PRINCIPAL FUNDS, INC.
AMENDED & RESTATED SUB-ADVISORY AGREEMENT
X.X. XXXXXX & CO., INC. SUB-ADVISED FUND
AGREEMENT executed as of the January 1, 2014, by and between
PRINCIPAL MANAGEMENT CORPORATION, an Iowa corporation
(hereinafter called "the Manager"), and X.X. XXXXXX & CO., 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 Manager represents and warrants that
it has been given full power and authority by the Fund's Board of
Directors to appoint the Sub-Advisor hereunder. 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. The
Manager shall provide prior written notice to the Sub-
Advisor of any amendment to the investment objectives and
policies of the Series that may impact the Sub-Advisor's
investment program and such amendment shall become
effective only upon the Sub-Advisor's written
acknowledgment of its receipt of such amendment, and the
Sub-Advisor shall be provided a reasonable time to make
appropriate adjustments to the investment program and to
otherwise comply with such amendment.
(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 to the extent described in (j) below.
(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;
provided that the Sub-Advisor shall incur not liability for any
such assistance taken or not taken in good faith.
(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 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. The
Manager acknowledges and agrees that the Sub-Advisor
may retain copies of all records it maintains for the Fund
insofar as necessary to comply with applicable law and
regulation. The Manager agrees to cooperate in good faith
with the Sub-Advisor with respect to sharing, providing
copies or otherwise making available such records as the
Sub-Advisor may reasonably need for regulatory,
compliance or litigation defense purposes, which obligation
shall survive the termination of this Agreement.
(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
reasonably 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
reasonably 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. 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.
(n) Have the responsibility and authority to vote proxies
solicited by, or with respect to, the issuers of securities held
in the Series and to take any other corporate or related
action requested of the shareholders of an issuer 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. The Sub-Advisor shall
not be liable with respect to voting of proxies or taking other
corporate action if the proxy materials and related
shareholder communications are not received by the Sub-
Advisor in a timely manner. The Manager acknowledges
and agrees that the Sub-Advisor will not be required to
advise or take any action on behalf of the Manager or the
Fund, including filing any proof of claim forms, with respect
to any bankruptcies, class actions or other legal
proceedings involving securities held or formerly held by the
Fund or the issuers of those securities.
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
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 and to the
extent of losses resulting directly 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, counterparty,
or other similar market participant or intermediary 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 which
will not be unreasonably withheld or delayed. Nothing contained
herein shall require the Manager to indemnify the Sub-Advisor
for Losses resulting directly from, and to the extent of, 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 and courts 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, regulations or subpoena.
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 Xxxxxx Asset Management, 00
Xxxxxxxx Xxxxx, 00xx Xxxxx, Xxxxxx Xxxx, Xxx Xxxxxx, 00000,
Attn: Chief Compliance Officer.
(c) Each party to this Agreement will promptly notify the other
party to this Agreement in writing of the occurrence of any of
the following events:
(1) the party fails to be registered as an investment adviser
under the Investment Advisers Act or under the laws of
any jurisdiction in which such party is required to be
registered as an investment advisor in order to perform
its obligations under this Agreement.
(2) the party 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, except to the extent disclosed in the
Sub-Advisor's Form ADV or other regulatory filings which
may be deemed 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.
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
X. X. XXXXXX & CO., INC.
By /s/ Xxxxxx X. Xxxxxxxx
Xxxxxx X. Xxxxxxxx,
CEO
APPENDIX A
X.X. Xxxxxx & Co., Inc. ("Xxxxxx") shall serve as an investment sub-
advisor for the Series identified below. The Manager will pay Xxxxxx, as
full compensation for all services provided under this Agreement, a fee,
computed and paid monthly, in arrears, at an annual rate as shown
below of the Series' net assets as the first day of each month allocated to
Xxxxxx'x management.
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 Xxxxxx provides investment advisory services and
which have the same 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.
Global Diversified Income Fund
Sub-Advisor's Fee as a Percentage of Average Daily Net Assets
First $200 million 0.40%
Next $550 million 0.30%
Assets over $750 million 0.25%
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