Management (i.e. Chief
Investment Officer and Chief Executive Officer) 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)	Have the responsibility and authority to vote proxies solicited
by, or with respect to, the issuers of securities held in the
Series and to take any other corporate or related action
requested of the shareholders of an issuer 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. The Sub-Advisor shall not be liable with respect
to voting of proxies or taking other corporate action if the
proxy materials and related shareholder communications are not
received by the Sub-Advisor in a timely manner. The Manager
acknowledges and agrees that the Sub-Advisor will not be
required to advise or take any action on behalf of the Manager
or the Fund, including filing any proof of claim forms, with
respect to any bankruptcies, class actions or other legal
proceedings involving securities held or formerly held by the
Fund or the issuers of those securities.

     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 duties under this Agreement or as a
result of the failure by the Manager or any of its affiliates to
comply with the terms of this Agreement except for and to the extent
of losses resulting directly 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
(excluding any broker-dealer, counterparty, or other similar market
participant or intermediary selected by the Sub-Advisor), or
affiliates.

     6.	Indemnification

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

     7.	Supplemental Arrangements

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

     8.	Regulation

The Sub-Advisor shall submit to all regulatory and administrative
bodies and courts 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, regulations or subpoena.

     9.	Duration and Termination of This Agreement

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

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

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

     10.	Amendment of this Agreement

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

     11.	General Provisions

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

(b)	Any notice 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, Des Moines, Iowa 50392-0200, and the
address of the Sub-Advisor shall be Reaves Asset Management, 10
Exchange Place, 18th Floor, Jersey City, New Jersey, 07302, Attn:
Chief Compliance Officer.

(c)	Each party to this Agreement will promptly notify the other
party to this Agreement in writing of the occurrence of any of
the following events:

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

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

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

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

(f)	The Sub-Advisor agrees that neither it nor any of its
affiliates will in any way refer directly or indirectly to its
relationship with the Fund, the Series, or the Manager or any of
their respective affiliates in offering, marketing or other
promotional materials, except to the extent disclosed in the Sub-
Advisor's Form ADV or other regulatory filings which may be
deemed 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

          /s/ Michael J. Beer
By
        Michael J. Beer, Executive Vice
President and Chief
            Operating Officer


W. H. REAVES & CO., INC.

          /s/ Ronald J. Sorenson
By
	    Ronald J. Sorenson, Chairman, CEO


APPENDIX A


W.H. Reaves & Co., Inc. ("Reaves") shall serve as an investment sub-
advisor for the Series identified below. The Manager will pay Reaves, as
full compensation for all services provided under this Agreement, a fee,
computed and paid monthly, in arrears, at an annual rate as shown below of
the Series' net assets as the first day of each month allocated to
Reaves's management.

In calculating the fee for a series included in the table, assets of any
unregistered separate account of Principal Life Insurance Company and any
investment company sponsored by Principal Life Insurance Company to which
Reaves 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.

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.


Global Diversified Income Fund
Sub-Advisor's Fee as a Percentage of Average Daily Net
Assets
First $200 million			0.40%
 Assets Over $200 million
	0.30%



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