PRINCIPAL FUNDS, INC.
AMENDED AND RESTATED SUB-ADVISORY AGREEMENT
BLACKROCK FINANCIAL MANAGEMENT, INC. SUB-ADVISED FUNDS
AGREEMENT executed as of the April 17, by and between PRINCIPAL
MANAGEMENT CORPORATION, an Iowa corporation (hereinafter called
"the Manager"), and BLACKROCK FINANCIAL MANAGEMENT, INC., a
Delaware 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
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
portfolio selection and related research and statistical services in
connection with the investment advisory services for each series 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; 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 for investment and reinvestment of
the securities and other assets of the Series, 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 economic conditions require, a recommended
investment program for the Fund 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 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.
(e) 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 thereunder and the Series'
investment strategies and restrictions as stated in the Fund's
prospectus and statement of additional information, 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. 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.
(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 in 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 its duties under this Agreement.
(i) Open accounts with broker-dealers 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 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 Manager recognizes
that, in some cases, this procedure may limit the size of the
position that may be acquired or sold for the Series. 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 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.
(j) 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
Advisor's Act of 1940 (the "Investment Advisor's 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, understanding that the Sub-Advisor must keep a
copy for regulatory purposes.
(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.
(l) 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 "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. Manager acknowledges receipt of Sub-
Advisor's Form ADV more than 48 hours prior to the execution
of this Agreement.
(a) Have the responsibility and authority to vote proxies solicited
by, or with respect to, the issuers of securities held in the
Series. 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.
3. Prohibited Conduct
In providing the services described in this agreement, as it relates
to the 1940 Act, 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 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 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 (excluding any broker-dealer
selected by the Sub-Advisor), or affiliates.
6. 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.
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 of the Fund.
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 may request or 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 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 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.
10. 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.
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 00
Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx, 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,
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 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.
(g) This Agreement contains the entire understanding and
agreement of the parties.
12. 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 MANAGEMENT CORPORATION
By:
/s/ Xxxxxxxx Xxxxx
Name:
Xxxxxxxx Xxxxx
Title:
Counsel
By:
/s/ Xxxx Xxxxxx
Name:
Xxxx Xxxxxx
Title:
Counsel
BLACKROCK FINANCIAL MANAGEMENT, INC.
By:
/s/ Xxxx Xxxxxxxx
Name:
Xxxx Xxxxxxxx
Title:
Managing Director
APPENDIX A
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