PRINCIPAL FUNDS, INC.
AMENDED AND RESTATED SUB-
ADVISORY AGREEMENT
MACQUARIE CAPITAL
INVESTMENT MANAGEMENT
LLC
SUB-ADVISED FUND
AMENDED AND RESTATED SUB-ADVISORY AGREEMENT (the
"Agreement") executed as of 1st Day of October, 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").
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 Amended and Restated Sub-Advisory Agreement between
the Manager (having assumed the rights and obligation of Principal
Management Corporation) and the Sub-Advisor dated May 22, 2017 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 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 Allocated Assets of
each Series.
(b) Furnish to the Board of Directors of the Fund for approval (or
any appropriate committee of such Board), and revise from time
to time as conditions require, a recommended investment
program for each Series consistent with each Series' respective
investment objective(s) and policies and any specific criteria
applicable to the Allocated Assets.
(c) 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.
(d) Advise and assist the officers of the Fund, as requested by the
officers, in taking such steps as are necessary or appropriate to
carry out the decisions of its Board of Directors, and any
appropriate committees of such Board, regarding the general
conduct of the investment business of each Series.
(e) 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.
(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 each
Series (and any specific criteria applicable to the Allocated
Assets) are being observed.
(g) Upon request, provide assistance and recommendations for the
determination of the fair value of certain securities when reliable
market quotations are not readily available for purposes of
calculating net asset value in accordance with procedures and
methods established by the Fund's Board of Directors.
(h) Furnish, at its own expense, (i) all necessary investment and
management facilities, including salaries of clerical and other
personnel required for it to execute its duties faithfully, and (ii)
administrative facilities, including bookkeeping, clerical
personnel and equipment necessary for the efficient conduct of
the investment advisory affairs of each Series.
(i) 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.
(j) Maintain all accounts, books and records with respect to the
Allocated Assets as are required of an investment advisor of a
registered investment company pursuant to the 1940 Act and
Investment Advisers Act of 1940, as amended (the "Adviser's
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
the Series upon request by the Fund or the Manager. The Sub-
Advisor has no responsibility for the maintenance of Fund
records except insofar as is directly related to the services the
Sub-Advisor provides to a Series.
(k) Observe and comply with Rule 17j-1 under the 1940 Act and the
Sub-Advisor's Code of Ethics adopted pursuant to that Rule as
the same may be amended from time to time. The Manager
acknowledges receipt of a copy of 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.
(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 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.
(m) 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 (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 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.
(n) 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.
(o) 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) .
(p) 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 81?(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
9, 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 (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 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 pending or
threatened 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 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.
(f) 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.
(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.
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
MACQUARIE CAPITAL INVESTMENT MANAGEMENT, LLC
By
/s/ Xxxx Xxxxxxxx
Name:
Xxxx Xxxxxxxx, President
By
/s/ Xxxxxxxx Xxxxx
Name:
Xxxxxxxx Xxxxx, Chief Operating Officer
APPENDIX A
[INTENTIONALLY OMITTED]
APPENDIX B
Effective Date and Initial Term of Sub-Advisory Agreement for each Series
Series
Effective Date
Initial Term
Diversified Real Asset Fund
March 27, 2015
2 Years
