PRINCIPAL FUNDS, INC. AMENDED AND RESTATED SUB-ADVISORY AGREEMENT PRINCIPAL GLOBAL INVESTORS SUB-ADVISED SERIES
| PRINCIPAL FUNDS, INC. | ||
| AMENDED AND RESTATED SUB-ADVISORY AGREEMENT | ||
| PRINCIPAL GLOBAL INVESTORS SUB-ADVISED SERIES | ||
| AGREEMENT effective as of July 1, 2009, 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, ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ | ||
| ▇▇▇▇▇-▇▇▇▇. | ||
| (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 |
| /s/ ▇▇▇▇▇▇▇ ▇. Beer |
| By:___________________________________ |
| ▇▇▇▇▇▇▇ ▇. Beer, Executive Vice President and |
| Chief Operating Officer |
| PRINCIPAL GLOBAL INVESTORS, LLC |
| /s/ ▇. ▇. ▇▇▇▇▇▇▇▇ |
| By:___________________________________ |
| ▇.▇. ▇▇▇▇▇▇▇▇, Chief Operations Officer and |
| Chief Compliance Officer |
| 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. |
| The fee for assets of any fund for which advisory services are provided directly or indirectly by employees of |
| Post Advisory Group, LLC is equal to an annual rate of 0.2937% of the portion of the net assets of such fund |
| with regard to which employees of Post Advisory Group, LLC provide investment advisory services. |
| 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 | ||||||||
| Fund | First $5B | Next $1B | Next $4B | Over $10B | ||||
| Bond & Mortgage Securities Fund, and High | 0.1126% | 0.0979% | 0.0930% | 0.0881% | ||||
| Quality Intermediate-Term Bond Fund | ||||||||
| TABLE B | ||||||||
| Net Asset Value of Fund | ||||||||
| First | Next | Next | Next | Next | Next | Over | ||
| Fund | $50M | $50M | $100M | $200M | $350M | $750M | $1.5B | |
| Disciplined LargeCap Blend | ||||||||
| Fund, Equity Income | 0.2643% | 0.2448% | 0.2154% | 0.1762% | 0.1273% | 0.0881% | 0.0587% | |
| Fund, and LargeCap | ||||||||
| Value Fund | ||||||||
| Diversified International | ||||||||
| Fund, and International | 0.3427% | 0.2741% | 0.1958% | 0.1566% | 0.1175% | 0.0979% | 0.0783% | |
| Growth Fund | ||||||||
| MidCap Blend Fund, and | 0.3916% | 0.3133% | 0.2643% | 0.2252% | 0.1762% | 0.1273% | 0.0783% | |
| MidCap Value Fund | ||||||||
| SmallCap Blend Fund, | ||||||||
| SmallCap Growth Fund, | 0.4699% | 0.3524% | 0.2643% | 0.2448% | 0.2154% | 0.1762% | 0.1175% | |
| and SmallCap Value | ||||||||
| Fund | ||||||||
| Table C | ||
| Sub-Advisor Percentage Fee as a | ||
| Fund | Percentage of Net Assets | |
| International Emerging Markets Fund | 0.4895% | |
| LargeCap S&P 500 Index Fund | 0.0147% | |
| 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% | |
| Ultra Short Bond Fund | 0.0734% | |
| Table D | |||
| Global Diversified Income Fund | |||
| Net Asset Value of Underlying Portfolio | |||
| First | Next | Over | |
| Underlying Portfolio | $500 Million | $500 Million | $ 1 Billion |
| Global Value Equity | 0.34% | 0.27% | 0.20% |
| Sub-Advisor Percentage Fee | |||
| as a Percentage of New Assets | |||
| High Yield | 0.30% | ||
| Emerging Market Debt | 0.50% | ||