PRINCIPAL FUNDS, INC.
AMENDED AND RESTATED SUB-ADVISORY AGREEMENT
ALLIANCEBERNSTEIN L.P. SUB-ADVISED FUNDS
AMENDED AND RESTATED SUB-ADVISORY AGREEMENT
(the "Agreement") executed as of the _1st__ day of _October_, 2017
by and between PRINCIPAL GLOBAL INVESTORS, LLC, a
Delaware limited liability company (hereinafter called the "Manager"),
and ALLIANCEBERNSTEIN 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 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
render discretionary investment advisory services for all or a portion
of the assets of each Series of the Fund identified in Appendix A
hereto, as may be amended from time to time (hereinafter called
"Series"), which the Manager has agreed to provide to the Fund, and
the Sub-Advisor desires to furnish such services; and
WHEREAS, the Manager and the Sub-Advisor agree to amend
and restate the Amended and Restated Sub-Advisory Agreement
between the Manager (having assumed the rights and obligation of
Principal Management Corporation) and the Sub-Advisor dated July
4, 2004 with this Agreement; 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 (the
"SEC");
(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 such portion of the assets of
each Series as may be allocated to the Sub-Advisor by the
Manager, from time to time (the "Allocated Assets"), 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
Allocated Assets of 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' respective investment
objective(s) and policies and any specific criteria
applicable to the Allocated Assets.
(c) Implement the approved investment program for the
Allocated Assets 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-Advisor's
investment advisory services provided to the Allocated
Assets, compliance with the 1940 Act and the
regulations adopted by the SEC thereunder and the
Series' investment strategies and restrictions as stated
in the Fund's prospectus and statement of additional
information and any specific criteria applicable to the
Allocated Assets.
(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 (and any
specific criteria applicable to the Allocated Assets) 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 Foreign Account Tax Compliance
Act compliant 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-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 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 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-Advisor 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-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 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 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-
Advisor in managing the Allocated Assets. 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 Allocated Assets as are required of an investment
advisor of a registered investment company pursuant to
the 1940 Act and Investment Advisers Act of 1940, as
amended (the "Advisers Act"), and the rules thereunder,
and furnish the Fund and the Manager with such
periodic and special reports as the Fund or the 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 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-Advisor has no responsibility for the maintenance of
Fund records except insofar as is directly related to the
services the Sub-Advisor provides to a 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
the Sub-Advisor's current Code of Ethics. The Sub-
Advisor shall promptly forward to the Manager a copy of
any material amendment to the Sub-Advisor's Code of
Ethics along with certification that the Sub-Advisor has
implemented procedures for administering 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 a
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 a
Series.
(m) Provide such information as is customarily provided by a
sub-advisor, or as may be required or reasonably
requested by the Manager, 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 Advisers Act, the Securities Act of 1933,
as amended (the "Securities Act"), and any state
securities laws, and any rule or regulation thereunder.
Such information includes, but is not limited to: the Sub-
Advisor's compliance manual and policies and
procedures adopted to comply with Rule 206(4)-7 of the
Advisers Act; the Sub-Advisor's most recent annual
compliance report or a detailed summary of such report;
timely and complete responses to all Quarterly
Compliance Questionnaires (including the identification
of any material compliance maters and a copy of any
material changes to the Sub-Advisor's Rule 206(4)-7
compliance policies and procedures, marked to show
changes along with a written summary of the purpose of
each such change); Annual Proxy Voting
Questionnaires; Annual Best Execution and Soft Dollar
Questionnaires, and responses to all other requests
from the Manager. The Sub-Advisor agrees to make
available for the Manager's review all deficiency letters
issued by the SEC together with all responses given by
Sub-Advisor to such letters. The Sub-Advisor will
advise the Manager of any material changes in the Sub-
Advisor's ownership within a reasonable time after any
such change.
(n) Vote proxies received on behalf of each Series (with
respect to the portion thereof allocated to the Sub-
Advisor) in a manner consistent with the 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 each Series (with respect to the portion thereof
allocated to the Sub-Advisor).
(p) Cooperate with the Manager in its performance of
quarterly and annual tax compliance tests to monitor the
Series' compliance with Subchapter M of the Code and
Section 817(h) of the Code. If it is determined by the
Manager or its tax advisors that the Series is not in
compliance with the requirements imposed by the Code,
the Sub-Advisor, in consultation with the Manager and
its tax advisors, will take prompt action to bring the
Series back into compliance with the time permitted
under the Code.
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
Allocated Assets, 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 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-Advisor or any of
its directors, officers, employees, agents, 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 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 6,
"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; or (iii) purchases or sales
of financial instruments which violate the investment
limitations or restrictions disclosed in the Fund's 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 of the
Fund; provided, however, that entry into any such
arrangements shall not relieve the Sub-Advisor of any of its
obligations under this Agreement.
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 with respect to a
Series as of the corresponding date set forth on Appendix B
to this Agreement, as may be amended from time to time,
and, unless otherwise terminated with respect to such Series,
shall continue in effect thereafter for the initial term set forth
on Appendix B to this Agreement, and thereafter from year to
year, provided that in each case the continuance is
specifically approved within the period required by the 1940
Act 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 Allocated Assets of
such 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 Allocated Assets of such Series during such
period is in compliance with Rule 15a-4 under the 1940 Act.
This Agreement may be terminated with respect to a Series
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," "voting
security" and "majority of the outstanding voting securities")
shall be applied.
10. Amendment of this Agreement
No amendment of this Agreement shall be effective unless in
writing and signed by both parties. 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 (as defined
in the 0000 Xxx) and by vote of a majority of the Board of
Directors of the Fund who are not interested persons (as
defined in the 0000 Xxx) 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.
11. Additional Series
In the event the Manager wishes to appoint the Sub-Advisor
to perform the services described in this Agreement with
respect to one or more additional Series of the Fund after the
effective date of this Agreement, such Series will become a
Series under this Agreement upon approval of this
Agreement in the manner required by the 1940 Act and the
amendment of Appendices A and B hereto.
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 00000-0000, and the address
of the Sub-Advisor shall be 0000 Xxxxxx xx xxx Xxxxxxxx,
Xxx Xxxx, XX 00000, Attention: Xxxxxxx Xxxx.
(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 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 a
Series.
(3) the Sub-Advisor becomes aware of any pending or
threatened action, suit, proceeding, inquiry or
investigation that is reasonably likely to result in a
conviction, order, judgment or decree issued with
respect to it or any affiliate that could reasonably be
expected to result in the Sub-Advisor becoming
ineligible to serve as an investment adviser of a
registered investment company under the 0000 Xxx.
(4) the Sub-Advisor becomes aware of a transaction or
series of transactions that is reasonably likely to
result in a change in the management or control of
the Sub-Advisor or a controlling person thereof or
otherwise in the assignment (as defined in the 0000
Xxx) of this Agreement by the Sub-Advisor.
(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 a Series, cash requirements and cash available
for investment in a 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 agrees that neither it nor any of its
affiliates will in any way refer 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.
(f) 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. The 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's or dealer's promotion or sale of Fund shares or
shares issued by any other registered investment
company.
(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 GLOBAL INVESTORS, LLC
By:
/s/ Xxxxxxx X. Beer
Name:
Xxxxxxx X. Beer
Title:
Executive Director - Principal Funds
By:
/s/ Xxxx X. Xxxxxx
Name:
Xxxx X. Xxxxxx
Title:
Counsel
ALLIANCEBERNSTEIN L.P.
By:
/s/ Xxxxx X. Xxxxxx
Name:
Xxxxx X. Xxxxxx
Title:
Assistant Secretary
APPENDIX A
[INTENTIONALLY OMITTED]
APPENDIX B
Effective Date and Initial Term of Sub-Advisory Agreement for each Series
Series
Effective Date
Initial Term
SmallCap Growth Fund I
March 31, 2003
2 Years
