PRINCIPAL FUNDS, INC.
AMENDED AND RESTATED SUB-ADVISORY AGREEMENT
AMERICAN CENTURY SUB-ADVISED FUNDS
AGREEMENT executed as of the 8th day of March, 2010 by and between
PRINCIPAL MANAGEMENT CORPORATION, an Iowa corporation (hereinafter called
"the Manager"), and AMERICAN CENTURY INVESTMENT MANAGEMENT, INC., a
Delaware corporation (hereinafter called "the Sub-Advisor").
W I T N E S S E T H:
WHEREAS, the Manager is the manager and investment adviser to each Series
of Principal Investors Fund, Inc., (the "Fund"), an open-end management
investment company registered under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Manager desires to retain the Sub-Advisor to furnish it with
portfolio selection and related research and statistical services in
connection with the investment advisory services for each of the Series of
the Fund identified in Appendix A hereto (each hereinafter called "the
Series"), which the Manager has agreed to provide to the Fund, and the
Sub-Advisor desires to furnish such services; and
WHEREAS, The Manager has furnished the Sub-Advisor with copies properly
certified or authenticated of each of the following and will promptly
provide the Sub-Advisor with copies properly certified or authenticated of
any amendment or supplement thereto:
(a) Management Agreement (the "Management Agreement") with the
Fund;
(b) The Fund's registration statement and financial statements as
filed with the Securities and Exchange Commission;
(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 Sub-Advisor
accepts such appointment and agrees to furnish the services
hereinafter set forth for the compensation herein provided. The
Sub-Advisor shall for all purposes herein be deemed to be an
independent contractor and shall, except as expressly provided or
authorized, have no authority to act for or represent the Fund or
the Manager in any way or otherwise be deemed an agent of the Fund
or the Manager.
2. Obligations of and Services to be Provided by the Sub-Advisor
(a) Provide investment advisory services, including but not
limited to research, advice and supervision for the Series.
(b) Furnish to the Board of Directors of the Fund for approval (or
any appropriate committee of such Board) a description of its
LargeCap Growth and LargeCap Value investment strategies, with
the understanding that the strategies are similar or identical
to those used for other funds managed by the Sub-Advisor. The
Manager shall ensure that the strategy is consistent with the
Series' investment objective and policies prior to presenting
the recommendation to the Board of Directors.
(c) Implement the approved investment strategy by placing orders for
the purchase and sale of securities without prior consultation
with the Manager and without regard to the length of time the
securities have been held, the resulting rate of portfolio
turnover or any tax considerations, subject always to the
provisions of the Fund's Certificate of Incorporation and Bylaws
and the requirements of the 1940 Act, as each of the same shall
be from time to time in effect.
(d) Advise and assist the officers of the Fund, as reasonably
requested by the officers, in taking such steps as are necessary
or appropriate to carry out the decisions of its Board of
Directors, and any appropriate committees of such Board,
regarding the general conduct of the investment business of the
Series.
(e) Report to the Board of Directors of the Fund at such times and
in such detail as the Board of Directors may reasonably deem
appropriate and as agreed by the Sub-Advisor in order to enable
the Board to determine that the investment policies, procedures
and approved investment program of the Series are being
observed. It is generally expected that such reports will be
made on a quarterly basis, in a format used with the level of
detail agreed upon by the parties.
(f) Upon request, provide assistance and recommendations for the
determination of the fair value of certain securities when
reliable market quotations are not readily available for
purposes of calculating net asset value in accordance with
procedures and methods established by the Fund's Board of
Directors.
(g) Furnish, at its own expense, (i) all necessary investment and
management facilities, including salaries of clerical and other
personnel required for it to execute its duties faithfully, and
(ii) administrative facilities, including bookkeeping, clerical
personnel and equipment necessary for the efficient conduct of
the investment advisory affairs of the Series.
(h) Open accounts with broker-dealers and future commission
merchants ("broker-dealers"), select broker-dealers to effect
all transactions for the Series, place all necessary orders with
broker-dealers or issuers (including affiliated broker-dealers),
and negotiate commissions, if applicable. To the extent
consistent with applicable law, purchase or sell orders for the
Series may be aggregated or, if appropriate, crossed with
contemporaneous purchase or sell orders of other clients of the
Sub-Advisor. If any trades are crossed, Sub-Advisor may charge
the Fund for reasonable expenses incurred in such cross-trade,
excluding brokerage commissions, fees (other than customary
transfer fees) or other remuneration paid in connection with the
transaction. A transaction fee charged by a custodial bank will
be considered a customary transfer fee for purposes of this
agreement. In such event, allocation of securities so sold or
purchased, as well as the expenses incurred in the transaction,
will be made by the Sub-Advisor in a manner consistent with the
Sub-Advisor's allocation policy and its fiduciary obligations to
the Fund and to other clients. The Sub-Advisor will report on
such allocations at the request of the Manager, the Fund or the
Fund's Board of Directors providing such information as the
number of aggregated trades to which the Series was a party, the
broker-dealers to whom such trades were directed and the basis
for the allocation for the aggregated trades. The Sub-Advisor
shall use its best efforts to obtain execution of transactions
for the Series at prices which are advantageous to the Series
and at commission rates that are reasonable in relation to the
benefits received. However, the Sub-Advisor may select brokers
or dealers on the basis that they provide brokerage, research or
other services or products to the Sub-Advisor. To the extent
consistent with applicable law, the Sub-Advisor may pay a broker
or dealer an amount of commission for effecting a securities
transaction in excess of the amount of commission or dealer
spread another broker or dealer would have charged for effecting
that transaction if the Sub-Advisor determines in good faith
that such amount of commission is reasonable in relation to the
value of the brokerage and research products and/or services
provided by such broker or dealer. This determination, with
respect to brokerage and research products and/or services, may
be viewed in terms of either that particular transaction or the
overall responsibilities which the Sub-Advisor and its
affiliates have with respect to the Series as well as to
accounts over which they exercise investment discretion. Not all
such services or products need be used by the Sub-Advisor in
managing the Series. Notwithstanding the foregoing, nothing in
this Agreement shall be construed to require the Sub-Advisor to
use any broker or dealer that provides brokerage, research or
other services, nor to use any broker or dealer that the Manager
may recommend. In addition, joint repurchase or other accounts
may not be utilized by the Series except to the extent permitted
under any exemptive order obtained by the Sub-Advisor provided
that all conditions of such order are complied with.
(i) Maintain all accounts, books and records with respect to the
Series as are required of an investment advisor of a registered
investment company pursuant to the 1940 Act and Investment
Adviser's Act of 1940 (the "Investment Adviser's Act"), and the
rules thereunder, and furnish the Fund and the Manager with such
quarterly and special reports as the Fund or Manager may
reasonably request. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Sub-Advisor hereby agrees that all
records that it maintains for the Series are the property of the
Fund, agrees to preserve for the periods described by Rule 31a-2
under the 1940 Act any records that it maintains for the Account
and that are required to be maintained by Rule 31a-1 under the
1940 Act, and further agrees to surrender promptly to the Fund
any records that it maintains for the Series upon request by the
Fund or the Manager. The Sub-Advisor has no responsibility for
the maintenance of Fund records except insofar as is directly
related to the services provided to the Series.
(j) Observe and comply with Rule 17j-1 under the 1940 Act and the
Sub-Advisor's Code of Ethics adopted pursuant to that Rule as
the same may be amended from time to time. The Manager
acknowledges receipt of a copy of Sub-Advisor's current Code of
Ethics. Sub-Advisor shall promptly forward to the Manager a
copy of any material amendment to the Sub-Advisor's Code of
Ethics.
(k) From time to time as the Manager or the Fund may request,
furnish the requesting party reports on portfolio transactions
and reports on investments held by the Series, all in such
detail as the Manager or the Fund and the Sub-Advisor shall
agree. The Sub-Advisor will make available appropriate
representatives to meet with the Fund's Board of Directors at
the Fund's principal place of business on due notice to review
the investments of the Series once a year.
(l) Provide such information as is customarily provided by a sub-
advisor and may be required for the Fund or the Manager to
comply with their respective obligations under applicable laws,
including, without limitation, the Internal Revenue Code of
1986, as amended (the "Code"), the 1940 Act, the Investment
Advisers Act, the Securities Act of 1933, as amended (the
"Securities Act"), and any state securities laws, and any rule
or regulation thereunder.
(m) Perform quarterly and annual tax compliance tests to monitor the
Series' compliance with Subchapter M of the Code. The
Sub-Advisor shall notify the Manager immediately upon having a
reasonable basis for believing that the Series has ceased to be
in compliance or that it might not be in compliance in the
future. If it is determined that the Series is not in
compliance with the requirements noted above, the Sub-Advisor,
in consultation with the Manager, will take prompt action to
bring the Series back into compliance (to the extent possible)
within the time permitted under the Code.
(n) Maintain, in connection with the Sub-Advisor's investment
advisory services obligations, compliance with the 1940 Act and
the regulations adopted by the Securities and Exchange
Commission thereunder and the Series' investment strategy and
restrictions as stated in the Fund's prospectus and statement of
additional information.
(o) Notify the Manager of the filing of any amendments to the Sub-
Advisor's Form ADV contemporaneously with filing of such
documents with the Securities and Exchange Commission or other
regulator agency.
3. Prohibited Conduct
In providing the services described in this agreement, the Sub-
Advisor will not consult with any other investment advisory firm
that provides investment advisory services to any investment company
sponsored by Principal Life Insurance Company regarding transactions
for the Fund in securities or other assets.
4. Compensation
As full compensation for all services rendered and obligations
assumed by the Sub-Advisor hereunder with respect to the Series, the
Manager shall pay the compensation specified in Appendix A to this
Agreement.
5. Liability of Sub-Advisor
Neither the Sub-Advisor nor any of its directors, officers,
employees, agents or affiliates shall be liable to the Manager, the
Fund or its shareholders for any loss suffered by the Manager or the
Fund resulting from any error of judgment made in the good faith
exercise of the Sub-Advisor's investment discretion in connection
with selecting investments for the Series or as a result of the
failure by the Manager or any of its affiliates to comply with the
terms of this Agreement and/or any insurance, securities or other
laws and rules applicable to the management and marketing of the
Fund, except for losses resulting from willful misfeasance, bad
faith or gross negligence of, or from reckless disregard of, the
duties of the Sub-Advisor or any of its directors, officers,
employees, agents, or affiliates.
The Manager agrees that subject to the investment objective,
investment policies and investment restrictions of the Series as set
forth in the Fund's registration statement as in effect from time to
time, the Sub-Advisor's adherence to a LargeCap Growth or LargeCap
Value investment style generally used by the Sub-Advisor in managing
its other LargeCap Growth or LargeCap Value Funds, shall not be
considered a failure by Sub-Advisor to use its best judgment,
efforts and advice under this Agreement.
6. Supplemental Arrangements
The Sub-Advisor may enter into arrangements with other persons
affiliated with the Sub-Advisor or with unaffiliated third parties
to better enable the Sub-Advisor to fulfill its obligations under
this Agreement for the provision of certain personnel and facilities
to the Sub-Advisor, subject to written notification to and approval
of the Manager and, where required by applicable law, the Board of
Directors of the Fund.
7. Regulation
The Sub-Advisor shall submit to all regulatory and administrative
bodies having jurisdiction over the services provided pursuant to
this Agreement any information, reports or other material which any
such body may request or require pursuant to applicable laws and
regulations.
8. Manager's Representations
The Manager represents and warrants that (i) it is registered as an
investment adviser under the Investment Advisers Act and will
continue to be so registered for so long as this Agreement remains
in effect; (ii) it is not prohibited by the 1940 Act or the
Investment Advisers Act from performing the services contemplated by
this Agreement; (iii) it has met, and will continue to meet for so
long as this Agreement remains in effect, any applicable federal or
state requirements, or the applicable requirements of any regulatory
or industry self-regulatory agency, necessary to be met in order to
perform the services contemplated by this Agreement; (iv) it has the
authority to enter into and perform the services contemplated by
this Agreement, and (v) it will immediately notify the Sub-Advisor
of the occurrence of any event that would disqualify the Manager
from serving as an investment advisor of an investment company
pursuant to Section 9(a) of the 1940 Act or otherwise.
9. Duration and Termination of This Agreement
This Agreement shall become effective on the latest of (i) the date
of its execution, (ii) the date of its approval by a majority of the
Board of Directors of the Fund, including approval by the vote of a
majority of the Board of Directors of the Fund who are not
interested persons of the Manager, the Sub-Advisor, Principal Life
Insurance Company or the Fund cast in person at a meeting called for
the purpose of voting on such approval or (iii) if required by the
1940 Act, the date of its approval by a majority of the outstanding
voting securities of the Series. It shall continue in effect
thereafter from year to year provided that the continuance is
specifically approved at least annually either by the Board of
Directors of the Fund or by a vote of a majority of the outstanding
voting securities of the Fund and in either event by a vote of a
majority of the Board of Directors of the Fund who are not
interested persons of the Manager, Principal Life Insurance Company,
the Sub-Advisor or the Fund cast in person at a meeting called for
the purpose of voting on such approval.
If the shareholders of the Series fail to approve the Agreement or
any continuance of the Agreement in accordance with the requirements
of the 1940 Act, the Sub-Advisor will continue to act as Sub-Advisor
with respect to the Series pending the required approval of the
Agreement or its continuance or of any contract with the Sub-Advisor
or a different manager or sub-advisor or other definitive action;
provided, that the compensation received by the Sub-Advisor in
respect to the Series during such period is in compliance with Rule
15a-4 under the 1940 Act.
This Agreement may be terminated at any time without the payment of
any penalty by the Board of Directors of the Fund or by the
Sub-Advisor, the Manager or by vote of a majority of the outstanding
voting securities of the Series on sixty days written notice. This
Agreement shall automatically terminate in the event of its
assignment or upon termination of the Management Agreement, provided
the Sub-Advisor has received prior written notice of such
termination. In interpreting the provisions of this Section 9, the
definitions contained in Section 2(a) of the 1940 Act (particularly
the definitions of "interested person," "assignment" and "voting
security") shall be applied.
10. Indemnification
(a) The Sub-Advisor agrees to indemnify and hold harmless the
Manager, any affiliated person within the meaning of Section
2(a)(3) of the 1940 Act ("affiliated person") of the Manager and
each person, if any who, within the meaning of Section 15 of the
Securities Act controls ("controlling persons") the Manager,
against any and all losses, claims, damages, liabilities or
litigation, including reasonable legal expenses (collectively
"Losses") to which the Manager or such affiliated person or
controlling person of the Manager may become subject under the
Securities Act, the 1940 Act, the Investment Advisers Act, under
any other statute, law, rule or regulation at common law or
otherwise, arising out of the Sub-Advisor's responsibilities
hereunder (1) to the extent of and as a result of the willful
misconduct, bad faith, or gross negligence by the Sub-Advisor,
any of the Sub-Advisor's employees or representatives or any
affiliate of or any person acting on behalf of the Sub-Advisor;
or (2) as a result of any untrue statement of a material fact
contained in the Registration Statement, including any amendment
thereof or any supplement thereto, or the omission to state
therein a material fact required to be stated therein or
necessary to make the statement therein not misleading, if such
a statement or omission was made in reliance upon and in
conformity with written information furnished by the Sub-Advisor
to the Manager specifically for use therein; provided, however,
that in no case is the Sub-Advisor's indemnity in favor of the
Manager or any affiliated person or controlling person of the
Manager deemed to protect such person against any liability to
which any such person would otherwise be subject by reason of
willful misconduct, bad faith or gross negligence in the
performance of its duties or by reason of its reckless disregard
of its obligations and duties under this Agreement.
(b) The Manager agrees to indemnify and hold harmless the Sub-
Advisor, any affiliated person and any controlling person of the
Sub-Advisor, if any, against any and all Losses to which the
Sub-Advisor or such affiliated person or controlling person of
the Sub-Advisor may become subject under the Securities Act, the
1940 Act, the Investment Advisers Act, under any other statute,
law, rule or regulation, at common law or otherwise, arising out
of the Manager's responsibilities as investment manager of the
Fund (1) to the extent of and as a result of the willful
misconduct, bad faith, or gross negligence by the Manager, any
of the Manager's employees or representatives or any affiliate
of or any person acting on behalf of the Manager, or (2) as a
result of any untrue statement of a material fact contained in
the Registration Statement, including any amendment thereof or
any supplement thereto, or the omission to state therein a
material fact required to be stated therein or necessary to make
the statement therein not misleading; provided, however, that in
no case is the Manager's indemnity in favor of the Sub-Advisor
or any affiliated person or controlling person of the Sub-
Advisor deemed to protect such person against any liability to
which any such person would otherwise be subject by reason of
willful misconduct, bad faith or gross negligence in the
performance of its duties or by reason of its reckless disregard
of its obligations and duties under this Agreement. It is
agreed that the Manager's indemnification obligations under this
Section will extend to expenses and costs (including reasonable
attorneys fees) incurred by the Sub-Advisor as a result of any
litigation brought by the Manager alleging the Sub-Advisor's
failure to perform its obligations and duties in the manner
required under this Agreement unless 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. The captions in this Agreement are included
for convenience only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or
effect.
(b) Any notice under this Agreement shall be in writing,
addressed and delivered or mailed postage pre-paid to the other
party at such address as such other party may designate for the
receipt of such notices. Until further notice to the other
party, it is agreed that the address of the Manager for this
purpose shall be Principal Financial Group, Xxx Xxxxxx, Xxxx
00000-0000, and the address of the Sub-Advisor shall be 0000
Xxxx Xxxxxx, Xxxxxx Xxxx, XX 00000, Attention: General
Counsel.
(c) The Sub-Advisor will promptly notify the Manager in writing
of the occurrence of any of the following events:
(1) the Sub-Advisor fails to be registered as an
investment adviser under the Investment Advisers Act or
under the laws of any jurisdiction in which the Sub-Advisor
is required to be registered as an investment advisor in
order to perform its obligations under this Agreement.
(2) the Sub-Advisor is served or otherwise receives notice
of any action, suit, proceeding, inquiry or investigation,
at law or in equity, before or by any court, public board or
body, involving the affairs of the Series.
(d) The Manager shall provide (or cause the Series custodian to
provide) timely information to the Sub-Advisor regarding such
matters as the composition of the assets of the Series, cash
requirements and cash available for investment in the Series,
any applicable investment restrictions imposed by state
insurance laws and regulations, and all other reasonable
information as may be necessary for the Sub-Advisor to perform
its duties and responsibilities hereunder.
(e) The Manager will provide Sub-Advisor promptly with any
changes to the Fund's Articles of Incorporation, By-laws,
registration statement, policies, procedures, instructions, and
any other document relevant to the Sub-Advisor's management of
the Series. The parties agree that the Sub-Advisor is not
responsible for compliance with any such changes until notified
and provided with a written copy of such change.
(f) The Sub-Advisor agrees that neither it nor any of its
affiliates will in any way refer directly or indirectly to its
relationship with the Fund, the Series, or the Manager or any
of their respective affiliates in offering, marketing or other
promotional materials without the express written consent of
the Manager.
(g) This Agreement contains the entire understanding and
agreement of the parties.
IN WITNESS WHEREOF, the parties have duly executed this Agreement on
the date first above written.
PRINCIPAL MANAGEMENT CORPORATION
By /s/ Xxxxxxx J Beer
____________________________________________
Xxxxxxx J Beer, Executive Vice
President
AMERICAN CENTURY INVESTMENT MANAGEMENT,
INC.
By /s/ Xxxxxxx X. Xxxxx
____________________________________________
Xxxxxxx X. Xxxxx, President
APPENDIX A
The Sub-Advisor shall serve as investment sub-advisor for the LargeCap
Growth Fund II of the Fund. The Manager will pay the Sub-Advisor, as full
compensation for all services provided under this Agreement, a fee
computed at an annual rate as follows (the "Sub-Advisor Percentage Fee"):
Sub-Advisor Fee as a
Series Percentage of Daily Net Assets
LargeCap Growth Fund II First $50,000,000..........................................
0.450%
Next $200,000,000........................................
0.400%
Next $500,000,000........................................
0.350%
Above $750,000,000......................................
0.300%
In calculating the fee for a Series, assets of any existing
unregistered separate account of Principal Life Insurance Company and any
existing investment company sponsored by Principal Life Insurance Company
to which the Sub-Advisor provides investment advisory services and which
have the same investment mandate as the Series, will be combined
(together, the "Aggregated Assets"). The fee charged for the assets in
the Series shall be determined by calculating a fee on the value of the
Aggregated Assets using the above fee schedule and multiplying the
aggregate fee by a fraction, the numerator of which is the amount of
assets in the Series and the denominator of which is the amount of the
Aggregated Assets.
The Sub-Advisor Percentage Fee shall be accrued for each calendar day and
the sum of the daily fee accruals shall be wired monthly to the
Sub-Advisor, and shall be accompanied or supplemented by such supportive
documentation as the Sub-Advisor may reasonably request. The daily fee
accruals will be computed by multiplying the fraction of one over the
number of calendar days in the year by the applicable annual rate
described above and multiplying this product by the net assets of the
Series as determined in accordance with the Series' prospectus and
statement of additional information as of the close of business on the
previous business day on which the Series was open for business. Cash and
cash equivalents shall be included in the Series net assets calculation up
to a maximum of 1.00% of the Series net assets. If the Manager requests
the Sub-Advisor to raise cash in the Series portfolio in excess of 1.00%
of the Series net assets for the purpose of funding redemptions from the
Series, such amount requested shall be included in the Series net assets
calculation.
If this Agreement becomes effective or terminates before the end of any
month, the fee (if any) for the period from the effective date to the end
of such month or from the beginning of such month to the date of
termination, as the case may be, shall be prorated according to the
proportion which such period bears to the full month in which such
effectiveness or termination occurs.
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