PRINCIPAL FUNDS, INC.
AMENDED AND RESTATED SUB-ADVISORY AGREEMENT
PRINCIPAL REAL ESTATE INVESTORS SUB-ADVISED
SERIES
AGREEMENT effective as of May 22, 2017, by and between
PRINCIPAL GLOBAL INVESTORS, LLC (hereinafter called
"the Manager"), and PRINCIPAL REAL ESTATE
INVESTORS, LLC (hereinafter called "the Sub-Advisor").
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WHEREAS, the Manager is the manager and investment
adviser to each Series of Principal Funds, Inc., (the "Fund"),
an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Manager desires to retain the Sub-Advisor to
furnish it with portfolio selection and related research and
statistical services in connection with the investment advisory
services for certain series of the Fund (hereinafter called the
"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 Fund's Articles of Incorporation and By-laws;
(d) Policies, procedures or instructions adopted or approved
by the Board of Directors of the Fund relating to
obligations and services to be provided by the Sub-
Advisor.
NOW, THEREFORE, in consideration of the premises and the
terms and conditions hereinafter set forth, the parties agree as
follows:
1. Appointment of Sub-Advisor
In accordance with and subject to the Management
Agreement, the Manager hereby appoints the Sub-Advisor
to perform the services described in Section 2 below for
investment and reinvestment of such portion of the assets
of each Series as may be allocated to the Sub-Advisor by
the Manager, from time to time (the "Allocated Assets"),
subject to the control and direction of the Manager and the
Fund's Board of Directors, for the period and on the terms
hereinafter set forth. The Sub-Advisor accepts such
appointment and agrees to furnish the services hereinafter
set forth for the compensation herein provided. The Sub-
Advisor shall for all purposes herein be deemed to be an
independent contractor and shall, except as expressly
provided or authorized, have no authority to act for or
represent the Fund or the Manager in any way or
otherwise be deemed an agent of the Fund or the
Manager.
2. Obligations of and Services to be Provided by the Sub-
Advisor
The Sub-Advisor will:
(a) Provide investment advisory services, including but not
limited to research, advice and
supervision for the Series.
(b) Furnish to the Board of Directors of the Fund for approval
(or any appropriate committee of such Board), and revise
from time to time as conditions require, a recommended
investment program for the Series consistent with the
Series' investment objective and policies.
(c) Implement the approved investment program by placing
orders for the purchase and sale of securities without
prior consultation with the Manager and without regard to
the length of time the securities have been held, the
resulting rate of portfolio turnover or any tax considerations,
subject always to the provisions of the Fund's Articles of
Incorporation and Bylaws, the requirements of the 1940
Act, as each of the same shall be from time to time in
effect.
(d) Advise and assist the officers of the Fund, as requested
by the officers, in taking such steps as are necessary or
appropriate to carry out the decisions of its Board of
Directors, and any appropriate committees of such
Board, regarding the general conduct of the investment
business of the 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 and the Series'
investment strategies and restrictions as stated in the
Fund's prospectus and statement of additional information.
(f) Report to the Board of Directors of the Fund at such
times and in such detail as the Board of Directors may
reasonably deem appropriate in order to enable it to
determine that the investment policies, procedures and
approved investment program of the 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 Directors.
(h) Furnish, at its own expense, (i) all necessary investment
and management facilities, including salaries of clerical
and other personnel required for it to execute its duties
faithfully, and (ii) administrative facilities, including
bookkeeping, clerical personnel and equipment necessary
for the efficient conduct of the investment advisory affairs
of the Series.
(i) Open accounts with broker-dealers, swap dealers,
clearinghouses and futures commission merchants
("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
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 Directors providing such
information as the number of aggregated trades to which
the 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 the 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 the 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.
U) 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 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 the 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 the
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.
(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 the
Series, all in such detail as the Manager or the Fund may
reasonably request. The Sub-Advisor will make available
its officers and employees to meet with the Fund's Board
of Directors at the Fund's principal place of business on
due notice to review the investments of the 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 1940 Act, the
Investment Advisers Act, the Securities Act of 1933, as
amended, the Commodity Exchange Act, as amended,
and any state securities laws, and any rule or regulation
thereunder.
(n) Perform quarterly and annual tax compliance tests to
monitor the Series' compliance with Subchapter M of the
Code. The Sub-Advisor shall notify the Manager
immediately upon having a reasonable basis for believing
that the Series has ceased to be in compliance or that it
might not be in compliance in the future. If it is determined
that the Series is not in compliance with the
requirements noted above, the Sub-Advisor, in
consultation with the Manager, will take prompt action
to bring the Series back into compliance (to the extent
possible) within the time permitted under the Code.
(o) Provide a copy of the Sub-Advisor's Form ADV and
any amendments thereto contemporaneously with the
filing of such documents with the Securities and
Exchange Commission or other regulatory agency.
3. Prohibited Conduct
In providing the services described in this agreement, the
Sub-Advisor will not consult with any other investment
advisory firm that provides investment advisory services to
any investment company sponsored by Principal Life
Insurance Company regarding transactions for the Fund in
securities or other assets.
4. Compensation
As full compensation for all services rendered and
obligations assumed by the Sub-Advisor hereunder with
respect to the 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 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 the Series or as a result of the
failure by the Manager or any of its affiliates to comply with
the terms of this Agreement, except for losses resulting
from willful misfeasance, bad faith or gross negligence of,
or from reckless disregard of, the duties of the Sub-
Advisor or any of its directors, officers, employees, agents,
or affiliates.
6. Supplemental Arrangements
The Sub-Advisor may enter into arrangements with other
persons affiliated with the Sub-Advisor or with unaffiliated
third parties to better enable the Sub-Advisor to fulfill its
obligations under this Agreement for the provision of
certain personnel and facilities to the Sub-Advisor, subject
to written notification to and approval of the Manager
and, where required by applicable law, the Board of
Directors of the Fund.
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
No amendment of this Agreement shall be effective
unless in writing and signed by both parties. This
Agreement shall become effective with respect to a
Series as of the corresponding date set forth on Appendix
B to this Agreement, as may be amended from time to
time, and, unless otherwise terminated, shall continue in
effect for the initial term set forth on Appendix B to this
Agreement, and thereafter from year to year provided
that in each case the continuance is specifically approved
within the period required by the 1940 Act either by the
Board of Directors of the Fund or by a vote of a majority of
the outstanding voting securities of the Series and in
either event by a vote of a majority of the Board of
Directors of the Fund who are not interested persons of
the Manager, Principal Life Insurance Company, the Sub-
Advisor or the Fund cast in person at a meeting called for
the purpose of voting on such approval.
If the shareholders of the Series fail to approve the
Agreement or any continuance of the Agreement in
accordance with the requirements of the 1940 Act, the
Sub-Advisor will continue to act as Sub-Advisor with
respect to the Allocated Assets of such Series pending
the required approval of the Agreement or its
continuance or of any contract with the Sub-Advisor or a
different manager or sub-advisor or other definitive action;
provided, that the compensation received by the Sub-
Advisor in respect to the Allocated Assets of such Fund
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 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 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.
10. 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 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 the 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 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) This Agreement contains the entire understanding and
agreement of the parties.
11. The Sub-Advisor acknowledges Manager's
representation that the Diversified Real Asset Fund
series does not rely on the exclusion from the
definition of "commodity pool operator" under
Section 4.5 of the General Regulations under the
Commodity Exchange Act (the CEA).
The Sub-Advisor represents that it is a commodity
trading advisor duly registered with the Commodity
Futures Trading Commission and is a member in
good standing of the National Futures Association
(the NFA) or is relying on an exemption from
registration as a commodity trading advisor. As
applicable, the Sub-Advisor shall maintain such
registration and membership in good standing or
continue to qualify for an exemption from registration
as a commodity trading advisor during the term of
this Agreement. Further, the Sub-Advisor agrees to
notify the Manager within a commercially
reasonable time upon (i) a statutory disqualification
of the Sub-Advisor under Sections 8a(2) or 8a(3) of
the CEA, (ii) a suspension, revocation or limitation
of the Sub-Advisor's commodity trading advisor
registration or NFA membership, or (iii) the institution
of an action or proceeding that would reasonably be
expected to lead to a statutory disqualification under
the CEA or an investigation by any governmental
agency or self-regulatory organization relating to
Sub- Advisor's registration as a commodity trading
advisor, in each case, subject to applicable law,
attorney-client privilege and confidentiality restrictions.
IN WITNESS WHEREOF, the parties have duly executed
this Agreement on the date first above written.
PRINCIPAL GLOBAL
INVESTORS, LLC
By /s/Xxxxxxx X. Beer
Xxxxxxx X. Beer,
Executive Director-
Principal Funds
By /s/Xxxx X. Xxxxxx
Xxxx X. Xxxxxx,
Counsel
PRINCIPAL REAL ESTATE
INVESTORS, LLC
By /s/Xxx X. Xxxxxx
Name: Xxx Xxxxxx
Title: Chief Operating
Officer - PGI
By /s/Xxxxxxx Xxxx
Name:
Title: Xxxxxxx Xxxx,
Counsel
APPENDI X A
[Intentionally Omitted]
APPENDIX 8
Effective Date and Initial Term of Sub-
Advisory Agreement for each Series
Series
Eff
ective Date
Ini
tial Term
Diversified Real Asset Fund
May 22, 2017
2 Years (Global REIT Portfolio)
Global Diversified Income Fund
(Global REIT Portfolio)
May 22, 2017
2 Years (CMBS Portfolio)
Global Real Estate Fund May 22,
2017 2 Years
Real Estate Allocation Fund May 22, 2017 2 Years
Real Estate Xxx Income Fund May 22, 2017 2 Years
Real Estate Securities Fund May 22,
2017 2 Years
