PRINCIPAL EXCHANGE-TRADED FUNDS
SUB-ADVISORY AGREEMENT
PRINCIPAL GLOBAL INVESTORS, LLC SUB-ADVISED SERIES
AGREEMENT executed as of July 8, 2015 by and between
PRINCIPAL MANAGEMENT CORPORATION
(hereinafter called "the Manager"), and PRINCIPAL GLOBAL
INVESTORS, LLC. (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 Exchange-Traded
Funds, (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 and related research and
statistical services in connection with the investment advisory
services for each Series of the Fund identified in Appendix A
hereto (hereinafter called "Series"), which the Manager has
agreed to provide to the Fund, and the Sub-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 Securities and Exchange Commission's Order
Approving a Proposed Rule Change (Release No. 34-74886;
File No. SR-NYSEArca-2015-15) related to the exchange listing
of the Series shares ( the"19b-4 Order").
(d) The Fund's Declaration of Trust and By-laws;
(e) Policies, procedures or instructions adopted or
approved by the Board of Trustees 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 the securities and other assets of each Series,
subject to the control and direction of the Manager and the
Fund's Board of Trustees, 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 each Series.
(b) Furnish to the Board of Trustees of the Fund for
approval (or any appropriate committee of such Board), and
revise from time to time as conditions require, a recommended
investment program for each Series consistent with each Series
investment objective and policies.
(c) Implement the approved investment program by
making recommendations 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, 19b-4 Order, Declaration of Trust 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 Trustees,
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 obligations, compliance with the
1940 Act and the regulations adopted by the Securities and
Exchange Commission thereunder, the Series' investment
strategies and restrictions as stated in the Fund's prospectus
and statement of additional information, and the restrictions
and limitations set forth in the 19b-4 Order.
(f) Report to the Board of Trustees of the Fund at such
times and in such detail as the Board of Trustees may
reasonably deem appropriate in order to enable it to
determine that the investment policies, procedures and
approved investment program of each Series are being
observed.
(g) Upon request, provide assistance and
recommendations for the determination of the fair value of
certain securities when reliable market quotations are not
readily available for purposes of calculating net asset value in
accordance with procedures and methods established by the
Fund's Board of Trustees.
(h) Furnish, at its own expense, (i) all necessary investment
and management facilities, including salaries of clerical and
other personnel required for it to execute its duties faithfully,
and (ii) administrative facilities, including bookkeeping,
clerical
personnel and equipment necessary for the efficient conduct of
the investment advisory affairs of each Series.
(i) Open accounts with broker-dealers, swap dealers,
clearinghouses 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 or swaps 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 Trustees 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 or derivatives
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 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.
(j) Maintain all accounts, books and records with respect
to each Series as are required of an investment advisor of
a
registered investment company pursuant to the 1940 Act
and Investment Advisers Act of 1940 (the "Investment Advisers
Act"), and the rules thereunder, and furnish the Fund and the
Manager with such periodic and special reports as the Fund or
Manager may reasonably request. In compliance with the
requirements of Rule 31a-3 under the 1940 Act, the Sub-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 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 along with certification that the Sub-
Advisor has implemented procedures for administering the
Sub-Advisor's Code of Ethics.
(I) 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 Trustees 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 and may be required for the Fund or the Manager
to comply with their respective obligations under applicable
laws, including, without limitation, the Internal Revenue Code
of
1986, as amended (the "Code"), the 1940 Act, the Investment
Advisers Act, the Securities Act of 1933, as amended
(the
"Securities Act"), and any state securities laws, and any rule or
regulation thereunder.
(n) Respond to tender offers, rights offerings and other
voluntary corporate action requests affecting securities held
by 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; provided however the Sub-Advisor shall consult
with Edge Asset Management, Inc. as necessary to discharge
its responsibilities to the Principal EDGE Asset Income ETF.
4. Compensation
As full compensation for all services rendered and
obligations assumed by the Sub-Advisor hereunder with
respect to each Series, 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 trustees, 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 trustees, directors, officers,
employees, agents, or affiliates.
6. 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 Trustees of the Fund.
7. 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.
8. Duration and Termination of This Agreement
This Agreement shall become effective on the latest of (i) the
date of its execution, (ii) the date of its approval by a
majority of
the Board of Trustees of the Fund, including approval by the
vote of a majority of the Board of Trustees 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
or (iii)
if required by the 1940 Act, the date of its approval by
amajority
of the outstanding voting securities of the Series. It shall
continue in effect thereafter from year to year provided that
the continuance is specifically approved at least annually
either
by the Board of Trustees 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 Trustees 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 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 Trustees 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" and "voting security") shall be applied.
9. Amendment of this Agreement
No material amendment of this Agreement shall be effective
until approved, if required by the 1940 Act or the rules,
regulations, interpretations or orders issued thereunder, by
vote of the holders of a majority of the outstanding voting
securities of the Series and by vote of a majority of the
Board of
Trustees 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.
10. (a) 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) Each of the Manager and the Series is a
"qualified eligible person" as defined in U.S. Commodity
Futures Trading Commission Regulation 4.7 (17 CFR 4.7) and
Manager has authority to consent and does consent to Sub-
Advisor treating it and the Series as an exempt account under
regulation 4.7.
(c) The Manager represents and warrants that it is
a member of the National Futures Association (NFA) and is
registered under the U.S. Commodity Exchange Act ("CEA") or is
not required to be a member of the NFA because (i) it is exempt
from registration under the CEA or (ii) it does not engage in
activities that require such registration.
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 and the
Sub-
Advisor for this purpose shall be Principal Financial Group,
Xxx
Xxxxxx, Xxxx 00000-0000.
(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 a Series.
(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) This Agreement contains the entire understanding and
agreement of the parties.
PURSUANT TO AN EXEMPTION FROM THE COMMODITY
FUTURES TRADING COMMISSION IN CONNECTION WITH
ACCOUNTS OF QUALIFIED ELIGIBLE PERSONS, THIS
BROCHURE OR ACCOUNT DOCUMENT IS NOT REQUIRED TO
BE, AND HAS NOT BEEN, FILED WITH THE COMMISSION.
THE COMMODITY FUTURES TRADING COMMISSION DOES NOT
PASS UPON THE MERITS OF PARTICIPATING IN A TRADING
PROGRAM OR UPON THE ADEQUACY OR ACCURACY OF
COMMODITY TRADING ADVISOR DISCLOSURE.
CONSEQUENTLY, THE COMMODITY FUTURES TRADING
COMMISSION HAS NOT REVIEWED OR APPROVED THIS
TRADING PROGRAM OR THIS BROCHURE OR ACCOUNT
DOCUMENT.
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
Principal Global Investors, LLC
By:/s/ Xxxxx Xxxxxxx
Xxxxx Xxxxxxx
Director - Investment Operations
By:/s/ Xxxxxx X. Xxxxxxxx
Xxxxxx X. Xxxxxxxx, Assistant General Counsel
APPENDIX A
Sub-Advisor shall serve as investment sub-advisor for each
Fund
identified below. The Manager will pay Sub-Advisor, as full
compensation for all services provided under this Agreement,
a
fee, computed and paid monthly, at an annual rate as shown
below of the Fund's net assets as of the first day of each
month
allocated to Sub-Advisor's management.
If this Agreement becomes effective or terminates before the
end of any month, the fee (if any) for the period from the
effective date to the end of such month or from the beginning
of such month to the date of termination, as the case may be,
shall be prorated according to the proportion which such period
bears to the full month in which such effectiveness or
termination occurs.
Sub-Advisor Percentage Fee
as a Percentage of Net Assets
Principal EDGE Active Income ETF...................... 0.12%
