PRINCIPAL FUNDS, INC.
AMENDED AND RESTATED SUB-ADVISORY AGREEMENT
XXXXXX CAPITAL MANAGEMENT L.P. SUB-ADVISED FUND
AMENDED AND RESTATED SUB-ADVISORY AGREEMENT (the
"Agreement") executed and effective as of the 1st day of October 2017, by
and between PRINCIPAL GLOBAL INVESTORS, LLC, a Delaware limited
liability company (hereinafter called the "Manager"), and XXXXXX
CAPITAL MANAGEMENT L.P., a Delaware limited partnership (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 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 render
discretionary investment advisory services for all or a portion of the assets
of each Series of the Fund identified in Appendix A hereto, as may be
amended from time to time (hereinafter called "Series"), which the Manager
has agreed to provide to the Fund, and the Sub-Advisor desires to furnish
such services; and
WHEREAS, the Manager and the Sub-Advisor agree to amend and
restate the Sub-Advisory Agreement between the Manager (having
assumed the rights and obligation of Principal Management Corporation)
and the Sub-Advisor dated the 7th day of April 2014 with this Agreement;
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 (the "SEC");
(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 supervision 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:
(i) Provide investment advisory services, including but not
limited to research, advice and supervision for the
Allocated Assets of each Series. Assets allocated to the
Sub-Advisor but not required for margin to support its
trading shall be invested by the Fund and shall not be the
responsibility of the Sub-Advisor.
(ii) 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 each Series consistent with each
Series' respective written investment objective(s) and
policies and any specific criteria applicable to the Allocated
Assets.
(iii) Implement the approved investment program for the
Allocated Assets 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 registration statement, Articles of
Incorporation and Bylaws and the requirements of the
1940 Act, as each of the same shall be from time to time in
effect.
(iv) 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 each Series.
(v) Maintain, in connection with the Sub-Advisor's investment
advisory services provided to the Allocated Assets, its
compliance with the 1940 Act and the regulations adopted
by the SEC thereunder and the Series' investment
strategies and restrictions as stated in the Fund's
prospectus and statement of additional information (and
any specific criteria applicable to the Allocated Assets.
(vi) 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 each Series (and any
specific criteria applicable to the Allocated Assets) are
being observed.
(vii) 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.
(viii) 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 each Series.
(ix) Open accounts with Foreign Account Tax Compliance Act
compliant broker-dealers and futures commission
merchants ("broker-dealers"), select broker-dealers to
effect all transactions for each 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 each 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 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 each 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 each 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 each 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 Allocated Assets. 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.
(x) Maintain all accounts, books and records with respect to
the Allocated Assets as are required of an investment
adviser of a registered investment company pursuant to
the 1940 Act and Investment Advisers Act of 1940, as
amended (the "Advisers Act"), and the rules thereunder,
and furnish the Fund and the Manager with such periodic
and special reports as the Fund or the 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 each 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 a 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 a Series.
(xi) 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 the Sub-
Advisor's current Code of Ethics. The Sub-Advisor shall
promptly forward to the Manager a copy of any material
amendment to the Sub-Advisor's Code of Ethics along with
certification that the Sub-Advisor has implemented
procedures for administering the Sub-Advisor's Code of
Ethics.
(xii) 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 a 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 a Series.
(xiii) Provide such information as is customarily provided by a
sub-advisor, or as may be required or reasonably
requested by the Manager, 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
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 Advisers Act; the Sub-Advisor's most
recent annual compliance report or a detailed summary of
such report; timely and complete responses to all Quarterly
Compliance Questionnaires substantially in the form as
previously completed by the Sub-Advisor (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 each such change); Annual Proxy Voting
Questionnaires; Annual Best Execution and Soft Dollar
Questionnaires, and responses to all other reasonable
requests from the Manager. The Sub-Advisor agrees to
make available for the Manager's review all deficiency
letters issued by the SEC together with all responses given
by Sub-Advisor to such letters. The Sub-Advisor will
advise the Manager of any material changes in the Sub-
Advisor's ownership within a reasonable time after any
such change.
(xiv) Vote proxies received on behalf of each Series (with
respect to the portion thereof allocated to the Sub-Advisor)
in a manner consistent with the Sub-Advisor's proxy voting
policies and procedures and provide a record of votes cast
containing all of the voting information required by Form N-
PX in an electronic format to enable the Series to file Form
N-PX as required by SEC rule.
(xv) Respond to tender offers, rights offerings and other
voluntary corporate action requests affecting securities
held by each Series (with respect to the portion thereof
allocated to the Sub-Advisor).
(xvi) Cooperate with the Manager in its performance of quarterly
and annual tax compliance tests to monitor the Series'
compliance with Subchapter M of the Code and Section
817(h) of the Code. If it is determined by the Manager or
its tax advisors that the Series is not in compliance with the
requirements imposed by the Code, the Sub-Advisor, in
consultation with the Manager and its tax advisors, will
take prompt action to bring the Series back into
compliance with the time permitted under the Code.
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
Allocated Assets, 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 a 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. 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 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 6, "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 Fund's 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; provided, however, that entry into any such
arrangements shall not relieve the Sub-Advisor of any of its
obligations under this Agreement.
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 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 with respect to such Series, shall continue in
effect thereafter 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 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 with respect to a Series 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,"
"voting security" and "majority of the outstanding voting securities")
shall be applied.
10. Amendment of this Agreement
No amendment of this Agreement shall be effective unless in
writing and signed by both parties. 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 (as defined in the 0000 Xxx) and by
vote of a majority of the Board of Directors of the Fund who are not
interested persons (as defined in the 0000 Xxx) 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.
11. Additional Series
In the event the Manager wishes to appoint the Sub-Advisor to
perform the services described in this Agreement with respect to
one or more additional Series of the Fund after the effective date of
this Agreement, such Series will become a Series under this
Agreement upon approval of this Agreement in the manner required
by the 1940 Act and the amendment of Appendices A and B hereto.
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 Xxxxxx Capital Management, L.P., 00
Xxxxxxxx Xxxxxx, Xxxxxxxx, XX 00000, Attention: Law
Department.
(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 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 a Series.
(3) the Sub-Advisor becomes aware of any action, suit,
proceeding, inquiry or investigation that is reasonably likely
to result in a conviction, order, judgment or decree issued
with respect to it or any affiliate that could reasonably be
expected to result in the Sub-Advisor becoming ineligible
to serve as an investment adviser of a registered
investment company under the 0000 Xxx.
(4) the Sub-Advisor becomes aware of a transaction or series
of transactions that is reasonably likely to result in a
change in the management or control of the Sub-Advisor
or a controlling person thereof or otherwise in the
assignment (as defined in the 0000 Xxx) of this Agreement
by the Sub-Advisor.
(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 a Series, cash
requirements and cash available for investment in a 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. The 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's or dealer's promotion or sale of Fund shares or shares
issued by any other registered investment company.
(f) 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.
(g) 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.
(h) This Agreement contains the entire understanding and
agreement of the parties.
PURSUANT TO AN EXEMPTION FROM THE COMMODITY FUTURES
TRADING COMMISSION IN CONNECTION WITH ACCOUNTS OF
QUALIFIED ELIGIBLE PERSONS, THIS AGREEMENT IS NOT
REQUIRED TO BE, AND HAS NOT BEEN, FILED WITH THE
COMMISSION. THE COMMODITY FUTURES TRADING COMMISSION
DOES NOT PASS UPON THE MERITS OF PARTICIPATING IN ANY
TRADING PROGRAM OR UPON THE ADEQUACY OR ACCURACY OF
COMMODITY TRADING ADVISOR DISCLOSURE. CONSEQUENTLY,
THE COMMODITY FUTURES TRADING COMMISSION HAS NOT
REVIEWED OR APPROVED ANY TRADING PROGRAM OF THE
ADVISOR OR THIS AGREEMENT.
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
Name:
Xxxxxxx X. Beer
Title:
Executive Director - Principal Funds
By
/s/ Xxxx X. Xxxxxx
Name:
Xxxx X. Xxxxxx
Title:
Counsel
XXXXXX CAPITAL MANAGEMENT, L.P.
By
/s/ Xxxx Xxxxxxx
Name:
Xxxx Xxxxxxx
Title:
COO
APPENDIX A
[INTENTIONALLY OMITTED]
APPENDIX B
Effective Date and Initial Term of Sub-Advisory Agreement for each Series
Series
Effective Date
Initial Term
Global Multi-Strategy Fund
4/11/2014
Two Years
