PRINCIPAL FUNDS, INC.
AMENDED AND RESTATED SUB-ADVISORY AGREEMENT
TORTOISE CAPITAL ADVISORS, LLC SUB-ADVISED FUNDS
AGREEMENT executed as of January 1, 2013 by and between
PRINCIPAL MANAGEMENT CORPORATION, an Iowa corporation
(hereinafter called "the Manager"), and TORTOISE CAPITAL
ADVISORS, L.L.C., a Delaware limited liability company (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 Fund of the 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
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 provided by the Sub-Advisor.
NOW, THEREFORE, in consideration of the premises and the terms
and conditions hereinafter set forth, the parties agree as follows:
1. Appointment of Sub-Advisor
In accordance with and subject to the Management Agreement,
the Manager hereby appoints the Sub-Advisor to perform the
services described in Section 2 below for investment and
reinvestment of the securities and other assets of the Series,
subject to the control and direction of the Manager and the
Fund's Board of Directors, for the period and on the terms
hereinafter set forth. The Sub-Advisor accepts such appointment
and agrees to furnish the services hereinafter set forth for the
compensation herein provided. The Sub-Advisor shall for all
purposes herein be deemed to be an independent contractor and
shall, except as expressly provided or authorized, have no
authority to act for or represent the Fund or the Manager in any
way or otherwise be deemed an agent of the Fund or the
Manager.
2.Obligations of and Services to be Provided by the Sub-Advisor
The Sub-Advisor will:
(a) Provide investment advisory services, including but not
limited to research, advice and supervision for the Series.
(b) Furnish to the Board of Directors of the Fund for approval
(or any appropriate committee of such Board), and revise
from time to time as economic conditions require, a
recommended investment program for the Fund consistent
with the 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 or the Board of Directors of
the Fund 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 Articles of Incorporation and
Bylaws, 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 reasonably
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 provided to the Series, its 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, subject to receipt of such additional
information as may be required from the Manager and
provided in accordance with Section 11(d) of this
Agreement. The Sub-Advisor has no responsibility for the
maintenance of Fund records except insofar as is directly
related to the services it provides to the Series.
(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 in 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 its duties under this Agreement.
(i) Open accounts with broker-dealers ("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 Manager
recognizes that, in some cases, this procedure may limit
the size of the position that may be acquired or sold for the
Series. 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 cause
the Series to pay a broker or dealer an amount of
commission for effecting a securities transaction in excess
of the amount of commission or dealer spread another
broker or dealer would have charged for effecting that
transaction if the Sub-Advisor determines in good faith that
such amount of commission is reasonable in relation to the
value of the brokerage and research products and/or
services provided by such broker or dealer. This
determination, with respect to brokerage and research
products and/or services, may be viewed in terms of either
that particular transaction or the overall responsibilities
which the Sub-Advisor and its affiliates have with respect to
the Series as well as to accounts over which they exercise
investment discretion. Not all such services or products
need be used by the Sub-Advisor in managing the Series.
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 Advisor's Act of 1940 (the "Investment
Advisor's 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 Fund and that are required to be
maintained by Rule 31a-1 under the 1940 Act, and further
agrees to surrender promptly to the Fund any records that
it maintains for the Series upon request by the Fund or the
Manager.
(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.
(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 the 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 the 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.
Sub-Advisor will advise Manager of any changes in Sub-
Advisor's managing directors within a reasonable time after
any such change. Manager acknowledges receipt of Sub-
Advisor's Form ADV more than 48 hours prior to the
execution of this Agreement.
(n) Perform quarterly and annual tax compliance tests to
monitor the Series' compliance with Subchapter M of the
Code and Section 817(h) of the Code, subject to receipt of
such additional information as may be required from the
Manager and provided in accordance with Section 11(d) of
this Agreement. The Sub-Advisor shall notify the Manager
immediately upon having a reasonable basis for believing
that the Series has ceased to be in compliance or that it
might not be in compliance in the future. If it is determined
that the Series is not in compliance with the requirements
noted above, the Sub-Advisor, in consultation with the
Manager, will take prompt action to bring the Series back
into compliance (to the extent possible) within the time
permitted under the Code.
(o) Have the responsibility and authority to vote proxies
solicited by, or with respect to, the issuers of securities held
in the Series. The Manager shall cause to be forwarded to
Sub-Advisor all proxy solicitation materials that it receives
and shall assist Sub-Advisor in its efforts to conduct the
proxy voting process.
3. Prohibited Conduct
In providing the services described in this agreement, the Sub-
Advisor will not consult with any other investment advisory firm
that provides investment advisory services to any investment
company sponsored by Principal Life Insurance Company
regarding transactions for the Fund in securities or other assets.
4. Compensation
As full compensation for all services rendered and obligations
assumed by the Sub-Advisor hereunder with respect to the Fund,
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 duties under this Agreement
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 the Sub-Advisor's willful misfeasance, bad faith or
gross negligence of, or from reckless disregard of, the duties of
the Sub-Advisor under this Agreement.
6. Indemnification
The Manager agrees to indemnify and hold harmless the Sub-
Advisor from and against any and all claims, losses, liabilities or
damages (including reasonable attorneys' fees and other related
expenses), ("Losses") howsoever arising, from or in connection
with this Agreement or the performance by the Sub-Advisor of its
duties hereunder, so long as the Sub-Advisor shall, after receipt
of notice of any claim or commencement of any action, promptly
notify the Manager in writing of the claim or commencement of
such action. The Manager shall not be liable for any settlement
of any claim or action effected without its written consent.
Nothing contained herein shall require the Manager to indemnify
the Sub-Advisor for Losses resulting from the Sub-Advisor's
willful misfeasance, bad faith or gross negligence in the
performance of its duties or from its reckless disregard of its
obligations and duties under this Agreement.
7. 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.
8. 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.
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. 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, and such amendment is signed by both parties.
11. 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 Principal Financial
Group, Xxx Xxxxxx, Xxxx 00000-0000, and the address of
the Sub-Advisor shall be Tortoise Capital Advisors, L.L.C.,
00000 Xxx Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxx 00000.
(c) The Sub-Advisor will promptly notify the Manager in writing
of the occurrence of any of the following events:
(1) the Sub-Advisor fails to be registered as an
investment adviser under the Investment Advisers
Act or under the laws of any jurisdiction in which the
Sub-Advisor is required to be registered as an
investment advisor in order to perform its obligations
under this Agreement.
(2) the Sub-Advisor is served or otherwise receives
notice of any action, suit, proceeding, inquiry or
investigation, at law or in equity, before or by any
court, public board or body, involving the affairs of the
Fund.
(d) The Manager shall provide (or cause the Series custodian
to provide) timely information to the Sub-Advisor regarding
such matters as the composition of the assets of the
Series, cash requirements and cash available for
investment in the Series, and all other reasonable
information as may be necessary for the Sub-Advisor to
perform its duties and responsibilities hereunder.
(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
By /s/s Xxxxxxx X. Beer
Xxxxxxx X. Beer, Executive Vice President and
Chief Operating Officer
TORTOISE CAPITAL ADVISORS, L.L.C.
By
APPENDIX A
Tortoise Capital Advisors, L.L.C. ("Tortoise") shall serve as an
investment sub-advisor for the Series identified below. The Manager
will pay Tortoise, as full compensation for all services provided under
this Agreement, a fee, computed daily and paid monthly, at an
annual rate as shown below of the Series' net assets as of the first
day of each month allocated to Tortoise'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 Tortoise 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.
Global Diversified Income Fund
Sub-Advisor's Fee as a Percentage of Average Daily Net Assets
First $25 million 1.00%
Next $25 million 0.85%
Next $25 million 0.75%
Next $25 million* 0.75%
Assets of $100 million or more** 0.625%
* During any period when the Fund's
Average Daily Net Assets equal or
exceed $75 million, but are less
than $100 million, Tortoise's fee as
a percentage of average daily net
assets shall be 0.75% on all assets.
** During any period when the Fund's
Average Daily Net Assets equal or
exceed $100 million, Tortoise's fee
as a percentage of average daily
net assets shall be 0.625% on all
assets.
Diversified Real Asset Fund
Sub-Advisor's Fee as a Percentage of Average Daily Net Assets
First $25 million 1.00%
Next $25 million 0.85%
Next $25 million 0.75%
Next $25 million* 0.75%
Assets of $100 million or more** 0.625%
* During any period when the Fund's
Average Daily Net Assets equal or
exceed $75 million, but are less
than $100 million, Tortoise's fee as
a percentage of average daily net
assets shall be 0.75% on all assets.
** During any period when the Fund's
Average Daily Net Assets equal or
exceed $100 million, Tortoise's fee
as a percentage of average daily
net assets shall be 0.625% on all
assets.
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