PRINCIPAL FUNDS, INC.
AMENDED AND RESTATED SUB-ADVISORY CONSULTING
AGREEMENT
GLOBAL MULTI-STRATEGY SUB-ADVISED FUND
AGREEMENT executed as of the 1st day of November, 2014, by and
between PRINCIPAL MANAGEMENT CORPORATION, an Iowa
corporation (hereinafter called "the Manager"), and Cliffwater, LLC, a
Delaware limited liability company (hereinafter called "the Sub-Advisor").
W I T N E S S E T H:
WHEREAS, the Manager is the manager and investment adviser to each
Fund of the Principal Funds, Inc., (the "Fund"), an open-end management
investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"); and
WHEREAS, the Manager desires to retain the Sub-Advisor to furnish it with
the services described in this Agreement related to the Fund's series
identified in Appendix A (hereinafter called the "Series"), and the
Sub-Advisor desires to furnish such services; and
WHEREAS, The Manager has furnished the Sub-Advisor with copies
properly certified or authenticated of each of the following and will promptly
provide the Sub-Advisor with copies properly certified or authenticated of
any amendment or supplement thereto:
(a) Management Agreement (the "Management Agreement") with
the Fund;
(b) The Fund's registration statement and financial statements as
filed with the Securities and Exchange Commission;
(c) The Fund's Articles of Incorporation and By-laws;
(d) Policies, procedures or instructions adopted or approved by
the Board of Directors of the Fund relating to obligations and
services provided by the Sub-Advisor.
NOW, THEREFORE, in consideration of the premises and the terms and
conditions hereinafter set forth, the parties agree as follows:
1. Appointment of Sub-Advisor
In accordance with and subject to the Management Agreement, the
Manager hereby appoints the Sub-Advisor to perform the services
described in Section 2 below, subject to the control and direction of
the Manager and the Fund's Board of Directors, for the period and
on the terms hereinafter set forth. The Sub-Advisor accepts such
appointment and agrees to furnish the services hereinafter set forth
for the compensation herein provided. The Sub-Advisor shall for all
purposes herein be deemed to be an independent contractor and
shall, except as expressly provided or authorized, have no authority
to act for or represent the Fund or the Manager in any way or
otherwise be deemed an agent of the Fund or the Manager.
2. Obligations of and Services to be Provided by the Sub-Advisor
The Sub-Advisor will:
(a) Monitor the Series:
The Manager allocates and from time to time re-allocates the
assets of the Series among multiple sub-advisors that are
responsible for managing those assets. The Sub-Advisor will
monitor the Manager's allocations of the Series' assets among
the sub-advisors and report to the Manager monthly, quarterly
and annually with recommendations regarding changes to the
Manager's current allocations. The Sub-Advisor
recommendations will include its outlook for capital markets
and opportunities currently offered by the market and will
reflect its internal capital markets research and analyses
performed using its proprietary tools. The Sub-Advisor will
also monitor the performance of the Series and report to the
Manager monthly, quarterly and annually on such
performance in comparison to such peer funds and
benchmarks as the Manager may from time to time select.
The Sub-Advisor's performance monitoring duties will include
portfolio performance, measurement and review, and each
quarterly performance report will reflect the results of such
performance, measurement and review and will include the
Sub-Advisor's analyses of, among other things, geographic
concentration, amount of leverage and beta exposure as well
as the Sub-Advisor's assessment of whether the risks to
which the Series is exposed through the use of the sub-
advisors have been identified and, to the extent possible,
controlled. Such monthly and quarterly reports will be in
substantially the form of Exhibit A hereto.
(b) Monitor the Sub-advisors:
The Sub-Advisor will monitor the performance of each of the
Series' sub-advisors and report to the Manager monthly,
quarterly and annually on such performance in comparison to
the performance of such advisers and benchmarks as the
Manager may from time to time select. The Sub-Advisor's
monitoring duties will include, and each monthly report
regarding the performance of each sub-advisor will reflect the
results of, one or more telephone conferences held by the
Sub-Advisor with each sub-advisor. Each monthly, quarterly,
and annual report will include, as appropriate, the Sub-
Advisor's assessment of whether any sub-advisor has, in
carrying out its investment duties for the Series, deviated
materially from its investment philosophy or process, changed
its personnel responsible for management of the assets of the
Series allocated to it, suffered a financial or other event that
threatens its ability to carry out its responsibilities to the
Series, achieved an acceptable level of performance during
the period without taking an unexpected degree of risk and
adhered to the investment guidelines established by the
Manager for each sub-advisor. Prior to the time the Sub-
Advisor begins its work pursuant to this agreement, the
Manager will provide the Sub-Advisor with the investment
guidelines and subsequently the Manager will provide the
Sub-Advisor promptly with any amendments to the guidelines.
In determining whether any sub-advisor has suffered a
financial or other event that threatens its ability to carry out its
responsibilities to the Series, or has failed to adhere to the
investment guidelines the Manager establishes, the Sub-
Advisor may rely solely on information the Manager receives
from each sub-advisor in the form of responses to the
Manager's periodic questionnaire or other documentation,
which documentation the Manager will provide to the Sub-
Advisor within ten business days of the Manager's receipt of
it. The Manager will also cause each sub-advisor to
cooperate with the Sub-Advisor, including causing each sub-
advisor to promptly provide to Sub-Advisor any other
information the Sub-Advisor reasonably requests and make
available the appropriate personnel to provide Sub-Advisor
with clarifications and such other information that the Sub-
Advisor may reasonably require to enable Sub-Advisor to
carry out its responsibilities pursuant to this agreement.
(c) Evaluate Sub-advisor Candidates:
The Manager may from time to time undertake to select and
recommend to the Fund's Board of Directors the engagement
of one or more new sub-advisors for the Series. At the
Manager's request and using a process satisfactory to both
the Manager and the Sub-Advisor, the Sub-Advisor will assist
the Manager in evaluating new sub-advisor candidates.
(d) Support Marketing:
(1) Training of Manager's Marketing Specialist. The
Manager will designate a marketing specialist employee
for training by the Sub-Advisor, and the Sub-Advisor will
provide training for purposes of developing in such
employee an understanding of the Sub-Advisor's
approach to the design and operation of the Series. As
part of such training, the Manager's employee shall
participate in the monthly telephone conference or
conferences held by the Sub-Advisor with each sub-
advisor, as described in 2(b) above, and in such other
telephone or in-person meetings that the Sub-Advisor
may hold with each sub-advisor. The training will occur
at the Sub-Advisor's offices in New York, New York or
Marina del Rey, California, or at another location
(including via conference call) as agreed upon by both
parties.
(2) Participation in Financial Adviser Conferences. During
the first twelve months beginning on November 23,
2011, the Manager may organize or designate a
maximum of twelve (12) conferences for purposes of
providing education to financial advisers regarding the
absolute return asset class and the Series design and
operation. The Sub-Advisor will cause one of its senior
level executives to attend and participate in providing
such education at each of these conferences. The
Manager will provide the Sub-Advisor with a forward
calendar with anticipated conference dates and times, as
well as at least 30 days advance notice of the date of
each conference.
(e) Advise and assist the officers of the Fund, as requested by
the officers, in taking such steps as are reasonably necessary
or appropriate to carry out the decisions of its Board of
Directors, and any appropriate committees of such Board,
regarding the general conduct of the investment business of
the Series.
(f) Maintain, in connection with the Sub-Advisor's services
provided to the Series, its compliance with the relevant
provisions of the 1940 Act and the regulations adopted by the
Securities and Exchange Commission thereunder. The
Manager will be responsible for all compliance monitoring,
reporting and administration relating to the Series, including
with respect to the sub-advisors. The Sub-Advisor has no
responsibility for the maintenance of Fund records except
insofar as is directly related to the services it provides to the
Series.
(g) Report to the Board of Directors of the Fund at such times
and in such detail as the Board of Directors may reasonably
deem appropriate.
(h) Furnish, at its own expense, (i) all necessary facilities,
including salaries of clerical and other personnel required for it
to execute its duties faithfully, and (ii) administrative facilities,
including bookkeeping, clerical personnel and equipment
necessary for the efficient conduct of its duties under this
Agreement.
(i) Maintain all accounts, books and records with respect to the
Series as are required of an investment advisor of a
registered investment company pursuant to the 1940 Act and
Investment Advisers Act of 1940 (the "Investment Advisers
Act"), and the rules thereunder, and furnish the Fund and the
Manager with such periodic and special reports as the Fund
or Manager may reasonably request. In compliance with the
requirements of Rule 31a-3 under the 1940 Act, the Sub-
Advisor hereby agrees that all records that it maintains for the
Series are the property of the Fund, agrees to preserve for the
periods described by Rule 31a-2 under the 1940 Act any
records that it maintains for the Fund and that are required to
be maintained by Rule 31a-1 under the 1940 Act, and further
agrees to surrender promptly to the Fund any records that it
maintains for the Series upon request by the Fund or the
Manager. Notwithstanding the foregoing, the Manager
acknowledges and agrees that the Sub-Advisor may retain
copies of such records if the Sub-Advisor determines that its
retention of such records is necessary for its compliance with
federal securities laws.
(j) Observe and comply with Rule 17j-1 under the 1940 Act and
the Sub-Advisor's Code of Ethics adopted pursuant to that
Rule as the same may be amended from time to time. The
Manager acknowledges receipt of a copy of Sub-Advisor's
current Code of Ethics. Sub-Advisor shall promptly forward to
the Manager a copy of any material amendment to the Sub-
Advisor's Code of Ethics.
(k) Provide such information as is customarily provided by a sub-
advisor and may be required for the Fund or the Manager to
comply with their respective obligations under applicable laws,
including, without limitation, the Internal Revenue Code of
1986, as amended (the "Code"), the 1940 Act, the Investment
Advisers Act, the Securities Act of 1933, as amended (the
"Securities Act"), and any state securities laws, and any rule
or regulation thereunder. Sub-Advisor will advise Manager of
any changes in Sub-Advisor's Senior Management (i.e. Chief
Investment Officer and Chief Executive Officer) within a
reasonable time after any such change. Manager
acknowledges receipt of Sub-Advisor's Form ADV more than
48 hours prior to the execution of this Agreement.
3. Research
During the term of this agreement, the Sub-Advisor will provide the
Manager with access to its general research related to capital
markets and absolute return strategies.
4. Prohibited Conduct
In providing the services described in this agreement, the Sub-
Advisor will not consult with any other investment advisory firm that
provides investment advisory services to any investment company
or series of an investment company sponsored by Principal Life
Insurance Company other than the Series regarding transactions
for the Fund in securities or other assets. For purposes of this
Section 4, the Manager shall periodically provide to the Sub-
Advisor, and the Sub-Advisor may rely exclusively upon, an
updated list of all such investment companies or series. The Sub-
Advisor shall have no liability in the event it consults with another
investment advisory firm advising an investment company or series
not on this list.
5. Compensation
As full compensation for all services rendered and obligations
assumed by the Sub-Advisor hereunder with respect to the Fund,
the Manager shall pay the compensation specified in Appendix A to
this Agreement.
6. Liability of Sub-Advisor
Neither the Sub-Advisor nor any of its directors, officers,
employees, agents or affiliates shall be liable to the Manager, the
Fund or its shareholders for any loss suffered by the Manager or
the Fund resulting from any error of judgment made in the good
faith exercise of the Sub-Advisor's duties under this Agreement or
as a result of the failure by the Manager or any of its affiliates to
comply with the terms of this Agreement except for losses resulting
from willful misfeasance, bad faith or gross negligence of, or from
reckless disregard of, the duties of the Sub-Advisor or any of its
directors, officers, employees, agents or affiliates.
7. Indemnification
The Manager agrees to indemnify and hold harmless the Sub-
Advisor from and against any and all claims, losses, liabilities or
damages (including reasonable attorneys' fees and other related
expenses), ("Losses") howsoever arising, from or in connection
with this Agreement or the performance by the Sub-Advisor of its
duties hereunder, so long as the Sub-Advisor shall, after receipt of
notice of any claim or commencement of any action, promptly notify
the Manager in writing of the claim or commencement of such
action. The Manager shall not be liable for any settlement of any
claim or action effected without its written consent. Nothing
contained herein shall require the Manager to indemnify the Sub-
Advisor for Losses resulting from the Sub-Advisor's willful
misfeasance, bad faith or gross negligence in the performance of
its duties or from its reckless disregard of its obligations and duties
under this Agreement.
8. Supplemental Arrangements
The Sub-Advisor may delegate some or all of its duties under this
Agreement to persons affiliated with the Sub-Advisor or with
unaffiliated third parties subject to prior written notification to and
receipt of written approval from the Manager and, where required
by applicable law, the Board of Directors of the Fund.
9. Regulation
The Sub-Advisor shall submit to all regulatory and administrative
bodies having jurisdiction over the services provided pursuant to
this Agreement any information, reports or other material which any
such body may request or require pursuant to applicable laws and
regulations.
10. Duration and Termination of This Agreement
This Agreement shall become effective as of the date of its
execution and, unless otherwise terminated, shall continue in effect
for a period of two years and thereafter from year to year provided
that the continuance is specifically approved at least annually either
by the Board of Directors of the Fund or by a vote of a majority of
the outstanding voting securities of the Series and in either event
by a vote of a majority of the Board of Directors of the Fund who
are not interested persons of the Manager, Principal Life Insurance
Company, the Sub-Advisor or the Fund cast in person at a meeting
called for the purpose of voting on such approval.
If the Board of Directors or the shareholders of a Series fail to
approve the Agreement or any continuance of the Agreement in
accordance with the requirements of the 1940 Act, the Sub-Advisor
will continue to act as Sub-Advisor with respect to the Series
pending the required approval of the Agreement or its continuance
or of any contract with the Sub-Advisor or a different manager or
Sub-Advisor or other definitive action; provided, that the
compensation received by the Sub-Advisor in respect to the Series
during such period is in compliance with Rule 15a-4 under the 1940
Act.
This Agreement may be terminated at any time without the
payment of any penalty by the Board of Directors of the Fund or by
the Sub-Advisor, the Manager or by vote of a majority of the
outstanding voting securities of the Series on sixty days written
notice. This Agreement shall automatically terminate in the event of
its assignment. In interpreting the provisions of this Section 9, the
definitions contained in Section 2(a) of the 1940 Act (particularly
the definitions of "interested person," "assignment" and "voting
security") shall be applied.
11. Amendment of this Agreement
No material amendment of this Agreement shall be effective until
approved, if required by the 1940 Act or the rules, regulations,
interpretations or orders issued thereunder, by vote of the holders
of a majority of the outstanding voting securities of the Series and
by vote of a majority of the Board of Directors of the Fund who are
not interested persons of the Manager, the Sub-Advisor, Principal
Life Insurance Company or the Fund cast in person at a meeting
called for the purpose of voting on such approval, and such
amendment is signed by both parties.
12. General Provisions
(a) Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the
purposes hereof. This Agreement shall be construed and
enforced in accordance with and governed by the laws of the
State of Iowa. The captions in this Agreement are included for
convenience only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or
effect.
(b) Any notice under this Agreement shall be in writing,
addressed and delivered or mailed postage pre-paid to the
other party at such address as such other party may
designate for the receipt of such notices. Until further notice to
the other party, it is agreed that the address of the Manager
for this purpose shall be Principal Financial Group, Xxx
Xxxxxx, Xxxx 00000-0000, and the address of the
Sub-Advisor shall be
Cliffwater LLC,
0000 Xxxxxxxxx Xxx, 00xx Xxxxx
Xxxxxx xxx Xxx, Xxxxxxxxxx 00000
ATTN: Xxxxxxxx Xxxxx and Xxxxxxxx Xxxxxxxx.
(c) The Sub-Advisor will promptly notify the Manager in writing of
the occurrence of any of the following events:
(1) the Sub-Advisor fails to be registered as an investment
adviser under the Investment Advisers Act or under the
laws of any jurisdiction in which the Sub-Advisor is
required to be registered as an investment advisor in
order to perform its obligations under this Agreement.
(2) the Sub-Advisor is served or otherwise receives notice
of any action, suit, proceeding, inquiry or
investigation, at law or in equity, before or by any
court, public board or body, involving the affairs of the
Fund.
(3) any actual change in control of the Sub-Advisor.
(d) The Sub-Advisor represents that it will not enter into any
agreement, oral or written, or other understanding under
which the Fund directs or is expected to direct portfolio
securities transactions, or any remuneration, to a broker or
dealer in consideration for the promotion or sale of Fund
shares or shares issued by any other registered investment
company. Sub-advisor further represents that it is contrary to
the Sub-advisor's policies to permit those who select brokers
or dealers for execution of Fund portfolio securities
transactions to take into account the broker or dealer's
promotion or sale of Fund shares or shares issued by any
other registered investment company.
(e) The Sub-Advisor agrees that neither it nor any of its affiliates
will in any way refer directly or indirectly to its relationship with
the Fund, the Series, or the Manager or any of their respective
affiliates in offering, marketing or other promotional materials
without the express written consent of the Manager, provided
that this Section 12(e) shall not apply to disclosures the Sub-
Advisor is required to make by law, rules, regulations or legal
or regulatory process, provided that sub-Advisor shall give
Manager notice of such disclosures. The Manager and the
Sub-Advisor agree that the Sub-Advisor is permitted to
include the name of the Manager in its clients lists used for
marketing purposes
(f) This Agreement contains the entire understanding and
agreement of the parties.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement on the date first above written.
PRINCIPAL MANAGEMENT
CORPORATION
By /s/ Xxxxxxx X. Beer
Xxxxxxx X. Beer,
Executive Vice President
and Chief
Operating Officer
CLIFFWATER LLC
By /s/ Xxxxxxxx Xxxxx
Xxxxxxxx Xxxxx, Senior
Managing Director & General
Counsel
APPENDIX A
Cliffwater shall serve as an investment sub-advisor for the Series identified
below. The Manager will pay Cliffwater, as full compensation for all services
provided under this Agreement, the fee described below.
In calculating the fee for a series included in the table, assets of any
unregistered separate account of Principal Life Insurance Company and
any investment company sponsored by Principal Life Insurance Company
to which Cliffwater provides investment advisory services and which have
the same or a similar investment mandate as the series for which the fee is
calculated, will be combined with the assets of the series to arrive at net
assets.
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.
SERIES SUB-
ADVISORY FEE
Global Multi-Strategy Fund First $500
million.....................
........0.25%
Next $500
million............................0.20%
Next $1
billion................................ 0.15%
Next $3
billion................................ 0.10%
Assets Over $5
billion...................... 0.05%
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