PRINCIPAL FUNDS. INC.
AMENDED AND RESTATED
SUB-ADVISORY CONSULTING
AGREEMENT GLOBAL MULTI-
STRATEGY SUB-ADVISED
FUND
AGREEMENT executed as of the 1st day of July, 2016 by and between
PRINCIPAL MANAGEMENT CORPORATION , an Iowa corporation
(hereinafter called "the Manager"), and Cliffwater LLC, 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 the services described in this Agreement related to the Fund's
series identified in Appendix A (hereinafter called the "Series"), 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, 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) Monitor the Series:
The Manager allocates and from time to time re-allocates
the assets of the Series among multiple sub- advisors that
are responsible for managing those assets. The Sub-
Advisor will monitor the Manager's allocations of the
Series' assets among the sub-advisors and report to the
Manager monthly, quarterly and annually with
recommendations regarding changes to the Manager's
current allocations. The Sub-Advisor recommendations will
include its outlook for capital markets and opportunities
currently offered by the market and will reflect its internal
capital markets research and analyses performed using its
proprietary
tools. The Sub-Advisor will also monitor the performance of the
Series and report to the Manager monthly, quarterly and annually
on such performance in comparison to such peer funds and
benchmarks as the Manager may from time to time select. The
Sub-Advisor's performance monitoring duties will include portfolio
performance, measurement and review, and each quarterly
performance report will reflect the results of such performance,
measurement and review and will include the Sub-Advisor's
analyses of, among other things, geographic concentration, amount
of leverage and beta exposure as well as the Sub- Advisor's
assessment of whether the risks to which the Series is exposed
through the use of the sub- advisors have been identified and, to
the extent possible, controlled. Such monthly and quarterly reports
will be in substantially the form of Exhibit A hereto.
(b) Monitor the Sub-advisors:
The Sub-Advisor will monitor the performance of each of the
Series' sub-advisors and report to the Manager monthly , quarterly
and annually on such performance in comparison to the
performance of such advisers and benchmarks as the Manager
may from time to time select. The Sub-Advisor's monitoring duties
will include, and each monthly report regarding the performance of
each sub-advisor will reflect the results of, one or more telephone
conferences held by the Sub-Advisor with each sub-advisor. Each
monthly, quarterly, and annual report will include, as appropriate, the
Sub-Advisor's assessment of whether any sub-advisor has, in
carrying out its investment duties for the Series, deviated
materially from its investment philosophy or process, changed its
personnel responsible for management of the assets of the Series
allocated to it, suffered a financial or other event that threatens its
ability to carry out its responsibilities to the Series, achieved an
acceptable level of performance during the period without taking an
unexpected degree of risk and adhered to the investment
guidelines established by the Manager for each sub-advisor . Prior
to the time the Sub-Advisor begins its work pursuant to this
agreement , the Manager will provide the Sub-Advisor with the
investment guidelines and subsequently the Manager will provide
the Sub-Advisor promptly with any amendments to the guidelines . In
determining whether any sub- advisor has suffered a financial or
other event that threatens its ability to carry out its responsibilities to
the Series, or has failed to adhere to the investment guidelines the
Manager establishes, the Sub-Advisor may rely solely on
information the Manager receives from each sub-advisor in the
form of responses to the Manager's periodic questionnaire or other
documentation , which documentation the Manager will provide to
the Sub-Advisor within ten business days of the Manager's receipt
of it. The Manager will also cause each sub-advisor to cooperate
with the Sub-Advisor , including causing each sub-advisor to
promptly provide to Sub-Advisor any other information the Sub-
Advisor reasonably requests and make available the appropriate
personnel to provide Sub-Advisor with clarifications and such other
information that the Sub- Advisor may reasonably require to enable
Sub-Advisor to carry out its responsibilities pursuant to this
agreement.
(c) Evaluate Sub-advisor Candidates:
The Manager may from time to time undertake to select and
recommend to the Fund's Board of Directors the engagement of
one or more new sub-advisors for the Series. At the Manager's
request and using a process satisfactory to both the Manager and
the Sub-Advisor , the Sub-Advisor will assist the Manager in
evaluating new sub-advisor candidates .
(d) Support Marketing:
(1) Training of Manager's Marketing Specialist. The Manager will
designate a marketing specialist employee for training by the
Sub-Advisor , and the Sub-Advisor will provide training for
purposes of developing in such employee an understanding
of the Sub-Advisor's approach to the design and operation
of the Series. As part of such training, the Manager's
employee shall participate in the monthly telephone
conference or conferences held by the Sub-Advisor with
each sub-advisor , as described in 2(b) above, and in such
other telephone or in-person meetings that the Sub-Advisor
may hold with each sub-advisor . The training will occur at the
Sub-Advisor's offices in New York , New York or Marina del
Rey, California, or at another location (including via
conference call) as agreed upon by both parties.
(2) Participation in Financial Adviser Conferences. During the
first twelve months beginning on November 23 , 2011, the
Manager may organize or designate a maximum of twelve (12)
conferences
for purposes of providing education to financial advisers
regarding the absolute return asset class and the Series
design and operation. The Sub-Advisor will cause one of
its senior level executives to attend and participate in
providing such education at each of these conferences.
The Manager will provide the Sub-Advisor with a forward
calendar with anticipated conference dates and times, as
well as at least 30 days advance notice of the date of
each conference .
(e) 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.
(f) Maintain, in connection with the Sub-Advisor's services
provided to the Series, its compliance with the relevant
provisions of the 1940 Act and the regulations adopted by the
Securities and Exchange Commission thereunder. The
Manager will be responsible for all compliance monitoring,
reporting and administration relating to the Series, including
with respect to the sub-advisors . 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.
(g) 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.
(h) Furnish, at its own expense, (i) all necessary 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) 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 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. Notwithstanding the
foregoing , the Manager acknowledges and agrees that the
Sub-Advisor may retain copies of such records if the Sub-
Advisor determines that its retention of such records is
necessary for its compliance with federal securities laws.
(j) 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.
(k) 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 Senior Management (i.e. Chief
Investment Officer and 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 Agree ment.
3. Research
During the term of this agreement, the Sub-Advisor will provide the
Manager with access to its general research related to capital
markets and absolute return strategies.
4. 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 or series of
an investment company sponsored by Principal Life Insurance
Company other than the Series regarding transactions for the Fund
in securities or other assets. For purposes of this Section 4, the
Manager shall periodically provide to the Sub-Advisor, and the Sub-
Advisor may rely exclusively upon, an updated list of all such
investment companies or series. The Sub-Advisor shall have no
liability in the event it consults with another investment advisory firm
advising an investment company or series not on this list.
5. 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.
6. 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 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.
7. 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.
8. Supplemental Arrangements
The Sub-Advisor may delegate some or all of its duties under this
Agreement to persons affiliated with the Sub-Advisor or with
unaffiliated third parties subject to prior written notification to and
receipt of written approval from the Manager and, where required by
applicable law, the Board of Directors of the Fund.
9. 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.
10. 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 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, 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.
11. 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.
12. 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-
0200 , and the address of the Sub-Advisor shall be
Cliffwater LLC 0000
Xxxxxxxxx Xxx, 00xx Xxxxx
Xxxxxx xxx Xxx, Xxxxxxxxxx 00000
ATTN: Xxxxxxxx Xxxxx and Xxxxxxxx Xxxxxxxx.
(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.
(3) any actual change in control of the Sub-Advisor .
(d) 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 .
(e) 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
that this Section 12(e) shall not apply to disclosures the Sub-
Advisor is required to make by law, rules, regulations or legal
or regulatory process, provided that sub-Advisor shall give
Manager notice of such disclosures . The Manager and the
Sub-Advisor agree that the Sub-Advisor is permitted to include
the name of the Manager in its clients lists used for marketing
purposes
(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
CLIFFWATER LLC
By: /s/ Xxxxxxx X. Xxxxx,
Xxxxxxxx Xxxxx,
Senior Managing Director
& General Counsel
