PRINCIPAL FUNDS, INC.
AMENDED AND RESTATED SUB-ADVISORY AGREEMENT
PRINCIPAL REAL ESTATE INVESTORS SUB-ADVISED SERIES
AGREEMENT effective as of December 31, 2014, by and between
PRINCIPAL MANAGEMENT CORPORATION (hereinafter called "the
Manager"), and PRINCIPAL REAL ESTATE 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 certain series of the
Fund (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 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 conditions require, a recommended investment
program for the Series 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 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 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.
(i) Open accounts with broker-dealers, swap dealers,
clearinghouses 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 or swaps 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 or derivatives
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 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 the 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 the 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.
(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 1940 Act, the Investment Advisers
Act, the Securities Act of 1933, as amended, the Commodity
Exchange Act, as amended, 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.
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 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 the 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 the 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 Fund 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 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 the 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 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) 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 REAL
ESTATE INVESTORS, LLC
By
____________________________________________
By
____________________________________________
APPENDIX A
The Sub-Advisor shall serve as investment sub-advisor for the Real
Estate Securities Fund, Real Estate Allocation Fund, Real Estate Debt
Income Fund, the Global Real Estate Fund, the Global Diversified Income
Fund (two separate portfolios), and the Diversified Real Asset Fund. The
Manager will pay the Sub-Advisor, as full compensation for all services
provided under this Agreement, a fee computed at an annual rate as follows
(the "Sub-Advisor Percentage Fee"):
Real Estate Securities Fund
0.4895% of the first $1 billion
0.4405% of the next $500 million
0.3916% of assets over $1.5 billion
Real Estate Allocation Fund
0.00% on all assets
Real Estate Debt Income Fund
0.25% on the first $200 million
0.20% on assets over $200 million
Global Real Estate Fund
0.54% of the first $1 billion
0.48% of the next $500 million
0.44% of assets over $1.5 billion
Global Diversified Income Fund
(Global REIT Portfolio)
0.54% of the first $1 billion
0.48% of the next $500 million
0.44% of assets over $1.5 billion
(CMBS Portfolio) 0.30% of the first $200 million
0.25% of assets over $200 million
Diversified Real Asset Fund
(Global REIT Portfolio)
0.54% of the first $1 billion
0.48% of the next $500 million
0.44% of assets over $1.5 billion
The Sub-Advisor Percentage Fee shall be accrued for each calendar
day and the sum of the daily fee accruals shall be paid monthly to the
Sub-Advisor. The daily fee accruals will be computed by multiplying the
fraction of one over the number of calendar days in the year by the
applicable annual rate described above and multiplying this product by the
net assets of the Series as determined in accordance with the Series'
prospectus and statement of additional information as of the close of
business on the previous business day on which the Series was open for
business.
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 Principal Real Estate Investors, LLC. 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.
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