PRINCIPAL FUNDS, INC. SUB-ADVISORY AGREEMENT INVESCO ADVISERS, INC. SUB-ADVISED FUNDS
| PRINCIPAL FUNDS, INC. | |
| SUB-ADVISORY AGREEMENT | |
| INVESCO ADVISERS, INC. SUB-ADVISED FUNDS | |
| AGREEMENT executed as of June 1, 2010, by and between PRINCIPAL MANAGEMENT CORPORATION | |
| (hereinafter called "the Manager"), and INVESCO ADVISERS, 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 advisor 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 investment advisory services | |
| with respect to each series identified in Appendix A (hereinafter called the “Series”), which the Manager has | |
| agreed to provide to the Fund, and the Sub-Advisor desires to furnish such services; 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 act as the Manager’s agent and attorney-in-fact with respect to the investment and | |
| reinvestment of assets in the Series with full power and authority to direct any custodian of the assets of | |
| the Series to purchase, sell or exchange any stocks, bonds, or other securities or such other assets | |
| which are acceptable to the Sub-Advisor (individually, "security" and collectively, "securities") and to | |
| issue directly to a broker or dealer such orders for the purchase, sale or exchange of securities or other | |
| property, as the Sub-Advisor may deem appropriate and without prior consultation with the Manager, | |
| 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 the Series. | |
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| (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 | |
| the 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 the 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 the 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 the Series. Except for expenses specifically | |
| assumed or agreed to be paid by the Sub-Advisor under this Agreement, the Sub-Advisor shall not | |
| be liable for any expenses of the Manager, the Fund or the Series including, without limitation, (i) | |
| interest and taxes, (ii) brokerage commissions and other costs in connection with the purchase or | |
| sale of securities or other investment instruments with respect to the Series, and (iii) custodian fees | |
| and expenses. | |
| (i) | Open accounts with broker-dealers and futures 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 | |
| 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 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 | |
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| 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. 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 the 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 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 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 Advisors 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 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 sub-advisory services to the Fund or a fund that is | ||
| under common control with the Fund regarding transactions for the Fund in the securities or other assets | ||
| allocated to the Sub-Advisor pursuant to this Agreement, except as provided by Rule 12d-3-1 under the | ||
| 1940 Act. | ||
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| 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 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 and/or insurance laws and rules 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 Sub- | |
| Advisor shall not have any responsibilities with respect to any assets of the Fund other than the Series. | |
| The Sub-Advisor shall not be responsible for any loss incurred by reason of any act or omission of any | |
| dealer or broker, or the Manager, or any custodian, or any other third-party service provider to the Fund | |
| or Series. | |
| The Sub-Advisor shall be responsible only for managing the Series in good faith and in accordance with | |
| the investment objectives, fundamental policies and restrictions, and shall have no responsibility | |
| whatsoever for, and shall incur no liability on account of (i) selection or establishment of such investment | |
| objectives, fundamental policies and restrictions (ii) advice on, or management of, any other assets for | |
| Manager or the Fund, (iii) filing of any tax or information returns or forms, withholding or paying any | |
| taxes, or seeking any exemption or refund for the Manager or the Fund, (iv) registration of the Fund or | |
| Series with any government or agency, or (v) administration of the plans and trusts investing through the | |
| Fund, (vi) overall Fund compliance with the requirements of the 1940 Act, which requirements are | |
| outside of the Sub-Advisor’s control, and any requirements of Subchapter M of the Internal Revenue | |
| Code of 1986, as amended, which are outside of the Sub-Advisor’s control and shall be indemnified and | |
| held harmless by Manager for any loss in carrying out the terms and provisions of this Agreement, | |
| including reasonable attorney’s fees, indemnification to the Fund, or any shareholder thereof and, | |
| brokers and commission merchants, fines, taxes, penalties and interest. Sub-Advisor, however, shall be | |
| liable for any liability, damages, or expenses of Manager or the Fund arising out of the 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 or employees. | |
| 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 advisor under the | |
| Investment Advisors 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 Advisors 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 | |
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| 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 as of the date of its execution and, unless otherwise terminated, | ||
| shall continue in effect for a period of two years and thereafter from year to year provided that the | ||
| continuance is specifically approved at least annually either by the Board of Directors of the Fund or by a | ||
| vote of a majority of the outstanding voting securities of the Series and in either event by a vote of a | ||
| majority of the Board of Directors 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 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 Advisors 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 Advisors Act, under any other statute, law, | ||
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| 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 judgment 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. This Agreement shall be construed and enforced in | ||
| accordance with and governed by the laws of the State of Iowa. The captions in this Agreement are | ||
| included for convenience only and in no way define or delimit any of the provisions hereof or | ||
| otherwise affect their construction or effect. | ||
| (b) | Any notice under this Agreement shall be in writing, addressed and delivered or mailed postage pre- | |
| paid to the other party at such address as such other party may designate for the receipt of such | ||
| notices. Until further notice to the other party, it is agreed that the address of the Manager for this | ||
| purpose shall be the Principal Financial Group, ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, and the address of | ||
| the Sub-Advisor shall be ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇. | ||
| (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 advisor under the Investment Advisors | |
| 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. | ||
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| (e) | The Sub-Advisor represents that it will not enter into any agreement, oral or written, or other |
| understanding under which the Fund directs or is expected to direct portfolio securities transactions, | |
| or any remuneration, to a broker or dealer in consideration for the promotion or sale of Fund shares | |
| or shares issued by any other registered investment company. Sub-advisor further represents that it | |
| is contrary to the Sub-advisor’s policies to permit those who select brokers or dealers for execution | |
| of fund portfolio securities transactions to take into account the broker or dealer’s promotion or sale | |
| of Fund shares or shares issued by any other registered investment company. | |
| (f) | The Sub-Advisor 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 | |
| /s/ ▇▇▇▇▇▇▇ ▇. Beer | |
| By | |
| ▇▇▇▇▇▇▇ ▇. Beer, Executive Vice President and Chief | |
| Operating Officer | |
| INVESCO ADVISERS, INC. | |
| /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. | |
| By | |
| ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. | |
| Vice President | |
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| APPENDIX A | ||
| Invesco shall serve as investment sub-advisor for each Series identified below. The Manager will pay Invesco, 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 Series’ net assets as the first day of each month allocated to Invesco’s | ||
| management. | ||
| In calculating the fee for a series included in the table, assets of any unregistered separate account of Principal | ||
| Life Insurance Company and any investment company sponsored by Principal Life Insurance Company to which | ||
| Invesco provides investment advisory services and which have the same investment mandate as the series for | ||
| which the fee is calculated, will be combined with the assets of the series to arrive at net assets. | ||
| If this Agreement becomes effective or terminates before the end of any month, the fee (if any) for the period | ||
| from the effective date to the end of such month or from the beginning of such month to the date of termination, | ||
| as the case may be, shall be prorated according to the proportion which such period bears to the full month in | ||
| which such effectiveness or termination occurs. | ||
| Sub-Advisor Fee | ||
| Series | (as percentage of Daily Net Assets Managed) Annualized Fee | |
| First $1.2 billion | Over $1.2 billion | |
| Tax-Exempt Bond Fund, | ||
| California Municipal Fund. | .15% | .125% |
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