INVESTMENT SUB-SUB-ADVISORY AGREEMENT
This AGREEMENT is effective this 3rd day of February, 2012 by and
between BROOKFIELD INVESTMENT MANAGEMENT INC., a Delaware corporation and
registered investment adviser ("BIM"), and AMP CAPITAL BROOKFIELD (US), LLC,
a Delaware limited liability company and registered investment adviser
("ACB", collectively with BIM, the "parties" and individually each, a
"party").
WHEREAS, the DIVERSIFIED REAL ASSET FUND (the "Fund") is an
investment portfolio of the PRINCIPAL FUNDS, INC. (the "Company"), a Maryland
corporation registered under the Investment Company Act of 1940, as
amended (the "1940 Act") as an open-end management investment company;
WHEREAS, PRINCIPAL MANAGEMENT CORPORATION ("PMC") and the Company are
parties to a Management Agreement dated as of November 1, 2011, pursuant
to which PMC acts as investment manager with respect to the investment
portfolios of the Company, including the Fund;
WHEREAS, PMC and BIM are parties to an Investment Sub-Advisory
Agreement, dated February 3, 2011 (the "Sub-Advisory Agreement"),
pursuant to which BIM acts as the investment manager with respect to the
Fund, which is an investment portfolio of the Company,
WHEREAS, BIM desires to retain ACB to provide certain investment
services with respect to the Fund upon the terms and conditions set forth
below.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
1. APPOINTMENT. BIM hereby appoints ACB, consistent with the terms of
the Sub-Advisory Agreement, to act as discretionary investment
manager with respect to such portion of the assets of the Fund as
BIM shall allocate to ACB for the period and pursuant to the terms
and conditions set forth in this Agreement. ACB accepts such
appointment and agrees to provide the services contemplated herein
for the compensation herein provided.
2. DELIVERY OF DOCUMENTS. PMC has or will furnish BIM certain documents,
as provided in the Sub-Advisory Agreement, which BIM hereby agrees
to provide to ACB prior to the commencement of ACB's services,
including:
a) Management Agreement (the "Management Agreement") with the
Fund;
b) The Company's registration statement and financial
statements as filed with the Securities and Exchange
Commission;
c) The Company'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.
During the term of this Agreement, BIM agrees to furnish ACB at
its principal office all proxy statements, reports to
shareholders, sales literature or other materials it receives
pursuant to the Sub-Advisory Agreement prepared for distribution
to shareholders of the Fund, prospectus of the Fund, prior to the
use thereof, and BIM shall not agree to the use of any such
materials under the Sub-Advisory Agreement until ACB agrees
thereto in writing, which such agreement shall not be
unreasonably withheld. ACB's right to object to such materials is
limited to the portions of such materials that expressly relate
to ACB, its services and its clients. BIM agrees to use its
reasonable best efforts to ensure that materials prepared by its
employees or agents or its affiliates that refer to ACB or its
clients in any way are consistent with those materials previously
approved by ACB as referenced in the first sentence of this
paragraph. Sales literature may be furnished to ACB by e-mail,
first class or overnight mail, facsimile transmission equipment
or hand delivery.
BIM will furnish ACB with copies of all amendments of or
supplements to the foregoing that relate specifically to ACB or the
Fund promptly upon its receipt thereof under the Sub-Advisory
Agreement. Any amendments or supplements that impact the management
of the Fund will not be deemed effective with respect to ACB until
ACB's written approval thereof; provided, however, that BIM's
written approval of such amendments or supplements to PMC shall be
binding under the Sub-Advisory Agreement.
3. MANAGEMENT. Subject always to the supervision of BIM, who in turn is
subject to the supervision of PMC, who in turn is subject to the
supervision of the Company's Board of Directors, ACB will furnish
an investment program in respect of, and make investment decisions
for, all assets of the Fund that are allocated to it by BIM and
place all orders for the purchase and sale of securities, including
foreign or domestic securities or other property (including
financial futures and options of any type), all on behalf of the
Fund. In the performance of its duties, ACB will satisfy its
fiduciary duties to the Fund (as set forth below), and will monitor
the Fund's investments, and will comply with the provisions of the
Company's Articles of Incorporation and By-Laws, as amended from
time to time, and the stated investment objectives, policies and
restrictions of the Funds set forth in the Fund's prospectus and
Statement of Additional Information, as they may be amended from
time to time. Notwithstanding the foregoing sentence, ACB shall not
be bound by any such amendments to the Company's Articles of
Incorporation and By-Laws or the stated investment objectives,
policies and restrictions of the Company until BIM has actually
received written copies of such amendments. Each of PMC, BIM and
ACB will make its officers and employees available to the others
from time to time at reasonable times to review investment policies
of the Fund and to consult with each other regarding the investment
affairs of the Fund. ACB will report to the Board of Directors and
to PMC and BIM with respect to the implementation of such program.
ACB, solely with respect to the assets of the Fund which are under
its management pursuant to this Agreement, and based on information
obtained from the Fund's administrator, custodian and other service
providers, shall take reasonable steps to comply with the
diversification provisions of Section 851 and Section 817(h) of the
Internal Revenue Code of 1986, as amended ("IRC"), and its
accompanying Regulation, Treas. Reg. Section 1.817-5, applicable to
the Fund.
BIM agrees that ACB shall not be liable for any failure to
recommend the purchase or sale of any security on behalf of the
Fund on the basis of any information which might cause such
purchase or sale to, in ACB's opinion, constitute a violation of
any federal or state laws, rules or regulations.
ACB represents, warrants and covenants that it is registered under
the Investment Advisers Act of 1940, as amended, and that it will
maintain such registration during the term of this Agreement.
ACB further agrees that it:
a) will use the same skill and care in providing such services
as it uses in providing services to its other client mandates
for which it has investment responsibilities;
b) will comply with all applicable Rules and Regulations of the
SEC in all material respects and in addition will conduct its
activities under this Agreement in accordance with any
applicable regulations of any governmental authority
pertaining to its investment advisory activities, including
but not limited to compliance with Rule 206(4)-7 under the
Investment Advisers Act of 1940, as amended;
c) will report regularly to BIM and to PMC and the Company's
Board of Directors as reasonably agreed between the BIM and
ACB and will make appropriate persons available for the
purpose of reviewing with representatives of BIM, PMC and the
Board of Directors on a regular basis at reasonable times
agreed to by the PMC, BIM and ACB, the management of the
Fund, including, without limitation, review of the general
investment strategies of the Fund, and the performance of the
Fund in relation to the specified benchmark(s) and will
provide various other reports from time to time as reasonably
requested by BIM;
d) will provide to BIM (i) a monthly compliance checklist
developed for the Fund by BIM and PMC, (ii) quarterly reports
developed for the Fund by BIM and PMC, and (iii) other
compliance and reporting information as requested by the BIM,
PMC or the Board of Directors from time-to-time;
e) as a service provider to the Fund, will cooperate fully with
the Chief Compliance Officer of the Company in the execution
of his/her responsibilities to monitor service providers to
the Fund under Rule 38a-1 under the 1940 Act;
f) will prepare and maintain such books and records with respect
to the Fund's securities transactions in accordance with
Section 7 herein, and will furnish BIM, PMC and the Company's
Board of Directors such periodic and special reports as BIM
or PMC may reasonably request;
g) will prepare and cause to be filed in a timely manner Form
13F and, if required, Schedule 13G with respect to securities
held for the account of the Fund subject to ACB's
supervision;
h) will act upon reasonable instructions from BIM and PMC not
inconsistent with the fiduciary duties and investment
objectives hereunder;
i) will treat confidentially and as proprietary information of
the Company all such records and other information relative
to the Company maintained by ACB, and will not use such
records and information for any purpose other than
performance of its responsibilities and duties hereunder,
except after prior notification to and approval in writing by
the Company, which approval shall not be unreasonably
withheld and may not be withheld where ACB may be exposed to
civil or criminal contempt proceedings for failure to comply,
when requested to divulge such information by duly
constituted authorities, or when so requested by the Company,
provided, however, that notwithstanding the foregoing, ACB
may disclose such information as required by applicable law,
regulation or upon request by a regulator or auditor of ACB;
j) will vote proxies received in connection with securities held
by the Fund in accordance with written policies and
procedures adopted by BIM, which may be amended from time to
time, and which at all times shall comply with the
requirements of applicable federal statutes and regulations
and any related guidance from the Securities and Exchange
Commission and its staff relating to such statutes and
regulations (collectively, "Proxy Voting Policies and
Procedures"). ACB shall vote proxies on behalf of the Fund in
a manner deemed by ACB to be in the best interests of the
Fund pursuant to BIM's written Proxy Voting Policies and
Procedures. PMC and BIM each understand that ACB may employ
the services of a proxy voting service to exercise proxies in
accordance with the Proxy Voting Policies and Procedures. ACB
shall provide disclosure regarding the Proxy Voting Policies
and Procedures in accordance with the requirements of Form N-
1A for inclusion in the Registration Statement of the Fund.
ACB shall report to BIM and PMC in a timely manner a record
of all proxies voted, in such form and format that complies
with acceptable federal statutes and regulations (e.g.,
requirements of Form N-PX). ACB shall certify at least
annually or more often as may reasonably be requested by PMC
and/or BIM, as to its compliance with the Proxy Voting
Policies and Procedures. ACB shall not incur any liability to
BIM by reason of any exercise of, or failure to exercise, any
such discretion and shall not incur any liability for any
failure arising from an act or omission of a person other
than ACB; and
k) may not consult with any other sub-adviser of the Company
concerning transactions in securities or other assets for any
investment portfolio of the Company, including the Fund,
except that such consultations are permitted between the
current and successor sub-advisers of the Fund in order to
effect an orderly transition of sub-advisory duties so long
as such consultations are not concerning transactions
prohibited by Section 17(a) of the 1940 Act.
4. CUSTODY OF ASSETS. ACB shall at no time have the right to physically
possess the assets of the Fund or have the assets registered in its
own name or the name of its nominee, nor shall ACB in any manner
acquire or become possessed of any income, whether in kind or cash,
or proceeds, whether in kind or cash, distributable by reason of
selling, holding or controlling such assets of the Fund. In
accordance with the preceding sentence, ACB shall have no
responsibility with respect to the collection of income, physical
acquisition or the safekeeping of the assets of the Fund. All such
duties of collection, physical acquisition and safekeeping shall be
the sole obligation of the custodian.
5. BROKERAGE. ACB is responsible for decisions to buy and sell
securities for the assets of the Fund allocated to it by BIM,
broker-dealer selection, and negotiation of brokerage commission
rates. ACB shall have the express authority to negotiate, open,
continue and terminate brokerage accounts and other brokerage
arrangements with respect to all portfolio transactions entered
into by ACB on behalf of the Fund. ACB will provide copies of
brokerage agreements entered into by the Fund to BIM, if
applicable. It is ACB's general policy in selecting a broker to
effect a particular transaction to seek to obtain "best execution",
which means prompt and efficient execution of the transaction at
the best obtainable price with payment of commissions which are
reasonable in relation to the value of the brokerage services
provided by the broker.
Consistent with this policy, ACB, in selecting broker-dealers and
negotiating commission rates, will take all relevant factors into
consideration, including, but not limited to: the best price
available; the reliability, integrity and financial condition of
the broker-dealer; the size of and difficulty in executing the
order; the broker's execution capabilities and any research
provided by the broker that aids ACB's investment decision-making
process; and the value of the expected contribution of the broker-
dealer to the investment performance of the Fund on a continuing
basis. Subject to such policies and procedures as the Company's
Board of Directors may determine, ACB shall have discretion to
effect investment transactions for the Fund through broker-dealers
(including, to the extent permissible under applicable law, broker-
dealer affiliates) who provide brokerage and/or research services,
as such services are defined in section 28(e) of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and to cause the
Fund to pay any such broker-dealers an amount of commission for
effecting a portfolio investment transaction in excess of the
amount of commission another broker-dealer would have charged for
effecting that transaction, if ACB determines in good faith that
such amount of commission is reasonable in relation to the value of
the brokerage or research services provided by such broker-dealer,
viewed in terms of either that particular investment transaction or
ACB's overall responsibilities with respect to the Fund and other
accounts to which ACB exercises investment discretion (as such term
is defined in section 3(a)(35) of the 1934 Act). Allocation of
orders placed by ACB on behalf of the Fund and other advisory
clients of ACB to broker-dealers shall be in such amounts and
proportions as ACB shall determine in good faith in conformity with
its responsibilities under applicable laws, rules and regulations.
ACB will submit reports on brokerage placements to BIM as
reasonably requested by BIM, in such form as may be mutually agreed
to by the parties hereto, indicating the broker-dealers to whom
such allocations have been made and the basis therefor.
6. EXPENSES. ACB shall bear all expenses incurred by it in connection
with the performance of its services under this Agreement. The Fund
will bear certain other expenses to be incurred in its operation,
including, but not limited to, investment advisory fees, and
administration fees; fees for necessary professional and brokerage
services; costs relating to local administration of securities; and
fees for any pricing services. All other expenses not specifically
assumed by ACB hereunder or by BIM under the Sub-Advisory Agreement
are borne by the Fund or the Company.
7. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-3
promulgated under the 1940 Act, ACB hereby agrees that all records
which it maintains for the Company shall be available for
inspection by the Company, PMC and BIM upon their reasonable
request and agrees to provide the Company with copies of any of
such records upon the Company's request. ACB further agrees to
preserve for the periods prescribed by Rule 31a-2 promulgated under
the 1940 Act the records required to be maintained by Rule 31a-1
promulgated under the 1940 Act related to the Fund's portfolio
transactions. PMC shall maintain all books and records not related
to the Fund's portfolio transactions.
8. COMPENSATION. For the services provided and the expenses assumed
pursuant to this Agreement, BIM will pay ACB, and ACB agrees to
accept as full compensation therefor, a sub-advisory fee accrued
daily and payable monthly on the average daily net assets in the
Fund as follows:
ACB's Fee as a Percentage of Daily Net Assets
First A$100 million.........................0.40%
Over A$100 million........................0.35%
In no event is PMC, the Fund or the Company responsible for fees
payable to ACB.
9. SERVICES NOT EXCLUSIVE. The services to be provided by ACB hereunder
are not to be deemed exclusive, and ACB shall be free to provide
similar services to other clients so long as whenever the Fund and
one or more other investment advisory clients of ACB have available
funds for investment, investments suitable and appropriate for each
will be allocated in a manner believed by ACB to be equitable to
each. ACB may group orders for the Fund with orders for other funds
and accounts to obtain the efficiencies that may be available on
larger transactions when it determines that investment decisions
are appropriate for each participating account. ACB cannot assure
that such policy will not adversely affect the price paid or
received by the Fund. The persons employed by ACB to assist in
ACB's duties under this Agreement will not devote their full time
to such service and nothing contained in this Agreement will be
deemed to limit or restrict the right of ACB or any of its
affiliates to engage in and devote time and attention to other
businesses or to render services of whatever kind or nature.
10. COMPLIANCE WITH APPLICABLE LAW. ACB will manage the assets of the Fund
that are under its management pursuant to this Agreement in
conjunction with those assets managed by BIM such that the Fund, as
whole, is in compliance with the requirements of the 1940 Act and
the regulations adopted by the Securities and Exchange Commission.
Further, ACB will conduct its activities under this Agreement in
accordance with applicable regulations of any governmental
authority pertaining to its investment advisory activities.
11. LIMITATION OF LIABILITY. ACB, its officers, directors, managers,
employees, agents or affiliates will not be subject to any
liability to BIM or its directors, officers, employees, agents or
affiliates for any error of judgment or mistake of law or for any
loss suffered by the Fund, any shareholder of the Fund or BIM or
PMC either in connection with the performance of ACB's duties under
this Agreement or its failure to perform due to events beyond the
reasonable control of ACB or its agents, except for a loss
resulting from ACB's willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties under this
Agreement. Federal and State securities laws may impose liabilities
under certain circumstances on persons who act in good faith, and
therefore nothing herein shall in any way constitute a waiver or
limitation of any right which BIM or PMC may have under any
applicable laws.
12. INDEMNIFICATION. PMC, BIM and ACB each agree to indemnify the other
party (and each such party's affiliates, employees, directors and
officers) against any claim, damages, loss or liability (including
reasonable attorneys' fees) arising out of any third party claims
brought against an indemnified party that are found to constitute
willful misfeasance or gross negligence on the part of the
indemnifying party.
13. DURATION AND TERMINATION. This Agreement will become effective upon
execution or, if later, on the date that initial capital for the
Fund is first provided to it and, unless sooner terminated as
provided herein, will continue in effect for two (2) years from the
date of its execution. Thereafter, if not terminated, this
Agreement will continue in effect for successive periods of 12
months, provided that such continuation is specifically approved at
least annually by the Company's Board of Directors or by vote of a
majority of the outstanding voting securities of the Fund, and in
either event approved also by a majority of the Directors of the
Company who are not interested persons of the Company, or of PMC,
BIM or ACB. Notwithstanding the foregoing, this Agreement may be
terminated at any time, without the payment of any penalty, on
sixty days' written notice by the Company or PMC, or on sixty days'
written notice by BIM or ACB. This Agreement will terminate
automatically if the Sub-Advisory Agreement terminates. This
Agreement will immediately terminate in the event of its
assignment. (As used in this Agreement, the terms "majority of the
outstanding voting securities", "interested persons" and
"assignment" have the same meaning of such terms as in the 1940
Act.) Section 10 and 11 herein shall survive the termination of
this Agreement.
14. ACKNOWLEDGEMENTS OF BIM. BIM acknowledges and agrees that:
(a) The assets of the Account may be invested in futures
contracts and consents to ACB's use of the alternate
disclosure and recordkeeping standards under Commodity
Futures Trading Commission Rule 4.7 with respect to such
futures trading, which alternate standards are available to
ACB on account of the Fund's ownership of securities of
issuers not affiliated with the Funds and other investments
with an aggregate market value of at least $2,000,000 and on
account of the Company's status as an investment company
registered under the 1940 Act (not formed for the specific
purpose of either investing in an exempt pool or opening an
exempt account);
(b) It is excluded from the definition of a commodity pool
operator under CFTC Rule 4.5, and in connection with such
exemption has filed a notice of eligibility and will
provide ACB with a copy of such notice of eligibility
before the execution of this Agreement; and
(c) Not less than forty-eight (48) hours before the date it has
executed this Agreement, it received from ACB a copy of Part
II of ACB's Form ADV, as required by Rule 204-(3) of the
Investment Advisers Act of 1940, as amended.
15. OBLIGATIONS OF BIM. BIM agrees to provide the following, when
received under the terms of the Sub-Advisory Agreement, prior to
the commencement of ACB's investment advisory services as specified
under this Agreement:
(a) A list of first tier affiliates and second tier affiliates
(i.e., affiliates of affiliates) of the Fund;
(b) A list of restricted securities for the Fund (including
CUSIP, Sedol or other appropriate security identification);
and
(c) A copy of the current compliance procedures for the Fund.
BIM also agrees to promptly forward updates of the above referenced
items when received from PMC in order to ensure their accuracy,
completeness and/or effectiveness and to provide copies of any
updates to ACB prior to their effectiveness.
16. CONFIDENTIAL TREATMENT. It is understood that any information or
recommendation supplied by, or produced by, ACB in connection
with the performance of its obligations hereunder is to be
regarded as confidential and for use only by BIM, PMC and the
Company. Furthermore, except as required by law (including, but not
limited to semi-annual, annual or other filings made under the 0000
Xxx) or as agreed to by ACB, BIM and PMC, neither PMC nor the
Company will disclose any list of securities held by the Fund until
it is either filed with the U.S. Securities & Exchange Commission
or mailed out to shareholders, which filing or mailing shall not
be made sooner than 30 days after quarter end in any manner
whatsoever except as expressly authorized in this Agreement,
except that the top 10 holdings may be disclosed 30 days after
month end. In addition, PMC may disclose to certain third party
data or service providers to the Fund, who have entered into a
confidentiality agreement with PMC, a list of securities
purchased or sold by the Fund during the quarter.
17. ENTIRE AGREEMENT; AMENDMENT OF THIS AGREEMENT. This Agreement constitutes
the entire agreement between the parties with respect to the Fund.
No provision of this Agreement may be changed, waived, discharged
or terminated orally, but only by an instrument in writing signed
by the party against which enforcement of the change, waiver,
discharge or termination is sought.
18. NOTICE. Any notice under this Agreement shall be in writing,
addressed and delivered or mailed, postage prepaid, to such address
as may be designated for the receipt of such notice, with (other
than invoices or notices in respect of invoices) copies to PMC and
the Fund. The respective addresses for the delivery of such notices
are as follows:
a) TO BIM:
Brookfield Investment Management Inc.
Three World Financial Center, 000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: General Counsel
b) TO ACB:
AMP Capital Brookfield (US), LLC
00 Xxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attn: General Counsel
c) COPIES TO PMC AND THE FUND MAY BE DELIVERED TO:
Principal Financial Group
Xxx Xxxxxx, XX 00000
Attn: Xxxxxxx Xxxxxxxx
19. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of
the provisions hereof or otherwise affect their construction or
effect. If any provision of this Agreement is held or made invalid
by a court decision, statute, rule or otherwise, the remainder of
this Agreement will be binding upon and shall inure to the benefit
of the parties hereto.
20. APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with applicable federal law and the laws of the State of
New York, without giving effect to its conflict of laws provisions.
21. COUNTERPART SIGNATURES. This Agreement may be executed in several
counterparts, including via facsimile, each of which shall be
deemed an original for all purposes, including judicial proof of
the terms hereof, and all of which together shall constitute and be
deemed one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of this _____ day of ________________, 2011, effective
December ___, 2011.
BROOKFIELD INVESTMENT MANAGEMENT INC.
By:
Name:
Title:
AMP CAPITAL BROOKFIELD (US) LLC
By:
Name:
Title:
ACCEPTED AND AGREED
PRINCIPAL FUNDS, INC.
By:
Name:
Title:
PRINCIPAL MANAGEMENT CORPORATION
By:
Name:
Title:
SCHEDULE A
FEBRUARY 3, 2011
(Funds)
Diversified Real Asset Fund
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