PRINCIPAL FUNDS, INC.
AMENDED AND RESTATED SUB-ADVISORY AGREEMENT
AGREEMENT executed as of the June 30, 2017, by and between
PRINCIPAL GLOBAL INVESTORS, LLC, a Delaware limited liability
company (hereinafter called "the Manager"), and XXXXXX X. XXXXX &
CO. INCORPORATED, a Wisconsin Corporation (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 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 ("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 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
Subject to the terms of this Agreement and applicable law, the
Sub-Advisor shall have full discretionary authority to manage the
assets of the Series designated by the Manager for management
by the Sub-Advisor. As part of its services, 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. The Sub-Advisor is
also authorized to provide instructions to the Fund's
custodian relating to such purchase, sale and exchange
of the Series' portfolio holdings.
(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.
(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 to the
Board of Directors or valuation committee of the Fund
with their 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; it being agreed
that the Sub-Advisor shall have no responsibility for
determining the fair value of the Series' portfolio
holdings.
(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. For the avoidance of doubt, the parties
agree that the Sub-Advisor shall not be responsible for
expenses related to the operation of the Fund, including,
without limitation, compensation of the Fund's officers or
directors, the Fund's brokerage commissions or taxes, or
the Fund's audit, accounting, administrative, transfer
agency, custody, legal, registration, or insurance
expenses.
(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; provided, however, the Sub-Advisor is
responsible for maintaining Fund records only insofar as
is directly related to the services the Sub-Advisor
provides to the Series.
(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 related to the Sub-
Advisor's management of the Series that may be
reasonably 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) Vote proxies, exercise conversion or subscription rights,
and respond to tender offers and other corporate actions
relating to the Series' portfolio holdings in the manner in
which the Sub-Advisor believes to be in the best
interests of the Series and in accordance with the Sub-
Advisor's policies and procedures then in effect. The
Sub-Advisor's obligations in the previous sentence
extend only to the proxies or other materials that it
actually receives and are contingent upon its timely
receipt of such 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. The parties agree that Sub-Advisor shall
not be responsible for the management, administration
or enforcement of any legal claims that any Series may
have, such as those related to class action lawsuits or
bankruptcies, but Sub-Advisor will provide reasonable
assistance with those matters to the Series or the
Manager if requested to do so.
(xv) The Sub-Advisor shall not be obligated to perform any
service not described in this Agreement, and shall not be
deemed by virtue of this Agreement to have made any
representation or warranty that any level of investment
performance or level of investment results will be
achieved
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;
provided that, this Section shall not prohibit the Sub-Advisor from
obtaining or using research services provided by such firms. 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: (i) any error of judgment,
mistake of law, or any other act or omission made by the Sub-
Advisor in the good faith exercise of the Sub-Advisor's duties
under this Agreement; (ii) any acts or omissions of the Manager
or any other sub-advisor or service provider to the Fund; or (iii)
acts of the Sub-Advisor which result from or are based upon acts
of the Manager or any other service provider to the Fund, except
to the extent such losses result from the 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.
The Manager shall indemnify and hold harmless the Sub-Advisor
(including its partners, members, directors, officers, employees,
agents and affiliates) from and against any and all claims,
losses, liabilities or damages (including reasonable attorney's
fees and other related expenses) resulting from: (i) the
Manager's or its affiliates' willful misfeasance, bad faith or gross
negligence in connection with the performance of the Manager's
obligations under this Agreement; (ii) the Manager's or its
affiliates' violation of applicable law or reckless disregard of the
Manager's obligations and duties under this Agreement; (iii) any
acts or omissions of the Manager, its affiliates or any other
service provider to the Fund with respect to the Fund or its
shareholders; or (iv) any untrue statement of a material fact
contained in, or any omission of a material fact required to be
stated therein or necessary to make the statement therein not
misleading in the Fund's registration statement, proxy materials
or reports filed with the SEC, unless and to the extent such
untrue statement of a material fact or omission was made in
reliance upon, and is consistent with, information furnished in
writing to the Manager by the Sub-Advisor for use therein;
provided, however, that the Manager's obligation under this
Section shall be reduced to the extent that the claim against, or
the loss, liability or damage experienced by the Sub-Advisor, is
caused by or is otherwise directly related to the Sub-Advisor's
own willful misfeasance, bad faith or gross negligence, or to the
reckless disregard of its duties under this Agreement.
Notwithstanding the foregoing, federal securities laws and
certain state laws impose liabilities under certain circumstances
on persons who have acted in good faith, and therefore nothing
herein shall in any way constitute a waiver or limitation of any
rights which a party may have under any federal securities law or
state law.
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. Any gains which occur due to
a Trade Error shall be retained by the Fund. 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; or (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.
The services of the Sub-Advisor to the Manager and the Fund
are not to be deemed exclusive and it shall be free to render
similar services to others so long as its services hereunder are
not impaired thereby. It is specifically understood that directors,
officers and employees of the Sub-Advisor and of its affiliates
may continue to engage in providing portfolio management
services and advice to other investment advisory clients. The
Manager agrees that Sub-Advisor may give advice and take
action in the performance of its duties with respect to any of its
other clients which may differ from advice given or the timing or
nature of action taken with respect to the Fund. Nothing in this
Agreement shall be deemed to require Sub-Advisor, its
principals, affiliates, agents or employees to purchase or sell for
the Fund any security which it or they may purchase or sell for its
or their own account or for the account of any other client.
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 amendment of this Agreement shall be effective until 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 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 Xxxxxx X. Xxxxx & Co. Incorporated, Attn: Xxxxx
Investment Management, 000 Xxxx Xxxxxxxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxxxx 00000.
(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.
(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 that the Series is relying on the
exclusion from the definition of "commodity pool
operator" under Section 4.5 of the General Regulations under
the Commodity Exchange Act ("Rule 4.5"). The Sub-
Advisor will not exceed the de minimis trading limits set forth in
Rule 4.5(c)(2)(iii)(B).
(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 (not to be
unreasonably withheld); provided, however, that the Manager
consents to the Sub-Advisor's use of the Manager's name and
the Fund and Series names in the Sub-Advisor's representative
client list that may be distributed to potential and existing clients
and in the Sub-Advisor's Form ADV Parts 1 and 2A and other
regulatory filings so long as this Agreement is in effect.
(h) 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.
(i) 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.
(j) 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. In addition,
the Manager represents and warrants that it has the authority to
engage the Sub-Advisor on behalf of each Series
(k) 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
By:
_______________________
_______________________
____
XXXXXX X. XXXXX & CO.
INCORPORATED
By
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