PRINCIPAL FUNDS, INC.
AMENDED AND RESTATED SUB-ADVISORY AGREEMENT
PRINCIPAL GLOBAL INVESTORS SUB-ADVISED SERIES
AGREEMENT effective as of March 1, 2013, 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 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 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 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 "Code"), the 1940 Act, the Investment Advisers
Act, the Securities Act of 1933, as amended (the "Securities Act"),
and any state securities laws, and any rule or regulation
thereunder.
(n) Vote proxies received on behalf of the Series in a manner
consistent with Sub-Advisor's proxy voting policies and procedures
and provide a record of votes cast containing all of the voting
information required by Form N-PX in an electronic format to
enable the Series to file Form N-PX as required by SEC rule.
(o) Respond to tender offers, rights offerings and other voluntary
corporate action requests affecting securities held by the Fund
and complete and file notices of claims in connection with class
action lawsuits concerning securities owned by the Fund.
3. Prohibited Conduct
In providing the services described in this agreement, the Sub-Advisor
will not consult with any other investment advisory firm that provides
investment 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
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 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 8, the definitions contained
in Section 2(a) of the 1940 Act (particularly the definitions of "interested
person," "assignment" and "voting security") 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. 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, Executive Vice President and Chief Operating Officer
PRINCIPAL GLOBAL INVESTORS, LLC
By
By /s/ Xxxxx X. Xxxxxxx
Xxxxx X. Xxxxxxx, Assistant General Counsel
APPENDIX A
PGI shall serve as investment sub-advisor for each Fund 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 as shown 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 fund included in Table A, assets of all
other funds included in Table A as well as
assets of any unregistered separate account of Principal Life
Insurance Company and any investment
company sponsored by Principal Life Insurance Company to which PGI
provides investment advisory
services and which invests primarily in fixed-income securities
(except money market separate accounts or
investment companies, and excluding assets of all such separate
accounts or investment companies for
which advisory services are provided directly or indirectly by employees
of Post Advisory Group, LLC), as well
as the assets of the Balanced Account of Principal Variable Contracts
Fund, will be combined with the assets
of the fund to arrive at net assets.
In calculating the fee for a fund included in Table B and Table D,
assets of any unregistered separate account
of Principal Life Insurance Company and 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 fund for which the fee is calculated, will be
combined with the assets of the fund 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.
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
Bond & Mortgage Securities Fund
0.1126%
0.0979%
0.0930%
0.0881%
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%
Diversified
International Fund
0.3427%
0.2741%
0.1958%
0.1566%
0.1175%
0.0979%
0.0783%
Net Asset Value of Fund
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 and
MidCap Value Fund III
0.3916%
0.3133%
0.2643%
0.2252%
0.1762%
0.1273%
0.0783%
SmallCap Blend Fund
0.4699%
0.3524%
0.2643%
0.2448%
0.2154%
0.1762%
0.1175%
Table C
Fund
Sub-Advisor Percentage Fee as a
Percentage of Net Assets
California Municipal Bond Fund
0.1000%
High Yield Fund
0.2643%
International Emerging Markets 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%
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%
International Equity Index Fund
0.05%
0.03%
PGI-7
