PRINCIPAL FUNDS, INC.
AMENDED & RESTATED SUB-ADVISORY AGREEMENT
AGREEMENT executed as of January 23, 2015, by and between
PRINCIPAL MANAGEMENT CORPORATION, an Iowa corporation
(hereinafter called "the Manager"), and ORGIN ASSET
MANAGEMENT LLP, a limited liability partnership organized under
the laws of the United Kingdom (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 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 in connection with the investment advisory
services for each series of the Fund 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 on the terms and conditions set forth herein;; and
WHEREAS, the Manager has furnished the Sub-Advisor with copies
properly certified or authenticated of each of the following:
(a) The Amended and Restated Management Agreement
between the Fund and the Manager (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 supervision 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 provide such services with
respect to the portion of the assets of the Series allocated to
it for management from time to time by the Manager. The
Sub-Advisor shall for all purposes herein be deemed to be an
independent contractor and shall, except as expressly
provided or authorized herein, 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:
(i) Provide investment advisory services, including but
not limited to research, advice and supervision for
the Series.
(ii) Furnish to the Board of Directors for approval (or
any appropriate committee of such Board of
Directors), and revise from time to time as economic
conditions require, a recommended investment
program for the Series consistent with the Series'
written investment objective and policies.
(iii) Implement the approved investment program by
placing orders for the purchase, sale and exchange
of securities, "commodity interests" (as defined in the
Commodity Exchange Act, as amended) and other
financial instruments without prior consultation with
the Manager and without regard to the length of time
the securities and other financial instruments have
been held, the resulting rate of portfolio turnover or
any tax considerations, subject always to (i) the
provisions of the Fund's Articles of Incorporation and
Bylaws and (ii) the requirements of the 1940 Act, as
each of the same shall be from time to time in effect.
(iv) Advise and assist the officers of the Fund, as
reasonably 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.
(v) 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 ("SEC") thereunder and the Series'
investment strategies and restrictions as stated in
the Fund's prospectus and statement of additional
information (together , the "Registration Statement"),
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.
(vi) 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.
(vii) Upon request, provide reasonable 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 Board of Directors.
(viii) 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.
(ix) Open accounts with Foreign Account Tax
Compliance Act ("FATCA") compliant broker-dealers,
futures commission merchants, banks and other
financial institutions (collectively "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 of the Sub-Advisor and its
affiliates over time. 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
and that aggregation of orders may not result in
more favorable pricing or lower brokerage
commissions in all instances. At the Manager's
request, the Sub-Advisor will provide the Manager
with the information required pursuant to Rule 31a-
1(b)(9) of the 1940 Act. The Sub-Advisor will effect
transactions with those broker-dealers which it
believes provide favorable net prices and are
capable of providing efficient executions, taking into
consideration, among other things, order size,
difficulty of execution, the operational capabilities,
facilities and financial condition of the broker-dealer
involved, whether that broker-dealer has risked its
own capital in positioning a block of securities or
other assets, and the prior experience of the broker-
dealer in effecting transactions of the relevant types.
The Sub-Advisor's primary objective will be to obtain
best execution with respect to all transactions for the
Series. However, the Sub-Advisor may select
brokers-dealers on the basis that they provide
brokerage, research or other services or products to
the Sub-Advisor or its affiliates. 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- 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-
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 and
other 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.
(x) Maintain all accounts, books and records with
respect to the Series as are required of an
investment adviser of a registered investment
company pursuant to the 1940 Act and the
Investment Advisers Act of 1940, as amended (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 Sub-Advisor may
retain copies of any such records.
(xi) Observe and comply with Rule 17j-1 under the 1940
Act and the Sub-Advisor's code of ethics (the "Code
of Ethics") adopted pursuant to Rule 17j-1 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.
(xii) 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 personnel to meet
with the Fund's Board of Directors at the Fund's
principal place of business on reasonable prior
notice to review the investments of the Series.
(xiii) Provide such additional information in the
possession of the Sub-Advisor or its affiliates 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/or 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.
(xiv) Have the responsibility and authority to vote proxies
solicited by, or with respect to, the issuers of
securities held in the Series in accordance with the
Sub-Advisor's proxy voting policy as most recently
provided to the Manager. The Sub-Advisor's
obligations in the previous sentence are contingent
upon its timely receipt of such proxy solicitation
materials from the Manager. 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. The Manager agrees to provide a
list of such other investment advisory firms to the Sub-
Advisor, such list to be promptly updated by the Manager
upon any changes thereto.
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 partners, members,
directors, officers, employees, agents or affiliates shall be
liable to the Manager, the Board of Directors, the Fund or its
shareholders for any claim, expense or other 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 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 partners, members, directors, officers, employees,
agents (excluding any broker-dealer selected by the Sub-
Advisor), or affiliates.
6. Trade Errors
The Sub-Advisor will notify the Manager of any Trade
Error(s), regardless of materiality, promptly upon the
discovery such Trade Error(s) by the Sub-Advisor.
Notwithstanding Section 5, the Sub-Advisor will be shall be
liable to the Manager, the Fund or its shareholders for any
loss suffered by the Manager or the Fund resulting from
Trade Errors. Any gains which occur due to a Trade Error
shall be retained by the Fund. For purposes under this
Section, Trade Errors are defined as errors (regardless of
cause, and including, but not limited to errors caused, at
least in part, by manual error or systems-related issues such
as coding, unauthorized access, or security breach) due to
(i) erroneous orders by the Sub-Advisor for the Series that
result in the purchase or sale of securities that were not
intended to be purchased or sold; (ii) erroneous orders by the
Sub-Advisor that result in the purchase or sale of securities
for the Series in an unintended amount or price; or (iii)
purchases or sales of financial instruments which violate the
investment limitations or restrictions disclosed in the
Registration Statement and/or imposed by applicable law or
regulation (calculated at the Sub-Advisor's portfolio level),
unless otherwise agreed to in writing.
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.
8. 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 require pursuant to
applicable laws and regulations.
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 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 Board of Directors or 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, or the Manager or by vote of a
majority of the outstanding voting securities of the Series, in
each case, 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 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, Xxx Xxxxxx, Xxxx 00000-0000, and the
address of the Sub-Advisor shall be Origin Asset
Management LLP, Xxx Xxxxx Xxxx, Xxxxxx, XX0X 0XX,
Xxxxxx Xxxxxxx.
(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, specifically naming the
Fund or 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 acknowledges that the Series is relying on
the exclusion from the definition of "commodity
pool operator" under Section 4.5 of the General Regulations
under the Commodity Exchange Act ("Rule
4.5"). The Sub-Advisor will not exceed the de minimis trading
limits set forth in Rule 4.5(c)(2) unless otherwise
agreed to in writing.
(g) 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; provided, however, that the Manager consents
to the Sub-Advisor's use of the Manager's name and the
Fund name in the Sub-Advisor's representative client list that
may be distributed to potential and existing clients so long as
this Agreement is in effect.
(h) The Manager shall promptly notify the Sub-Advisor of the
occurrence of any event that would disqualify the
Manager from serving as an investment adviser of an
investment company pursuant to Section 9(a) of the 1940
Act or other applicable law, rule or regulation.
(i) The Sub-Advisor shall promptly notify the Manager of the
occurrence of any event that would disqualify the Sub-
Advisor from serving as an investment adviser of an
investment company pursuant to Section 9(a) of the
1940 Act or other applicable law, rule or regulation.
(j) Each party represents, warrants and covenants to the other
party that (i) it has all requisite power and authority to
enter into and perform its obligations under the Agreement,
(ii) it has taken all necessary corporate action to
authorize its execution, delivery and performance of this
Agreement, (iii) it has duly executed and delivered the
Agreement, and (iv) this Agreement constitutes its legal, valid
and binding agreement, enforceable against it in
accordance with its terms.
(k) 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 X. Beer
Executive Vice
President & COO
ORIGIN ASSET
MANAGEMENT LLP
By /s/ Lindsay Xxxxx
Xxxxxxxx
Xxxxxxx Xxxxx
Xxxxxxxx
Partner & Chief
Operating Officer
By /s/ Xxxxx Xxxxxx
Xxxxx Xxxxxx
Partner
APPENDIX A
Origin Asset Management, LLP ("Origin") shall serve as investment
sub-advisor for each Fund identified below. The Manager will pay
Origin, as full compensation for all services provided under this
Agreement, a fee, computed and paid monthly, at an annual rate as
shown below of the Fund's net assets as of the first day of each
month allocated to Origin'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 Origin 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.
International Fund I
Sub-Advisor's Fee as a Percentage of Net Assets
First $1 billion
0.36%
Assets over $1 billion
0.33%
Origin Emerging Markets Fund
Sub-Advisor's Fee as a Percentage of Net Assets
All Assets
0.50%
10
