PRINCIPAL FUNDS, INC.
AMENDED AND RESTATED SUB-ADVISORY AGREEMENT
PRINCIPAL GLOBAL INVESTORS SUB-ADVISED SERIES
AGREEMENT effective as of June 29, 2016, by and between
PRINCIPAL MANAGEMENT CORPORATION (hereinafter called "the
Manager"), and PRINCIPAL GLOBAL INVESTORS, LLC (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 Series of the
Fund identified in Appendix A hereto (hereinafter called "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 perform the services
described in Section 2 below for investment and reinvestment of the
securities and other assets of each Series, subject to the control and
direction of the Manager and the Fund's Board of Directors, for the
period and on the terms hereinafter set forth. The Sub-Advisor
accepts such appointment and agrees to furnish the services
hereinafter set forth for the compensation herein provided. The
Sub-Advisor shall for all purposes herein be deemed to be an
independent contractor and shall, except as expressly provided or
authorized, have no authority to act for or represent the Fund or the
Manager in any way or otherwise be deemed an agent of the Fund
or the Manager.
2. Obligations of and Services to be Provided by the Sub-Advisor
The Sub-Advisor will:
(a) Provide investment advisory services, including but not limited
to research, advice and supervision for each 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 each 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 each 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 each 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 each Series.
(i) Open accounts with broker-dealers, swap dealers,
clearinghouses and futures commission merchants ("broker-
dealers"), select broker-dealers to effect all transactions for
each 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 each Series may be
aggregated with contemporaneous purchase or sell orders of
other clients of the Sub-Advisor. In such event allocation of
securities or swaps 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 each 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 each 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 or derivatives 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 each 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 each
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 each 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 1940 Act, the Investment Advisers Act, the
Securities Act of 1933, as amended, the Commodity Exchange
Act, as amended, 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.
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 each 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, 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.
6. Supplemental Arrangements
The Sub-Advisor may enter into arrangements with other persons
affiliated with the Sub-Advisor or with unaffiliated third parties to
better enable the Sub-Advisor to fulfill its obligations under this
Agreement for the provision of certain personnel and facilities to the
Sub- Advisor, subject to written notification to and approval of the
Manager and, where required by applicable law, the Board of
Directors of the Fund.
7. Regulation
The Sub-Advisor shall submit to all regulatory and administrative
bodies having jurisdiction over the services provided pursuant to this
Agreement any information, reports or other material which any such
body may request or require pursuant to applicable laws and
regulations.
8. Duration and Termination of This Agreement
No amendment of this Agreement shall be effective unless in
writing and signed by both parties. This Agreement shall become
effective with respect to a Series as of the corresponding date set
forth on Appendix B to this Agreement, as may be amended from
time to time, and, unless otherwise terminated with respect to such
Series, shall continue in effect thereafter for the initial term set forth
on Appendix B to this Agreement, and thereafter from year to year,
provided that in each case the continuance is specifically approved
within the period required by the 1940 Act 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 such 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 such Series during such period is in compliance with
Rule 15a-4 under the 1940 Act.
This Agreement may be terminated with respect to a Series at any
time without the payment of any penalty by the Board of Directors of
the Fund or by the Sub-Advisor, the Manager or by vote of a majority
of the outstanding voting securities of the Series on sixty days'
written notice. This Agreement shall automatically terminate in the
event of its assignment. In interpreting the provisions of this Section
8, the definitions contained in Section 2(a) of the 1940 Act
(particularly the definitions of "interested person," "assignment,"
"voting security" and "majority of the outstanding voting securities")
shall be applied.
9. Amendment of this Agreement
No material amendment of this Agreement shall be effective until
approved, if required by the 1940 Act or the rules, regulations,
interpretations or orders issued thereunder, by vote of the holders of
a majority of the outstanding voting securities of the Series and by
vote of a majority of the Board of Directors of the Fund who are not
interested persons of the Manager, the Sub-Advisor, Principal Life
Insurance Company or the Fund cast in person at a meeting called
for the purpose of voting on such approval.
10. Additional Series
In the event the Manager wishes to appoint the Sub-Advisor to
perform the services described in this Agreement with respect to
one or more additional Series of the Fund after the effective date of
this Agreement, such Series will become a Series under this
Agreement upon approval of this Agreement in the manner required
by the 1940 Act and the amendment of Appendices A and B hereto.
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 and the Sub-Advisor for this
purpose shall be Principal Financial Group, Xxx Xxxxxx, Xxxx
00000-0000.
(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/ Xxxxxxx X. Beer
Xxxxxxx X. Beer,
President And Chief Executive Officer
By /s/ Xxxx X. Xxxxxx
Xxxx X. Xxxxxx,
Counsel
PRINCIPAL GLOBAL INVESTORS, LLC
By /s/ Xxxx XxXxxxxx
Xxxx XxXxxxxx, Xx.
Executive Director - COO
& Boutique Operations
By /s/ Xxxxx Xxxxxxxxx
Xxxxx Xxxxxxxxx,
VP & Associate General Counsel
APPENDIX A
PGI shall serve as investment sub-advisor for each Series
identified below. The Manager will pay PGI, as full compensation
for all services provided under this Agreement, a fee, computed
and paid monthly, at an annual rate determined as described
below of the Fund's net assets as of the first day of each month
allocated to PGI's management.
In calculating the fee for a Series included in Table A, assets of all
other Series included in Table A, assets of any unregistered
separate account of Principal Life Insurance Company or other
non-fund pooled investment vehicles (identified below as "Other
Aggregated Fixed Income Pools"), as well as any other future
fixed income investment pools which may be added, as agreed,
from time to time, will be combined with the assets of the relevant
Series to arrive at net assets for fee breakpoint purposes.
In calculating the fee for a Series included in Table B, assets of
any unregistered separate account of Principal Life Insurance
Company or any investment company sponsored by Principal Life
Insurance Company to which PGI provides investment advisory
services and which have the same investment mandate (e.g.
MidCap Value) as the Series for which the fee is calculated
(identified below as "Other Aggregated Pools in Style"), as well as
any other future investment pools in the same style which may be
added, as agreed, from time to time, will be combined with the
assets of the relevant Series to arrive at net assets for fee
breakpoint purposes.
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.
Table A
Net Asset Value of Fund and Sub-Advisor
Percentage Fee as a Percentage of Net Assets
Fund
First $5B
Next $1B
Next $4B
Over $10B
Core Plus Bond Fund
0.1126%
0.0979%
0.0930%
0.0881%
Other Aggregated Fixed Income Pools:
The following other series of the Fund:
Government & High Quality Bond Fund (Edge), Income Fund (Edge),
and Short-Term Income Fund (Edge)
Principal Variable Contracts Funds Inc. Accounts: Balanced Account,
Core Plus Bond Account, Income Account
(Edge), Government & High Quality Bond Account (Edge), and
Short-Term Income Account (Edge)
The following Principal Life Insurance Company separate accounts:
Core Plus Bond, LDI Long Duration, and
Government & High Quality
Table B
Net Asset Value of Fund and Sub-Advisor
Percentage Fee as a Percentage of Net Assets
Fund
First
$50M
Next
$50M
Next
$100M
Next
$200M
Next
$350M
Next
$750M
Over
$1.5B
LargeCap Value Fund
0.2643%
0.2448%
0.2154%
0.1762%
0.1273%
0.0881%
0.0587%
Other Aggregated Pools in Style:
The following other series of the Fund:
Equity Income Fund(Edge)
The following Principal Variable Contracts Funds Inc. Accounts:
Equity Income Account I (Edge) and LargeCap Value Account
The following Principal Life Insurance Company separate accounts:
LargeCap Value Separate Account
Diversified International Fund
0.3427%
0.2741%
0.1958%
0.1566%
0.1175%
0.0979%
0.0783%
Other Aggregated Pools in Style:
The following Principal Funds, Inc. funds:
Diversified International Account
The following Principal Life Insurance Company separate accounts:
Diversified International Separate Account
Net Asset Value of Fund and Sub-Advisor
Percentage Fee as a Percentage of Net Assets
Fund
First
$25
million
Next
$75
million
Next
$100
million
Next
$300
million
Next
$500
million
Next
$500
million
Over
$1.5B
billion
MidCap Fund
0.4016%
0.3233%
0.2743%
0.2352%
0.1862%
0.1373%
0.0883%
Other Aggregated Pools in Style:
The following Principal Variable Contracts Funds Inc. Accounts:
MidCap Account
The following Principal Life Insurance Company separate accounts:
MidCap Separate Account
MidCap Value Fund III
0.3916%
0.3133%
0.2643%
0.2252%
0.1762%
0.1273%
0.0783%
Other Aggregated Pools in Style:
The following other series of the Fund:
Principal Capital Appreciation Fund (Edge)
The following Principal Variable Contracts Funds Inc. Accounts:
Principal Capital Appreciation Account (Edge)
The following Principal Life Insurance Company separate accounts:
MidCap Value Separate Account
SmallCap Fund
0.4699%
0.3524%
0.2643%
0.2448%
0.2154%
0.1762%
0.1175%
Other Aggregated Pools in Style:
The following Principal Variable Contracts Funds Inc. Accounts:
SmallCap Account
The following Principal Life Insurance Company separate accounts:
SmallCap Separate Account
Table C
Fund
Net Asset Value of Fund Sub-Advisor
Percentage Fee as a Percentage of Net
Assets
California Municipal Bond Fund
0.1000%
Credit Opportunities Explorer Fund
0.2100%
Dynamic High Yield Explorer Fund
0.2643%
Global Diversified Income Fund (High Yield Sleeve)
0.3000%
High Yield Fund
0.2643%
International Emerging Markets Fund
0.4895%
International Small Company Fund
0.4895%
LargeCap S&P 500 Index Fund
0.0147%
MidCap S&P 400 Index Fund
0.0147%
Money Market Fund
0.0734%
Opportunistic Municipal Fund
0.1500%
Principal LifeTime 2010 Fund
0.0300%
Principal LifeTime 2015 Fund
0.0300%
Principal LifeTime 2020 Fund
0.0300%
Principal LifeTime 2025 Fund
0.0300%
Principal LifeTime 2030 Fund
0.0300%
Principal LifeTime 2035 Fund
0.0300%
Principal LifeTime 2040 Fund
0.0300%
Principal LifeTime 2045 Fund
0.0300%
Principal LifeTime 2050 Fund
0.0300%
Principal LifeTime 2055 Fund
0.0300%
Principal LifeTime 2060 Fund
0.0300%
Principal LifeTime Strategic Income Fund
0.0300%
SmallCap S&P 600 Index Fund
0.0147%
SystematEx International Fund
0.1500%
SystematEx Large Value Fund
0.1000%
Tax-Exempt Bond Fund
0.1000%
Table D
Global Diversified Income Fund
Net Asset Value of Underlying Portfolio
Sub-Advisor Percentage Fee as a
Percentage of Net Assets
First
Next
Over
Underlying Portfolio
$500 Million
$500 Million
$ 1 Billion
Global Value Equity
0.34%
0.27%
0.20%
Table E
Net Asset Value of Fund and Sub-Advisor
Percentage Fee as a Percentage of Net Assets
Fund
First $500 Million
Assets over $500 Million
Blue Chip Fund
0.25%
0.15%
Global Opportunities Fund
0.34%
0.27%
Global Opportunities Equity Hedged Fund
0.50%
0.45%
International Equity Index Fund
0.05%
0.03%
Table F
Global Diversified Income Fund
Net Asset Value of Underlying Portfolio
Sub-Advisor Percentage Fee as a
Percentage of Net Assets
First
Next
Over
Underlying Portfolio
$250 Million
$250 Million
$ 500 Million
Opportunistic MBS
0.25%
0.20%
0.15%
APPENDIX B
Effective Date and Initial Term of Sub-Advisory Agreement for
each Series
Series
Effective Date
Initial Term
Blue Chip Fund
06/13/2012
One Year
California Municipal Fund
09/12/2011
One Year
Core Plus Bond Fund
12/06/2000
One Year
Credit Opportunities Explorer
Fund
09/11/2014
One Year
Diversified International Fund
12/06/2000
One Year
Dynamic High Yield Explorer
Fund
09/11/2014
One Year
Global Diversified Income Fund
12/15/2008
One Year
Global Opportunities Fund
12/28/2012
One Year
Global Opportunities Equity
Hedged Fund
09/22/2015
One Year
High Yield Fund
04/09/2012
One Year
International Emerging Markets
Fund
12/06/2000
One Year
International Equity Index Fund
12/21/2009
One Year
International Small Company Fund
06/11/2014
One Year
LargeCap S&P 500 Index Fund
12/06/2000
One Year
LargeCap Value Fund
12/06/2000
One Year
XxxXxx Fund
12/06/2000
One Year
MidCap S&P 400 Index Fund
12/06/2000
One Year
XxxXxx Value Fund III
11/29/2000
One Year
Money Market Fund
12/06/2000
One Year
Opportunistic Municipal Fund
06/13/2012
One Year
Principal LifeTime 2010 Fund
03/01/2001
One Year
Principal LifeTime 2015 Fund
02/29/2008
One Year
Principal LifeTime 2020 Fund
03/01/2001
One Year
Principal LifeTime 2025 Fund
02/29/2008
One Year
Principal LifeTime 2030 Fund
03/01/2001
One Year
Principal LifeTime 2035 Fund
02/29/2008
One Year
Principal LifeTime 2040 Fund
03/01/2001
One Year
Principal LifeTime 2045 Fund
02/29/2008
One Year
Principal LifeTime 2050 Fund
03/01/2001
One Year
Principal LifeTime 2055 Fund
02/29/2008
One Year
Principal LifeTime 2060 Fund
03/01/2013
One Year
Principal LifeTime Strategic
Income Fund
03/01/2001
One Year
Effective Date and Initial Term of Sub-Advisory Agreement for
each Series
Series
Effective Date
Initial Term
SmallCap Fund
12/06/2000
One Year
SmallCap S&P 600 Index Fund
12/06/2000
One Year
SystematEx International Fund
09/22/2015
One Year
SystematEx Large Value Fund
09/22/2015
One Year
Tax-Exempt Bond Fund
09/12/2011
One Year
PGI-7
