PRINCIPAL FUNDS, INC.
AMENDED AND RESTATED SUB-ADVISORY AGREEMENT
PRINCIPAL GLOBAL INVESTORS SUB-ADVISED SERIES
AGREEMENT effective as of June 14, 2012, 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 /s/ Xxxxx Xxxxxxxxxxx
Xxxxx Xxxxxxxxxxx, Chief Compliance
Officer - North America
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%
MidCap Blend 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
High Yield Fund 0.2643%
International Emerging Markets Fund 0.4895%
LargeCap S&P 500 Index Fund 0.0147%
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 Strategic Income Fund 0.0300%
MidCap S&P 400 Index Fund 0.0147%
SmallCap S&P 600 Index Fund 0.0147%
Money Market Fund 0.0734%
Tax-Exempt Bond Fund 0.1000%
California Municipal Bond Fund 0.1000%
Table D
Global Diversified Income Fund
Net Asset Value of Underlying Portfolio and 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
International Equity Index Fund 0.05% 0.03%
Blue Chip Fund 0.25% 0.15%
PGI-8
