PRINCIPAL FUNDS, INC.
AMENDED AND RESTATED SUB-ADVISORY AGREEMENT
MELLON CAPITAL MANAGEMENT CORPORATION SUB-
ADVISED FUNDS
AMENDED AND RESTATED SUB-ADVISORY AGREEMENT (the
"Agreement") executed 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
MELLON CAPITAL MANAGEMENT CORPORATION, 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 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 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;
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 obligations of
Principal Management Corporation) and the Sub-Advisor dated
December 31, 2009 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 communicated in writing to the Sub-
Advisor which is 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,
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
communicated in writing to the Sub-Advisor which is
applicable to the Allocated Assets, subject to receipt of such
additional information as may be required from the Manager
and provided in accordance with Section 13(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 each Series (and any specific criteria
communicated in writing to the Sub-Advisor which is
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 its duties under this Agreement.
(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
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 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
"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 it 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.
(l) From time to time as the Manager or the Fund may request,
furnish the requesting party reports on portfolio transactions
and reports on investments held by 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 view 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.
The Manager acknowledges receipt of Sub-Advisor's Form
ADV more than 48 hours prior to the execution of this
Agreement.
(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
817(h) of the Code, subject to receipt of such additional
information as may be required from the Manager and
provided in accordance with Section 13(d) of this
Agreement. The Sub-Advisor shall notify the Manager
immediately upon having a reasonable basis for believing
that the Series has ceased to be in compliance or that it
might not be in compliance in the future. 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 within (to the extent possible) 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 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 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 under this Agreement 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 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 in 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 in 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. In addition, 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 and the Sub-
Advisor accepts such appointment 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. The address of the Sub-
Advisor for this purpose shall be 00 Xxxxxxx Xxxxxx, Xxxxx
0000, Xxx Xxxxxxxxx, XX 00000.
(c) The Sub-Advisor will promptly notify the Manager in writing of
the occurrence of any of the following events:
(1) the Sub-Advisor fails to be registered as an investment
adviser under the 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 action,
suit, proceeding or investigation that is reasonably likely
to result in a conviction, order, judgment or decree issued
with respect to it 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 Manager represents and warrants, and the Sub-Advisor
acknowledges, that the Series is relying on the exclusion
from the definition of "commodity pool operator" under
Section 4.5 of the General Regulations under the Commodity
Exchange Act ("Rule 4.5"). The Sub-Advisor will not exceed
the de minimis trading limits set forth in Rule 4.5(c)(2)(iii)(B)
unless otherwise agreed to in writing.
(g) The Manager further represents and warrants that (i) it is a
member of the National Futures Association ("NFA") and is
registered under the Commodity Exchange Act ("CEA") or is
not required to be a member of the NFA because (A) it is
exempt from registration under the CEA or (B) it does not
engage in activity that requires such registration and (ii) each
Series is a "qualified eligible person" as defined in Rule 4.7 of
the Commodity Futures Trading Commission ("CFTC") and
consents to its account being treated as an exempt account
under Rule 4.7.
(h) 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.
(i) 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.
PURSUANT TO AN EXEMPTION FROM THE COMMODITY
FUTURES TRADING COMMISSION IN CONNECTION WITH
ACCOUNTS OF QUALIFIED ELIGIBLE PERSONS, THIS
BROCHURE OR ACCOUNT DOCUMENT 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 A TRADING
PROGRAM OR UPON THE ADEQUACY OR ACCURACY OF
COMMODITY TRADING ADVISOR DISCLOSURE.
CONSEQUENTLY, THE COMMODITY FUTURES TRADING
COMMISSION HAS NOT REVIEWED OR APPROVED THIS
TRADING PROGRAM OR THIS BROCHURE OR ACCOUNT
DOCUMENT.
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
MELLON CAPITAL MANAGEMENT
CORPORATION
By
/s/ Xxxxxx Xxxxx
Name:
Xxxxxx Xxxxx
Title:
Managing Director
APPENDIX A
[INTENTIONALLY OMITTED]
APPENDIX B
Effective Date and Initial Term of Sub-Advisory Agreement for each Series
Series
Effective Date
Initial Term
Bond Market Index Fund
December 31, 2009
2 Years
High Yield Fund I
October 2, 2017
2 Years
