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AMENDED AND RESTATED
SUB-ADVISORY AGREEMENT
MACQUARIE CAPITAL
INVESTMENT MANAGEMENT
LLC
AGREEMENT executed as of May 22, 2017, by and between
PRINCIPAL GLOBAL INVESTORS, LLC, a Delaware limited
liability company (hereinafter called "the Manager"), and
Macquarie Capital Investment Management LLC, a Delaware
limited liability company (hereinafter called "the Sub-Advisor").
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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 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 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 Foreign Account Tax Compliance
Act ("FATCA") compliant 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 applicable
law or 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 Adviser's Act of 1940 (the
"Investment Adviser'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.
(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
"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. Such information includes, but is
not limited to; the Sub-Advisor's compliance manual and
policies and procedures adopted to comply with Rule
206(4)-7 of the Investment Advisers Act; the Sub-
advisor's most recent annual compliance report or a
detailed summary of such report; timely and
complete responses to Quarterly Compliance
Questionnaires (including the identification of any
material compliance
matters and a copy of any material changes to the
Sub-advisor's Rule 206(4)-7 compliance policies and
procedures marked to show changes along with a
written summary of the purpose of such changes),
Annual Proxy Voting Questionnaires, Annual Best
Execution and Soft Dollar Questionnaire, and other
ad-hoc compliance requests the Manager deems
necessary. Sub-advisor agrees to make available for
review, deficiency letters issued by the Securities and
Exchange Commission and the Sub-advisor's
response to such deficiency letters. Sub-Advisor will
advise Manager of any material changes in Sub-
Advisor's ownership 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.
(n) 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, 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, that Sub-
Adviser may engage an affiliate to perform investment
advisory services for the Fund (the "Sub-Advisory Affiliate")
and this prohibition shall not apply to consultations with the
Sub-Advisory Affiliate.
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. Trade Errors
The Sub-Advisor will notify the Manager of any Trade
Error(s), regardless of materiality, promptly upon the
discovery such Trade Error(s) by the Sub-Advisor.
Notwithstanding Section 5, the Sub-Advisor will be shall
be liable to the Manager, the Fund or its shareholders for
any loss suffered by the Manager or the Fund resulting
from Trade Errors due to negligence, misfeasance, or
disregard of duties of the Sub-Advisor or any of its
directors, officers, employees, agents (excluding any
broker-dealer selected by the Sub- Advisor), or affiliates.
For purposes under this Section, Trade Errors are defined
as errors due to (i) erroneous orders by the Sub-Advisor
for the Series that result in the purchase or sale of
securities that were not intended to be purchased or sold;
(ii) erroneous orders by the Sub-Advisor that result in the
purchase or sale of securities for the Series in an
unintended amount or price; or (iii) purchases or sales of
financial instruments which violate the investment
limitations or restrictions disclosed in the Registration
Statement and/or imposed by applicable law or regulation
(calculated at the Sub-Advisor's portfolio level), unless
otherwise agreed to in writing.
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
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 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 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 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 (i) 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; or (ii) by electronic mail to the address of the
party specified below or such other address as either
party may specify in writing. 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, Email:
xxxxxx.xxxx@xxxxxxxxx.xxx, and the address of the
Sub-Advisor shall be:
Macquarie Capital Investment
Management, LLC
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000-0000
Email:
xxxxxxxxxxxxx@xxxxxxxxx.xxx
(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 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 GLOBAL
INVESTORS, LLC
By /s/Xxxxxxx X. Beer
Xxxxxxx X. Beer,
Executive Director-
Principal Funds
By /s/Xxxx X. Xxxxxx
Xxxx X. Xxxxxx,
Counsel
MACQUARIE CAPITAL
INVESTMENT
MANAGEMENT, LLC
By /s/Xxxx Xxxxxxxxx
Xxxx Xxxxxxxxx,
President
By /s/Xxxxxxxx Xxxxx
Xxxxxxxx Xxxxx,
Chief Operating
Officer
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APPENDIX 8
Effective Date and Initial Term of Sub-
Advisory Agreement for each Series
Series
Effective Date
Initial Term
Diversified Real Asset Fund
May 22, 2017
2 Years
