PRINCIPAL FUNDS, INC.
AMENDED AND RESTATED
SUB-ADVISORY AGREEMENT
COLUMBUS CIRCLE INVESTORS SUB-ADVISED SERIES
AGREEMENT executed as of May 1, 2009, by and between PRINCIPAL MANAGEMENT
CORPORATION (hereinafter called "the Manager"), and COLUMBUS CIRCLE
INVESTORS ("CCI") (hereinafter called "the Sub-Adviser").
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-Adviser to furnish it with
investment advisory services with respect to all or a portion of the
portfolio assets of 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-Adviser desires to furnish such services; and
WHEREAS, The Manager has furnished the Sub-Adviser with copies properly
certified or authenticated of each of the following and will promptly
provide the Sub-Adviser 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; and
(c) 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-Adviser.
NOW, THEREFORE, in consideration of the premises and the terms and
conditions hereinafter set forth, the parties agree as follows:
1. Appointment of Sub-Adviser
In accordance with and subject to the Management Agreement, the Manager
hereby appoints the Sub-Adviser 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-Adviser accepts such appointment and agrees
to furnish the services hereinafter set forth for the compensation herein
provided. The Sub-Adviser 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-Adviser
The Sub-Adviser 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-Adviser'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-Adviser. 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-Adviser in the manner the Sub-Adviser
considers to be the most equitable and consistent with its fiduciary
obligations to the Fund and to other clients. The Sub-Adviser 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-Adviser 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-Adviser may select brokers or dealers on the
basis that they provide brokerage, research or other services or products
to the Sub-Adviser. To the extent consistent with applicable law, the Sub-
Adviser 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-Adviser 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-Adviser 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-Adviser 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-Adviser 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-Adviser 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-Adviser has no
responsibility for the maintenance of Fund records except insofar as is
directly related to the services the Sub-Adviser provides to a Series.
(k) Observe and comply with Rule 17j-1 under the 1940 Act and the Sub-Adviser'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-
Adviser's current Code of Ethics. Sub-Adviser shall promptly forward to
the Manager a copy of any material amendment to the Sub-Adviser's Code of
Ethics along with certification that the Sub-Adviser has implemented
procedures for administering the Sub-Adviser'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-Adviser 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-adviser 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) Perform quarterly and annual tax compliance tests to monitor each Series'
compliance with Subchapter M of the Code. The Sub-Adviser shall notify the
Manager immediately upon having a reasonable basis for believing that a
Series has ceased to be in compliance or that it might not be in compliance
in the future. If it is determined that a Series is not in compliance with
the requirements noted above, the Sub-Adviser, 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) Provide a copy of the Sub-Adviser's Form ADV and any amendments thereto
contemporaneously with the filing of such documents with the Securities and
Exchange Commission or other regulatory agency.
(p) Vote proxies received on behalf of the Series in a manner consistent
with Sub-Adviser'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.
(q) 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-Adviser 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-Adviser hereunder with respect to each Series, the Manager shall
pay the compensation specified in Appendix A to this Agreement.
5. Liability of Sub-Adviser
Neither the Sub-Adviser 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-Adviser'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-Adviser
or any of its directors, officers, employees, agents, or affiliates.
6. Supplemental Arrangements
The Sub-Adviser may enter into arrangements with other persons affiliated
with the Sub-Adviser or with unaffiliated third parties to better enable
the Sub-Adviser to fulfill its obligations under this Agreement for the
provision of certain personnel and facilities to the Sub- Adviser, 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-Adviser 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-Adviser, 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-Adviser 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-Adviser will continue to act as Sub-Adviser with respect
to the Series pending the required approval of the Agreement or its
continuance or of any contract with the Sub-Adviser or a different manager
or sub-adviser or other definitive action; provided, that the compensation
received by the Sub-Adviser 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-Adviser, 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-Adviser, 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 for this purpose shall be Principal Financial Group, Xxx Xxxxxx,
Xxxx 00000-0000, and the address of the Sub-Adviser shall be Columbus
Circle Investors, Metro Center, Xxx Xxxxxxx Xxxxx, Xxxxxxxx XX 00000.
(c) The Sub-Adviser will promptly notify the Manager in writing of the
occurrence of any of the following events:
(1) the Sub-Adviser fails to be registered as an investment adviser under
the Investment Advisers Act or under the laws of any jurisdiction in which
the Sub-Adviser is required to be registered as an investment advisor in
order to perform its obligations under this Agreement.
(2) the Sub-Adviser 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-Adviser 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-Adviser to perform its duties and responsibilities
hereunder.
(e) This Agreement contains the entire understanding and agreement of the
parties.
IN WITNESS WHEREOF, the parties have duly executed this Agreement on the
date first above written.
PRINCIPAL MANAGEMENT CORPORATION
By /s/ Xxxxxxx X. Beer___________________________
Xxxxxxx X. Beer, Executive Vice
President
COLUMBUS CIRCLE INVESTORS
By /s/ Xxxxx X.
Cuttita____________________________
Xxxxx X. Xxxxxxx, Managing
Director and
Chief Administrative Officer
APPENDIX A
CCI shall serve as investment sub-adviser for each Series identified below.
The Manager will pay CCI, 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 managed by CCI as of the first day of
each month allocated to CCI'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
CCI provides investment advisory services and which have the same investment
mandate (e.g. LargeCap Growth) 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.
Compensation Table
Fund Net Assets Managed by CCI
First Next Next Next Next Next Next Next Over
Fund $50 million $50 million $100 million $200 million $350 million $750 million $500 million $2.5 billion $4.5 billion
LargeCap Growth Fund 0.2643% 0.2448% 0.2154% 0.1762% 0.1273% 0.0881%
0.0587% 0.2448% 0.1664%
Fund Net Assets Managed by CCI
First Next Next Next Over
Fund $25 million $75 million $100 million $100 million $300 million
MidCap Growth Fund 0.3916% 0.3133% 0.2643% 0.2252% 0.3427%
Fund Net Assets Managed by CCI
Fund All Assets
SmallCap Growth Fund I 0.50%
CCI-7
