PRINCIPAL FUNDS. INC.
SUB-ADVISORY AGREEMENT
AGREEMENT executed as of the July 1, 2016, by and between
PRINCIPAL MANAGEMENT CORPORATION, an Iowa corporation
(hereinafter called "the Manager"), and YORK REGISTERED
HOLDINGS, L.P., a Delaware Limited Partnership (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 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 in connection with the investment
advisory services for each series of the Fund 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 on the terms and conditions set forth herein; and
WHEREAS, the Manager has furnished the Sub-Advisor with copies
properly certified or authenticated of each of the following:
(a) The Amended and Restated Management Agreement dated
March 31, 2016, between the Fund and the Manager (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 supervision 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 provide such
services with respect to the portion of the assets of the
Series allocated to it for management from time to time by
the Manager. The Sub-Advisor shall for all purposes
herein be deemed to be an independent contractor and
shall, except as expressly provided or authorized herein,
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
(a) The Sub-Advisor will:
(i) Provide investment advisory services, including but
not limited to research, advice and supervision for the
Series.
(ii) Furnish to the Board of Directors for approval (or
any appropriate committee of such Board of
Directors), and revise from time to time as economic
conditions require, a recommended investment
program for the Series consistent with the Series'
written investment objective and policies.
(iii) Implement the approved investment program by placing
orders for the purchase, sale and exchange of securities,
"commodity interests" (as defined in the Commodity
Exchange Act, as amended) and other financial instruments
without prior consultation with the Manager and without regard
to the length of time the securities and other financial
instruments have been held, the resulting rate of portfolio
turnover or any tax considerations, subject always to (i) the
provisions of the Fund's Articles of Incorporation and Bylaws
and (ii) the requirements of the 1940 Act, as each of the same
shall be from time to time in effect.
(iv) Advise and assist the officers of the Fund, as reasonably
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.
(v) 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 ("SEC") thereunder and the
Series' investment strategies and restrictions as stated in the
Fund's prospectus and statement of additional information
(together , the "Registration Statement"), 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.
(vi) 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.
(vii) Upon request, provide reasonable 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 Board of
Directors.
(viii) 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.
Notwithstanding the foregoing, the cost of the securities or
other investment instruments purchased or sold or held by the
Fund (including taxes, brokerage commissions and other
applicable transaction and custodial costs, interest payable on
any margin loans and other Fund borrowings, and dividend
and interest expenses on short positions, if any), shall be
solely borne by the Fund.
(ix) Open accounts with broker-dealers, futures commission
merchants, banks and other financial institutions (collectively
"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 of the
Sub-Advisor and its affiliates over time. 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
and that aggregation of orders may not result in more
favorable pricing or lower brokerage commissions in all
instances. At the Manager's request, the Sub-Advisor will
provide the Manager with the information required pursuant to
Rule 31a-1(b)(9) of the 1940 Act. The Sub-Advisor will effect
transactions with those broker-dealers which it believes
provide favorable net prices and are capable of providing
efficient executions, taking into consideration, among other
things, order size, difficulty of execution, the operational
capabilities, facilities and financial condition of the broker-
dealer involved, whether that broker-dealer has risked its
own capital in positioning a block of securities or other
assets, and the prior experience of the broker- dealer in
effecting transactions of the relevant types. The Sub-Advisor's
primary objective will be to
obtain best execution with respect to all transactions for the
Series However, the Sub-Advisor may select brokers-dealers
on the basis that they provide brokerage, research or other
services or products to the Sub-Advisor or its affiliates. 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- 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-
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 and other 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.
(x) Maintain all accounts, books and records with respect to the
Series as are required of an investment adviser of a
registered investment company pursuant to the 1940 Act
and the Investment Advisers Act of 1940, as amended (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
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. The Sub-Advisor may
retain copies of any such records.
(xi) Observe and comply with Rule 17j-1 under the 1940 Act and
the Sub-Advisor's code of ethics (the "Code of Ethics")
adopted pursuant to Rule 17j-1 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.
(xii) 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 personnel to meet
with the Fund's Board of Directors at the Fund's principal
place of business on reasonable prior notice to review the
investments of the Series.
(xiii) Provide such additional information in the possession of the
Sub-Advisor or its affiliates 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
Senior Management (i.e. Chief Investment Officer and/or Chief
Executive Officer) 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.
(xiv) Have the responsibility and authority to vote proxies solicited
by, or with respect to, the issuers of securities held in the
Series in accordance with the Sub-Advisor's proxy voting
policy as most recently provided to the Manager. The Sub-
Advisor's obligations in the previous sentence are
contingent upon its timely receipt of such proxy solicitation
materials from the Manager. 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.
(b) The Sub-Advisor is hereby authorized to prepare and file all
documentation in connection with its management of the Series,
including proofs of claim, evidence of indebtedness, related
bankruptcy and insolvency filings and other similar filings on
behalf of 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.
The Manager agrees to provide a list of such other investment
advisory firms to the Sub-Advisor, such list to be promptly
updated by the Manager upon any changes thereto.
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 partners, members,
directors, officers, employees, agents or affiliates shall be liable
to the Manager, the Board of Directors, the Fund or its
shareholders for any claim, expense or other 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 willful misfeasance, bad faith or gross
negligence of, or from reckless disregard of, the duties of the
Sub-Advisor or any of its partners, members, directors, officers,
employees, agents (excluding any broker- dealer selected by the
Sub-Advisor), or affiliates.
6. Trade Errors
The Sub-Advisor will notify the Manager of any Trade Error(s),
regardless of materiality, promptly upon the discovery such Trade
Error(s) by the Sub-Advisor. Notwithstanding Section 5, the Sub-
Advisor will be shall be liable to the Manager, the Fund or its
shareholders for any loss suffered by the Manager or the Fund
resulting from Trade Errors due to negligence, misfeasance, or
disregard of duties of the Sub-Advisor or any of its directors,
officers, employees, agents (excluding any broker-dealer selected
by the Sub-Advisor), or affiliates. For purposes under this Section,
Trade Errors are defined as errors due to (i) erroneous orders by
the Sub-Advisor for the Series that result in the purchase or sale
of securities that were not intended to be purchased or sold; (ii)
erroneous orders by the Sub-Advisor that result in the
purchase or sale of securities for the Series in an unintended
amount or price; and(iii) purchases or sales of financial
instruments which violate the investment limitations or restrictions
disclosed in the Registration Statement and/or imposed by
applicable law or regulation (calculated at the Sub-Advisor's
portfolio level), unless otherwise agreed to in writing.
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.
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 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 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 Board of Directors or 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, or the Manager or by vote of' a majority
of the outstanding voting securities of the Series, in each case,
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 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 York Registered
Holdings, L.P., 000 Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX
00000 ATIN: General Counsel.
(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, specifically naming the Fund or involving the
affairs of the Fund that would be reasonably expected to
have a material adverse impact on 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 acknowledges Manager's representation that the
Global Multi-Strategy Fund series does not rely on the exclusion
from the definition of "commodity pool operator" under Section
4.5 of the General Regulations under the Commodity Exchange
Act (the CEA).
The Sub-Advisor represents that it is a commodity trading
advisor duly registered with the Commodity Futures Trading
Commission and is a member in good standing of the National
Futures Association (the NFA) or is relying on an exemption from
registration as a commodity trading advisor. As applicable, the
Sub- Advisor shall maintain such registration and membership
in good standing or continue to qualify for an exemption from
registration as a commodity trading advisor during the term of this
Agreement. Further, the Sub-Advisor agrees to notify the
Manager within a commercially reasonable time upon (i) a
statutory disqualification of the Sub Advisor under Sections 8a(2)
or 8a(3) of the CEA, (ii) a suspension, revocation or limitation of
the Sub-Advisor's commodity trading advisor registration or
NFA membership, or (iii) the institution of an action or
proceeding that could lead to a statutory disqualification under
the CEA or an investigation by any governmental agency or self-
regulatory organization of which the Sub-Advisor is subject or has
been advised it is a target.
(g) 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; provided,
however, that the Manager consents to the Sub-Advisor's use of
the Manager's name and the Fund name in the Sub-Advisor's
representative client list that may be distributed to potential and
existing clients so long as this Agreement is in effect.
(h) The Sub-Advisor shall provide investment advisory services to
the Series on a non-exclusive basis. In particular, the Manager
hereby acknowledges and agrees that, during the term of this
Agreement, the Sub-Advisor and its affiliated persons trade or
may trade for their own accounts (or the accounts of family
members, friends or investment vehicles established for the
benefit of any of such persons) or the accounts of other
persons. Such other accounts include investment companies,
funds, vehicles and accounts managed or advised by the Sub-
Advisor or its affiliated persons (each, including the Series, a
"York Fund") with investment objectives and strategies that are
the same as, or overlap with, those of the Series and may
include York Funds in which affiliated persons of the Sub-
Advisor have substantial ownership interests from time to time.
In addition, in their respective trading for proprietary and other
accounts, the Sub-Advisor and its affiliated persons may take
positions that are the same as or different from those taken on
behalf of the Series in accordance with the Sub-Advisor's
internal policies and consistent with the Sub-Advisor's fiduciary
duty to the Series.
(i) The Manager shall promptly notify the Sub-Advisor of the
occurrence of any event that would disqualify the Manager from
serving as an investment adviser 'of an investment company
pursuant to Section 9(a) of the 1940 Act or other applicable law,
rule or regulation.
(j) The Sub-Advisor shall promptly notify the Manager of the
occurrence of any event that would disqualify the Sub-Advisor
from serving as an investment adviser of an investment
company pursuant to Section 9(a) of the 1940 Act or other
applicable law, rule or regulation.
(k) Each party represents, warrants and covenants to the other
party that (i) it has all requisite power and authority to enter
into and perform its obligations under the Agreement, (ii) it
has taken all necessary corporate action to authorize its
execution, delivery and performance of this Agreement, (iii) it
has duly executed and delivered the Agreement, and (iv) this
Agreement constitutes its legal, valid and binding agreement,
enforceable against it in accordance with its terms.
(I) 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
President and Chief Executive Officer
By /s/ Xxxx Xxxxxxx
Xxxx Xxxxxxx
Assistant General Counsel
York Registered Holdings, L.P.
By: /s/ Xxxxxxx Xxxxxxx
Xxxxxxx Xxxxxxx,
General Counsel
